Altria Group, Inc. Reports 2004 First-Quarter Results; 2004 First-Quarter Diluted Earnings Per Share of $1.07 Versus $1.07 in Year-Ago Quarter.Business Editors NEW YORK--(BUSINESS WIRE)--April 20, 2004 Comparison Affected by Charges of $0.09 in First-Quarter 2004, As Detailed in Attached Reconciliation 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) today announced first-quarter 2004 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 $1.07, including $0.09 in charges for the previously announced food restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). and other items as described in the attached reconciliation of first-quarter 2003 to first-quarter 2004 results. Altria's reported diluted earnings per share of $1.07 in the first quarter a year ago contained no charges. "All in all, we had a solid first quarter that met our expectations," 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. "Results were very strong for our domestic tobacco business, which reported good income growth and retail share gains, especially for Marlboro and Parliament. Our international tobacco business posted solid income growth aided by currency, and volume and share gains in key markets around the world, but experienced continued weakness in France and 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. , which moderated total volume growth. Kraft's results were in line with expectations as it implemented the first phase of its restructuring program and invested in brand building initiatives." Altria Group, Inc. reaffirmed its previously announced projection for 2004 full-year diluted earnings per share in a range of $4.57 to $4.67, which includes a $0.23 reduction for anticipated charges related to the Kraft restructuring program announced in January January: see month. and other items, but does not include potential charges for the international tobacco agreement under discussion with 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 . 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 this projection. On April 3, 2004, 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. (PMI See Private Mortgage Insurance. ), Altria Group, Inc.'s international tobacco business, announced that it is in discussions to reach an agreement with the European Commission that provides for broad cooperation with European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. law enforcement agencies A law enforcement agency (LEA) is a term used to describe any agency which enforces the law. This may be a local or state police, federal agencies such as the Federal Bureau of Investigation (FBI) or the Drug Enforcement Administration (DEA). on anti-contraband and anti-counterfeit efforts. The draft agreement would also resolve past disputes relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc these issues. Under the draft agreement, PMI would make 13 payments over 12 years and would record a pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta charge of $250 million for the initial payment when the agreement is signed. The draft agreement calls for base payments of $150 million on the first anniversary of the agreement, $100 million on the second anniversary and $75 million each year thereafter for 10 years, each of which is to be adjusted based on certain variables, including PMI's market share in the EU in the year preceding payment. PMI would record these base payments as an expense in cost of sales when product is shipped. A conference call with members of the investment community will be Webcast at 9:00 a.m. Eastern Time on April 20, 2004. 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 2003 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. 2004 First-Quarter Results Net revenues for the first quarter 2004, 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 12.7% versus the first quarter 2003 to $21.8 billion, due primarily to increases from Altria's domestic and international tobacco businesses, favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. currency of $1.3 billion and an increase from North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. food. Operating income decreased 3.5% to $3.7 billion, due primarily to the impact of the food restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. and lower income from food, partially offset by higher income from domestic tobacco. Also affecting operating income comparisons were favorable currency of $278 million and the other items described in the attached reconciliation of first-quarter 2003 operating companies income to first-quarter 2004 operating companies income. Net earnings increased 0.4% to $2.2 billion, due primarily to higher income from domestic tobacco, favorable currency and a lower effective tax rate, partially offset by food restructuring charges and lower income from food. The effective tax rate decreased from 35.2% in the first quarter of 2003 to 34.6% in the first quarter of 2004. During the first quarter of 2004, Altria Group, Inc. declared a regular quarterly dividend of $0.68 per common share, 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 $2.72 per common share. DOMESTIC TOBACCO 2004 First-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, delivered robust market share performance, with total retail share growing 1.3 share points to 49.6%, driven by Marlboro's strong performance. 