Altria Group, Inc. Reports 2003 Third-Quarter Results.Business Editors NEW YORK--(BUSINESS WIRE)--Oct. 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)
2003 Third-Quarter Diluted Earnings Per Share of $1.22
Versus $2.06 in Year-Ago Quarter, Which Included
$0.81 Gain on Miller Transaction
2003 Full-Year Diluted Earnings Per Share Projection Reaffirmed
In a Range of $4.50 to $4.60 Including $0.08 in Charges
Altria Group, Inc. (NYSE: MO) today announced third-quarter 2003 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 of $1.22, versus $2.06 for the same period a year ago, which included a gain of $0.81 per share for the Miller Brewing brewing: see beer. Co. transaction. "We had a solid quarter that met our earnings target," 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. "Our domestic tobacco business sustained its recovery with stable volumes and improved retail market share. Our international tobacco business recorded strong income growth despite volume issues in Italy Italy (ĭt`əlē), Ital. Italia, officially Italian Republic, republic (2005 est. pop. 58,103,000), 116,303 sq mi (301,225 sq km), S Europe. , France and Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). . Actions are in place to address our performance in these important markets. Finally, our worldwide food business results reflected a particularly challenging quarter and the impact of our previously announced reinvestment Reinvestment Using dividends, interest and capital gains earned in an investment or mutual fund to purchase additional shares or units, rather than receiving the distributions in cash. 1. In terms of stocks, it is the reinvestment of dividends to purchase additional shares. program to narrow price gaps and enhance brand equity in several key categories." "We remain confident that our investments across all our businesses will bear fruit in the years to come," Mr. Camilleri Camilleri is a surname. People with Camilleri as a surname
2. When a tenant holds over after the expiration of his lease, with the consent of his landlord, this will amount to a relocation. of Philip Philip, tetrarch of Ituraea Philip, d. A.D. 34, tetrarch of Ituraea, son of Herod the Great. He was perhaps the ablest of the Herod dynasty. He is mentioned in the Gospel of St. Luke. Morris USA's headquarters. The factors described in the Forward-Looking for·ward-look·ing adj. Concerned with or making provision for the future: forward-looking educators; a forward-looking corporate plan. Adj. 1. 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 9:30 a.m. Eastern Time on October October: see month. 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 To reserve a resource such as memory or disk. See memory allocation. resources. Management believes it is appropriate to disclose this measure to help investors analyze business performance and trends. For a reconciliation of operating companies income to operating income, see the Condensed 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. Statements of Earnings contained in this release. 2003 Third-Quarter Results Net revenues for the third 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," increased 4.7% versus 2002 to $20.9 billion, due primarily to favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. currency of $940 million and to increases from the international tobacco and food businesses, partially offset by lower net revenues from the domestic tobacco business. Operating income decreased 7.3% to $4.2 billion, due primarily to lower operating income of $344 million from the domestic tobacco business and $180 million from food, partially offset by higher operating results from international tobacco. Also affecting operating income comparisons were favorable currency of $177 million; a $23 million gain due to 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 an international food business; charges related to Philip Morris USA's headquarters relocation of $27 million; and asset impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. and exit costs in the international tobacco and food segments in both periods. Net earnings decreased 42.9% to $2.5 billion, due primarily to the after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. impact of the Miller transaction of $1.7 billion, or $0.81 per share, that was recorded during the third quarter of 2002. The effective tax rate decreased from the first-half rate of 35.2% to 34.5% in the third quarter, due primarily to favorable rulings affecting Altria's state taxes. During the third quarter, Altria Group, Inc. raised its dividend 6.3% to 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 $2.72 per common share, marking the 36th time in 34 years that the dividend has been increased. DOMESTIC