Altria Group, Inc. (Altria) Reports 2007 Results and Announces Spin-off of Philip Morris International Inc. (PMI) [Corrected] |
Note: Contrary to Altria's original news release of January 30, 2008, Altria has subsequently
received advice that the PMI spin-off will be subject to tax in Norway. This version reflects
that change. NEW YORK--(BUSINESS WIRE)--Jan. 30, 2008--Regulatory News: Altria
Group, Inc. (NYSE: MO):
ALTRIA REPORTS 2007 RESULTS
-- 2007 full-year diluted earnings per share from continuing
operations of $4.33 versus $4.43 in 2006, including the items
detailed on Schedule 8
-- Adjusted 2007 full-year diluted earnings per share from
continuing operations up 8.1% to $4.38 versus $4.05 in 2006,
including items detailed in Table 2
-- 2007 fourth-quarter diluted earnings per share from continuing
operations of $1.03 versus $1.14 for the same period in 2006,
including the items detailed on Schedule 7
-- Adjusted 2007 fourth-quarter diluted earnings per share
from continuing operations up 5.3% to $1.00 versus $0.95 for
the same period in 2006, including items detailed in Table 2
PHILIP MORRIS INTERNATIONAL SPIN-OFF EFFECTIVE MARCH 28, 2008
-- Identifies new Board of Directors post-spin for both Altria
and PMI
-- Sets spin-off share distribution ratio of one-for-one
-- Announces dividend policies, initial dividend rates and share
repurchase programs
-- Altria dividend policy anticipates payout ratio of 75%
post-spin
-- Altria initial post-spin annualized dividend rate of $1.16
per common share
-- Altria post-spin share repurchase program of $7.5 billion
over 2 years
-- PMI dividend policy anticipates payout ratio of 65% post-
spin
-- PMI initial post-spin annualized dividend rate of $1.84 per
common share
-- PMI post-spin share repurchase program of $13.0 billion
over 2 years
-- To commence tender offer shortly for all outstanding Altria
notes
-- Forecasts 2008 earnings per share growth rates
-- Altria 2008 full-year diluted earnings per share from
continuing operations projected to grow approximately 9% to
11% from a 2007 adjusted base of $1.50, excluding PMI, which
will be accounted for as a discontinued operation for the
full-year 2008
-- PMI 2008 full-year diluted earnings per share from
continuing operations projected to grow approximately 12% to
14% at current exchange rates, from a 2007 pro-forma adjusted
base of $2.78
Altria Group, Inc. (NYSE: MO) today issued its 2007 full-year and
fourth-quarter results and announced the spin-off of Philip Morris
International Inc. (PMI). In conjunction with the PMI spin-off, the
company identified the new Altria and PMI Boards of Directors,
announced dividend policies, initial dividend rates and share
repurchase programs for each company, and provided separate forecasts
for 2008 earnings per share from continuing operations for Altria and
PMI.
"Today's announcement underscores our long-term commitment to
build shareholder value," said Louis C. Camilleri, Chairman and Chief
Executive Officer of Altria. "The PMI spin-off and related actions
position our international and domestic tobacco businesses for future
success as stand-alone companies with unique and formidable strengths,
including leading brands, strong cash flow, experienced leadership and
solid growth prospects."
"2007 was a watershed year, with strong underlying earnings growth
and a number of strategic actions that further strengthen our tobacco
businesses for long-term growth," Mr. Camilleri said. "While we are by
all means not immune to the current economic uncertainties, we enter
2008 with solid momentum and I am confident that both Altria and PMI
are well positioned to not only weather these uncertainties, but to
deliver strong results this year and beyond."
Conference Call
A conference call hosted by Mr. Camilleri with members of the
investment community and news media will be webcast at 1:00 p.m. New
York City Time on January 30, 2008. Access is available at
www.altria.com.
Spin-Off of Philip Morris International (PMI)
The Board of Directors of Altria voted today to authorize the
spin-off of 100% of the shares of Philip Morris International (PMI) to
Altria's shareholders.
The distribution will be made on March 28, 2008, to Altria
shareholders of record as of 5:00 p.m. New York City Time on March 19,
2008 (the "record date").
Altria will distribute one share of PMI for every share of Altria
common stock outstanding as of the record date, based on the number of
Altria shares outstanding at 5:00 p.m. New York City Time on that
date.
After much consideration, Altria's Board of Directors and
management determined that PMI's separation from Altria will enhance
growth and shareholder value by providing the following benefits:
-- An improved focus on the different market dynamics,
competitive frameworks, challenges and opportunities that
Altria and PMI face;
-- A more optimal and efficient capital allocation to enhance
shareholder value, coupled with greater financial flexibility,
including an increase in the combined debt capacity of Altria
and PMI;
-- Greater transparency leading to the elimination of the
sum-of-the-parts discount under which Altria's common stock
has typically traded;
-- A significant reduction in corporate overheads, including the
closure of Altria's corporate headquarters in New York;
-- The creation of a potential acquisition currency in the form
of more focused equity that neither of Altria's tobacco
subsidiaries has had available prior to the spin-off; and
-- A tighter alignment of compensation and rewards with the
performance of each entity.
Altria has been advised that a "when issued" public market for
Altria common stock will begin some time before the record date on the
New York Stock Exchange (NYSE) and continue through the distribution
date under the symbol "MO wi." "When issued" refers to buying Altria
shares without the right to receive PMI shares. Altria common stock
will remain outstanding and will continue to trade on the NYSE under
the symbol "MO."
Any holder of Altria common stock who sells shares of Altria in
the "regular way" market on or before the distribution date will also
be selling the right to receive shares of PMI common stock in the
spin-off. Holders of Altria common stock are encouraged to consult
with their financial advisors regarding the specific implications of
selling Altria common stock on or before the distribution date.
Currently, there is no public market for PMI's common stock. It is
anticipated that PMI will be listed for trading on the NYSE under the
symbol "PM." The company anticipates that trading in PMI common stock
will commence on a "when issued" basis shortly before the record date
under the symbol "PM wi."
On the first trading day following the distribution date, "when
issued" trading will end and "regular way" trading will begin for PMI
common stock. PMI cannot predict the trading price for its common
stock following the distribution.
Altria has received a private letter ruling from the U.S. Internal
Revenue Service (IRS) and an opinion of counsel that the distribution
of PMI common stock to Altria shareholders qualifies as a tax-free
distribution for U.S. federal income tax purposes.
Non-U.S. shareholders may be subject to tax on the distribution in
jurisdictions other than the U.S. In this regard, Altria has received
advice from some foreign tax authorities and advisors, and anticipates
that the distribution will be tax-free in Canada and Sweden,
but subject to tax in Denmark, France, Germany, Ireland, Japan, the
Netherlands, Norway and Switzerland. Altria is awaiting final advice from the
U.K. tax authorities.
It is extremely important that shareholders consult their tax
advisors regarding the particular consequences of the distribution in
their situation, including the applicability and effect of any U.S.
federal, state, local and foreign tax laws.
Registered shareholders in the U.S. and Canada who would like more
information should contact Computershare Trust Company by email at
altria@computershare.com or by phone at 1-866-538-5172. Registered
shareholders outside the U.S. and Canada should call 1-781-575-3572.
If you hold Altria shares through a broker, bank or other nominee,
please contact your financial institution directly or call D.F. King &
Co. at 1-800-290-6431.
Additional information including answers to frequently asked
questions (FAQs) will be available in a special section of the Altria
website beginning at about 12:00 noon New York City Time today at
www.altria.com/pmispinoff.
Board of Directors
Set forth below are the individuals who have agreed to serve on
the respective Board of Directors of Altria and PMI following the
spin-off.
Altria's Board of Directors post-spin will include four continuing
members from the current Altria Board of Directors. They are Elizabeth
E. Bailey, Robert E.R. Huntley, Thomas W. Jones and George Munoz. They
will be joined by four new directors: Thomas F. Farrell II, Chairman,
President and Chief Executive Officer of Dominion Resources, Inc.,
Gerald L. Baliles, Director of the Miller Center of Public Affairs at
the University of Virginia and former Governor of Virginia, Dinyar S.
Devitre, who will step down as Chief Financial Officer of Altria
following the spin-off, and Michael E. Szymanczyk, who will serve as
Chairman of the Board and Chief Executive Officer of Altria.
PMI's Board of Directors post-spin will include five members who
will step down from the current Altria Board of Directors. They are
Harold Brown, Mathis Cabiallavetta, J. Dudley Fishburn, Lucio A. Noto
and Stephen M. Wolf. In addition, Sergio Marchionne, Chief Executive
Officer of Fiat S.p.A. and Carlos Slim Helu will join the PMI Board of
Directors at the time of the PMI spin-off, and Graham Mackay, Chief
Executive Officer of SABMiller, has agreed to join the PMI Board of
Directors later in 2008. Louis C. Camilleri will serve as Chairman of
the Board and Chief Executive Officer of PMI following his resignation
from those posts at Altria.
John S. Reed has elected to retire from the Altria Board of
Directors. He is one of the longest-serving members of the Board of
Directors and has provided outstanding leadership throughout his more
than 30 years of distinguished service to the company and its
shareholders.