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 shipment volume decreased 1.7% to 43.1 billion units, but was essentially flat when adjusted for the timing of promotions, wholesaler inventory changes and one extra shipping day in the first quarter of 2004. Premium mix for Philip Morris USA improved by approximately 0.2 share points to 91.3%. Operating companies income increased 30.7%, to $970 million, due to the absence of one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. buy-down costs incurred in the first quarter of 2003, lower returned goods expenses and lower cash discounts paid to the trade, partially offset by lower volume and pre-tax charges of $11 million for the 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 and other exit costs. The increase in Philip Morris USA's total retail share to 49.6% in the first quarter of 2004 was driven by a 1.5 share point gain in Marlboro. 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. 72mm, a premium-priced addition to the Marlboro Menthol family, was launched nationally at retail in March and met its initial share and distribution objectives. Parliament recorded a 0.2 share point gain, while retail share was unchanged for Basic and down slightly 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 , as shown in the following table:
Philip Morris USA Quarterly Retail Share*
Q1 2004 Q1 2003 Change
----------- ----------- -----------
Marlboro 39.0% 37.5% + 1.5 pp
Parliament 1.7% 1.5% + 0.2 pp
Virginia Slims 2.4% 2.5% - 0.1 pp
Basic 4.3% 4.3% 0.0 pp
----------- ----------- -----------
Focus Brands 47.4% 45.8% + 1.6 pp
Other Philip Morris USA 2.2% 2.5% - 0.3 pp
----------- ----------- -----------
Total Philip Morris USA 49.6% 48.3% + 1.3 pp
* IRI/Capstone Total Retail Panel data
Philip Morris USA's retail share of the premium segment increased 0.8 share points to 61.8% in the first quarter of 2004, while its share of the discount segment increased 0.4 share points to 16.1%. INTERNATIONAL TOBACCO 2004 First-Quarter Results Shipment volume for Philip Morris International Inc. (PMI), Altria Group, Inc.'s international tobacco business, increased 3.2% to 196.9 billion units in the first quarter of 2004. Gains in key markets and additional volume from 2003 acquisitions were partially offset by declines primarily in France and Italy. Excluding acquisition volume, shipments of 190.8 billion units were the same in the first quarter of 2004 as the first quarter of 2003. Operating companies income for PMI rose 8.6% to $1.8 billion for the first quarter due to favorable currency of $243 million, the impact of acquisitions and higher pricing, partially offset by lower volume in the higher margin markets of 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 investments in marketing, distribution and infrastructure. During the first quarter of 2004, PMI achieved widespread market share gains, including increases in the top income 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. , Japan, 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. , 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. , 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 , 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. ,
Switzerland Switzerland (swĭt`sərlənd), Fr. Suisse, Ger. Schweiz, Ital. Svizzera, officially Swiss Confederation, federal republic (2005 est. pop. 7,489,000), 15,941 sq mi (41,287 sq km), central Europe. , Turkey, the Ukraine Ukraine (y`krān, ykrān`), Ukr. Ukraina, republic (2005 est. pop. and the United Kingdom.Total Marlboro shipments were down 3.0% in the first quarter of 2004 versus the first quarter of 2003, due primarily to declines in France and Italy. However, Marlboro volume was higher in many markets, most notably in Argentina, Brazil Brazil (brəzĭl`), Port. Brasil, officially Federative Republic of Brazil, republic (2005 est. pop. 186,113,000), 3,286,470 sq mi (8,511,965 sq km), E South America. , Korea Korea (kôrē`ə, kə–), Korean Hanguk or Choson, region and historic country (85,049 sq mi/220,277 sq km), E Asia. , Malaysia, Mexico, the Philippines, Poland, Romania, Russia, Serbia and the Ukraine. Share gains for Marlboro were achieved in the key markets of Argentina, Belgium, 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. , Japan, Malaysia, Mexico, Portugal, Russia, Spain, the Ukraine and the United Kingdom. In Western Europe, shipment volume decreased 10.6% for the first quarter of 2004, due to an unfavorable comparison with the first quarter of 2003, when the full effects