TOBACCO 2003 Third-Quarter Results 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. Inc., Altria Group, Inc.'s domestic tobacco business, continued to show solid retail share performance in the third quarter, as its enhanced sales and promotional programs drove sequential gains again. Philip Morris USA's shipment volume was down 1.0% to 48.9 billion units for the third quarter; however, premium volume for Philip Morris USA was essentially flat while its premium mix improved by nearly 1%, to approximately 91%. Operating companies income decreased 24.4% to $1.1 billion, due to higher spending in support of Philip Morris USA's ongoing promotional programs and to lower volume, as well as charges related to the previously announced move of Philip Morris USA's headquarters to Richmond Richmond, cities, United States Richmond. 1 City (1990 pop. 87,425), Contra Costa co., W Calif., on San Pablo Bay, an inlet of San Francisco Bay; inc. 1905. , VA. Philip Morris USA's total retail share continued to improve in the third quarter of 2003 versus the three previous quarters, driven by steady gains in Marlboro and the continued growth of Parliament. Retail share was stable for 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 Basic. The following table summarizes sequential retail share performance for Philip Morris USA's key brands since implementing enhanced promotional programs in 2002, based on data from the IRI/Capstone Total Retail Panel:
Q3 Q2 Q1 Q4
2003 2003 2003 2002
----- ----- ----- -----
Marlboro 38.1% 37.8% 37.5% 37.4%
Parliament 1.8% 1.7% 1.5% 1.3%
Virginia Slims 2.4% 2.4% 2.5% 2.5%
Basic 4.2% 4.2% 4.3% 4.3%
----- ----- ----- -----
Focus Brands 46.5% 46.1% 45.8% 45.5%
Other PM USA 2.3% 2.4% 2.5% 2.6%
----- ----- ----- -----
Total PM USA 48.8% 48.5% 48.3% 48.1%
On a sequential basis, Philip Morris USA's retail share of the premium segment for the third quarter of 2003 increased 0.2 share points from the second quarter of 2003 to 61.3%, while its share of the discount segment increased 0.2 share points to 15.8%. Retail share for the discount segment of the industry declined by 0.2 share points to 27.4% compared to the second quarter of 2003 and retail share for the industry's deep discount segment was essentially flat, down 0.1 share point to 9.9%, as measured by the IRI/Capstone Total Retail Panel. Parliament Ultra Lights and Marlboro Blend No. 27, introduced in the second quarter, both met distribution and share objectives during the third quarter. Philip Morris USA continued test marketing premium 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. and announced that it will begin test marketing an addition to the Marlboro Menthol menthol, white crystalline substance with a characteristic pungent odor. It is derived from the oil of the peppermint plant, Mentha piperita (see mint), or prepared synthetically from coal tar. family in the fourth quarter. INTERNATIONAL TOBACCO 2003 Third-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 12.9% versus the same period a year ago to $1.7 billion, due to favorable currency of $150 million, volume gains, higher pricing and 2002 charges of $33 million for asset impairment and exit costs. Shipment volume increased 0.8% to 189.4 billion units, as declines in Germany, Italy and France largely offset gains in other markets and volume of approximately one billion units from an acquisition in Serbia Serbia (sûr`bēə), Serbian Srbija (sŭr`bēä), officially Republic of Serbia, republic (1995 est. pop. . Volume comparisons benefited from a double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. decline in Japan for the third quarter of 2002, due to the timing of shipments to that market caused by the shutdown shut·down n. A cessation of operations or activity, as at a factory. shutdown Noun the closing of a factory, shop, or other business Verb shut down of U.S. West Coast shipping ports, which was partially offset by a trade inventory reduction following the July July: see month. 2003 price increase. PMI achieved widespread market share gains, including increases in the key markets of Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. , Austria Austria (ô`strēə), Ger. Österreich [eastern march], officially Republic of Austria, federal republic (2005 est. pop. 8,185,000), 32,374 sq mi (83,849 sq km), central Europe. , France, Japan, Korea Korea (kôrē`ə, kə–), Korean Hanguk or Choson, region and historic country (85,049 sq mi/220,277 sq km), E Asia. , Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. , Russia Russia, officially the Russian Federation, Rus. Rossiya, republic (2005 est. pop. 143,420,000), 6,591,100 sq mi (17,070,949 sq km). , Saudi Arabia Saudi Arabia (sä  `dē ərā`bēə, sou`–, sô–), officially Kingdom of Saudi Arabia, kingdom (2005 est. pop. , Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. , Turkey, the Ukraine Ukraine (y`krān, ykrān`), Ukr. Ukraina, republic (2005 est. pop. and the United Kingdom.Total Marlboro shipments were down 3% in the third quarter, due primarily to declines in France, Germany and Italy. However, Marlboro share increased in Japan and other key income markets, including Austria, 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. , Mexico, the Slovak Slo·vak also Slo·va·ki·an n. 1. a. A native or inhabitant of Slovakia. b. A person of Slovak descent. 