As a result of the PMI spin-off, the date for the Annual Meeting
of Shareholders for Altria has been moved to May 28, 2008 in Richmond,
Virginia. Shareholders who have not already submitted proposals for
consideration at the meeting have until March 28, 2008 to do so, by
following the procedures described in the "2008 Annual Meeting"
section on page 66 of Altria's March 23, 2007 proxy statement.
Dividends
The Board of Directors of Altria today reaffirmed its intention to
adjust Altria's dividend immediately following the distribution of PMI
shares so that Altria shareholders who retain their PMI shares will
receive, in the aggregate, the same annual cash dividend rate of $3.00
per share that existed before the spin-off.
Altria is expected to pay a dividend at the initial rate of $0.29
per share per quarter, or $1.16 per common share on an annualized
basis. Altria has established a dividend policy that anticipates a
payout ratio of approximately 75% post-spin.
PMI is expected to pay a dividend at the initial rate of $0.46 per
share per quarter, or $1.84 per common share on an annualized basis.
PMI has established a dividend policy that anticipates a payout ratio
of approximately 65% post-spin.
Payment of future cash dividends will be at the discretion of the
Boards of Directors of Altria and PMI.
Share Repurchase Programs
The Board of Directors today approved share repurchase programs as
follows:
For Altria, a new $7.5 billion two-year share repurchase program
was authorized and is expected to begin in April, after completion of
the spin-off.
For PMI, a $13.0 billion two-year share repurchase program was
authorized and is expected to begin in early May, consistent with SEC
regulations.
Tender Offer for Altria Notes
Altria will commence a tender offer and consent solicitation
shortly in connection with the spin-off to purchase for cash all of
Altria's notes outstanding, including $2.6 billion of domestic notes
denominated in U.S. dollars and EUR 1.0 billion in euro-denominated
notes.
While Altria believes that the proposed distribution is not
prohibited by the indentures, it believes it is desirable to eliminate
any uncertainty by amending the indentures with the consent of note
holders.
In order to finance the tender offer, Altria has arranged a $4.0
billion, 364-day credit facility. Subsequent to the spin-off, Altria
intends to access the public debt market to refinance debt incurred in
connection with the tender offer.
PMI Form 10
PMI has filed a Form 10, which includes a preliminary Information
Statement, subject to completion, with the U.S. Securities and
Exchange Commission (SEC). PMI plans to file an updated Form 10 with
the SEC on or about February 8, 2008. The update will include PMI's
audited financial statements for 2007, management's discussion and
analysis of operations and a discussion of PMI's governance and
compensation. In addition, the Form 10 will include pro-forma
financial information, which gives effect to the following:
-- In establishing the initial capitalization of the two
companies, PMI will pay to Altria $4.0 billion in dividends,
$3.1 billion of which were paid at the end of 2007;
-- Altria and PMI will reimburse each other for the fair value of
stock awards held by their respective employees. Based on the
number of stock awards outstanding at December 31, 2007 the
net payment from Altria to PMI would be $427 million;
-- Altria will transfer to PMI federal tax contingencies of $97
million;
-- Altria will transfer to PMI balances for pension and other
benefits related to PMI's U.S.-based employees; and
-- PMI will incur the cost of certain headquarters functions that
are currently performed by Altria. The cost of these functions
was $92 million in 2007.
PMI plans to file reported and pro-forma amounts as follows:
At December 31, 2007 ($ Billions)
------------------------------------
Reported Pro-forma
Cash $ 1.7 $ 1.3
Total debt (6.3) (6.3)
---------- ------------
Net debt $(4.6) $(5.0)
Stockholders' equity $15.4 $14.7
Following the effectiveness of the Form 10, the company will mail
an Information Statement shortly after the record date to all holders
of Altria common stock as of the record date. The Information
Statement will include the procedures by which the distribution will
be effected and other details of the transaction, together with
comprehensive data on PMI.
Investor Presentation
In connection with the spin-off, the company announced that it
will hold an investor presentation on March 11, 2008 in New York City.
The presentation will be webcast beginning at approximately 8:30 a.m.
until 1:00 p.m. New York City Time and will be available at
www.altria.com.
Following opening remarks from Louis C. Camilleri, Altria and PMI
will give presentations on their growth strategies, capital structure,
cost savings and productivity initiatives, opportunities and outlook,
followed by a question-and-answer session.
Presenting for Altria will be Michael E. Szymanczyk and David
Beran, who will become Chairman and Chief Executive Officer, and Chief
Financial Officer, respectively, following the spin-off.
Presenting for PMI will be Andre Calantzopoulos and Hermann
Waldemer, who will become Chief Operating Officer and Chief Financial
Officer, respectively, following the spin-off.
2008 Full-Year Forecast for Altria and PMI
Altria (excluding PMI) forecasts that 2008 adjusted full-year
diluted earnings per share from continuing operations will grow to a
range of $1.63 to $1.67, representing a growth rate of approximately
9% to 11% for the full-year 2008 from a base of $1.50 per share in
2007, which is shown in Table 1 below. This projection reflects a
higher effective tax rate, the contribution of income from recently
acquired John Middleton, Inc. and the impact of share repurchases.
Earnings per share growth is expected to be stronger in the second
half of 2008.
PMI forecasts adjusted diluted earnings per share from continuing
operations at current exchange rates will increase to a range of $3.11
to $3.17 for the full-year 2008, reflecting a growth rate of
approximately 12% to 14% from the pro-forma adjusted base of $2.78 per
share in 2007, as shown in Table 1.
Table 1 Illustrative EPS for Year Ended Dec. 31,
2007
--------------------------------------------
Altria
Consolidated Altria
Dec. 31, 2007 Ex PMI PMI
------------- ------------- --------------
Reported Diluted EPS $4.33 $1.48 $2.85
Tax items (0.12) (0.09) (0.03)
PMCC recoveries from
airline exposure (0.06) (0.06)
Interest on tax reserve
transfers to Kraft 0.02 0.02
Asset impairment and
exit costs 0.21 0.15 0.06
--------- --------- ---------
Adjusted Diluted EPS $4.38 $1.50 $2.88
Interest on borrowings
to pay $4.0 billion
dividend to Altria (0.07)
Incremental corporate
expenses (0.03)
--------------
Pro-Forma Adjusted See Note
Diluted EPS Below $2.78
Note: While PMI will be required to file these pro-forma 2007
results with the SEC, Altria is prohibited under current SEC
guidelines from imputing interest income on the transferred cash.
These forecasts exclude the impact of any potential future
acquisitions or divestitures, Altria's gain on the sale of its
headquarters in New York City, charges related to the tender offer for
Altria's notes and a number of other factors, including the items
shown above in Table 1. The factors described in the Forward-Looking
and Cautionary Statements section of this release represent continuing
risks to these projections.
2007 FULL-YEAR AND FOURTH-QUARTER RESULTS
As described in "Note 15. Segment Reporting" of Altria's 2006
Annual Report, management reviews operating companies income, which is
defined as operating income before corporate expenses and amortization
of intangibles, to evaluate segment performance and allocate
resources. Management believes it is appropriate to disclose this
measure to help investors analyze business performance and trends. For
a reconciliation of operating companies income to operating income,
see the Condensed Statements of Earnings contained in this release.
Altria's 2007 reported results and previous-year results reflect
Kraft Foods Inc. (Kraft) as a discontinued operation. As such, net
revenues and operating companies income for Kraft are excluded from
the company's results, while the net earnings impact is included as a
single line item.
All references in this news release are to continuing operations,
unless otherwise noted. References to international tobacco market
shares are PMI estimates based on a number of sources.
2007 Diluted EPS From Continuing Operations
For the full year 2007, diluted earnings per share from continuing
operations were down 2.3% to $4.33, including items detailed on
Schedule 8, versus $4.43 for the full year 2006. Adjusted for items
detailed in Table 2 below, diluted earnings per share were up 8.1% to
$4.38, versus $4.05 for 2006.
Fourth-quarter 2007 diluted earnings per share from continuing
operations were down 9.6% to $1.03, including items detailed on the
attached Schedule 7, versus $1.14 in the year-ago period. Adjusted for
items detailed in Table 2, fourth-quarter 2007 diluted earnings per
share were up 5.3% to $1.00 versus $0.95 in the year-earlier period,
which included a $488 million gain from PMI's reorganization of its
tobacco and beer equity holdings in the Dominican Republic.
Table 2 2007 Results Excluding Items
-------------------------------------------
Full Year Fourth Quarter
---------------------- --------------------
2007 2006 Change 2007 2006 Change
------- ------- ------ ----- ----- ------
Diluted EPS (from
continuing operations for
full year) $ 4.33 $ 4.43 (2.3)% $ 1.03 $1.14 (9.6)%
(Gain) on sales of
businesses (0.15) (0.15)
Asset impairment, exit and
implementation costs 0.21 0.05 0.04 0.02
Italian antitrust charge 0.03
(Recoveries) Provision for
airline industry exposure (0.06) 0.03
Tax items (0.12) (0.35) (0.07) (0.06)
Interest on tax reserve
transfers to Kraft 0.02 0.01
----- ----- ------- ------
Diluted EPS, excluding
above items $ 4.38 $ 4.05 8.1% $ 1.00 $0.95 5.3%
Acquisitions and Divestitures
During the first quarter of 2007, PMI acquired an additional 50.2%
stake in Lakson Tobacco Company Ltd. (Lakson) in Pakistan, and
completed a mandatory tender offer for the remaining shares, which
increased PMI's total ownership interest in Lakson from 40% to
approximately 98%, for $383 million.