of tax-driven price increases in France and low-price competition in Italy had not yet fully impacted results. In France, shipment volume was down 31.0%, reflecting an overall market decline and trade inventory reductions. However, PMI's share in France was stable at 39.2% during the first quarter. In Italy, volume was down 14.6% and share declined 3.9 points to 51.8%. Marlboro and Diana were adversely impacted in Italy by low-priced competitive brands, trade purchasing patterns around price increases in the first quarter of 2004 and a lower total market. In Germany, volume declined 3.0%, primarily reflecting a lower total cigarette market mainly due to continued shifts to low-priced tobacco portions. PMI will enter the tobacco portions segment under the Marlboro and Next brands later this month. Share in Germany was up slightly to 37.3% during the first quarter of 2004. In Spain, share increased 1.8 share points to 37.2%, driven by the continued strong performance of Marlboro and 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. . Total market share in Western Europe declined 0.6 share points to 38.6% in the first quarter of 2004, but was up slightly excluding Italy. 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 increased 18.4%, due mainly to gains in Greece and Serbia, which benefited from the impact of acquisitions and an increase in the Czech Republic. These gains were partially offset by a decline in Poland due to intense price competition, as well as down trading to roll-your-own cigarettes. In worldwide duty-free, volume increased a strong 14.2%, reflecting increased travel and strong performance in Turkey, Romania, Asia and the Middle East. 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 9.3%, due primarily to Russia, Turkey and the Ukraine. In Russia, market share was up 2.1 share points to 26.1%, fueled by L&M, Next and Chesterfield. In Turkey, share grew 3.8 points to 34.1% due to the continued strong performance of L&M and the successful July 2003 launch of Muratti. In Asia, volume advanced 6.0%, reflecting significant investments made by PMI in major markets. In Korea, volume increased 35.0%, benefiting from the growth of Lark and newly introduced Marlboro Ultra Lights. Strong volume increases in Malaysia and Thailand were aided by the growth of Marlboro and L&M, respectively. In the Philippines, volume increased 35.8%, driven by Marlboro and the acquisition of the Sterling brands. These increases were partially offset by declines in Indonesia and Japan. In Japan, the total market was down 3.4% due to the adverse impact of the July 2003 tax-driven retail price increase and a lower incidence of smoking. However, PMI's share in Japan was up 0.2 share points to 24.2% due to Marlboro. 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 2.5%, driven by gains in Brazil and Mexico. In Brazil, volume and share were up due to Marlboro. In Mexico, PMI's share rose 1.4 share points to 59.1%, due mainly to Marlboro's strong performance and the launch of B&H Lights Menthol late last year. In Argentina, Marlboro drove a 0.3 share point increase to 66.5% market share. 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 2004 first-quarter results. Kraft's worldwide total reported volume was up 0.5%, due to ongoing volume growth of 0.8%, partially offset by the impact of divestitures. Volume strength across many businesses was partially offset by continued challenges in cookies and cereals, including the low carbohydrate carbohydrate, any member of a large class of chemical compounds that includes sugars, starches, cellulose, and related compounds. These compounds are produced naturally by green plants from carbon dioxide and water (see photosynthesis). diet phenomenon; by trade inventory reductions in certain categories and countries; and by tough comparisons with last year, when new product activity was skewed skewed curve of a usually unimodal distribution with one tail drawn out more than the other and the median will lie above or below the mean. skewed Epidemiology adjective Referring to an asymmetrical distribution of a population or of data to the first quarter. Operating income declined 33.5% to $989 million, as exit costs associated with the previously announced restructuring program, higher commodity and benefit costs, increased marketing investment and an intangible asset Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. 