2. The Slavic language of the Slovaks. adj. Republic, Spain, Poland Poland, Pol. Polska, officially Republic of Poland, republic (2005 est. pop. 38,635,000), 120,725 sq mi (312,677 sq km), central Europe. It borders on Germany in the west, on the Baltic Sea and the Kaliningrad region of Russia in the north, on Lithuania, , Portugal Portugal (pôr`chəgəl), officially Portuguese Republic, republic (2005 est. pop. 10,566,000), 35,553 sq mi (92,082 sq km), SW Europe, on the western side of the Iberian Peninsula and including the Madeira Islands and the Azores in the , the Ukraine and the United Kingdom. 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). , shipment volume declined 7.5%, due to a confluence confluence /con·flu·ence/ (kon´floo-ins) 1. a running together; a meeting of streams.con´fluent 2. in embryology, the flowing of cells, a component process of gastrulation. of adverse industry dynamics in Germany, Italy and France, partially offset by increases in Spain and the United Kingdom. In Germany, volume declined 7.3%, reflecting a total market decline and consumer down trading to low-priced tobacco portions, which are benefiting from a discriminatory dis·crim·i·na·to·ry adj. 1. Marked by or showing prejudice; biased. 2. Making distinctions. dis·crim 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. structure. PMI has filed unfair competition claims against the principal manufacturers of these products and, in addition, the European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the European Community has challenged the legality le·gal·i·ty n. pl. le·gal·i·ties 1. The state or quality of being legal; lawfulness. 2. Adherence to or observance of the law. 3. A requirement enjoined by law. Often used in the plural. of such excise tax treatment. PMI's share in Germany was down 0.2 points to 36.7%, reflecting increased trade inventories by competitors. In Italy, volume was down 19.3% while share fell 8.1 points to 53.1%, as Marlboro and Diana Diana, in Roman religion Diana (dīăn`ə), in Roman religion, goddess of the moon, forests, animals, and women in childbirth. She was probably originally a forest goddess and a special patroness of women. remained under pressure from low-priced competitive brands. As a result of the growth of this segment, the Italian government has suffered a significant loss in revenue and can be expected to take appropriate action. In France, shipment volume was down 6.7%, due to a lower total market as a result of tax-driven price increases. However, PMI's share was up 0.5 points to 39.1% in the quarter. Excise tax increases effective this month will continue impacting total market size going forward. However, the percent price gap between Marlboro and low-priced brands is likely to be further decreased, to approximately 13%. In Spain, volume was up a strong 14.2% as Marlboro and Chesterfield grew rapidly. Overall, PMI's share in Western Europe was down 1.1 points to 38.9%, but excluding Italy was up 0.3 points to 35.6%. 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. , volume decreased 1.3%, as declines from intense price competition in Lithuania Lithuania (lĭth ā`nēə), Lithuanian Lietuva, officially Republic of Lithuania, republic (2005 est. pop. 3,597,000), 25,174 sq mi (65,201 sq km), N central Europe. , Poland and the Slovak Republic were
partially offset by gains in other Baltic countries, Greece Greece, Gr. Hellas or Ellas, republic (2005 est. pop. 10,668,000), 50,944 sq mi (131,945 sq km), SE Europe. It occupies the southernmost part of the Balkan Peninsula and borders on the Ionian Sea in the west, on the Mediterranean Sea in the south, on and Serbia,
with the latter also benefiting from acquisition volume. During the
