Altria Group, Inc. Reports 2003 First-Quarter Results; Diluted Earnings Per Share Down 1.8% to $1.07; Net Earnings Down 7.6% to $2.2 Billion.Business Editors NEW YORK--(BUSINESS WIRE)--April 16, 2003 Altria Group “Philip Morris” redirects here. For the racecar driver, see Philip Morris (autoracer). Altria Group, Inc. (NYSE: MO) (previously named Philip Morris Companies Inc. , Inc. (NYSE NYSE See: New York Stock Exchange : MO) announced today that first-quarter 2003 net earnings decreased 7.6% to $2.2 billion, while diluted earnings per share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of fell 1.8% to $1.07. "Our first-quarter performance was in line with our expectations. However, our results were clearly overshadowed by developments in the Price class action suit against Philip Morris USA Philip Morris USA is the United States tobacco division of Altria Group, Inc. General information On January 27, 2003, Philip Morris Companies Inc. changed its name to Altria Group, Inc. Even under this new name, Altria continues to own 100% of Philip Morris USA. ," said Louis C. Camilleri Louis C. Camilleri (b. 1955, Alexandria, Egypt) is the Chairman and CEO of Altria Group, the parent company of Philip Morris. Camilleri received a degree in economics and business administration from HEC Lausanne, the prestigious business school of the University of Lausanne , chairman and chief executive officer of Altria Group, Inc. "While the court's April 14 appeal bond order is onerous on·er·ous adj. 1. Troublesome or oppressive; burdensome. See Synonyms at burdensome. 2. Law Entailing obligations that exceed advantages. , we are pleased that Philip Morris USA can now promptly move forward with what I am convinced will be a successful appeal on the merits on the merits adj. referring to a judgment, decision or ruling of a court based upon the facts presented in evidence and the law applied to that evidence. A judge decides a case "on the merits" when he/she bases the decision on the fundamental issues and considers of the case. It is regrettable that credit rating agency A credit rating agency (CRA) is a company that assigns credit ratings for issuers of certain types of debt obligations. In most cases, these issuers are companies, cities, non-profit organizations, or national governments issuing debt-like securities that can be traded on a action has denied us access, for now, to the commercial paper market. We are hopeful that such access will be restored in the relative near term." "While we suffered difficult comparisons versus the prior-year quarter," Mr. Camilleri said, "I am pleased with the volume and share stability exhibited by Philip Morris USA, as well as by the continuing solid fundamentals of our international tobacco business and our worldwide food business." Standard & Poor's Rating Services, Moody's Investors Services Moody's Investors Service A leading global credit rating, research and risk analysis firm. Moody's Investors Service A leading firm engaged in credit rating, risk analysis, and research of fixed-income securities and their issuers. and Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. took ratings actions that eliminated Altria's access to the commercial paper market, due to the Price case. As a result of these developments, Altria has drawn against its revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. lines in order to repay its maturing commercial paper and to fund normal working capital needs, and has suspended its share repurchase Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. program until such time as its access to the capital markets is restored. Despite these developments, Altria Group, Inc. is reaffirming the earnings per share guidance of $4.60 to $4.70 for the full-year 2003 originally provided on January 29, 2003. The factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to these projections. A conference call with members of the investment community will be Webcast at 9:00 a.m. Eastern Time on April 16, 2003. Access is available at www.altria.com. ALTRIA GROUP, INC. As described in "Note 14, Segment Reporting segment reporting A type of financial reporting in which the firm discloses information by identifiable industry segments. For example, Union Pacific Corporation reports revenues, income, assets, depreciation, and capital expenditures for each of four " of Altria Group, Inc.'s 2002 Annual Report, management reviews operating companies operating company A business that engages in transactions with outsiders. income, which is defined as operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. 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. 2003 First-Quarter Results Net revenues for the first quarter of 2003, as detailed in the attached schedule entitled en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: "Selected Financial Data by Business Segment," decreased 5.7% versus 2002 to $19.4 billion, due primarily to the impact of the Miller Brewing Company Miller Brewing Company is the second largest American beermaker and is based in Milwaukee. It is owned by SABMiller. Miller owns breweries in Albany, Georgia; Chippewa Falls, Wisconsin; Eden, North Carolina; Fort Worth, Texas; Irwindale, California; Milwaukee, Wisconsin and (Miller) transaction, with $1.2 billion in net revenues included in the first quarter of 2002 but not the first quarter of 2003, and a $1.2 billion decrease in net revenues from the domestic tobacco business, partially offset by higher net revenues from the food and international tobacco businesses. Favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. currency increased net revenues by $619 million. Operating companies income, as detailed on the attached schedule entitled "Selected Financial Data by Business Segment," decreased 6.7% to $4.0 billion, due primarily to lower operating results of $508 million from the domestic tobacco business, and $130 million from the Miller transaction, partially offset by higher operating results for the other businesses. Also affecting operating companies income comparisons were increases due to favorable currency of $91 million, as well as the impact of 2002 charges for separation programs and integration costs. Altria Group, Inc. declared a regular quarterly dividend of $0.64 during the first quarter of 2003, which represents an annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. rate of $2.56 per common share. During the first quarter, Altria Group, Inc. spent $689 million to repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. 