During the fourth quarter of 2007, PMI completed the acquisition
of an additional 30% stake in its Mexican tobacco business from its
joint venture partner, Grupo Carso, S.A.B. de C.V. PMI previously held
a 50% stake in its Mexican tobacco business and the transaction
brought PMI's stake to 80%. Grupo Carso retains a 20% stake in the
business. The transaction had a value of approximately $1.1 billion.
On December 11, 2007 Altria announced that it had completed the
acquisition of 100% of John Middleton, Inc. (Middleton), a leading
manufacturer of machine-made large cigars, from privately held
Bradford Holdings, Inc. for $2.9 billion in cash. The net cost of the
acquisition, after deducting approximately $700 million in present
value tax benefits arising from the terms of the transaction, is $2.2
billion. The acquisition was financed with existing cash and is
expected to be modestly accretive to Altria's 2008 earnings and
generate an attractive double-digit economic return. It had no
material impact on Altria's 2007 fourth-quarter and full-year
earnings.
2007 Full-Year Results
Revenues net of excise taxes increased 5.8% to $38.1 billion for
the full-year 2007, driven by increases in both U.S. tobacco and
international tobacco.
Operating income increased 2.7% to $13.2 billion, reflecting the
items described in the attached reconciliation on Schedule 6,
including higher results from operations of $512 million and favorable
currency of $471 million.
Earnings from continuing operations decreased 1.8% to $9.2
billion, reflecting the items mentioned above and a higher tax rate in
2007, partially offset by a decrease in interest expense in 2007 due
to lower debt outstanding. The company's effective tax rate was 31.5%
for the full-year 2007 versus 27.2% for 2006. Full-year 2007 results
included favorable tax adjustments of $251 million or $0.12 per share,
primarily due to the reversal of tax reserves and other tax accruals
no longer required and the reduction of the German corporate tax rate,
versus favorable tax adjustments of $757 million or $0.35 per share
for the full-year 2006.
Net earnings, including discontinued operations, decreased 18.6%
to $9.8 billion, reflecting the Kraft spin-off and other items
mentioned above. Diluted earnings per share, including discontinued
operations as detailed on Schedule 4, decreased 19.1% to $4.62.
2007 Fourth-Quarter Results
Revenues net of excise taxes increased 7.4% to $9.3 billion for
the fourth quarter of 2007, largely driven by international tobacco.
Operating income decreased 6.4% to $3.0 billion, reflecting the
items described in the attached reconciliation on Schedule 3,
primarily the impact of the 2006 Dominican Republic transaction,
partially offset by higher results from operations of $143 million and
favorable currency of $150 million.
Earnings from continuing operations decreased 9.1% to $2.2
billion, reflecting the items mentioned above as well as a higher tax
rate in the fourth quarter of 2007 versus the year-earlier period,
partially offset by lower interest expense.
Net earnings, including discontinued operations, decreased 26.1%
to $2.2 billion, reflecting the impact of the Kraft spin-off and the
factors mentioned above. Diluted earnings per share, including
discontinued operations as detailed on Schedule 1, decreased 26.4% to
$1.03.
U.S. TOBACCO
2007 Full-Year and Fourth-Quarter Results
Philip Morris USA Inc. (PM USA), Altria's U.S. tobacco business,
achieved strong retail share results for the full year and fourth
quarter of 2007, driven by Marlboro, which increased its retail market
share 0.5 points to 41.0% for the full-year 2007 and 0.8 points to
41.2% in the fourth quarter.
Full-year revenues net of excise taxes increased 1.2% to $15.0
billion for Altria's U.S. tobacco segment, which includes both PM USA
and John Middleton, Inc. (Middleton). Fourth-quarter revenues net of
excise taxes increased 0.5% to $3.7 billion.
For the full-year 2007, U.S. tobacco operating companies income
decreased 6.1% to $4.5 billion compared to 2006. The decrease was
primarily driven by lower volume, increased resolution expenses,
investments in support of PM USA's smokeless products, $371 million of
pre-tax charges in 2007 related to asset impairment, exit and
implementation costs for the previously announced closure of the
Cabarrus cigarette manufacturing facility and a $26 million provision
for the Scott case in Louisiana. Those factors were partially offset
by lower wholesale promotional allowance rates and lower selling,
general and administrative costs. U.S. tobacco operating companies
income would have increased by 1.9% for the full-year 2007 when
adjusted for the items shown in the table below.
In the fourth quarter of 2007, U.S. tobacco operating companies
income decreased 3.2% to $1.1 billion compared to the year-earlier
period. The decrease was driven by lower volume, investments in
support of PM USA's smokeless products, increased resolution expenses,
$31 million of pre-tax charges in 2007 primarily related to asset
impairment, exit and implementation costs for closure of the Cabarrus
facility and the provision for the Scott case. Those factors were
partially offset by lower wholesale promotional allowance rates and
lower selling, general and administrative costs. U.S. tobacco
operating companies income would have increased 1.0% for the fourth
quarter of 2007 compared to the year-earlier period when adjusted for
the items shown in the table below.
U.S. Tobacco 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
------------------------ ------------------------
2007 2006 Change 2007 2006 Change
------- ------- -------- ------- ------- --------
Reported Operating
Companies Income $4,518 $4,812 (6.1)% $1,089 $1,125 (3.2)%
Implementation costs 27 15
Asset impairment and
exit costs related
to Cabarrus plant
closure 344 10 16 10
Provision for Scott
case 26 26
------- ------- ------- -------
Adjusted Operating
Companies Income $4,915 $4,822 1.9% $1,146 $1,135 1.0%
Adjusted OCI Margin* 32.7% 32.5% 0.2pp 31.3% 31.2% 0.1pp
*Margins are calculated as adjusted operating companies income,
divided by net revenues excluding excise taxes.
PM USA's full-year 2007 cigarette shipment volume of 175.1 billion
units was 4.6% lower than the previous year, but was estimated to be
down approximately 3.6% when adjusted for changes in trade inventories
and calendar differences. For the full year 2007, PM USA estimates a
decline of about 4% in total cigarette industry volume. In the fourth
quarter, PM USA's cigarette shipment volume of 41.7 billion units was
7.8% lower than the prior-year period, but was estimated to be down
approximately 3.3% when adjusted for changes in trade inventories and
calendar differences.
Cigarette volume performance by brand for PM USA is summarized in
the table below:
PM USA Cigarette Volume* by Brand (Billion Units)
----------------------------------------------------------------------
Full Year Fourth Quarter
------------------------ ------------------------
2007 2006 Change** 2007 2006 Change**
------- ------- -------- ------- ------- --------
Marlboro 144.4 150.3 (3.9)% 34.3 37.3 (8.0)%
Parliament 6.0 6.0 0.0% 1.6 1.5 8.0%
Virginia Slims 7.0 7.5 (7.2)% 1.6 1.8 (10.8)%
Basic 13.2 14.5 (8.8)% 3.1 3.5 (11.3)%
------- ------- ------- -------
Focus Brands 170.6 178.3 (4.3)% 40.6 44.1 (7.9)%
Other PM USA 4.5 5.1 (11.9)% 1.1 1.2 (6.7)%
------- ------- ------- -------
Total PM USA 175.1 183.4 (4.6)% 41.7 45.3 (7.8)%
*U.S. unit volume includes units sold as well as promotional
units, and excludes Puerto Rico and U.S. Territories.
**Calculation based on millions of units.
For the full-year 2007, retail share gains for Marlboro and
Parliament of 0.5 points and 0.1 point, respectively, were partially
offset by losses of 0.1 share point each for Virginia Slims, Basic and
the non-focus brands. In the fourth quarter of 2007, share gains for
Marlboro of 0.8 points were partially offset by losses of 0.1 share
point each for Virginia Slims and Basic, as shown in the table below:
PM USA Cigarette Retail Share* by Brand
----------------------------------------------------------------------
Full Year Fourth Quarter
-------------------------- --------------------------
2007 2006 Change 2007 2006 Change
-------- -------- -------- -------- -------- --------
Marlboro 41.0% 40.5% + 0.5 pp 41.2% 40.4% + 0.8 pp
Parliament 1.9% 1.8% + 0.1 pp 1.9% 1.9% 0.0 pp
Virginia Slims 2.2% 2.3% - 0.1 pp 2.2% 2.3% - 0.1 pp
Basic 4.1% 4.2% - 0.1 pp 4.0% 4.1% - 0.1 pp
------- ------- ------- -------
Focus Brands 49.2% 48.8% + 0.4 pp 49.3% 48.7% + 0.6 pp
Other PM USA 1.4% 1.5% - 0.1 pp 1.4% 1.4% 0.0 pp
------- ------- ------- -------
Total PM USA 50.6% 50.3% + 0.3 pp 50.7% 50.1% + 0.6 pp
*Retail share performance is based on data from the Information
Resources, Inc.(IRI)/Capstone Total Retail Panel, which is a tracking
service that uses a sample of stores to project market share
performance in retail stores selling cigarettes. The panel was not
designed to capture sales through other channels, including Internet
and direct mail.