third quarter, PMI acquired a controlling interest controlling interestThe ownership of a quantity of outstanding corporate stock sufficient to control the actions of the firm. Controlling interest often involves ownership of significantly less than 51% of a firm's outstanding stock because many owners fail in Duvanska Industrija Nis (DIN), a formerly state-owned state-owned adj → estatal, del estado state-owned adj → étatisé(e) state-owned state adj → cigarette company in Serbia. In early October, PMI announced that it had been given clearance by the European Commission European Commission, branch of the governing body of the European Union (EU) invested with executive and some legislative powers. Located in Brussels, Belgium, it was founded in 1967 when the three treaty organizations comprising what was then the European Community for the acquisition of the Greek In desktop publishing, to display text in a representative form in which the actual letters are not discernible, because the screen resolution isn't high enough to display them properly. The software lets you set which font sizes should be greeked. cigarette company Papastratos, and that it is proceeding with the purchase. In 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. , the Middle East and Africa, volume grew a strong 9.4%, driven by continued robust gains in Russia, Turkey and the Ukraine. In Russia, L&M, Marlboro, Parliament and Chesterfield continued to perform well. In Turkey, L&M and the recent launch of Muratti The Muratti is an annual men's football match, inaugurated in 1905, between the Channel Islands of Guernsey, Jersey and Alderney, the prize for winning being a trophy called the Muratti Vase. Ambassador fueled double-digit volume growth and a 6.8 point share gain to 33.1%. In the Ukraine, volume was up 26.5%, driven by the strong performance of Marlboro, L&M and Bond Street. In Asia, volume increased 3.3%, driven by increases in Japan, Korea, Malaysia Malaysia (məlā`zhə), independent federation (2005 est. pop. 23,953,000), 128,430 sq mi (332,633 sq km), Southeast Asia. The official capital and by far the largest city is Kuala Lumpur; Putrajaya is the adminstrative capital. , Taiwan and Vietnam, partially offset by declines in Indonesia and the Philippines. In Korea, volume and share improved significantly, driven by the successful introduction of Lark in the premium segment in November 2002 and the launch of Virginia Slims Ultra Lights in July 2003. In Japan, volume increased, and share advanced 0.5 points to 24.2% driven by Marlboro and Lark. During the third quarter of 2003, Japan Tobacco Inc. (JT) and PMI announced that they had mutually agreed that JT's license to manufacture and sell Marlboro brand cigarettes in Japan would not be renewed when the term of the agreement expires in April 2005. In 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. , volume rose 3.3%, due mainly to a strong gain in Argentina, where Marlboro and L&M continued to perform well, and to gains in Mexico and Central America Central America, narrow, southernmost region (c.202,200 sq mi/523,698 sq km) of North America, linked to South America at Colombia. It separates the Caribbean from the Pacific. . PMI's share increased in Argentina and Mexico. During the third quarter, PMI increased its ownership interest in an affiliate in Ecuador. 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 third-quarter 2003 results. Kraft's worldwide volume decreased 0.2%, partially reflecting the impact of divestitures. Volume growth from ongoing businesses, which excludes the impact of businesses sold, was 1.0%, driven by tack on tack on Verb to attach or add (something) to something that is already complete: an elegant mansion with a modern extension tacked on at the back Verb 1. acquisitions, which accounted for 0.6 percentage points of growth, solid growth in several North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. businesses, and broad strength across the Asia Pacific region. Volume was lower in U.S. cookies, and European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. coffee and chocolate, due to significant softness in these categories. Operating income decreased $150 million, or 9.6%, to $1.4 billion, driven by higher commodity and benefit costs, the previously announced investment spending in focus categories (cheese, coffee, cold cuts and biscuits) and unfavorable mix, marginally offset by a gain on sale of the European rice business and the effects of favorable currency. NORTH AMERICAN FOOD 2003 Third-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 0.9%. Excluding the impact of a small, divested confectionery confectionery, delicacies or sweetmeats that have sugar as a principal ingredient, combined with coloring matter and flavoring and often with fruit or nuts. In the United States it is usually called candy, in Great Britain, sweets or boiled sweets. business, volume grew 1.0%, driven by strength in ready-to-drink beverages, foodservice, enhancers and meats, partially offset by consumption weakness in select categories, particularly cookies. Operating companies income decreased 11.6% to $1.2 billion, driven by higher commodity and benefit