18.7 million shares of its common stock. DOMESTIC TOBACCO 2003 First-Quarter Results Results for Philip Morris USA Inc., Altria Group, Inc.'s domestic tobacco business, were in line with expectations. Operating companies income decreased 40.6% to $742 million in the first-quarter 2003 versus 2002, due to lower volume and higher spending to support its new promotional strategy and expanded sales force. However, Philip Morris USA believes that these strategies are having their intended results, as sequential retail shares are improving. Philip Morris USA also continues to invest in programs to address contraband contraband, in international law, goods necessary or useful in the prosecution of war that a belligerent may lawfully seize from a neutral who is attempting to deliver them to the enemy. issues, including counterfeit To falsify, deceive, or defraud. A copy or imitation of something that is intended to be taken as authentic and genuine in order to deceive another. A counterfeit coin is one that may pass for a genuine coin and may include a lower denomination coin altered so that it may enforcement, and compliance with the Master Settlement Agreement and related state escrow escrow Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. requirements. Philip Morris USA's shipment volume decreased 16.1% to 43.8 billion units for the first quarter. Comparisons to the year-ago period are adversely impacted by both higher promotional shipments and a significant build-up build·up also build-up n. 1. The act or process of amassing or increasing: a military buildup; a buildup of tension during the strike. 2. of inventories by the trade in the first quarter of 2002. Industry shipments as reported by Management Science Associates decreased 12.9% to 88.2 billion units in the first quarter of 2003 versus the first quarter of 2002. As a result of these factors, Philip Morris USA's shipment share as reported by Management Science Associates decreased by 1.9 share points to 49.7%. However, on a sequential basis, Philip Morris USA's shipment share increased from 48.3% in the fourth quarter of 2002 to 49.7% in the first quarter of 2003. Philip Morris USA cautions that industry volume and share, as reported by Management Science Associates, do not include shipments of some manufacturers that Management Science Associates is presently unable to monitor effectively. Accordingly, the discussion of Philip Morris USA's performance within the industry is based upon Management Science Associates' estimates of total industry volume. Effective with the first quarter of 2003, Philip Morris USA is reporting retail share results based on an enhanced retail tracking service, the IRI/Capstone Total Retail Panel. This new service was developed to provide a more comprehensive measure of market share in all retail outlets retail outlet n → punto de venta retail outlet n → point m de vente retail outlet retail n → selling cigarettes, versus approximately 87% coverage in the previous service. Market share data for the fourth quarter of 2002 has been restated to reflect this new retail service. Philip Morris USA's retail share is lower using data from the IRI/Capstone Total Retail Panel compared to its previous service, primarily because the new service expands coverage into stores where Philip Morris USA historically had a lower retail presence. Based on data from the new IRI/Capstone Total Retail Panel, Philip Morris USA's retail share increased from the fourth quarter of 2002 to the first quarter of 2003, aided by Philip Morris USA's new off-invoice promotional allowance program that is paid at the wholesale level on its four focus brands. The promotional program broadens the reach of these brands' price promotions to a greater number of retail stores and has been extended through May 2003. Philip Morris USA essentially held its share of both the premium and discount segments at retail, as its share of the premium segment declined 0.1 share point to 61.0% versus the fourth quarter of 2002 and its share of the discount segment increased 0.1 share point to 15.7%. Total industry retail share for the discount segment decreased from the fourth quarter of 2002 to the first quarter of 2003 by 0.4 share points to 28.1%, while growth of the deep discount segment moderated. The following table summarizes retail share performance for Philip Morris USA's key brands, based on data from the IRI/Capstone Total Retail Panel for the first quarter of 2003 versus the fourth quarter of 2002:
Q1 2003 Q4 2002 Change
--------------------------------
Marlboro 37.5% 37.4% 0.1pp
Parliament 1.5% 1.3% 0.2pp
Virginia Slims 2.5% 2.5% 0.0pp
Basic 4.3% 4.3% 0.0pp
--------------------------------
Focus Brands 45.8% 45.5% 0.3pp
Other PM USA 2.5% 2.6% -0.1pp
--------------------------------
Total PM USA 48.3% 48.1% 0.2pp(a)
(a) On an unrounded basis, retail share for Philip Morris USA was up
0.14 share points.
