Altria Group Inc. (NYSE:MO) Q2 2016 Earnings Conference Call - Final Transcript

Jul 27, 2016 • 09:00 am ET


Altria Group Inc. (NYSE:MO) Q2 2016 Earnings Conference Call - Final Transcript


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

I would now like to turn the call over to Ms. Sarah Knakmuhs, VP, IR 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, our CFO to discuss Altria's 2016 second quarter and first half business results. Earlier today we issued a press release providing these results, which is available on our website at or through the Altria investor app.

(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 U.S. 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 earnings release.

Now I will turn the call over to Marty.

Marty Barrington

Thanks, Sarah. Good morning, everyone, thanks for joining us. Altria Group delivered strong 2016 second quarter and first half results, growing adjusted diluted earnings per share by 9.5% in the second quarter and by nearly 11% for the first half.

Our core tobacco businesses continued to produce very strong results with yet another solid quarter of income and retail share performance. Marlboro matched the record retail share it set in the first half last year, and Copenhagen and Skoal produced excellent share results on a combined basis. And we continued to reward our shareholders, paying out more than $2.2 billion in dividends to shareholders thus far in 2016.

So here are some of the operating highlights from the quarter and the first half. The smokeable product segment continued to produce excellent results. Despite difficult year-over-year comparisons, it grew adjusted operating companies income by 4.5% in the second quarter and nearly 7% for the first half.

You will recall that last year the smokeable segment grew adjusted OCI by nearly 16% in the second quarter and over 14% for the first half. This growth in 2015 benefited from higher reported volumes at PM USA, driven by stable industry volume and a trade inventory build influenced by upcoming cigarette excise tax increases.

In the second quarter of 2016, the trade depleted inventory levels. So when adjusted for these inventory movements, PM USA estimates its second quarter cigarette volume declined 3%, in line with PM USA's estimate for the total industry decline rate.

For the half, PM USA estimates that its adjusted cigarette volume declined 1.5% in line with the industry. For the first half of 2016, Marlboro's retail share was unchanged at 44.1%, matching its record share level set a year ago.

Marlboro's second quarter retail share