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. charge were partially offset by favorable currency and top line growth. In March, Kraft announced the acquisition of Veryfine Products Inc., the privately held manufacturer of Fruit2O flavored water and Veryfine juices and juice drinks, with 2003 net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of approximately $140 million. In early April, Kraft announced a licensing agreement with Tazo Tea Company, a wholly-owned subsidiary of Starbucks Corporation, under which Kraft will market, sell and distribute Tazo products across the entire U.S. grocery channel. NORTH AMERICAN FOOD 2004 First-Quarter Results For the first quarter of 2004, volume for Kraft 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. Commercial (KNAC), formerly Kraft Foods North America, Inc., grew 1.0% due to broad-based broad-based Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased growth with strength in foodservice, cheese, snack nuts, meats, desserts and enhancers, partially offset by weakness in cookies and cereal cereal or grain Any grass yielding starchy seeds suitable for food. The most commonly cultivated cereals are wheat, rice, rye, oats, barley, corn, and sorghum. As human food, cereals are usually marketed in raw grain form or as ingredients of food products. , as well as new product timing and trade inventory reductions on ready-to-drink beverages. Operating companies income declined 33.5% to $846 million due to exit costs for the restructuring program of $245 million, higher commodity and benefit costs, increased marketing investment, and an intangible asset impairment charge of $17 million, partially offset by the contribution from volume growth and favorable currency of $11 million. INTERNATIONAL FOOD 2004 First-Quarter Results For the first quarter of 2004, volume for Kraft International Commercial (KIC KIC Kuwait Investment Company KIC Keep in Contact (alumni programme of Deutsche Post World Net) KIC Ketchikan Indian Community (Ketchikan, Alaska) KIC Keep It Coming ), formerly Kraft Foods International, Inc., decreased 0.9%, as the impact of divested businesses more than offset ongoing volume growth of 0.4%. Ongoing volume growth was driven by acquisitions and growth in the United Kingdom and Germany, partially offset by declines in France and Puerto Rico Puerto Rico (pwār`tō rē`kō), island (2005 est. pop. 3,917,000), 3,508 sq mi (9,086 sq km), West Indies, c.1,000 mi (1,610 km) SE of Miami, Fla. , due to aggressive price competition, and in Russia due to trade inventory reductions. Other key developing markets, such as China, Venezuela, Argentina and Brazil, all recorded solid volume increases in the quarter. Operating companies income decreased 26.8% to $191 million, as exit costs for the restructuring program of $34 million, lower margins, higher benefit costs, infrastructure investment in developing markets, and an intangible asset impairment charge of $12 million were partially offset by favorable currency of $24 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. 2004 First-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 15.7% to $70 million for the first quarter of 2004, driven by lower lease portfolio revenues as a result of PMCC's shift in strategic direction announced in 2003. Altria Group, Inc. Profile Altria Group, Inc. is the parent company of Kraft Foods Inc., with 84.6% 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 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 2003 net revenues of $81.8 billion. Trademarks and service marks mentioned in this release are the registered property of, or licensed by, the subsidiaries of Altria Group, Inc. 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; 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 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 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 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, 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 March 31,
(in millions, except per share data)
2004 2003 % Change
---------------------------
Net revenues $21,839 $19,371 12.7 %
Cost of sales 8,084 7,565 6.9 %
Excise taxes on products (*) 6,317 4,887 29.3 %
-----------------
Gross profit 7,438 6,919 7.5 %
Marketing, administration and research
costs 3,207 2,870
Domestic tobacco headquarters relocation
charges 10 -
Asset impairment and exit costs 309 -
-----------------
Operating companies income 3,912 4,049 (3.4)%
Amortization of intangibles 4 2
General corporate expenses 164 183
Asset impairment and exit costs 16 -
-----------------
Operating income 3,728 3,864 (3.5)%
Interest and other debt expense, net 300 283
-----------------
Earnings before income taxes and minority
interest 3,428 3,581 (4.3)%
Provision for income taxes 1,186 1,261 (5.9)%
-----------------
Earnings before minority interest 2,242 2,320 (3.4)%
Minority interest in earnings and other,
net 48 134
-----------------
Net earnings $ 2,194 $ 2,186 0.4 %
=================
Basic earnings per share $ 1.07 $ 1.08 (0.9)%
=================
Diluted earnings per share $ 1.07 $ 1.07 - %
=================
Weighted average number of
shares outstanding - Basic 2,041 2,032 0.4 %
- Diluted 2,059 2,040 0.9 %
(*) The detail of excise taxes on products sold is as follows:
2004 2003
-----------------
Domestic tobacco $ 852 $ 866
International tobacco 5,465 4,021
-----------------
Total excise taxes $ 6,317 $ 4,887
=================
ALTRIA GROUP, INC.