The new service's audit sample was not complete until the fourth quarter of 2002. Consequently, Philip Morris USA is not reporting share comparisons versus the year-ago period. Additionally, the new service cannot be meaningfully compared to previously reported market shares, which reflected data that projected to a smaller universe of stores. In addition to announcing its new off-invoice promotional allowance in the first quarter of 2003, Philip Morris USA launched a new line extension, Marlboro Blend No. 27, which began shipping nationwide during the last week in March. Philip Morris USA also announced that it will launch another new line extension, Parliament Ultra Lights, in the second quarter. During the first quarter, Philip Morris USA announced that it is moving its corporate headquarters from New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. to Richmond, Virginia Richmond IPA: [ɹɯʒmɐnɖ] is the capital of the Commonwealth of Virginia, in the United States. , with the move to be completed by June 2004. Philip Morris USA estimates that the total cost of the relocation RELOCATION, Scotch law, contracts. To let again to renew a lease, is called a relocation. 2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. will be approximately $120 million, including compensation to those employees who do not relocate re·lo·cate v. re·lo·cat·ed, re·lo·cat·ing, re·lo·cates v.tr. To move to or establish in a new place: relocated the business. v.intr. , and the relocation is expected to result in annual cost savings of $60 million for Philip Morris USA beginning in 2005. The announced move had no impact on results for the first quarter of 2003. INTERNATIONAL TOBACCO 2003 First-Quarter Results Operating companies income for Philip Morris International Philip Morris International, (PMI) based in Lausanne, Switzerland, held a 15.5% share of the international cigarette market in 2005. Its brands, led by Marlboro and L&M, are sold in over 160 countries around the world. Inc. (PMI See Private Mortgage Insurance. ), Altria Group, Inc.'s international tobacco business, rose 8.1% versus the same period a year ago to $1.7 billion, due to volume gains, higher pricing and favorable currency translation of $85 million, partially offset by unfavorable mix and higher investment spending. Shipment volume increased 3.6% to 190.7 billion units, due to gains in Central & Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. , Asia and Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. , partially offset by lower volume in Western Europe Western Europe The countries of western Europe, especially those that are allied with the United States and Canada in the North Atlantic Treaty Organization (established 1949 and usually known as NATO). and the Middle East. Total Marlboro shipments declined 1.5% in the first quarter, due primarily to tax-driven price increases in France and Germany, low-price competition in Italy and anti-American sentiment in certain markets. PMI achieved strong market share gains in many markets, including the key income markets of Germany, Japan, Russia, Spain and Turkey. In Western Europe, shipment volume fell 2.2%, driven by declines in France, Germany and Italy, partially offset by higher volumes in Spain, Austria and Greece. In France, shipment volume was down 10.8%, driven by a corresponding industry decline following the January 2003 tax-driven price increase. PMI's share in France essentially held steady in the quarter at 39.3%. In Germany, volume was down 4.2%, driven by an industry decline of 6.7% as a result of a January 2003 tax-driven price increase and the timing of Easter holiday shipments. However, market share in Germany was up 0.7 share points, driven by Marlboro's continued momentum. In Italy, volume declined 6.6%, while share fell 12.4 share points as year-on-year comparisons were hugely distorted by competitor shipment patterns. Total market share in Western Europe declined 0.5 points to 38.9%, due to shipment distortions in the Italian market. In Central Europe Central Europe is the region lying between the variously and vaguely defined areas of Eastern and Western Europe. In addition, Northern, Southern and Southeastern Europe may variously delimit or overlap into Central Europe. , the Middle East and Africa (CEMA CEMA Conveyor Equipment Manufacturers Association CEMA Chef d'Etat-Major des Armees CEMA Consumer Electronics Manufacturers Association CEMA Canadian Egg Marketing Agency CEMA Council for the Encouragement of Music and the Arts ), volume increased 6.2%, driven by strong gains in the Czech Republic Czech Republic, Czech Česká Republika (2005 est. pop. 10,241,000), republic, 29,677 sq mi (78,864 sq km), central Europe. It is bordered by Slovakia on the east, Austria on the south, Germany on the west, and Poland on the north. , Poland, Romania and Turkey, partially offset by declines in Saudi Arabia Saudi Arabia (sä  `dē ərā`bēə, sou`–, sô–), officially Kingdom of Saudi Arabia, kingdom (2005 est. pop. , Egypt,
