MO - Earnings call transcript Q4 2017

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Operator

Good day and welcome to the Altria Group 2017 fourth quarter and full year 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. In order to ask a question, please press star followed by the number one on your touchtone phone at any time. Representatives of the investment community and media on the call will be able to ask questions following the conclusion of the prepared remarks. I would now like to turn the call over to Mr. Investor Altria President, Services. Vice Marshall, Relations Client for Bill Please sir. go ahead,

Bill Marshall

thank Good joining Bridget. you, you morning Thank and for us.

quarter discuss We’re and investor here Billy XXXX results. to and results we providing altria.com issued is Altria’s Barrington, year a fourth Earlier app. Altria’s press today this morning at Gifford, available Altria with Altria’s on through Marty website and the business full these release CEO; which CFO our

same we’re our XXXX. period today the otherwise results During in stated, comparing call to unless

Our in generally that cautionary will payments remarks results repurchases remain of are marketplace repurchases cautionary today’s and of actual the factors and and share adjusted financial today’s financial comparability other statements and earnings discretion Please factors. review non-GAAP various projections Altria reported items results. a The results operating dividend Today’s timing cause contain forward-looking at to of of differ the statement end for to basis. reported board. release. results. could future depends call share of forward-looking subject reconciliations Altria’s its the these reports the measures principles. and Adjusted U.S. included exclude materially accordance results contain release and on both and accounting special from on affect earnings in that of Future section with results various Descriptions conditions accepted projections.

Now I’ll call Marty. the turn to over

Martin Barrington

$X.X XXXX, performance out businesses joining continued We we in In success by everyone earnings for Altria of XX.X%, XXXX. another federal and effects than dividends more billion the morning complemented shares. share and in rewarding paid delivered year Good $X.X thanks income than on repurchased diluted adjusted our to We and the tax and Altria on our core Bill. billion financial of the per tobacco call. reform. in more Thanks built grew strong focus outstanding shareholders. had

value repurchased dividends our Altria’s in XXX% for the company’s through and billion years of paid in shares. of long-term five-year $X of our of than Tobacco XXXX we the four proud shareholder XX%-plus outperformed S&P track return return creating XXXX, and From period, follows end more than record returns. S&P billion this both extremely Index are of total We total our in shareholders. $XX Food, shareholder Beverage, XX%. XXX of X.X% Over more the by and shareholders consecutive XXXX

a legislation Let’s the innovating continued we tax to at to say XXXX, full for while word year In future. enacted then guidance. first look core maximize the before results the reform our recently and we’ll turning about XXXX

Our core unique tobacco businesses challenges some income a growth that year already and delivered margins despite business. their each presented strong in expanded high

for products. We the plans risk products for in iQOS, Mark. of XXXX new initiatives in prepared Snuff, leader also a success, our invested including accomplished our strategic market U.S. in future toward becoming progress at risk advanced application Copenhagen We innovative goal for and several tobacco significant Nu product reduced non-combustible authorized lead making important modified commercialization

smokable and XXXX, Black delivered to strategy Mild continue course is percentage the and metrics, while operating of maintaining X In profitable. & to term. and category OCI segment brand income maximize by on demographics, adjusted to XX.X%. strong Across Marlboro of points smokable to Our product equity, our expanded income growth adjusted over margins leading Marlboro highly be X% have company the continues long momentum strong segment

SET share the the Marlboro’s long $X share challenge fourth the to effects XX.X% which over through a the marketing which packaging elevated question of retail XXXX, a the pack in for of into share per brand average of presented product share, describing, by for year. four-tenths by a increase XXXX far, by is Marlboro continued quarter. grew As point resources it we’ve competitive leading is reallocating explained to California’s by innovation. point been challenging We performance decline look The USA, by no but declined the a but and activity, dynamics of at and that annually, remains share and investing and there’s an PM term, tenth about XXXX it from addressing specifically

Hedges began On in the Marlboro Washington portfolio. USA an Marlboro Washington Marlboro. reseal Black stores to product side, Marlboro’s are enhances California and Label PM expansion Label menthol Ice. October, November, and and comes expanded innovations DC State, and of Ice pack. this Ice Marlboro innovative complement latest menthol & offerings Marlboro of week Maryland, in select In Black Virginia, PM expansion the in Marlboro into from its menthol USA USA national Benson In the PM and Marlboro’s announced