costs, investment spending in North American focus categories and unfavorable mix. INTERNATIONAL FOOD 2003 Third-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%, driven by the impact of divestitures. Volume from ongoing businesses increased 0.8%, as a 2.5 percentage point impact from acquisitions was largely offset by the adverse impact of the summer heat wave across Europe on the chocolate and coffee categories, and price competition. Operating companies income increased 2.3% to $307 million, as the effects of currency favorability of $18 million, a gain on sale of the European rice business of $23 million and higher pricing were partly offset by unfavorable mix, higher benefit costs and infrastructure investment in developing markets. 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. 2003 Third-Quarter Results 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 ) decreased 7.3% to $76 million, driven by lower lease portfolio revenues, partially offset by higher asset management gains due primarily to the sale of six single-investor leases. Earlier in 2003, PMCC announced that it was shifting its strategic focus from an emphasis on the growth of its portfolio of finance leases through new lease investments to one of maximizing investment gains and generating cash flow from its diversified diversified (di·verˑ·s portfolio of leased assets. 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 International Inc., Philip Morris USA Inc. and Philip Morris Capital Corporation. 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 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 , 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. Prior to January 27, 2003, Altria Group, Inc. was named Philip Morris Companies Inc. This news release refers to Altria Group, Inc. even when historical events took place under the company's former name. 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 Brewing Co. into SAB. The transaction closed on July 9, 2002 and SAB changed its name to SABMiller plc (SABMiller). The transaction resulted in a pre-tax gain of $2.6 billion or $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 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 9:30 a.m. Eastern Time on October 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 var·i·ance n. 1. a. The act of varying. b. The state or quality of being variant or variable; a variation. c. A difference between what is expected and what actually occurs. 2. 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 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. As a result of 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. is currently unable to access the commercial paper market and must rely on 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. facilities instead. 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 and its Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the period ended June 30, 2003. 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 September 30,
(in millions, except per share data)
2003 2002 % Change
-------------------------
Net revenues $20,939 $19,996 4.7 %
Cost of sales 7,900 7,674 2.9 %
Excise taxes on products (a) 5,637 4,758 18.5 %
----------------
Gross profit 7,402 7,564 (2.1)%
Marketing, administration and research costs 2,991 2,806
Domestic tobacco headquarters relocation
charges 27 -
Gains on sales of businesses (23) -
Food asset impairment and exit costs 6 -
International tobacco asset impairment
and exit costs - 33
----------------
Operating companies income 4,401 4,725 (6.9)%
Amortization of intangibles 2 1
General corporate expenses 176 166
----------------
Operating income 4,223 4,558 (7.3)%
Gain on Miller transaction - (2,653)
Interest and other debt expense, net 301 279
----------------
Earnings before income taxes and minority
interest 3,922 6,932 (43.4)%
Provision for income taxes 1,353 2,461 (45.0)%
----------------
Earnings before minority interest 2,569 4,471 (42.5)%
Minority interest in earnings, net 79 112
----------------
Net earnings $ 2,490 $ 4,359 (42.9)%
================
Basic earnings per share (b) $ 1.23 $ 2.07 (40.6)%
================
Diluted earnings per share (b) $ 1.22 $ 2.06 (40.8)%
================
Weighted average number of
shares outstanding - Basic 2,027 2,104 (3.7)%
- Diluted 2,036 2,119 (3.9)%
(a) The detail of excise taxes on products sold is as follows:
2003 2002
----------------
Domestic tobacco $ 964 $ 974
International tobacco 4,673 3,784
Beer - -
----------------
Total excise taxes $ 5,637 $ 4,758
================
(b) Basic and diluted earnings per share are computed for each of the
periods presented. Accordingly, the sum of the quarterly earnings
per share amounts may not agree to the year-to-date amounts.