Israel and Lebanon, reflecting consumer down trading as well as
anti-American sentiment.In Eastern Europe, PMI achieved volume growth of 11.8%, driven by continued robust gains in Russia and solid growth in the Ukraine. In Russia, L&M, Bond Street, Parliament, Marlboro, Chesterfield Chesterfield, city (1991 pop. 73,352) and district, Derbyshire, central England. An important industrial center, Chesterfield produces mining equipment, railroad cars, metal products, glass, and pottery. , Virginia Slims Virginia Slims cigarette trademark marketed to “independent women.” “You’ve come a long way, baby,” as slogan. [Trademarks: Crowley Trade, 630] See : Feminism and local brand Optima, each contributed to the strong volume gain versus prior year. In Asia, volume increased 5.1%, driven by strong gains in Japan, Thailand and Taiwan, partially offset by lower shipments to Korea, due to continued intense competition and a decline in Indonesia as a result of the November 2002 tax-driven price increase. In Japan, share advanced 0.7 share points to a record 24.1%, driven by the continued growth of Lark and Marlboro. In Latin America, volume rose 4.4%, driven by gains in Brazil and Mexico and an improved performance for PMI's portfolio of brands in Argentina, including Marlboro, L&M and the Philip Morris brand. FOOD Yesterday, Kraft Foods Kraft Foods Inc. (NYSE: KFT) is the largest food and beverage company headquartered in North America and the second largest in the world after Nestlé SA. The Philip Morris Company (now known as Altria Group), a company that produces tobacco products, acquired Kraft for Inc. (Kraft) reported first-quarter 2003 results. Kraft worldwide volume increased 0.1%, despite the impact of divested businesses of 0.8 percentage points. Kraft's volume was reduced by the shift in shipments supporting the Easter holidays Easter holidays npl → Semana Santa sg , which fall into the second quarter of 2003 versus the first quarter of 2002, a reduction in trade inventories in the first quarter of 2003 and a difficult business environment in Venezuela. It is estimated that together, these three items reduced Kraft's total volume by nearly 2.0% in the first quarter. Worldwide operating companies income increased $184 million, or 13.6%, to $1.5 billion, due primarily to the absence of $169 million in pre-tax separation and integration charges incurred in 2002. Operating companies income also benefited from revenue growth, productivity and synergy The enhanced result of two or more people, groups or organizations working together. In other words, one and one equals three! It comes from the Greek "synergia," which means joint work and cooperative action. savings and currency favorability, offset by higher benefit costs. NORTH AMERICAN North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. FOOD 2003 First-Quarter Results Volume for Kraft Foods North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Inc. (KFNA KFNA Kraft Foods North America ) increased 1.3%, driven by new products and strong results in Beverages, Desserts and Cereals and Oscar Mayer Oscar Mayer is an American meat and cold cut production company, now owned by Kraft Foods, known for its hot dogs, bologna, bacon and Lunchables products. German immigrant Oscar Ferdinand Mayer and Pizza, partially offset by the shift in Easter timing and trade inventory reductions. Operating companies income increased 18.1% to $1.3 billion, due primarily to the absence of $162 million of separation and integration charges recorded in 2002. Operating companies income also was driven by pricing, net of cost increases, for several non-dairy businesses, favorable cheese commodity costs and productivity and synergy savings, partially offset by higher benefit costs. INTERNATIONAL FOOD 2003 First-Quarter Results Volume for Kraft Foods International, Inc. (KFI KFI Key from Image KFI Key Facts Illustration (UK financial services) KFI Kraft Foods International KFI Korea Fire Equipment Inspection Corporation KFI Key Frame Interval KFI Kernel Function Instrumentation ) decreased 3.2%, as the impact of the decrease in Venezuela, the Easter shift and the divestiture The breakup of AT&T. By federal court order, AT&T divested itself on January 1, 1984 of its 23 operating companies, which became known as the Regional Bell Operating Companies (RBOCs). of KFI's Latin America bakery ingredients business in 2002 were partially offset by the benefit of new product launches, successful marketing programs and the acquisition of the Kar Gida salted snacks business in Turkey. Operating companies income decreased 6.0% to $237 million, due primarily to lower results in Latin America and the shift in Easter volume, partially offset by favorable currency of $7 million. FINANCIAL SERVICES The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. Operating companies income for Philip Morris Capital Corporation (PMCC PMCC Product Moment Correlation Coefficient PMCC Postmark Collectors Club PMCC Professional Military Comptroller Course PMCC Packet Mode Channel Connect PMCC Project Management Core Competency PMCC Pensky-Martens Closed Cup test ) increased 16.9% to $83 million, driven by increased income from leasing activities. During the first quarter, US Airways airways Anatomy The 'pipes'–trachea, bronchi, bronchioles–through which air passes to and from the alveoli. See Small airways. emerged from bankruptcy and affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. all of its leases with PMCC. PMCC continues to closely monitor its exposure to the troubled airline industry. Altria Group, Inc. Profile Altria Group, Inc. is the parent company of Kraft Foods Inc., with approximately 84% ownership of outstanding Kraft common shares, Philip Morris Capital Corporation, Philip Morris International Inc. and Philip Morris USA Inc. In addition, Altria Group, Inc. has a 36% economic interest in SABMiller plc, the world's second-largest brewer. The brand portfolio of Altria Group, Inc.'s consumer packaged goods Noun 1. packaged goods - groceries that are packaged for sale foodstuff, grocery - (usually plural) consumer goods sold by a grocer plural, plural form - the form of a word that is used to denote more than one companies includes such well-known names as Kraft, Jacobs, L&M, Marlboro, Maxwell House Maxwell House is a brand of coffee manufactured by a like-named division of Kraft Foods. It is named in honor of the Maxwell House Hotel in Nashville, Tennessee. For many years until the late 1980s it was the largest-selling coffee in the U.S. and is currently (ca. , Nabisco, Oreo, Oscar Mayer, Parliament, Philadelphia, Post and Virginia Slims. Altria Group, Inc. recorded 2002 net revenues of $80.4 billion. Trademarks and service marks mentioned in this release are the registered property of, or licensed by, the subsidiaries of Altria Group, Inc. Effective January 27, 2003, Altria Group, Inc., is the new name of the parent company of Kraft Foods Inc., Philip Morris International Inc. and Philip Morris USA Inc. For clarity, this news release refers to Altria Group, Inc. even when historical events took place under the parent company's former name of Philip Morris Companies Inc. On May 30, 2002, Altria Group, Inc. announced an agreement with South African Breweries South African Breweries was founded in 1895 by Jacob Letterstedt specifically to serve a new market of miners and prospectors in and around Johannesburg. Two years later, it became the first industrial company to list on the Johannesburg Stock Exchange (JSE). plc (SAB SAB Spontaneous abortion. See Abortion. ) to merge Miller into SAB. The transaction closed on July 9, 2002 and SAB changed its name to SABMiller plc (SABMiller) and resulted in a pre-tax gain of approximately $2.6 billion or approximately $1.7 billion after-tax in the third quarter of 2002. Altria records its share of SABMiller's net earnings based on its economic ownership percentage in minority interest in earnings, net, on the condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. consolidated statement of earnings. You may learn more by listening to a live audio webcast of the Altria Group, Inc. conference call with members of the investment community at 9:00 a.m. Eastern Time on April 16, 2003. Access is available at www.altria.com. Forward-Looking and Cautionary Statements This press release contains projections of future results and other forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 consumer products subsidiaries are subject to unfavorable currency movements; intense price competition, changes in consumer preferences and demand for their products; changing prices for raw materials, fluctuations in levels of customer inventories and the effects of foreign economies and local economic and market conditions. 