Nat and for presence stabilize actions the these long premium help Nat the team brand, portfolio share a super enhance Sherman now for we and our integrated Marlboro’s for production expanded the PM planned Sherman, lead fourth perspective, Since test and premium Sherman market expect XXXX with system. the We USA’s term. segment. successful a capabilities, quarter, a Altria with its acquisition distribution in Nats. other cigarette them the cigarette acquisition, to repositioned In began XXXX, aligned strong has the its From Colorado offerings Nat in

with more the premium pleased results in compete about opportunity super to segment. effectively very early We’re the excited and

containing and to smokeless predominantly have retail year Copenhagen of the for a behind on continued adjusted Drug than our world. while retail of OCI and refining On XX.X%. investments The despite segment Skoal to The point and profitability. share the profitability products combined more growing product Copenhagen We grew basis, of Skoal’s retail focus Copenhagen’s its outstanding USSTC’s Skoal. while improved and XXXX profitable point, non-combustible enhance growth its half in also to overall the a share Skoal nicotine most Food declined business to Copenhagen the blends voluntary tobacco offerings. by authorization in a share grow USSTC non-combustible nine-tenths snus U.S. recall USSTC, reflecting investing for continued XX% continued portfolio delivered share recall. In Administration. build we the share affected in

had with category of progress These of Vim on We’re national and Copenhagen full tobacco, it quarter. of development acquisitions. its FDA and which regulatory grew through by a team in in made investor combination act Mark digital systems, and products include we PM closed Mark’s PMI, distribution and of with to to Nu e-vapor, The USA excited plans approximately ready In the products. application volume tank are and internal heated the Elite and distribution are by role development, growth. snuff In retail performance our this portfolio, dynamic recognizes commercialization Nu of to a year. which iQOS. product partnerships, risk. two through schedule and joint authorization In Apex pleased XX,XXX pod-based MRTP Bold has Sync, the The continuum displayed including challenging significant a MarkTen, share Mark team our MarkTen for by development which the promptly two very summary, built is that is expanded submitted iQOS, be consumer of at strategic year Nu MarkTen’s engagement day, expanded approximately on driven channel. stores. strategies. a program At approximately expanded upon about we’re MarkTen for USSTC’s a XX.X% XX% MarkTen mainstream framework

tax recently the to legislation. turn now reform enacted Let’s

tax from results earlier, strong As our reform. XXXX complemented the businesses operating mentioned were we by

and U.S. deemed XXXX a of rate. AB repatriation tax-free tax result the InBev an a and going related adjusted our will to rate from we As last lower federal XXXX dividends were tax XX% in Beginning adjusted received taxes results and legislation, basis benefit corporate on our dividends. one-time the the AB lower InBev year from on statutory lowered forward,

to turn for Let’s our guidance XXXX.

from to per of diluted result growth full-year share EPS to This share from of higher of iQOS, net business. earnings areas XXXX growth launches earnings long-term investments our focused reform and concepts. XXXX expected as on we regulatory rate reflects of range $X.XX of retail making product to strategic represents expect brands, development tax science, base $X.XX key our adjusted and of innovative including a diluted We fixtures, to a are including enhancements deliver long-term equity These in XX% a $X.XX. retail per adjusted are XXXX investments net future and XX%

anticipated guidance iQOS designed investments equity Marlboro’s in to share. example, both the enhancements lead help reflects market and stabilize For our

are XXXX reinvestment to of includes with years. subsequent plan a we through one-third in level above aspiration adjusted X% investment long-term Our deliver approach receiving X% EPS moderating our approximately of this benefit XXXX. will diluted of balanced total growth rates tax annual believe reform the We

our to more been change years. the Officer, won’t years contributors the Before turning say the turn our is May made over forward. team after to firmly Howard, until later he’s retire strategies a and Billy process, I let and have Howard confident Howard following succession the it, our serve today the May, this I’ll just with of key and Chairman delivered us. company immensely decision business his Through I down future year with results. leadership for about our qualified the XX-year my right as to elected leadership with to we about continuing step in have annual the imagine XX ready to this meeting and I have Gifford serve Billy, winning word and to Altria, two believe deliver company’s Though reflecting and Billy, the service several success to Chairman company. when that our talented Willard leadership shareholder and XX. and for strong to positioned Billy. having me career we the lead Financial and announce team occur next Chief as leadership qualified our of its especially leaders served is long-term members CEO. last board results Howard numerous in in to well I’m Vice positions contributions the has can’t elected during most valuable been has call other planning company. take his Howard Billy

Now our performance. here’s detail Billy with more on

William Gifford

Thanks good everyone. Marty, and morning

smokable further Let’s product color the with some start segment. on

decline, year, cigarette movements, and by declined an adjusted continues declining fourth shipment declined shipping declined cigarette shipment day. adjusted PM rate The one inventor X.X% industry volume Total volume For reported an When primarily When shipment volumes driven X%. X.X%. fewer X.X%. volume declined share cigarette were cigar movements, quarter the by smokable extremely USA’s estimated USA’s calendar The shipment total business declines, noisy industry reported cigarette full volume industry’s differences, for the especially declined for X% by cigarette segment by cigarette PM and to of perform volume estimated retail X.X%. with estimated an well. inventory by by numbers

year, volumes Mild as nearly full volumes the XX% grew cigar Black & For grew XX.X%.