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended September 30,
(in millions)
North
Domestic International American International
tobacco tobacco food food
----------------------------------------------
2003 Net Revenues $ 4,440 $ 8,912 $ 5,326 $ 2,154
2002 Net Revenues 5,022 7,644 5,225 1,991
% Change (11.6)% 16.6% 1.9% 8.2%
Reconciliation:
---------------
2002 Net Revenues $ 5,022 $ 7,644 $ 5,225 $ 1,991
Divested businesses -
2003 - - - (2)
Divested businesses -
2002 - - (7) (23)
Currency - 727 46 167
Operations (582) 541 62 21
----------------------------------------------
2003 Net Revenues $ 4,440 $ 8,912 $ 5,326 $ 2,154
==============================================
Financial
Beer services Total
---------------------------------
2003 Net Revenues $ - $ 107 $20,939
2002 Net Revenues - 114 19,996
% Change (6.1)% 4.7%
Reconciliation:
-----------------------
2002 Net Revenues $ - $ 114 $19,996
Divested businesses -
2003 - - (2)
Divested businesses -
2002 - - (30)
Currency - - 940
Operations - (7) 35
---------------------------------
2003 Net Revenues $ - $ 107 $20,939
=================================
Note: The detail of excise taxes on products sold is as follows:
2003 2002
-------------------
Domestic tobacco $ 964 $ 974
International tobacco 4,673 3,784
Beer - -
-------------------
Total excise taxes $ 5,637 $ 4,758
===================
Currency increased international tobacco excise taxes by $433
million.
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended September 30,
(in millions)
North
Domestic International American International
tobacco tobacco food food
----------------------------------------------
2003 Operating Companies
Income $ 1,147 $ 1,719 $ 1,152 $ 307
2002 Operating Companies
Income 1,518 1,522 1,303 300
% Change (24.4)% 12.9% (11.6)% 2.3%
Reconciliation:
---------------
2002 Operating Companies
Income $ 1,518 $ 1,522 $ 1,303 $ 300
Divested businesses -
2003 - - - (1)
Divested businesses -
2002 - - (2) (5)
Domestic tobacco
headquarters
relocation charges -
2003 (27) - - -
Gains on sales of
businesses -
2003 - - - 23
Asset impairment and exit
costs - 2003 - - - (6)
Asset impairment and exit
costs - 2002 - 33 - -
Currency - 150 9 18
Operations (344) 14 (158) (22)
----------------------------------------------
2003 Operating Companies
Income $ 1,147 $ 1,719 $ 1,152 $ 307
==============================================
Financial
Beer services Total
--------------------------------
2003 Operating Companies
Income $ - $ 76 $ 4,401
2002 Operating Companies
Income - 82 4,725
% Change (7.3)% (6.9)%
Reconciliation:
---------------
2002 Operating Companies
Income $ - $ 82 $ 4,725
Divested businesses -
2003 - - (1)
Divested businesses -
2002 - - (7)
Domestic tobacco
headquarters relocation
charges - 2003 - - (27)
Gains on sales of
businesses - 2003 - - 23
Asset impairment and exit
costs - 2003 - - (6)
Asset impairment and exit
costs - 2002 - - 33
Currency - - 177
Operations - (6) (516)
--------------------------------
2003 Operating Companies
Income $ - $ 76 $ 4,401
================================
ALTRIA GROUP, INC.
and Subsidiaries
Condensed Statements of Earnings
For the Nine Months Ended September 30,
(in millions, except per share data)
2003 2002 % Change
-------------------------
Net revenues $61,141 $61,634 (0.8)%
Cost of sales 23,456 24,707 (5.1)%
Excise taxes on products (a) 15,868 13,916 14.0 %
----------------
Gross profit 21,817 23,011 (5.2)%
Marketing, administration and research costs 8,789 8,807
Domestic tobacco legal settlement 182 -
Domestic tobacco headquarters relocation
charges 36 -
Gains on sales of businesses (23) (3)
Food integration costs - 119
Food asset impairment and exit costs 6 142
International tobacco asset impairment
and exit costs - 58
Beer asset impairment and exit costs - 23
----------------
Operating companies income 12,827 13,865 (7.5)%
Amortization of intangibles 7 5
General corporate expenses 542 504
----------------
Operating income 12,278 13,356 (8.1)%
Gain on Miller transaction - (2,653)
Interest and other debt expense, net 847 881
----------------
Earnings before income taxes and minority
interest 11,431 15,128 (24.4)%
Provision for income taxes 3,996 5,370 (25.6)%
----------------
Earnings before minority interest 7,435 9,758 (23.8)%
Minority interest in earnings, net 322 424
----------------
Net earnings $ 7,113 $ 9,334 (23.8)%
================
Basic earnings per share (b) $ 3.51 $ 4.39 (20.0)%
================
Diluted earnings per share (b) $ 3.50 $ 4.34 (19.4)%
================
Weighted average number of
shares outstanding - Basic 2,027 2,128 (4.7)%
- Diluted 2,035 2,150 (5.3)%
(a) The detail of excise taxes on products sold is as follows:
2003 2002
----------------
Domestic tobacco $ 2,781 $ 2,913
International tobacco 13,087 10,550
Beer - 453
----------------
Total excise taxes $15,868 $13,916
================
(b) Basic and diluted earnings per share are computed for each of the
periods presented. Accordingly, the sum of the quarterly earnings
per share amounts may not agree to the year-to-date amounts.