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 in a consolidating environment at the retail and manufacturing levels; to improve productivity; and to respond effectively to changing prices for their raw materials. Altria Group, Inc.'s tobacco subsidiaries (Philip Morris USA and Philip Morris International) continue to be subject to litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , including risks associated with adverse jury and judicial determinations, courts reaching conclusions at variance with the company's understanding of applicable law, bonding requirements and the absence of adequate appellate Relating to appeals; reviews by superior courts of decisions of inferior courts or administrative agencies and other proceedings. remedies to get timely relief from any of the foregoing; price disparities and changes in price disparities between premium and lowest-price brands; legislation, including actual and potential excise tax Excise Tax 1. An indirect tax charged on the sale of a particular good. 2. A penalty tax applied to ineligible transactions in retirement accounts. This penalty is assessed by and paid to the IRS. Notes: 1. increases; 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 relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the use of tobacco products and exposure to environmental tobacco smoke environmental tobacco smoke (ETS/passive smoke), n the gaseous by-product of burning tobacco products, including but not limited to commercially manufactured cigarettes and cigars; contains toxic elements harmful to the health of adults and children ; governmental regulation; privately imposed smoking restrictions; and governmental and grand jury investigations. Altria Group, Inc.'s financial flexibility may be affected by its current inability to access credit markets for short-term and long-term borrowings on terms as favorable as those that existed prior to recent actions by credit rating agencies Credit Rating Agencies Firms that compile information on and issue public credit ratings for a large number of companies. . Altria Group, Inc.'s financial services subsidiary (Philip Morris Capital Corporation) is subject to the effects of a weak economy, particularly with respect to aircraft leases to the troubled airline industry. Altria Group, Inc.'s consumer products subsidiaries are subject to other risks detailed from time to time in its publicly filed documents, including its Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the period ended December 31, 2002. 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.
and Subsidiaries
Condensed Statements of Earnings
For the Quarters Ended March 31,
(in millions, except per share data)
2003 2002 % Change
-------------------------
Net revenues $19,371 $20,535 (5.7)%
Cost of sales 7,565 8,532 (11.3)%
Excise taxes on products (a) 4,887 4,575 6.8 %
----------------
Gross profit 6,919 7,428 (6.9)%
Marketing, administration and research costs 2,870 2,894
Food integration costs - 27
Food separation programs - 142
Beer separation programs and asset impairment - 23
----------------
Operating companies income 4,049 4,342 (6.7)%
Amortization of intangibles 2 2
General corporate expenses 183 169
----------------
Operating income 3,864 4,171 (7.4)%
Interest and other debt expense, net 283 293
----------------
Earnings before income taxes and minority
interest 3,581 3,878 (7.7)%
Provision for income taxes 1,261 1,376 (8.4)%
----------------
Earnings before minority interest 2,320 2,502 (7.3)%
Minority interest in earnings, net 134 137
----------------
Net earnings $2,186 $2,365 (7.6)%
================
Basic earnings per share $1.08 $1.10 (1.8)%
================
Diluted earnings per share $1.07 $1.09 (1.8)%
================
Weighted average number of
shares outstanding - Basic 2,032 2,145 (5.3)%
- Diluted 2,040 2,171 (6.0)%
(a) The detail of excise taxes on products sold is as follows:
2003 2002
----------------
Domestic tobacco $866 $1,028
International tobacco 4,021 3,334
Beer - 213
----------------
Total excise taxes $4,887 $4,575
================
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended March 31,
(in millions)
North
Domestic International American International
tobacco tobacco food food
---------------------------------------------
2003 Net Revenues $3,817 $8,079 $5,380 $1,979
2002 Net Revenues 5,018 7,034 5,294 1,853
% Change (23.9)% 14.9% 1.6% 6.8%
Reconciliation:
--------------------------
2002 Net Revenues $5,018 $7,034 $5,294 $1,853
Divested businesses - 2002 - - (4) (18)
Currency - 538 (6) 87
Operations (1,201) 507 96 57
------------------------------------------
2003 Net Revenues $3,817 $8,079 $5,380 $1,979
==========================================
Financial
Beer services Total
-----------------------------
2003 Net Revenues $- $116 $19,371
2002 Net Revenues 1,219 117 20,535
% Change (0.9)% (5.7)%
Reconciliation:
----------------------------
2002 Net Revenues $1,219 $117 $20,535
Divested businesses - 2002 (1,219) - (1,241)
Currency - - 619
Operations - (1) (542)
-----------------------------
2003 Net Revenues $- $116 $19,371
=============================
Note: The detail of excise taxes on products sold is as follows:
2003 2002
---------------------
Domestic tobacco $866 $1,028
International tobacco 4,021 3,334
Beer - 213
---------------------
Total excise taxes $4,887 $4,575
=====================
Currency increased international tobacco excise taxes by $312 million.