PM USA is focused on developing new and innovative products that
are based on a deep understanding of adult tobacco consumers. During
2007, PM USA launched Marlboro Smooth, Marlboro Virginia Blend and six
other new cigarette line extensions. These new products contributed to
PM USA's retail share growth for the year, and in the fourth quarter
of 2007 generated more than one share point of business.
Marlboro Smooth utilizes an innovative menthol application process
to create a uniquely different smoking experience, and helped drive
Marlboro's performance as the industry's fastest-growing menthol
brand. Also contributing to Marlboro's growth was Marlboro Virginia
Blend, a single-leaf, non-menthol blend that reinforces the Marlboro
brand's flavor heritage. In addition, PM USA introduced L&M packings
in select geographies, offering a unique, contemporary product in the
discount category.
As part of its adjacency growth strategy to develop new revenue
and income sources for the future, PM USA initiated a test market of
Marlboro Snus in the Dallas/Fort Worth area beginning in August 2007.
Due to initial favorable reaction by adult consumers, wholesalers and
retailers to the Marlboro Snus test market, PM USA announced plans to
expand the test market to the Indianapolis area in early 2008. In
addition, PM USA began test marketing Marlboro Moist Smokeless Tobacco
in the Atlanta area in October 2007. Marlboro Moist Smokeless Tobacco
is designed to provide a premium quality product at an attractive
price for adult moist smokeless tobacco consumers. Based on the
encouraging initial consumer and trade response, PM USA is expanding
the Marlboro Moist Smokeless Tobacco test market to include additional
counties in the greater Atlanta area in early 2008.
As previously mentioned, Altria completed the acquisition of
Middleton on December 11, 2007. Middleton's results had no material
impact on Altria's fourth-quarter and full-year earnings. For the
full-year 2007, Middleton's volume, revenues net of excise taxes and
operating companies income were in line with estimates provided when
the acquisition was announced on November 1, 2007. Middleton
participates in the machine-made large cigar segment, which had
estimated volume of 5.3 billion units in 2007. The segment is
estimated to have grown volumes at a compound annual rate of
approximately 4% over the 2003 to 2007 period.
Retail market share for Middleton's leading brand Black & Mild
increased 2.2 share points in 2007 to 25.2% of the machine-made large
cigar segment. Retail share performance is based on data from the most
recent IRI Syndicated Reviews Database (November 2007 year-to-date),
which is a tracking service that uses a sample of stores to project
market share performance across multiple product categories, including
cigars.
INTERNATIONAL TOBACCO
2007 Full-Year and Fourth-Quarter Results
Philip Morris International Inc. (PMI), Altria's international
tobacco business, achieved strong income results for the full year and
fourth quarter of 2007.
Reported revenues net of excise taxes for the full-year 2007 of
$22.8 billion were up 9.6%. In the fourth quarter, revenues net of
excise taxes grew 11.6% to $5.5 billion.
Operating companies income increased 5.5% to $8.9 billion for the
full-year 2007, due primarily to higher pricing, favorable currency of
$471 million and productivity and cost savings, partially offset by
the impact of the 2006 gain on the Dominican Republic transaction and
higher marketing and R&D. Operating companies income grew 12.5% for
the full-year 2007 when adjusted for the impact of the Dominican
Republic transaction and other items shown in the table below.
For the fourth quarter, operating companies income decreased 10.0%
to $2.0 billion, due primarily to the impact of the Dominican Republic
transaction in the fourth quarter of 2006 as well as unfavorable mix,
partially offset by higher pricing and favorable currency of $150
million. Operating companies income grew 15.5% for the fourth quarter
of 2007 when adjusted for the impact of the Dominican Republic
transaction and other items shown in the table below.
PMI 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
---------------------- -----------------------
2007 2006 Change 2007 2006 Change
------- ------- ------ ------- ------- -------
Reported Operating
Companies Income $8,922 $8,458 5.5% $2,010 $2,233 (10.0)%
Divested businesses (51) (6)
Asset impairment and
exit costs 195 126 42 38
Gains on sales of
businesses (488) (488)
Italian antitrust
charge 61
------- ------ ------- -------
Adjusted Operating
Companies Income $9,117 $8,106 12.5% $2,052 $1,777 15.5%
Adjusted OCI Margin* 40.0% 39.0% 1.0pp 37.3% 36.1% 1.2pp
*Margins are calculated as adjusted operating companies income,
divided by net revenues excluding excise taxes.
Cigarette shipment volume, as shown in the table below, increased
2.2% or 18.6 billion units, to 850.0 billion units for the full year
2007, due to the acquisition of Lakson in Pakistan. Excluding Lakson
and the acquisition of local trademarks in Mexico effective November
1, 2007, cigarette shipments were down 0.7% or 5.6 billion units, due
mainly to lower shipments in Germany and Poland and the unfavorable
impact of timing and trade inventory movements, primarily in Japan and
Mexico. Partially offsetting the decline were strong gains in
Argentina, Egypt, Indonesia, Korea and Ukraine, as well as favorable
timing in Italy. Absent acquisitions and the net impact of unfavorable
timing and inventory movements, PMI shipments were essentially flat in
2007.
In the fourth quarter, cigarette shipment volume increased 3.7% or
7.1 billion units to 198.4 billion units, due to acquisition volume
from Lakson and local trademarks in Mexico, as well as gains in
Argentina, Colombia, Egypt, Indonesia, Korea and Russia and favorable
timing in Italy, partially offset by lower volume in Poland and the
United Kingdom and unfavorable timing, primarily in Japan and Mexico.
Excluding the impact of acquisitions in Pakistan and Mexico, cigarette
shipment volume was down 0.4% or 700 million units. Absent the above
mentioned acquisitions and the net impact of unfavorable timing and
inventory movements, PMI shipments rose 1.7% in the fourth quarter,
reflecting improving trends and strengthened business fundamentals.
PMI Cigarette Volume by Segment (Billion Units)
----------------------------------------------------------------------
Full Year Fourth Quarter
------------------- -------------------
2007 2006 Change* 2007 2006 Change*
----- ----- ------- ----- ----- -------
European Union 257.1 259.0 (0.7)% 57.2 57.3 (0.2)%
Eastern Europe, Middle East &
Africa 291.3 288.6 0.9% 65.1 63.9 1.9%
Asia 211.7 194.6 8.8% 51.0 46.5 9.7%
Latin America 89.9 89.2 0.8% 25.1 23.6 6.4%
----- ----- ----- -----
Total PMI 850.0 831.4 2.2% 198.4 191.3 3.7%
*Calculation based on millions of units.
PMI's full-year 2007 market share performance improved versus the
year-ago period in many markets including: Argentina, Australia,
Austria, Brazil, Egypt, Finland, Greece, Hungary, Israel, Italy,
Korea, Mexico, the Netherlands, the Philippines, Portugal, Singapore,
Sweden and Ukraine.
PMI's fourth-quarter 2007 market share performance improved versus
the year-ago period in Argentina, Australia, Austria, Brazil,
Dominican Republic, Egypt, Finland, Germany, Greece, Hungary, Israel,
Italy, Korea, the Netherlands, Slovak Republic, Sweden, Switzerland,
Taiwan and Ukraine.
For the full-year 2007, Marlboro cigarette shipment volume of
311.2 billion units was down 1.5%, due mainly to timing in Mexico and
unfavorable distributor inventory movements in Japan, partially offset
by gains in Argentina, Bulgaria, Indonesia, Korea and Russia. Absent
timing and inventory distortions in Japan, Mexico and other markets,
Marlboro shipments were down slightly at 0.2% in 2007. Marlboro market
share was up in Argentina, Brazil, Egypt, Greece, Hungary, Indonesia,
Israel, Korea, the Philippines, Poland, Russia and Ukraine.
In the fourth quarter, total Marlboro cigarette shipment volume of
72.4 billion units was down 1.4%, due primarily to the timing and
inventory distortions mentioned above, partially offset by gains in
Argentina, Indonesia and Russia. Absent timing and inventory
distortions in Japan, Mexico and other markets, Marlboro cigarette
shipments were up 1.0% in the fourth quarter of 2007 versus the
year-earlier period.
Shipment volume for PMI's other international brands grew by 1.5%
or 4.8 billion units to 327 billion units for the full-year 2007,
driven by gains in Parliament, Virginia Slims, the Philip Morris
brand, Merit, Chesterfield, Bond Street and Muratti, partially offset
by lower volume for L&M and Lark.
