Altria Reports 2012 Third-Quarter And Nine-Month Results; Reaffirms 2012 EPS Guidance; Expands Share Repurchase Program By $500 Million

The wine segment's 2012 third-quarter and nine-month net revenues increased 6.1% and 9.2%, respectively, primarily due to higher shipment volume, higher pricing and improved premium mix. Revenues net of excise taxes for the third quarter and first nine months of 2012 grew 6.3% and 9.2%, respectively.

The wine segment's 2012 third-quarter and nine-month reported OCI increased 13.0% and 16.7%, respectively, primarily due to higher pricing, higher shipment volume and improved premium mix, partially offset by higher costs for select vintages and costs related to its sales force expansion. Comparisons of third-quarter and nine-month reported OCI results were impacted by UST acquisition-related costs incurred in 2011. Adjusted OCI, which is calculated excluding these costs, increased 8.3% for the third quarter of 2012 and 8.6% for the first nine months of 2012.

Adjusted OCI margins increased 0.4 percentage points to 19.3% for the third quarter of 2012 and declined 0.1 percentage point to 17.2% for the first nine months of 2012. Revenues and OCI for the wine segment are summarized in Table 10.

Table 10 - Wine: Revenues and OCI ($ in millions)
			Third Quarter																			Nine Months Ended September 30,
				2012						2011						Change							2012						2011						Change
Net revenues				$		140				$		132					6.1	%					$		381				$		349					9.2	%
Excise taxes				(5			)			(5			)										(14			)			(13			)
Revenues net of excise taxes				$		135				$		127					6.3	%					$		367				$		336					9.2	%
Reported OCI				$		26				$		23					13.0	%					$		63				$		54					16.7	%
UST acquisition-related costs				—						1													—						4
Adjusted OCI				$		26				$		24					8.3	%					$		63				$		58					8.6	%
Adjusted OCI margins*				19.3			%			18.9			%			0.4 pp							17.2			%			17.3			%			(0.1) pp

*Adjusted OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.

Ste. Michelle's 2012 third-quarter and nine-month reported wine shipment volume increased 3.7% and 4.0%, respectively, primarily due to the national expansion of select wines into off-premise channels. Ste. Michelle's reported shipment volume performance for wine is summarized in Table 11.

Table 11 - Wine: Shipment Volume (cases in thousands)
				Third Quarter														Nine Months Ended September 30,
					2012				2011				Change						2012				2011				Change
Chateau Ste. Michelle					704				605				16.4	%					1,860				1,718				8.3	%
Columbia Crest					440				479				(8.2	)%					1,193				1,356				(12.0	)%
Other					766				757				1.2	%					2,113				1,892				11.7	%
Total Wine					1,910				1,841				3.7	%					5,166				4,966				4.0	%

Note: Percent volume change calculation is based on units to the nearest hundred.

FINANCIAL SERVICES

Comparisons of the financial services segment's net revenues and reported OCI for the first nine months were impacted primarily by special items related to the tax treatment of PMCC's LILO and SILO transactions discussed above. The 2011 nine-month results included a $490 million charge related to the tax treatment of PMCC's LILO and SILO transactions and 2012 nine-month results included a $7 million charge related to the timing of the previously announced closing agreement with the IRS that resolved the federal income tax treatment of PMCC's LILO and SILO transactions.

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