Altria Group Inc. (NYSE:MO) Q1 2016 Earnings Conference Call - Final Transcript

Apr 28, 2016 • 09:00 am ET


Altria Group Inc. (NYSE:MO) Q1 2016 Earnings Conference Call - Final Transcript


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Good day and welcome to the Altria Group 2016 First Quarter Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Altria's management and the question-and-answer session. (Operator Instructions)

If you would now like to turn the call over to Ms. Sarah Knakmuhs, Vice President, Investor Relations for Altria client services. Please go ahead, ma'am.

Sarah Knakmuhs

Thank you. Good morning and thank you for joining us. We are here this morning with Marty Barrington, Altria's CEO; and Billy Gifford, Altria's CFO, to discuss Altria's 2016 first quarter business results.

Earlier today, we issued a press release regarding these results. For additional review, please see the earnings release on our website at or through the Altria investor app. During our call today, unless otherwise stated, we are comparing results to the same period in 2015.

(Forward Looking Cautionary Statements)

Future dividend payments and share repurchases remain subject to the discretion of Altria's Board. The timing of share repurchases depends on marketplace conditions and other factors. Altria reports its financial results in accordance with US generally accepted accounting principles.

Today's call will contain various operating results on both a reported and adjusted basis, which excludes items that affect the comparability of reported results. Descriptions of these non-GAAP financial measures and reconciliations are included in today's release, which is available on our website and via the Altria investor app.

Now I'll turn the call over to Marty.

Marty Barrington

Thanks, Sarah. Good morning, everyone. Altria is off to an excellent start in 2016, growing adjusted diluted earnings per share by 14.3% despite a tough 2015 comparison. Both the smokeable and smokeless product segments saw robust adjusted operating companies' income growth and expanded margins.

Altria paid over $1.1 billion in dividends. So once again, our first-quarter results illustrate the strength of our core tobacco businesses and our focus on execution. Here are the highlights from the quarter.

The smokeable products segment continued its outstanding performance, with contributions across the brand portfolio. In the quarter, adjusted operating companies' income grew 9.2%, primarily driven by higher net pricing, higher volume, and lower SG&A and manufacturing costs, partially offset by higher resolution expense.

Cigarette industry volume declines were moderate in the quarter, supported by lower gas prices and employment and wage growth, which continued to benefit adult tobacco consumers. PM USA's volume did even better than the industry decline rate due to modest share gains, though the growth was flattered a bit by an additional shipping day and trade inventory movements. For the quarter, PM USA's total retail share was 51.4%, up three tenths of a percentage point. Marlboro's retail share remained at 44%, and L&M gained share in discount.

In the machine-made large cigar category, Middleton's focus on the more profitable tipped cigar segment continued to produce strong results. Middleton's volumes were up 8.3%. So, we are very pleased with the smokeable segment's performance. PM USA's investments to maintain a vibrant Marlboro franchise and our long-term approach to the business continue to pay off.