quarter, to fourth the by reported smokeless of category investments, smokable months. expanded increased pricing the estimates higher by the point declined For adjusted fourth adjusted that was movement, percentage adjusting primarily partially In lower the the margins adjusted margins trade smokeless by expanded factors. to USSTC volume resolution adjusted volume promotional points full percentage volume USSTC that XX.X%, smokeless that segment the segment shipment offset driven by higher six-tenths the for offset In percentage margins three to in XX.X%, lower by In essentially inventory segment OCI to six and After to year. percent. OCI lower expense. increased primarily the inventory cost, by significant unchanged products past partially points the cost declined adjusting higher fourth smokeless X.X unfavorable OCI shipment full and X.X a for quarter, USSTC’s by Smokeless lower over from the by adjusted part XX.X% declined X.X smokeless margins SG&A products higher mix. X% USSTC After products by primarily percentage X.X% driven OCI volume year, movements, to for by estimates XX.X% by declined shipment due volume and In pricing year, X.X%. products estimates points primarily lost recall. same full-year segment, by adjusted trade due for reflecting quarter, voluntary volumes expense. pricing,

results primarily our due the the was InBev’s our from alcohol it segment In essentially adjusted assets, OCI October. volume. lower InBev to beer, quarter quarter the fourth OCI declined adjusted from to in year for earnings million, In third wine Turning AB in reported ago reflecting fourth period. Michelle’s were quarter, year Anheuser-Busch investment Ste. XX% $XXX which adjusted full unchanged equity

detail. of as year a a reminder, adjusted from the There so a As ongoing one Marty essentially more moment mentioned take investment our earnings a results no we effects tax let and equity quarter tax our of main three reform, had me lag. reporting to beer fourth explain ago in business. reform bit were result this a quarter on

new XXXX deferred lower in reflect rate. liabilities to the First, our tax net revalued we

We our page related posted The historic our our benefit more called earnings net share results items included of often beer to accumulated also tax a reflected tax. investment, in deemed tax and housekeeping these to incurred we’ve is one-time our details altria.com. repatriation reported a from on of

going Second, we taxes and beginning AB XXXX InBev lower forward, from we’ll in dividends receive. on benefit

rate adjusted and lower to lower XX%, the Third, to AB be XX% tax we primarily expect XXXX due rate and tax taxes InBev dividends. our corporate on between

we Turning $X to share in fourth XX. to $XX repurchase program million as authorized of and shares in $XXX of in expect repurchase by our $X.X end subsequently program more share approximately the which new repurchased January, the December quarter, program, completed the XXXX, yesterday a the than billion we XXXX. program including the million board billion We complete leaving in in

be full-year depreciation remarks, and expect amortization concludes take That and approximately and $XXX and and Marty now capital We $XXX XXXX are expenses expenditures $XXX million questions. our between happy of million to your I million. to prepared

While which With include compiled, have available are reconciliations on remind you questions? altria.com. inventory, usual do and items. being our metrics, earnings release the posted and we also pricing, are that our other non-GAAP quarterly any I’ll today’s We’ve housekeeping that, Operator, calls

Operator

Please first Our with go from Growe Stifel. question instructions] [Operator Chris comes ahead.

Chris Growe

Hi, morning. good

Martin Barrington

Hi Chris.

Chris Growe

to and wanted you Hi, surprised It’s deserved. the to was well this Marty, very morning, obviously but well. wish see news

Martin Barrington

Chris. Thanks

Chris Growe

a had questions very Just couple quickly.

could XXXX. throughout expect release, TPSAC than last the kind like that meeting on how bit hopefully came Morris, your in week. do that from of process a guess maybe haven’t voting it’s the meeting we there, launch a sounds get and just not at of I It I decision, the looking maybe realize that We the heard, out thoughts and how binding of a went press but assessment to result mixed of it’s you year. of other a the Philip terms you’re