During 2007, PMI continued to build strong brand equity through
innovation. Notable new product introductions included Marlboro Filter
Plus in Kazakhstan, Korea, Romania, Russia, Taiwan and Ukraine, and
Marlboro kretek in Indonesia. Marlboro Intense, a new short cigarette
developed to deliver more full-flavor taste, was recently launched
nationally in Turkey. In the rapidly growing menthol segment, Marlboro
Fresh Mint and Marlboro Crisp Mint were successfully launched in Hong
Kong, and Marlboro Ice Mint was introduced in Japan. Other innovations
in 2007 included Parliament Platinum in Japan, Virginia Slims Uno in
Russia, Ukraine, Kazakhstan and Greece, Virginia Slims Noire in Japan
and a new, smoother tasting L&M in Russia, Ukraine and Romania. Also,
a new packaging design and communication platform for Chesterfield was
recently implemented in Eastern Europe. In the other tobacco products
(OTP) segment in Germany, Next Tobacco Block and L&M Tobacco Block
were introduced in the fine cut category.
EUROPEAN UNION (EU)
2007 Full-Year and Fourth-Quarter Results
In the European Union (EU), operating companies income grew 18.7%
to $4.2 billion in 2007, primarily driven by higher pricing and
favorable currency of $417 million. Operating companies income grew
17.1% for the full-year 2007 when adjusted for the impact of the items
shown in the table below.
In the fourth quarter, operating companies income grew 17.4% to
$917 million, driven by higher pricing and favorable currency of $123
million. Operating companies income grew 18.5% for the quarter when
adjusted for the items shown in the table below.
EU 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
---------------------- ------------------
2007 2006 Change 2007 2006 Change
------ ------ ------ ---- ----
Reported Operating Companies
Income $4,173 $3,516 18.7% $917 $781 17.4%
Asset impairment and exit
costs 137 104 36 23
Italian antitrust charge 61
------- ------- ----- -----
Adjusted Operating Companies
Income $4,310 $3,681 17.1% $953 $804 18.5%
Adjusted OCI Margin* 48.9% 46.6% 2.3pp 46.0% 44.8% 1.2pp
*Margins are calculated as adjusted operating companies income,
divided by net revenues excluding excise taxes.
The total cigarette market in the EU declined 0.7% in 2007. PMI's
cigarette shipment volume in the EU of 257.1 billion units was down
0.7% for the full-year 2007, as declines in Germany and Poland and
unfavorable distributor inventory movements in France were partially
offset by increased shipments in Hungary and the Baltics and the
impact of favorable inventory movements in Italy. Cigarette market
share in the EU at 39.3% was down 0.1 point for the full-year 2007
versus 2006, primarily due to the Czech Republic. Absent distorted
trade inventories in the Czech Republic, market share in the EU is
estimated to have been 39.4% for the full-year 2007.
PMI's cigarette shipment volume of 57.2 billion units declined
0.2% in the fourth quarter. The total market in the EU increased 0.2%
or 390 million units versus the fourth quarter of 2006. PMI's market
share in the EU at 39.2% was down 0.3 points. Adjusted for the impact
of trade inventories in the Czech Republic, PMI share in the EU is
estimated to have been 39.5% in the fourth quarter of 2007.
In France, for the full-year 2007 the total market declined 1.5%,
due to higher pricing. PMI's cigarette shipments were down 4.8% versus
2006. Market share for PMI of 42.4% was down 0.3 points, with Marlboro
down 0.7 share points to 30.2%, reflecting the temporary impact of
crossing the EUR 5.00 per pack threshold. In the mid-price segment,
the Philip Morris brand gained 0.3 points to 6.2%. PMI achieved
sequential improvement in market share every month since September.
In Germany, the cigarette market declined 4.0% for the full-year
2007, due mainly to the tax-driven price increase in October 2006.
PMI's in-market cigarette sales were down 5.0% and market share of
36.5% declined 0.4 points due to lower Marlboro share, partially
offset by share gains for L&M. PMI's cigarette shipments were down
4.6% versus 2006. Market share in the fourth quarter was up 1.4 points
to 37.6%.
In Italy, the total market was down 1.1% for the full-year 2007,
while PMI's in-market sales rose 0.4%. PMI's cigarette market share of
54.6% grew 0.8 points, driven by Chesterfield and Merit. Share for
Marlboro in Italy of 22.8% was essentially unchanged. PMI's full-year
2007 cigarette shipments were up 2.9%, due mainly to favorable timing
of shipments compared to 2006.
In Poland, consumer price sensitivity within the low-price segment
following significant tax-driven price increases led to a total
cigarette market decline of 3.5% for the full-year 2007, as consumers
switched to other tobacco products. PMI's market share was down 1.0
point to 39.0%, primarily reflecting share declines for its low-price
and local 70mm brands. However, Marlboro market share rose 0.4 points
to 8.5%. PMI's cigarette shipments in Poland declined 6.0% for the
full-year 2007, but profits more than doubled due to improved pricing
and product mix.
In Spain, the total cigarette market was down 1.2% for the
full-year 2007, while PMI's market share of 32.1% was down slightly.
Marlboro share declined 0.6 points to 16.5%, partially offset by gains
for Chesterfield, L&M and the Philip Morris brand. Cigarette shipments
in Spain rose 0.7% in 2007 and operating companies income climbed
close to 40%.
EASTERN EUROPE, MIDDLE EAST & AFRICA (EEMA)
2007 Full-Year and Fourth-Quarter Results
In Eastern Europe, Middle East & Africa (EEMA), PMI's operating
companies income increased 17.5% to $2.4 billion for the full year
2007, due mainly to higher pricing, improved volume/mix and favorable
currency of $90 million. Operating companies income grew 18.0% for the
full year 2007 when adjusted for the impact of the items shown in the
table below.
In the fourth quarter, operating companies income for the segment
increased 21.1% to $516 million, due mainly to higher pricing, lower
costs and favorable currency of $25 million. Operating companies
income grew 20.6% for the fourth quarter of 2007 when adjusted for the
impact of the items shown in the table below.
EEMA 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
---------------------- ------------------
2007 2006 Change 2007 2006 Change
------ ------ ------ ---- ---- ------
Reported Operating Companies
Income $2,427 $2,065 17.5% $516 $426 21.1%
Asset impairment and exit
costs 12 2 2
------- ------- ----- -----
Adjusted Operating Companies
Income $2,439 $2,067 18.0% $516 $428 20.6%
Adjusted OCI Margin* 38.4% 36.9% 1.5pp 34.4% 32.8% 1.6pp
*Margins are calculated as adjusted operating companies income,
divided by net revenues excluding excise taxes.
Full-year 2007 cigarette shipment volume of 291.3 billion units
was up 0.9% as gains in Algeria, Bulgaria, Egypt and Ukraine were
partially offset by declines in Romania, Russia, Serbia and Turkey. In
the fourth quarter of 2007, cigarette shipment volume of 65.1 billion
units was up 1.9%, driven by solid gains in Eastern Europe, Turkey and
the Middle East, partially offset by lower duty-free shipments.
In Egypt, PMI's cigarette shipments rose 25.6% for the full-year
2007, while market share advanced 1.9 points to 12.0%, driven by
Marlboro, L&M and Merit.
In Russia, shipment volume declined 2.0% for the full-year 2007,
as lower volume for L&M was partially offset by the continued growth
of higher-margin brands, including Marlboro, Parliament, Chesterfield
and Muratti. PMI market share of 26.6% was unchanged. Improved brand
mix and better pricing resulted in income growth of 24%. In September
2007, PMI replaced the entire L&M brand family with a completely new,
smoother tasting product line-up in response to changing adult
consumer preferences.
In Turkey, the total market was down slightly by 0.4% for the
full-year 2007 versus 2006, while PMI's market share declined 2.1
points to 40.4%, due mainly to the decline of lower-margin brands in
PMI's portfolio. Although PMI's shipments were down 1.6%, income grew
in the double digits, driven by strong pricing and growth in premium
brand volume.
In Ukraine, shipments grew 4.7% for the full-year 2007 and market
share rose 0.8 points to 33.9%, driven by adult consumer uptrading to
Marlboro, Parliament and Chesterfield. Profit growth was robust at
more than 25%.
ASIA
2007 Full-Year and Fourth-Quarter Results
In Asia, operating companies income decreased 3.6% to $1.8 billion
for the full-year 2007, primarily due to lower volume in Japan and
unfavorable currency of $36 million, partially offset by favorable
pricing. Operating companies income decreased 3.1% for the full-year
2007 when adjusted for the impact of the items shown in the table
below.
In the fourth quarter, operating companies income decreased 5.6%
to $390 million, primarily due to lower volume in Japan, partially
offset by favorable pricing. Operating companies income decreased 6.8%
for the fourth quarter of 2007 when adjusted for the impact of the
items shown in the table below.
Asia 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
---------------------------- ----------------------------
2007 2006 Change 2007 2006 Change
--------- --------- -------- --------- --------- --------
Reported
Operating
Companies
Income $1,802 $1,869 (3.6)% $390 $413 (5.6)%
Asset
impairment
and exit
costs 28 19 6 12
--------- --------- --------- ---------
Adjusted
Operating
Companies
Income $1,830 $1,888 (3.1)% $396 $425 (6.8)%
Adjusted OCI
Margin* 32.4% 34.1% (1.7) pp 29.2% 31.6% (2.4) pp
*Margins are calculated as adjusted operating companies income,
divided by net revenues excluding excise taxes.