and Subsidiaries
Segment Reclass
Quarterly 2003
($ in millions with the exception of volume)
Note: Due to a change in reporting responsibilities, results for the
Kraft Mexico and Puerto Rico businesses have been moved from Kraft
North America Commercial to Kraft International Commercial. Reported
segment results have been restated to reflect this change. See
reconciliation below:
Q1 Q2 Q3 Q4
-- -- -- --
2003 Volume (lbs) - As Reported
Kraft North America Commercial 3,371 3,674 3,318 3,378
Kraft International Commercial 1,093 1,233 1,168 1,446
Puerto Rico / Mexico Reclass 79 96 85 85
2003 Volume (lbs) - After Reclass
Kraft North America Commercial 3,292 3,578 3,233 3,293
Kraft International Commercial 1,172 1,329 1,253 1,531
Year
----
2003 Volume (lbs) - As Reported
Kraft North America Commercial 13,741
Kraft International Commercial 4,940
Puerto Rico / Mexico Reclass 345
2003 Volume (lbs) - After Reclass
Kraft North America Commercial 13,396
Kraft International Commercial 5,285
----------------------------------------------------------------------
Q1 Q2 Q3 Q4
-- -- -- --
2003 Net Revenue - As Reported
Kraft North America Commercial $ 5,380 $ 5,644 $ 5,326 $ 5,557
Kraft International Commercial 1,979 2,197 2,154 2,773
Puerto Rico / Mexico Reclass 114 151 123 116
2003 Net Revenue - After Reclass
Kraft North America Commercial 5,266 5,493 5,203 5,441
Kraft International Commercial 2,093 2,348 2,277 2,889
Year
----
2003 Net Revenue - As Reported
Kraft North America Commercial $21,907
Kraft International Commercial 9,103
Puerto Rico / Mexico Reclass 504
2003 Net Revenue - After Reclass
Kraft North America Commercial 21,403
Kraft International Commercial 9,607
----------------------------------------------------------------------
Q1 Q2 Q3 Q4
-- -- -- --
2003 Operating Companies Income - As
Reported
Kraft North America Commercial $ 1,297 $ 1,383 $ 1,152 $ 1,088
Kraft International Commercial 237 296 307 442
Puerto Rico / Mexico Reclass 24 43 28 28
2003 Operating Companies Income -
After Reclass
Kraft North America Commercial 1,273 1,340 1,124 1,060
Kraft International Commercial 261 339 335 470
Year
----
2003 Operating Companies Income - As
Reported
Kraft North America Commercial $ 4,920
Kraft International Commercial 1,282
Puerto Rico / Mexico Reclass 123
2003 Operating Companies Income -
After Reclass
Kraft North America Commercial 4,797
Kraft International Commercial 1,405
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
----------------------------------------------
2004 Net Revenues $ 4,004 $ 10,043 $ 5,399 $ 2,294
2003 Net Revenues 3,817 8,079 5,266 2,093
% Change 4.9% 24.3% 2.5% 9.6%
Reconciliation:
---------------
2003 Net Revenues $ 3,817 $ 8,079 $ 5,266 $ 2,093
Divested businesses -
2003 - - - (31)
Currency - 992 72 234
Operations 187 972 61 (2)
----------------------------------------------
2004 Net Revenues $ 4,004 $ 10,043 $ 5,399 $ 2,294
==============================================
Financial Total
services
-----------------------
2004 Net Revenues $ 99 $ 21,839
2003 Net Revenues 116 19,371
% Change (14.7)% 12.7%
Reconciliation:
---------------
2003 Net Revenues $ 116 $ 19,371
Divested businesses -
2003 - (31)
Currency - 1,298
Operations (17) 1,201
-----------------------
2004 Net Revenues $ 99 $ 21,839
=======================
Note: The detail of excise taxes on products sold is as follows:
2004 2003
-----------------------
Domestic tobacco $ 852 $ 866
International tobacco 5,465 4,021
-----------------------