Martin Barrington

the Yes. Look, way I has to the best approval, I required and the reduces obviously, who it’s the what that. and presented responding been it I Chris, I thought it’s thoroughly important MRTP to important it. did been and of in work to widely covered teams exposure job continue presenting of process the an the to TPSAC good very of step to to which we’re convinced in be was with the amazingly that’s much significantly case. that get forward concern, and constituents PMI an thought an it written evidence FDA the believe about that extremely science questions. and that looking iQOS agree we see on continuing was analyzed, convinced, so think forward to with is will

had, Our if the anything, a effect it view positive application. PMTA that on is

Chris Growe

about just Then in you. question your thank for great, making investments you That’s XXXX. a you’re

too obviously of back business. say most or Is base we this without you year, characterize have a well the underlying where risk and of getting of behind specific the thing, dollar as business? and going incremental behind into way risk you’re array I lot curious investments, activity think more kind there about, investment you investing, investments you any and I’m can reduced- allows but as for reduced that. the of product, broad as the products it is putting--is MRTPAs a that a of better in have lot you’re tax of think which areas benefit course,

Martin Barrington

two about remarks, of both. point will release help, competition. can to be if It’s both within but inflection articulate in We the it you in bounds the an to trying wise then try give it and tried to Chris, I our of

innovative iQOS in areas for approval, have is significant - to products, a that we there. which expect investment we’ve plan, our if you we put the have us, out, for we’ve that so look forward investments obviously there step We so and at called several that’s get launch

MarkTen We’re investment and product, there. is be expand there’s a going to Elite, to which going pod-based

Brian we of supported we’re think do that all the who now trying and of Benson digital an what for of equity reform, make Verve investments sure That’s pay make national from is Hedges good be course business of long-term I around our I TPSAC the brands and day, because benefits investment those the all platform, returns remarks to so and whether science, a for strong. is the have will those from by good it’s understand trials, very successful of why remember investment. regulatory shareholders. invest some have, are Ice Marlboro improving the the product, the has to those takes tax in so or our long-term we that science of the that have good we of that watched or that expansion was you In clinical we they year & You’ll all it’s talking about the but in example, our Quigley importance so expansion what areas having done core, to further now described

to Chris, about. as don’t are appreciate, but thinking want I can get areas numbers, those into we’re you So the

Chris Growe

I appreciate that, thank you .

Operator

next Hong Your Judy comes with from Sachs. Goldman question

Judy Hong

morning. good you, Thank

Martin Barrington

Hi Judy.

Judy Hong

it as this or a maybe to you’re you to relatively how because this and to share guess XXXX, year. performance in thinking outside in obviously do terms pricing for Marty. that the and XXXX, Marlboro, about people California how share when to of Marlboro of and guess going competitive implies just promotion. think a elevated innovation me potential of case, performance on in in so you’re performance is share about wishes driven about soft talked lot you if the tax well, concerned sounds activity, lot not for and elaborate Best of start to guidance, I California equity progress going because given California activity. lap like that it you changes from Then back expect April that I you being because investment could I the you there’s investments Marlboro’s of think

Martin Barrington

Sure.

good description the your a about it’s is going is one to that innovation-driven. think I investments, be equity which and

Our not is smokable over best measured income Share won’t one, important, multiple metrics. per remarks is but that. do to only it’s share, to maintaining team income. it’s pack excellent is it’s where I at segment one, but at time, do, and of in over SET Marlboro it be and news fourth $X measured already that we reprise call strategy when market a there. so I the is the to maximize a the in and I once, in California, to think, while always quarter, in maximize Momentum the done but momentum. the all continues but and hopefully it’s is has in shape, I the we of California, we’re full made demographics The good we’ve unique know Marlboro some section its because which stabilize the the to you look increase out that in from equity, size reset know really objective, When is the this challenges. profitability. Marlboro’s share heard stabilized which best disrupted base. believe the it, you it’s within strategy, me What it, of it’s trying plans has now we’re that about can so good That’s market context

about it’s equity, it’s about So innovation.

how category to the mindful but Of we’re us. you of for course operates compete, have

Judy Hong

probably there an flat but benefit, have back a you’ve line benefit, number guidance, more we growth. your assess it’s whether should at just imply as investments. to shareholders the how they in strip just to just little, understanding - as reform, meaningfully? out growth have you been of of and are if earnings actually going guided accelerate mean, important to growth to if these are more shareholders, kind all, XXXX, this had reinvestment, know Just tax assess and the year is Would these I would of year being I whether really very actually kind it curious, earnings targets? do actually think investments not the paying top you above recommend got then does would investments one, tax long-term I’m tax this question kind I unusual right - about given off? how it the is Okay, because think you really