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Nine Months Ended September 30,
(in millions)
North
Domestic International American International
tobacco tobacco food food
----------------------------------------------
2003 Net Revenues $12,755 $25,379 $16,350 $ 6,330
2002 Net Revenues 14,921 21,817 16,087 5,789
% Change (14.5)% 16.3% 1.6% 9.3%
Reconciliation:
---------------
2002 Net Revenues $14,921 $21,817 $16,087 $ 5,789
Divested businesses -
2003 - - - 6
Divested businesses -
2002 - - (17) (70)
Currency - 2,044 58 382
Operations (2,166) 1,518 222 223
----------------------------------------------
2003 Net Revenues $12,755 $25,379 $16,350 $ 6,330
==============================================
Financial
Beer services Total
--------------------------------
2003 Net Revenues $ - $ 327 $61,141
2002 Net Revenues 2,641 379 61,634
% Change (13.7)% (0.8)%
Reconciliation:
---------------
2002 Net Revenues $ 2,641 $ 379 $61,634
Divested businesses -
2003 - - 6
Divested businesses -
2002 (2,641) - (2,728)
Currency - - 2,484
Operations - (52) (255)
--------------------------------
2003 Net Revenues $ - $ 327 $61,141
================================
Note: The detail of excise taxes on products sold is as follows:
2003 2002
-------------------
Domestic tobacco $ 2,781 $ 2,913
International tobacco 13,087 10,550
Beer - 453
-------------------
Total excise taxes $15,868 $13,916
===================
Currency increased international tobacco excise taxes by $1,217
million.
ALTRIA GROUP, INC.
and Subsidiaries
Selected Financial Data by Business Segment
For the Nine Months Ended September 30,
(in millions)
North
Domestic International American International
tobacco tobacco food food
----------------------------------------------
2003 Operating Companies
Income $ 2,902 $ 5,012 $ 3,832 $ 840
2002 Operating Companies
Income 4,222 4,489 3,770 851
% Change (31.3)% 11.7% 1.6% (1.3)%
Reconciliation:
---------------
2002 Operating Companies
Income $ 4,222 $ 4,489 $ 3,770 $ 851
Divested businesses -
2003 - - - 3
Divested businesses -
2002 - - (4) (15)
Domestic tobacco legal
settlement -
2003 (182) - - -
Domestic tobacco
headquarters relocation
charges - 2003 (36) - - -
Gains on sales of
businesses - 2003 - - - 23
Gains on sales of
businesses - 2002 - - - (3)
Asset impairment and exit
costs - 2003 - - - (6)
Asset impairment and exit
costs - 2002 - 58 135 7
Integration costs - 2002 - - 102 17
Currency - 360 10 40
Operations (1,102) 105 (181) (77)
----------------------------------------------
2003 Operating Companies
Income $ 2,902 $ 5,012 $ 3,832 $ 840
==============================================
Financial
Beer services Total
--------------------------------
2003 Operating Companies
Income $ - $ 241 $12,827
2002 Operating Companies
Income 276 257 13,865
% Change (6.2)% (7.5)%
Reconciliation:
---------------
2002 Operating Companies
Income $ 276 $ 257 $13,865
Divested businesses -
2003 - - 3
Divested businesses -
2002 (299) - (318)
Domestic tobacco legal
settlement - 2003 - - (182)
Domestic tobacco
headquarters relocation
charges - 2003 - - (36)
Gains on sales of
businesses - 2003 - - 23
Gains on sales of
businesses - 2002 - - (3)
Asset impairment and exit
costs - 2003 - - (6)
Asset impairment and exit
costs - 2002 23 - 223
Integration costs - 2002 - - 119
Currency - - 410
Operations - (16) (1,271)
--------------------------------
2003 Operating Companies
Income $ - $ 241 $12,827
================================
ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Quarters Ended September 30,
($ in millions, except per share data)
Net Diluted
Earnings E.P.S.(a)