PMI's full-year 2007 cigarette shipments of 211.7 billion units
rose 8.8%, reflecting the acquisition of Lakson in Pakistan and higher
volume in Indonesia and Korea, partially offset by a decline in Japan.
Excluding the Lakson volume, shipments were down 3.2% or 6.2 billion
units, reflecting the negative impact of inventory movements and the
lower in-market sales in Japan in the fourth quarter of 2007. In the
fourth quarter of 2007, PMI's cigarette shipment volume of 51.0
billion units rose 9.7%, due to acquisition volume in Pakistan and
gains in Indonesia, Korea and Thailand, partially offset by Japan.
Excluding acquisition volume in Pakistan, volume was down 5.1%.
In Indonesia, the total cigarette market was up 3.9% for the
full-year 2007. PMI market share was down slightly to 28.0%,
reflecting the share decline of A Mild and Dji Sam Soe, due to a
temporary stick-price disadvantage versus competitive brands,
partially offset by the growth of Marlboro, which gained 0.4 points to
4.0%. PMI's cigarette shipments grew 2.8% while Marlboro shipments
rose 14.7%, driven by focused marketing and improved distribution and
the July 2007 Marlboro kretek launch.
In Japan, the total cigarette market declined 4.8% or 13.0 billion
units for the full-year 2007, due primarily to the impact of the 2006
mid-year excise tax-driven price increase. PMI's in-market sales were
down 6.2% and market share declined 0.4 points to 24.3%, due mainly to
Lark. Marlboro's share at 9.9% was flat for the full-year 2007, but up
0.2 points in the fourth quarter of 2007 versus the year-earlier
period. For the full-year 2007, cigarette shipment volume was down
12.6%, reflecting lower in-market sales and a reduction in distributor
inventory durations at year-end 2007 versus 2006.
In Korea, the total market was up 4.6% for the full-year 2007.
PMI's shipments rose 20.3% and market share increased 1.3 points to
9.9%. The share increase was driven by Marlboro, Parliament and
Virginia Slims and benefited from recent new line extensions,
including Marlboro Filter Plus. Income was significantly higher in
2007.
LATIN AMERICA
2007 Full-Year and Fourth-Quarter Results
In Latin America, operating companies income decreased 48.4% to
$520 million in 2007, due mainly to the impact of the 2006 Dominican
Republic transaction, partially offset by higher pricing in 2007.
Operating companies income increased 14.5% for the full-year 2007 when
adjusted for the impact of the items shown in the table below.
In the fourth quarter of 2007, operating companies income
decreased 69.5% to $187 million, due mainly to the impact of the 2006
Dominican Republic transaction in the year-earlier period, partially
offset by higher pricing. Operating companies income increased 55.8%
for the fourth quarter of 2007 when adjusted for the impact of the
items shown in the table below.
Latin America 2007 Operating Companies Income ($ Millions)
----------------------------------------------------------------------
Full Year Fourth Quarter
---------------------------- ----------------------------
2007 2006 Change 2007 2006 Change
--------- --------- -------- --------- --------- --------
Reported
Operating
Companies
Income $520 $1,008 (48.4)% $187 $613 (69.5)%
Divested
businesses (51) (6)
Asset
impairment
and exit
costs 18 1 1
Gains on
sales of
businesses (488) (488)
--------- --------- --------- ---------
Adjusted
Operating
Companies
Income $538 $470 14.5% $187 $120 55.8%
Adjusted OCI
Margin* 27.0% 26.8% 0.2pp 32.7% 24.7% 8.0pp
*Margins are calculated as adjusted operating companies income,
divided by net revenues excluding excise taxes.
Full-year 2007 cigarette shipment volume of 89.9 billion units was
up 0.8%, as higher volume in Argentina more than offset declines in
Mexico and the Dominican Republic. Fourth quarter 2007 cigarette
shipment volume of 25.1 billion units was up 6.4%, driven by gains in
Argentina, Brazil, Colombia and acquisition volume in Mexico.
Excluding local brands acquired in Mexico, full-year 2007 volume was
down 0.3%, while fourth-quarter 2007 volume was up 2.5%.
In Argentina, the total cigarette market grew 3.0% for the
full-year 2007. PMI's market share increased 2.6 points to a record
68.9%, driven by Marlboro and the Philip Morris brand. PMI shipments
grew 7.1% and profits advanced more than 40%.
In Mexico, the total market declined 6.3% for the full-year 2007,
due to lower consumption following the price increases in January and
October 2007, as well as an unfavorable comparison with the prior
year, which included trade purchases in advance of the January 2007
tax-driven price increase. PMI's market share gain of 0.8 points to a
record 64.3% was fueled by Benson & Hedges and Delicados. Marlboro's
share at 47.7% was flat versus the prior year.
FINANCIAL SERVICES
2007 Full-Year and Fourth-Quarter Results
Philip Morris Capital Corporation (PMCC) reported operating
companies income of $421 million for the full-year 2007 and $89
million for the fourth quarter of 2007, versus $176 million for the
full-year 2006 and $38 million for the fourth quarter of 2006. Results
for the full-year 2007 include cash recoveries of $214 million related
to certain airline leases previously written down, versus a provision
of $103 million in 2006. Results for the fourth quarter of 2007
reflect higher asset management gains versus the same period in 2006.
Consistent with its strategic shift in 2003, PMCC is focused on
managing its existing portfolio of finance assets in order to maximize
gains and generate cash flow from asset sales and related activities.
PMCC is no longer making new investments and expects that its
operating companies income will fluctuate over time as investments
mature or are sold.
Altria Group, Inc. Profile
As of December 31, 2007, Altria owned 100% of Philip Morris
International Inc., Philip Morris USA Inc., John Middleton, Inc. and
Philip Morris Capital Corporation, and approximately 28.6% of
SABMiller plc. The brand portfolio of Altria's tobacco operating
companies includes such well-known names as Marlboro, L&M, Parliament,
Virginia Slims and Black & Mild. Altria recorded 2007 net revenues
from continuing operations of $73.8 billion.
Trademarks and service marks mentioned in this release are the
registered property of, or licensed by, the subsidiaries of Altria
Group, Inc.
A complete copy of Altria's audited 2007 financial statements will
be available through Altria's website after they are filed with the
Securities and Exchange Commission on or about February 4, 2008. If
you do not have Internet access but would like to receive a copy of
the 2007 audited financial statements for Altria, please call
toll-free (800) 367-5415 in the U.S. and Canada to request a copy.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and
other forward-looking statements that involve a number of risks and
uncertainties and are made pursuant to the Safe Harbor Provisions of
the Private Securities Litigation Reform Act of 1995. The following
important factors could cause actual results and outcomes to differ
materially from those contained in such forward-looking statements.
Altria Group, Inc.'s tobacco subsidiaries (Philip Morris USA Inc.,
John Middleton, Inc. and Philip Morris International Inc.) are subject
to intense price competition; changes in consumer preferences and
demand for their products; fluctuations in levels of customer
inventories; the effects of foreign economies and local economic and
market conditions; unfavorable currency movements and changes to
income tax laws. Their results are dependent upon their continued
ability to promote brand equity successfully; to anticipate and
respond to new consumer trends; to develop new products and markets
and to broaden brand portfolios in order to compete effectively with
lower-priced products; and to improve productivity.
Altria Group, Inc.'s tobacco subsidiaries continue to be subject
to litigation, including risks associated with adverse jury and
judicial determinations, and courts reaching conclusions at variance
with the company's understanding of applicable law and bonding
requirements in the limited number of jurisdictions that do not limit
the dollar amount of appeal bonds; legislation, including actual and
potential excise tax increases; discriminatory excise tax structures;
increasing marketing and regulatory restrictions; the effects of price
increases related to excise tax increases and concluded tobacco
litigation settlements on consumption rates and consumer preferences
within price segments; health concerns relating to the use of tobacco
products and exposure to environmental tobacco smoke; governmental
regulation; privately imposed smoking restrictions; and governmental
and grand jury investigations.
Altria Group, Inc. and its subsidiaries are subject to other risks
detailed from time to time in its publicly filed documents, including
its Annual Report on Form 10-K for the period ended December 31, 2006
and Quarterly Report on Form 10-Q for the period ended September 30,
2007. Altria Group, Inc. cautions that the foregoing list of important
factors is not complete and does not undertake to update any
forward-looking statements that it may make.