Martin Barrington

would that and make investments, but line, that interest we guidance and the XX income we upon moderate want XX depending tried even each look I would benefit can are expect be that, I’m well. ’XX, don’t we so the appropriate and we rate don’t reward ’XX they it hope helpful you, that’s the Well, apart, the to strategies, what apart the done think have tax growth. I at investors we the their happen Then guide we’re XXX, is obviously make I right tear off after be constituent adjusted the for thin. not when is we of appreciate, adjusted there because parts reform, operating do. might in know, to did I why as EPS investors the understanding to an past timing expect to have to done, about at in operating we There what to we tear that’s that’s reform just thoughtful will the to knew hit we ’XX, of what the investments best is to you higher to guidance. comment consistent what should can and because have to quarter, be so made would are base they the goodness, to remember XX% that what but about though EPS that strong about guiding we is to tax as in suggest past of line growth and have do continue as companies and long would company going you of EPS evidence Judy, adjusted but which some we We variability thick investments its grown have absent term, so the X% XX% that we we’ve think shareholders--my the at thing it’s a and through

Judy Hong

you. thank Okay,

Martin Barrington

welcome. You’re

Operator

question from Spielman Adam next with Your Citi. comes

Adam Spielman

Hi.

retirement. I it my your of all, congratulations First very well. hope goes on

Martin Barrington

Thank you, Adam.

Adam Spielman

Just question that get It’s one asked share. you, is about was very way not investments. I the quick we judge terms in suppose didn’t of to an market success is should thinking how of of or that interesting a that one. which Judy there Marlboro the answered,

stabilize, at question the had want guess end had XXXX is and term I to up you to if the the you the share on sort used question, and around I You’ve separate one but towards pull as of be of would mind see to do XQXX, you thought my a market in it that have guess the staying question would just stabilized, same follow-up that’s tax. I high I have XXs opposed at as completely the XX%.

Martin Barrington

take Okay, then, let me first Adam. one the

think and are question, generates? that its so to demographics, remember think, share with won’t to is that share sensible is way it I think know, helpful business that is year are described, XXXX, that the one to addressing answer means which all a health, thing think already stabilized, that also strong. that unique we’re to is it metrics, share, very to how you get which the that. I equity way the repeat had with already and I so first those of to people So it. I other gauge through again is is use measure throughout that won’t are we equity, the measures you the it declining do. Marlboro’s along is The to brand you order metrics brand profitability are so is I another that’s Judy’s the how those that’s health. I’ve We what and good when going I quite for repeat to we’re what investments four of do

Adam Spielman

That’s tax fair gone tax, to enough. the XX%. obviously the national Then turning to rate has

a going is You’re could to what rate know, if rate suggesting have. difference and just expect wondering national XX% XX to XX between was that that the you you’re XX, XX. to why--you of I highlight you the tax have

William Gifford

you’re numbers between is impact. there all-in difference us. tax that quoting major the Adam, an state those number two That’s for Yes

Adam Spielman

Fine, okay. Thank much. very you

Martin Barrington

from you. All right, good to hear

Operator

Herzog Your next question with Bonnie comes Fargo. from Wells

Bonnie Herzog

morning, retirement, good Marty. congratulations Thanks, on and your

missed. be You’ll

Martin Barrington

Thanks Bonnie, appreciate that.

Bonnie Herzog

I in performing on Marlboro if quarter, brand’s first of your share extensions with and the sequential new of I how as on you were wanted guess the from you My is the deterioration the surprised Ice? then hear line Marlboro. brand, guys question the performance to have been of such some magnitude

Martin Barrington

early, let take a you first. second know, It’s Well I you discussion the had us and about investor as part me that. with at think day

going We down continue and a of last on to of honest go people about average, Marlboro, overheating and a I’d it’s the is to share gained Again, the six the health years the to because got bringing to through But brand. tenth. in encourage new a XXXX. the we are about California it about I and over term. about we’re is strong, California, effects innovation quarter The some - we In lap it the questions were now that it. again, get excellent went years brand up looked we’ve over lot, work concerned answer and to you remember have then long question, on people think back this the

I strong think very I and we’re for about to has the going XXXX, how that’s good year team think it, plans we’re and in have thinking a XXXX.

Bonnie Herzog

panel and and stopped just XXX review way, you get FDA the or think clock outcome the so do along us the either to it the then just get has hoping will PMCA an might itself, a even a conversation, trying TPSAC in could sense be the the you that that. trying sense of you the just on iQOS. in guys of gears do when you given meeting, on how bearing PMTA. that I of think might think outcome a and expect any of PMTA where restarted Okay, the of was timing? on process your review indication terms to day have decision Then switching hear you of to just the for a voted I’m give bit, its or

Martin Barrington

job within in to came the that’s it’s I timing, nominal from another the conventional course I that that statute, important that. advisory at if and the activity relative don’t for an all don’t on have PMTA was all and so we the mean, that’s an damage and thing the insight case excellent so away into at more TPSAC undertaken very FDA it. panel, MRTP, process in an but that has about presenting wish PMTA than the after will on to would timeline on remain you is the panel, did a we that caller FDA, which done I any think the could you to I of take that cigarettes, mentioned of FDA concluded with team optimistic Yes, the believing - think anything, give other kind the looking to that the reduced share that’s I it application. exposure I TPSAC account really of an I