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended March 31,
(in millions)
North
Domestic International American International
tobacco tobacco food food
---------------------------------------------
2003 Operating Companies
Income $742 $1,690 $1,297 $237
2002 Operating Companies
Income 1,250 1,564 1,098 252
% Change (40.6)% 8.1% 18.1% (6.0)%
Reconciliation:
---------------
2002 Operating Companies
Income $1,250 $1,564 $1,098 $252
Divested businesses - 2002 - - (1) (2)
Integration Costs - 2002 - - 27 -
Separation Programs - 2002 - - 135 7
Asset Impairment - 2002 - - - -
Currency - 85 (1) 7
Operations (508) 41 39 (27)
------------------------------------------
2003 Operating Companies
Income $742 $1,690 $1,297 $237
==========================================
Financial
Beer services Total
-----------------------------
2003 Operating Companies
Income $- $83 $4,049
2002 Operating Companies
Income 107 71 4,342
% Change 16.9% (6.7)%
Reconciliation:
----------------------------
2002 Operating Companies
Income $107 $71 $4,342
Divested businesses - 2002 (130) - (133)
Integration Costs - 2002 - - 27
Separation Programs - 2002 8 - 150
Asset Impairment - 2002 15 - 15
Currency - - 91
Operations - 12 (443)
-----------------------------
2003 Operating Companies
Income $- $83 $4,049
=============================
ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Quarters Ended March 31,
($ in millions, except per share data)
Diluted
Net E.P.S.
Earnings
--------- -------
2003 $2,186 $1.07
2002 $2,365 $1.09
% Change (7.6)% (1.8)%
Reconciliation:
--------------
2002 Reported $2,365 $1.09
Food integration costs - 2002,
net of minority interest impact 15 0.01
Food separation programs - 2002,
net of minority interest impact 77 0.03
Beer separation programs and
asset impairment - 2002 15 0.01
Currency 59 0.03
Shares outstanding - 0.06
Operations (345) (0.16)
--------- -------
2003 Reported $2,186 $1.07
========= =======
ALTRIA GROUP, INC.
and Subsidiaries
Condensed Balance Sheets
(in millions, except ratios)
March 31, December 31,
2003 2002
----------------------
Assets
------
Cash and cash equivalents $1,391 $565
All other current assets 17,800 16,876
Property, plant and equipment, net 15,101 14,846
Goodwill and other intangible assets, net 38,109 37,871
Other assets 8,606 8,151
----------------------
Total consumer products assets 81,007 78,309
Total financial services assets 8,893 9,231
----------------------
Total assets $89,900 $87,540
======================
Liabilities and Stockholders' Equity
------------------------------------
Accrued settlement charges $3,883 $3,027
All other current liabilities 15,970 16,055
Long-term debt 20,782 19,189
Deferred income taxes 6,092 6,112
Other long-term liabilities 15,155 15,498
----------------------
Total consumer products liabilities 61,882 59,881
Total financial services liabilities 7,869 8,181
----------------------
Total liabilities 69,751 68,062
Total stockholders' equity 20,149 19,478
----------------------
Total liabilities and
stockholders' equity $89,900 $87,540
======================
Total consumer products debt $22,713 $21,154
Debt/equity ratio - consumer products 1.13 1.09
Total debt $24,839 $23,320
Total debt/equity ratio 1.23 1.20
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