ALTRIA GROUP, INC. Schedule 1
and Subsidiaries
Condensed Statements of Earnings
For the Quarters Ended December 31,
(in millions, except per share data)
(Unaudited)
2007 2006 % Change
-----------------------------
Net revenues $ 18,229 $ 16,027 13.7 %
Cost of sales 4,048 3,836 5.5 %
Excise taxes on products (*) 8,976 7,413 21.1 %
-------------------
Gross profit 5,205 4,778 8.9 %
Marketing, administration and research
costs 1,959 1,822
Asset impairment and exit costs 58 48
(Gains) on sales of businesses - (488)
-------------------
Operating companies income 3,188 3,396 (6.1)%
Amortization of intangibles 10 6
General corporate expenses 95 139
Asset impairment and exit costs 47 7
-------------------
Operating income 3,036 3,244 (6.4)%
Interest and other debt expense, net 28 42
-------------------
Earnings from continuing operations
before income taxes, and equity
earnings and minority interest, net 3,008 3,202 (6.1)%
Provision for income taxes 862 860 0.2 %
-------------------
Earnings from continuing operations
before equity earnings and minority
interest, net 2,146 2,342 (8.4)%
Equity earnings and minority interest,
net 42 64
-------------------
Earnings from continuing operations 2,188 2,406 (9.1)%
Earnings from discontinued operations,
net of income taxes and minority
interest - 553
-------------------
Net earnings $ 2,188 $ 2,959 (26.1)%
===================
Per share data:
Basic earnings per share from continuing
operations $ 1.04 $ 1.15 (9.6)%
Basic earnings per share from
discontinued operations $ - $ 0.26
-------------------
Basic earnings per share $ 1.04 $ 1.41 (26.2)%
===================
Diluted earnings per share from
continuing operations $ 1.03 $ 1.14 (9.6)%
Diluted earnings per share from
discontinued operations $ - $ 0.26
-------------------
Diluted earnings per share $ 1.03 $ 1.40 (26.4)%
===================
Weighted average number of
shares outstanding - Basic 2,104 2,092 0.6 %
- Diluted 2,119 2,110 0.4 %
(*) The segment detail of excise taxes on products sold is shown in
the Net Revenues page.
ALTRIA GROUP, INC. Schedule 2
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended December 31,
(in millions)
(Unaudited)
Net Revenues US
tobacco European Union EEMA Asia
------------------------------------------
2007 $4,487 $ 6,429 $ 2,944 $ 2,748
2006 4,536 5,504 2,256 2,475
% Change (1.1)% 16.8% 30.5% 11.0%
Reconciliation:
---------------------------
For the quarter ended
December 31, 2006 $4,536 $ 5,504 $ 2,256 $ 2,475
Divested businesses - 2006 - - - -
Divested businesses - 2007 - - - -
Acquired businesses 15 - - 76
Currency - 686 307 108
Operations (64) 239 381 89
------------------------------------------
For the quarter ended
December 31, 2007 $4,487 $ 6,429 $ 2,944 $ 2,748
==========================================
(*) The detail of excise
taxes on products sold is
as follows:
2007 $ 826 $ 4,358 $ 1,445 $ 1,391
2006 $ 893 $ 3,710 $ 953 $ 1,132
2007 Currency increased
international tobacco
excise taxes $ - $ 472 $ 196 $ 78
Net Revenues Total
Latin International Financial
America tobacco services Total
------------------------------------------
2007 $1,527 $ 13,648 $ 94 $18,229
2006 1,211 11,446 45 16,027
% Change 26.1% 19.2% +100% 13.7%
Reconciliation:
---------------------------
For the quarter ended
December 31, 2006 $1,211 $ 11,446 $ 45 $16,027
Divested businesses - 2006 - - - -
Divested businesses - 2007 - - - -
Acquired businesses 32 108 - 123
Currency 43 1,144 - 1,144
Operations 241 950 49 935
------------------------------------------
For the quarter ended
December 31, 2007 $1,527 $ 13,648 $ 94 $18,229
==========================================
(*) The detail of excise
taxes on products sold is
as follows:
2007 $ 956 $ 8,150 $ 8,976
2006 $ 725 $ 6,520 $ 7,413
2007 Currency increased
international tobacco
excise taxes $ 26 $ 772 $ 772
ALTRIA GROUP, INC. Schedule 3
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended December 31,
(in millions)
(Unaudited)
Operating Companies
Income US tobacco European Union EEMA Asia
--------------------------------------------
2007 $ 1,089 $ 917 $ 516 $ 390
2006 1,125 781 426 413
% Change (3.2)% 17.4% 21.1% (5.6)%
Reconciliation:
-------------------------
For the quarter ended
December 31, 2006 $ 1,125 $ 781 $ 426 $ 413
Divested businesses -
2006 - - - -
Italian antitrust charge
- 2006 - - - -
Asset impairment and exit
costs - 2006 10 23 2 12
Gains on sales of
businesses - 2006 - - -
Provision for airline
industry exposure - 2006 - - - -
--------------------------------------------
10 23 2 12
--------------------------------------------
Divested businesses -
2007 - - - -
Asset impairment and exit
costs - 2007 (16) (36) - (6)
Implementation costs -
2007 (15) - - -
Recoveries from airline
industry exposure - 2007 - - - -
--------------------------------------------
(31) (36) - (6)
--------------------------------------------
Acquired businesses 7 - - 3
Currency - 123 25 -
Operations (22) 26 63 (32)
--------------------------------------------
For the quarter ended
December 31, 2007 $ 1,089 $ 917 $ 516 $ 390
============================================
Operating Companies Total
Income Latin International Financial
America tobacco services Total
--------------------------------------------
2007 $ 187 $ 2,010 $ 89 $3,188
2006 613 2,233 38 3,396
% Change (69.5)% (10.0)% +100% (6.1)%
Reconciliation:
-------------------------
For the quarter ended
December 31, 2006 $ 613 $ 2,233 $ 38 $3,396
Divested businesses -
2006 (6) (6) - (6)
Italian antitrust charge
- 2006 - - - -
Asset impairment and exit
costs - 2006 1 38 - 48
Gains on sales of
businesses - 2006 (488) (488) - (488)
Provision for airline
industry exposure - 2006 - - - -
--------------------------------------------
(493) (456) - (446)
--------------------------------------------
Divested businesses -
2007 - - - -
Asset impairment and exit
costs - 2007 - (42) - (58)
Implementation costs -
2007 - - - (15)
Recoveries from airline
industry exposure - 2007 - - - -
--------------------------------------------
- (42) - (73)
--------------------------------------------
Acquired businesses 8 11 - 18
Currency 2 150 - 150
Operations 57 114 51 143
--------------------------------------------
For the quarter ended
December 31, 2007 $ 187 $ 2,010 $ 89 $3,188
============================================
ALTRIA GROUP, INC. Schedule 4
and Subsidiaries
Condensed Statements of Earnings
For the Twelve Months Ended December 31,
(in millions, except per share data)
(Unaudited)
2007 2006 % Change
---------------------------
Net revenues $73,801 $67,051 10.1 %
Cost of sales 16,547 15,540 6.5 %
Excise taxes on products (*) 35,750 31,083 15.0 %
-----------------
Gross profit 21,504 20,428 5.3 %
Marketing, administration and research
costs 7,318 7,170
Italian antitrust charge - 61
Asset impairment and exit costs 539 136
(Gains) on sales of businesses - (488)
(Recoveries) Provision (from) for airline
industry exposure (214) 103
-----------------
Operating companies income 13,861 13,446 3.1 %
Amortization of intangibles 28 23
General corporate expenses 487 494
Asset impairment and exit costs 111 42
-----------------
Operating income 13,235 12,887 2.7 %
Interest and other debt expense, net 215 367
-----------------
Earnings from continuing operations before
income taxes, equity earnings and
minority interest, net 13,020 12,520 4.0 %
Provision for income taxes 4,096 3,400 20.5 %
-----------------
Earnings from continuing operations before
equity earnings and minority interest,
net 8,924 9,120 (2.1)%
Equity earnings and minority interest, net 237 209
-----------------
Earnings from continuing operations 9,161 9,329 (1.8)%
Earnings from discontinued operations, net
of income taxes and minority interest 625 2,693
-----------------
Net earnings $ 9,786 $12,022 (18.6)%
=================
Per share data (**):
Basic earnings per share from continuing
operations $ 4.36 $ 4.47 (2.5)%
Basic earnings per share from discontinued
operations $ 0.30 $ 1.29
-----------------
Basic earnings per share $ 4.66 $ 5.76 (19.1)%
=================
Diluted earnings per share from continuing
operations $ 4.33 $ 4.43 (2.3)%
Diluted earnings per share from
discontinued operations $ 0.29 $ 1.28
-----------------
Diluted earnings per share $ 4.62 $ 5.71 (19.1)%
=================
Weighted average number of
shares outstanding - Basic 2,101 2,087 0.7 %
- Diluted 2,116 2,105 0.5 %
(*) The segment detail of excise taxes on products sold is shown in
the Net Revenues page.
(**) Basic and diluted earnings per share are computed for each of the
periods presented.
Accordingly, the sum of the quarterly earnings per share amounts may
not agree to the year-to-date amounts.