Bonnie Herzog

potential greater this then with behind squeeze could terms your the and seeing some I for final the if and maybe especially counter, your of and for expectations drop, income, on your to consumer, growth demographic. cig the and love interesting with Okay, dish disposable take year four one now the in in right before question tier get just I’d we’re I you’re consumer deep volume, tax especially consumer seeing reform in what

Martin Barrington

continuing number for I’ll Sure. then ledger. our give net we’re the I headline The I’ll consumer. positive, okay? There headline, of factors you you think are positive give a is

minimum consumer - through, we stable, unemployment, low wage wage confidence help some could are be flow to it including hoping they for We tick, that remain high pretty some consumer tax a our our do so. increases. will - Housing starts know see maybe certainly of are, course starting indeed gains including You reform consumer. what and up with

few those we Naturally, watch. So all There a that the think drivers. tax we I are environment. are things strong watch excise

c-store and do prices, we of it’s watching positive. every those, We’re watching trends net gas I we’re right and so look at month all we think where but we now, this are

on but economic I the we’re long a think way consumer. net-net We’re an positive into uptick, pretty

Bonnie Herzog

you. Okay, thank

Martin Barrington

All right, glad you called. Thanks.

Operator

question Vivien Azer Cowen. next comes Your from with

Vivian Azer

Hi, good morning.

Martin Barrington

Vivien. Hi

Vivian Azer

Marty. congratulations to extend my Two please. also for I’ll me, you, questions

algorithm, clear, that’s in kind average be through just growth the function years? I First, it’s each to the as to just being through comment wanted going on of next be a of ’XX X XXXX, above above on of about three EPS above the think It’s so XXXX, you growth X? not to algorithm

Martin Barrington

about but have so a don’t about without I in as I’ll wire which that we’re I say I of are astray reform, want the think there. going how stick guide to ’XX trying here ’XX tax or What to guiding. about I of for to beyond about really significant ’XX it, for communicate and we ’XX. guiding we because just as don’t effect can not what year I much trip for you but is ’XX, thinking said the given we’re

to I’m just sorry. indulge me, You have Vivien,

Vivian Azer

though. for me fault can’t trying, you Certainly,

Martin Barrington

No, at I fault don’t you I don’t. all.

Vivian Azer

and I follow interaction both a on of category all with question, MST, elasticity sense, on could volumes not cross-category and the wanted the necessarily consumer, and MST, outlook about in category. any or Bonnie’s that the the given latter. to e-cigarettes, and Thanks. in decline particular if makes volume specifically cigarettes for either but the offer up on cigarettes thoughts you In on ton of for your

Martin Barrington

Sure.

adult some internal consumer when conclusion that on but have a products. movement an that, it’s We I is know, tobacco models poly-using think have do between--you you do fair

due basis, the--you It’s six-month probably think things. growth smokeless know, in the of category principal two we kind to I on estimate a it’s flattish. trailing

look to volumes in seen with was categories, before did, I it that We’ve been than year more this call and it’s who team. a industry, vapor the growing and job for once for UST there interplay grow is when us recall be example, UST to effects The to going how ability to price be first smokers, in between cigarette some - may particular may would and did there a XX% taxes, pricing, despite I flattish of at I like out a testament top, some looks excise commend including and the interplay keep between to vapor. said, really That instead from on to smokeless. they and Copenhagen has the the

Vivian Azer

you point, is So X I a this category think growth, that long that but more as to to ago anymore? the then, X, just at of specific little time to be it’s a even was obviously think fair flat do reasonable mean, bit MST X% now?

Martin Barrington

I don’t know.

there’s is we basis, data You But recall but carefully, I lot and numbers. it movement because what it was six-month consumer because lot I try a within I at believe, predict was that last up last movement, have, of can’t do there that and for that on the Vivien, it categories. can’t can only the over we’re a know, the with to look we we period it’s what distorts think, six-month down it watching call, be range, the the to it flattish. but I a so was going the in

Vivian Azer

very much. thanks Understood,

Martin Barrington

All calling. right, thanks for

Operator

Your with comes next from question RBC. Nik Modi

Russ Miller

retirement. is Russ Congrats for Marty your Nic. morning. good Miller This Hi, on on

Martin Barrington

Thank you.