-------- --------
2003 $ 2,490 $ 1.22
2002 $ 4,359 $ 2.06
% Change (42.9)% (40.8)%
Reconciliation:
---------------
2002 Reported $ 4,359 $ 2.06
International tobacco asset impairment and
exit costs - 2002 21 0.01
Gain on Miller transaction - 2002 (1,711) (0.81)
Domestic tobacco headquarters relocation
charges - 2003 (17) (0.01)
Gains on sales of businesses - 2003, net of
minority interest impact 13 -
Food asset impairment and exit costs - 2003,
net of minority interest impact (3) -
Currency 114 0.05
Effect of change in shares outstanding - 0.05
Effect of change in tax rate 39 0.02
Operations (325) (0.15)
-------- --------
2003 Reported $ 2,490 $ 1.22
======== ========
(a) Basic and diluted earnings per share are computed for each of the
periods presented. Accordingly, the sum of the quarterly earnings
per share amounts may not agree to the year-to-date amounts.
ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Nine Months Ended September 30,
($ in millions, except per share data)
Net Diluted
Earnings E.P.S.(a)
-------- --------
2003 $ 7,113 $ 3.50
2002 $ 9,334 $ 4.34
% Change (23.8)% (19.4)%
Reconciliation:
---------------
2002 Reported $ 9,334 $ 4.34
Gains on sales of businesses - 2002, net of
minority interest impact (2) -
Food integration costs - 2002, net of minority
interest impact 64 0.03
Food exit costs - 2002, net of minority
interest impact 77 0.03
International tobacco asset impairment and exit
costs - 2002 37 0.02
Beer asset impairment and exit costs - 2002 15 0.01
Gain on Miller transaction - 2002 (1,711) (0.80)
Domestic tobacco legal settlement - 2003 (118) (0.06)
Domestic tobacco headquarters relocation
charges - 2003 (23) (0.01)
Gains on sales of businesses - 2003, net of
minority interest impact 13 0.01
Food asset impairment and exit costs - 2003,
net of minority interest impact (3) -
Currency 265 0.12
Effect of change in shares outstanding - 0.19
Effect of change in tax rate 58 0.03
Operations (893) (0.41)
-------- --------
2003 Reported $ 7,113 $ 3.50
======== ========
(a) Basic and diluted earnings per share are computed for each of the
periods presented. Accordingly, the sum of the quarterly earnings
per share amounts may not agree to the year-to-date amounts.
ALTRIA GROUP, INC.
and Subsidiaries
Condensed Balance Sheets
(in millions, except ratios)
September December
30, 31,
2003 2002
-------- --------
Assets
------
Cash and cash equivalents $ 6,048 $ 565
All other current assets 16,811 16,876
Property, plant and equipment, net 15,377 14,846
Goodwill 26,751 26,037
Other intangible assets, net 11,807 11,834
Other assets 9,029 8,151
------- -------
Total consumer products assets 85,823 78,309
Total financial services assets 8,603 9,231
------- -------
Total assets $94,426 $87,540
======= =======
Liabilities and Stockholders' Equity
------------------------------------
Short-term borrowings $ 4,427 $ 407
Current portion of long-term debt 1,510 1,558
Accrued settlement charges 3,287 3,027
All other current liabilities 13,898 14,090
Long-term debt 18,548 19,189
Deferred income taxes 6,487 6,112
Other long-term liabilities 15,303 15,498
------- -------
Total consumer products liabilities 63,460 59,881
Total financial services liabilities 8,137 8,181
------- -------
Total liabilities 71,597 68,062
Total stockholders' equity 22,829 19,478
------- -------
Total liabilities and stockholders' equity $94,426 $87,540
======= =======
Total consumer products debt $24,485 $21,154
Debt/equity ratio - consumer products 1.07 1.09
Total debt $26,568 $23,320
Total debt/equity ratio 1.16 1.20
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