ALTRIA GROUP, INC. Schedule 5
and Subsidiaries
Selected Financial Data by Business Segment
For the Twelve Months Ended December 31,
(in millions)
(Unaudited)
Net Revenues US tobacco European Union EEMA Asia
--------------------------------------------
2007 $ 18,485 $ 26,682 $12,149 $11,099
2006 18,474 23,752 9,972 10,142
% Change 0.1% 12.3% 21.8% 9.4%
Reconciliation:
-------------------------
For the twelve months
ended December 31, 2006 $ 18,474 $ 23,752 $ 9,972 $10,142
Divested businesses -
2006 - - - -
Divested businesses -
2007 - - - -
Acquired businesses 15 - - 227
Currency - 2,306 760 371
Operations (4) 624 1,417 359
--------------------------------------------
For the twelve months
ended December 31, 2007 $ 18,485 $ 26,682 $12,149 $11,099
============================================
(*) The detail of excise
taxes on products sold
is as follows:
2007 $ 3,452 $ 17,869 $ 5,801 $ 5,452
2006 $ 3,617 $ 15,859 $ 4,365 $ 4,603
2007 Currency increased
international tobacco
excise taxes $ - $ 1,558 $ 439 $ 296
Net Revenues Total
Latin International Financial
America tobacco services Total
--------------------------------------------
2007 $ 5,166 $ 55,096 $ 220 $73,801
2006 4,394 48,260 317 67,051
% Change 17.6% 14.2% (30.6)% 10.1%
Reconciliation:
-------------------------
For the twelve months
ended December 31, 2006 $ 4,394 $ 48,260 $ 317 $67,051
Divested businesses -
2006 - - - -
Divested businesses -
2007 - - - -
Acquired businesses 143 370 - 385
Currency 76 3,513 - 3,513
Operations 553 2,953 (97) 2,852
--------------------------------------------
For the twelve months
ended December 31, 2007 $ 5,166 $ 55,096 $ 220 $73,801
============================================
(*) The detail of excise
taxes on products sold
is as follows:
2007 $ 3,176 $ 32,298 $35,750
2006 $ 2,639 $ 27,466 $31,083
2007 Currency increased
international tobacco
excise taxes $ 42 $ 2,335 $ 2,335
ALTRIA GROUP, INC. Schedule 6
and Subsidiaries
Selected Financial Data by Business Segment
For the Twelve Months Ended December 31,
(in millions)
(Unaudited)
Operating Companies
Income US tobacco European Union EEMA Asia
---------------------------------------------
2007 $ 4,518 $ 4,173 $ 2,427 $ 1,802
2006 4,812 3,516 2,065 1,869
% Change (6.1)% 18.7% 17.5% (3.6)%
Reconciliation:
------------------------
For the twelve months
ended December 31, 2006 $ 4,812 $ 3,516 $ 2,065 $ 1,869
Divested businesses -
2006 - - - -
Italian antitrust charge
- 2006 - 61 - -
Asset impairment and
exit costs - 2006 10 104 2 19
Gains on sales of
businesses - 2006 - - - -
Provision for airline
industry exposure -
2006 - - - -
---------------------------------------------
10 165 2 19
---------------------------------------------
Divested businesses -
2007 - - - -
Asset impairment and
exit costs - 2007 (344) (137) (12) (28)
Implementation costs -
2007 (27) - - -
Recoveries from airline
industry exposure -
2007 - - - -
---------------------------------------------
(371) (137) (12) (28)
---------------------------------------------
Acquired businesses 7 (2) - 12
Currency - 417 90 (36)
Operations 60 214 282 (34)
---------------------------------------------
For the twelve months
ended December 31, 2007 $ 4,518 $ 4,173 $ 2,427 $ 1,802
=============================================
Operating Companies Total
Income Latin International Financial
America tobacco services Total
---------------------------------------------
2007 $ 520 $ 8,922 $ 421 $13,861
2006 1,008 8,458 176 13,446
% Change (48.4)% 5.5% +100% 3.1%
Reconciliation:
------------------------
For the twelve months
ended December 31, 2006 $ 1,008 $ 8,458 $ 176 $13,446
Divested businesses -
2006 (51) (51) - (51)
Italian antitrust charge
- 2006 - 61 - 61
Asset impairment and
exit costs - 2006 1 126 - 136
Gains on sales of
businesses - 2006 (488) (488) - (488)
Provision for airline
industry exposure -
2006 - - 103 103
---------------------------------------------
(538) (352) 103 (239)
---------------------------------------------
Divested businesses -
2007 - - - -
Asset impairment and
exit costs - 2007 (18) (195) - (539)
Implementation costs -
2007 - - - (27)
Recoveries from airline
industry exposure -
2007 - - 214 214
---------------------------------------------
(18) (195) 214 (352)
---------------------------------------------
Acquired businesses 6 16 - 23
Currency - 471 - 471
Operations 62 524 (72) 512
---------------------------------------------
For the twelve months
ended December 31, 2007 $ 520 $ 8,922 $ 421 $13,861
=============================================
ALTRIA GROUP, INC. Schedule 7
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Quarters Ended December 31,
($ in millions, except per share data)
(Unaudited)
Diluted
Net Earnings E.P.S.
------------ ------------
2007 Continuing Earnings $ 2,188 $ 1.03
2006 Continuing Earnings $ 2,406 $ 1.14
% Change (9.1)% (9.6)%
Reconciliation:
-------------------------------------------
2006 Continuing Earnings $ 2,406 $ 1.14
2006 Asset impairment and exit costs 38 0.02
2006 Gains on sales of businesses (317) (0.15)
2006 Tax items (126) (0.06)
------------ ------------
(405) (0.19)
------------ ------------
2007 Asset impairment, exit and
implementation costs (85) (0.04)
2007 Tax items 154 0.07
------------ ------------
69 0.03
------------ ------------
Currency 104 0.05
Change in shares - -
Change in tax rate (104) (0.05)
Operations 118 0.05
------------ ------------
2007 Continuing Earnings $ 2,188 $ 1.03
2007 Discontinued Earnings $ - $ -
------------ ------------
2007 Net Earnings $ 2,188 $ 1.03
============ ============
2007 Continuing Earnings Excluding Special
Items $ 2,119 $ 1.00
2006 Continuing Earnings Excluding Special
Items $ 2,001 $ 0.95
% Change 5.9 % 5.3 %
ALTRIA GROUP, INC. Schedule 8
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Twelve Months Ended December 31,
($ in millions, except per share data)
(Unaudited)
Diluted
Net Earnings E.P.S. (*)
------------ ------------
2007 Continuing Earnings $ 9,161 $ 4.33
2006 Continuing Earnings $ 9,329 $ 4.43
% Change (1.8)% (2.3)%
Reconciliation:
----------------------------------------
2006 Continuing Earnings $ 9,329 $ 4.43
2006 Italian antitrust charge 61 0.03
2006 Asset impairment and exit costs 118 0.05
2006 Gains on sale of businesses (317) (0.15)
2006 Interest on tax reserve transfers
to Kraft 29 0.01
2006 Provision for airline industry
exposure 66 0.03
2006 Tax items (757) (0.35)
------------ ------------
(800) (0.38)
------------ ------------
2007 Asset impairment, exit and
implementation costs (452) (0.21)
2007 Recoveries from airline industry
exposure 137 0.06
2007 Interest on tax reserve transfers
to Kraft (50) (0.02)
2007 Tax items 251 0.12
------------ ------------
(114) (0.05)
------------ ------------
Currency 316 0.15
Change in shares - (0.02)
Change in tax rate (41) (0.02)
Operations 471 0.22
------------ ------------
2007 Continuing Earnings $ 9,161 $ 4.33
2007 Discontinued Earnings $ 625 $ 0.29
------------ ------------
2007 Net Earnings $ 9,786 $ 4.62
============ ============
2007 Continuing Earnings Excluding
Special Items $ 9,275 4.38
2006 Continuing Earnings Excluding
Special Items $ 8,529 4.05
% Change 8.7 % 8.1 %
(*) Basic and diluted earnings per share are computed for each of the
periods presented. Accordingly, the sum of the quarterly earnings per
share amounts may not agree to the year-to-date amounts.
ALTRIA GROUP, INC. Schedule 9
and Subsidiaries
Condensed Balance Sheets
(in millions, except ratios)
(Unaudited)
December 31, December 31,
2007 2006
------------ ------------
Assets
--------------------------------------------
Cash and cash equivalents $ 6,498 $ 4,781
All other current assets 16,392 13,724
Property, plant and equipment, net 8,857 7,581
Goodwill 8,001 6,197
Other intangible assets, net 4,953 1,908
Other assets 6,447 6,837
Assets of discontinued operations - 56,452
------------ ------------
Total consumer products assets 51,148 97,480
Total financial services assets 6,063 6,790
------------ ------------
Total assets $ 57,211 $ 104,270
============ ============
Liabilities and Stockholders' Equity
--------------------------------------------
Short-term borrowings $ 638 $ 420
Current portion of long-term debt 2,445 648
Accrued settlement charges 3,986 3,552
All other current liabilities 11,713 10,941
Long-term debt 7,463 6,298
Deferred income taxes 2,182 1,391
Other long-term liabilities 4,627 5,208
Liabilities of discontinued operations - 29,495
------------ ------------
Total consumer products liabilities 33,054 57,953
Total financial services liabilities 5,603 6,698
------------ ------------
Total liabilities 38,657 64,651
Total stockholders' equity 18,554 39,619
------------ ------------
Total liabilities and stockholders' equity $ 57,211 $ 104,270
============ ============
Total consumer products debt $ 10,546 $ 7,366
Debt/equity ratio - consumer products 0.57 0.19
Total debt $ 11,046 $ 8,485
Total debt/equity ratio 0.60 0.21
CONTACT: Altria Group, Inc.
Nicholas M. Rolli, 917-663-3460
or
Timothy R. Kellogg, 917-663-2759
SOURCE: Altria Group, Inc.
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