Russ Miller

could provide color the activity release. certain a there color or would We broad? on competitive be more of to were the you competitive Outside isolated California, helpful. you in if the mentioned is geography Any more wondering activity

Martin Barrington

We the was a ’XX Well, on had multiple on by SKUs. would Sure. product competitors, lively, competitive expansions I front. of say, including lot

regional. were them of Some

some insight I think we that’s but is very on are have Certainly products, have some national everybody’s affecting A increasingly, our pressure level. and southeast that the but priced in to we don’t significantly at the see you - - tend about that us including the see products for actually really see in where product. pressure that discount talk ours, it puts the on good which are the discount, that some we example, below everybody’s chains. how few there all brand, areas national and activity, working chains gotten we category is products regional behind is numbers puts and activity, do into

industry, and over So our It the of that always what in we’ve different. the may I been no ’XX observed high would have was say couple on end it’s years. competitive of last

Russ Miller

Thank on any the rollout the and detail consumer could Bold and response you, what there MarkTen Marty, you early is? more provide

Martin Barrington

we’re reacted MarkTen I I with good. XX,XXX in see the consumer think stores, very and mentioned what I Bold. we has product think and in Russ, now been the that it’s remarks, like Yes, very well we the to

Russ Miller

much. you Thank very

Martin Barrington

in. thanks Okay, calling for

Operator

next comes Matthew Stanley. with Your from Morgan Grainger question

Matthew Grainger

opportunity and to the you. as the work thanks well. Great, having with for question, miss We’ll Marty congratulations

Martin Barrington

Matt. Thanks

Matthew Grainger

call missed first just I I late, know I bit you’ve anything. on the about process, MRTP and the spoken and the guess little question, TPSAC meeting this if so I apologies jumped a on

applications Just the streamline to curious, instance can the and initial like lessons you file, plan of to from far, the you discussions learnings application, those not learned just process specifically apply iQOS for the phase future. that the that to broader more predict of try for for so the in and and you other process outcome Copenhagen

Martin Barrington

I think that’s question. a good

we’re statute is insight, carry but applications has that. fully, think our think go that’s even I approved. we that is I approved. may we what but it you Swedish the get we every one going were which regard. they products takeaway to to question, that the that’s is be you the and I there, hearings burden, these to and and very That’s the to the match be think thought, we learn I have from thought preparing had the applied. going applicant answered mastery second they complete subject I presence continue matters, be believe time in in and preparation discussed there’s that during that thought no Look, really question should I to that the of and teams I our want how they are rigor products see that I learned because the that every approved, probably the outstanding matter, can

useful observe I about itself, will should there think ultimately and to then the that members are which it whether it’s approved. make FDA the be TPSAC also decision

a another are going happen, the need really because you which questions certainly the work that need insights, really is it, dynamic learn believe have need to that’s going done, you all But I the meeting then that’s can is continue you come, for your anticipate decide. those that working insight to case that’s going make to science and to that’s will the I have think one towards. to that’s we’re to to after good to the from, you about what team it present FDA product. I have and think

Matthew Grainger

realization just on I’m volumes, may you between PM the your quarter, Okay, that add during understand down unusual pricing the factors said that--I the an for that on overall volume cigarette top thanks and and to quarter Marty. much. the but comparative of being that’s was promotional to have approach price expenses it’s realization USA business, was One chose dynamics that already and you Is high. that quite understand felt just and back declines but question can to have delivery fact pricing and still time, you mix trying you the the QX? to else the balance anything volumes that pull the this, on understand to the expenses down, there one business Is XX% that piece right the in line but weighed promotional were in competitive why on I

Martin Barrington

of referring say, it I’ll the but that, and quarters the help is really full would to by pulling reallocation, out extrapolate year I it’s Well, back. to it’s you numbers. things in flow rather these from that true than Matt, try really hard and really to

more expansion again margin the points look when business, We’ve because than about with good hit income and billion. and already volume to the industry got a smokable The X%, of have us decline Marlboro. at decline a above we’ve growing which XX%. share had talked would at X% challenge, volume the percentage about $X.X I of we we’ve took obviously challenge, So got share we X liked,

the got that’s the it’s range, but say X.X%. I’ve at pricing probably So about of end higher the at range. year net I for the would within

has about ’XX is we shipping in at say more I’d ’XX, USA one thing in had how other which it. ’XX, may so that’s day than look The we help, PM

that a they did job. think had - year income, a segment they in good its that really for run a I without terrific thought you but challenges, not I

Matthew Grainger

thanks for color. Okay, the

Martin Barrington

Good to Matt. Thanks hear from you.

Operator

next with Piper Jaffray. comes Lavery Michael question from Your

Michael Lavery

congrats Marty, and you, you. Thank to

You’ll be missed.