Total excise taxes $ 6,317 $ 4,887
=======================
Currency increased international tobacco excise taxes by $586 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
----------------------------------------------
2004 Operating Companies
Income $ 970 $ 1,835 $ 846 $ 191
2003 Operating Companies
Income 742 1,690 1,273 261
% Change 30.7% 8.6% (33.5)% (26.8)%
Reconciliation:
---------------
2003 Operating Companies
Income $ 742 $ 1,690 $ 1,273 $ 261
Divested businesses -
2003 - - - (5)
Domestic tobacco
headquarters relocation
charges - 2004 (10) - - -
Asset impairment and
exit costs - 2004 (1) - (262) (46)
Currency - 243 11 24
Operations 239 (98) (176) (43)
----------------------------------------------
2004 Operating Companies
Income $ 970 $ 1,835 $ 846 $ 191
==============================================
Financial Total
services
----------------------
2004 Operating Companies
Income $ 70 $ 3,912
2003 Operating Companies
Income 83 4,049
% Change (15.7)% (3.4)%
Reconciliation:
---------------
2003 Operating Companies
Income $ 83 $ 4,049
Divested businesses -
2003 - (5)
Domestic tobacco
headquarters relocation
charges - 2004 - (10)
Asset impairment and
exit costs - 2004 - (309)
Currency - 278
Operations (13) (91)
----------------------
2004 Operating Companies
Income $ 70 $ 3,912
======================
ALTRIA GROUP, INC.
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Quarters Ended March 31,
($ in millions, except per share data)
Net Diluted
Earnings E.P.S.
-------- -------
2004 $ 2,194 $ 1.07
2003 $ 2,186 $ 1.07
% Change 0.4 % - %
Reconciliation:
---------------
2003 Reported $ 2,186 $ 1.07
2004 Domestic tobacco headquarters relocation
charges (7) -
2004 Corporate asset impairment and exit costs (10) -
2004 Asset impairment and exit costs, net of
minority interest impact (170) (0.09)
--------- --------
(187) (0.09)
--------- --------
Currency 180 0.09
Change in shares - (0.01)
Change in tax rate 23 0.01
Operations (8) -
--------- --------
2004 Reported $ 2,194 $ 1.07
========= ========
ALTRIA GROUP, INC.
and Subsidiaries
Condensed Balance Sheets
(in millions, except ratios)
March 31, December 31,
2004 2003
------------ ------------
Assets
------
Cash and cash equivalents $ 3,204 $ 3,777
All other current assets 17,115 17,605
Property, plant and equipment, net 16,009 16,067
Goodwill 28,277 27,742
Other intangible assets, net 11,402 11,803
Other assets 11,222 10,641
------------ ------------
Total consumer products assets 87,229 87,635
Total financial services assets 8,336 8,540
------------ ------------
Total assets $ 95,565 $ 96,175
============ ============
Liabilities and Stockholders' Equity
------------------------------------
Short-term borrowings $ 2,494 $ 1,715
Current portion of long-term debt 1,528 1,661
Accrued settlement charges 1,265 3,530
All other current liabilities 13,536 14,487
Long-term debt 19,294 18,953
Deferred income taxes 7,224 7,295
Other long-term liabilities 15,187 15,137
------------ ------------
Total consumer products liabilities 60,528 62,778
Total financial services liabilities 8,197 8,320
------------ ------------
Total liabilities 68,725 71,098
Total stockholders' equity 26,840 25,077
------------ ------------
Total liabilities and
stockholders' equity $ 95,565 $ 96,175
============ ============
Total consumer products debt $ 23,316 $ 22,329
Debt/equity ratio - consumer products 0.87 0.89
Total debt $ 25,393 $ 24,539
Total debt/equity ratio 0.95 0.98
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