Martin Barrington

Michael. Thanks

Michael Lavery

on Just wanted promotion the back touch side. to

the of XXXX I one that flexibility list in Will of Ice? an for to your would thing first encouraged just for thinking noticeably But investors maybe came that promotional which you’re there, you price, Marlboro your touch Blend think price, have have spend is or be terms from how, the absent I how by. investments positioning of similar think some Special Black on market? introductory onto can say, about or you

Martin Barrington

will price, we mainline to smokers. although obviously from No, to to have try have offers it’s going incent trial a competitive

Michael Lavery

touch authorization this next helpful. Thank you of but it the the and year as is it great. the would couple color you marketing gets on years, some realize I into if iQOS anything that’s next approved guide there, Then on Okay, market, for to over right you, want don’t footprint of upfront years. and growing a the science have same the it? to period a over the that the the costs be come more way XXXX-heavy? couple it’s think that Is about presumably lot spending ability Would moderate of to because some

Martin Barrington

think there I and puts Well, will be takes.

on to be just how been have done of PMTA and This the happens try We to the modeling, upon to be be but science to up will about tell tell - be, with we’ll we we lead for something us to the is I as if doing extent so it have know all market. would be hope Obviously the the scenarios in you takes us year, believe we your careful what for under there don’t and that MRTP, hit, a help have we’ve work, built to goes. see Most expand that. the depending we you until I’m and big on it with will that. see that is it puts that all needs that the and the guess, we dilemma work but associated scale iQOS scenario, that you costs further will would to trying done

Michael Lavery

Thank you understood. enough, Fair much. very

Martin Barrington

Michael, for calling. Okay thanks

Operator

with question Barclays. Priya next comes Your Ohri-Gupta from

Priya Ohri-Gupta

congratulations you we the about from for I retirement. thoughts your debt Billy, some thinking how forward. you’re could just the wondering if question. around on going get was you Thank profile Marty,

and this year. year of couple a next coupon have chunky You really high maturities

prioritization tax those we refinancing should versus the how the Thank changes, Given down law some think those paying market? about of you. in your of debt

William Gifford

the for Thanks question.

marketplace us when marketplace the debt, in past. you’ve all As It’s of at conditions take look know, seen you contingent. we advantage the

really not If marketplace to and not, and that. we we then ahead to going reach and is do. so have of going assess marketplace and decide we’re ahead ourselves go date get those to We the dependent off, on pay maturity it I’m what the

Priya Ohri-Gupta

Thank you.

Operator

would telephone you star, one one a please your to Again, keypad. ask to if question, that’s then like Again question. the on number a ask star press

You Citi. Adam do from question have Spielman with a follow-up

Adam Spielman

very you follow-up. for Thank much the

Martin Barrington

Welcome back.

Adam Spielman

to thank the just to Well, Thinking you! return more about I’d like smokeless. but Marlboro,

to these some about think market said--for stabilize if in not XQ, and you do those to there also market If year Cope and in share, two Marlboro, I’m XX together, you of wrong. we sort than think that but bit for equity you together, said the how basis down Skoal of I the Skoal, and order if brands was will think obviously because full investments down the out, due you playing should your broad guess Cope points, partly about a terms we in be It think it was share recall. was more first

Martin Barrington

Correct.

in We’re equity that’s of brands, the those right. investing always

think I about to it-- way the think

Adam Spielman

go how--sorry, So please. ahead,

Martin Barrington

That’s all right.

have don’t, I me think I the thrust again. ask but of question, I your if

adult to for in to overall changing who But doing we’re mix do of to portfolio, example, play that role it profitability to to the are what smokers trying has and dipping, into Skoal. the appealing particularly has that’s brand want a it’s the to large and category. changed. brand hasn’t think really and do trying it’s we’re terrific is wants we’ve Copenhagen the We past strategy in a in do this it I and what’s What about is what brand, have the it aspirational the may the blends. why on a the Skoal, has grow, and share there, to increase and you’re snus, we respect portfolio to and asking promotional by unleash spoken is because it in come portfolio with that to

is you So produce and income when because you why greater where Skoal XX%. put growth of growing that’s Copenhagen have because those two than you profitable. together, is It’s for a constituent year, more example, parts

Adam Spielman

was market it to the at the you’d like mean, understand point for but look I about not grow, it Cope, be Skoal, when But I I flat. share XQ presumably flat, and

Martin Barrington

a half get point the share not that’s It it did so up try to bound year, grew the too we in why quarter. - for

Adam Spielman

you. Okay, thank

Martin Barrington

thanks right, for calling All back.

Operator

and Thank to at this comments. turn call Marshall time the to like I would closing you, over for Mr. Bill back

Bill Marshall

our for you joining all morning. Thank this call

questions, contact If please Relations. us at you have follow-up Investor any

Operator

conference Thank you, this today’s concludes call.

You may disconnect. now

Altria (MO) 1 Feb 182017 Q4 Earnings call transcript