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

Previously Announced Capital Markets Activities in Q3 2012

UST LLC repaid $600 million of senior unsecured notes that matured in July 2012. The notes had a coupon of 6.625%.

In August 2012, Altria issued $1.9 billion aggregate principal amount of new senior unsecured 2.85% notes due 2022 and $900 million aggregate principal amount of new senior unsecured 4.25% notes due 2042.

In September 2012, Altria completed a tender offer for $2.0 billion aggregate principal amount of certain of its senior unsecured notes, purchasing $1,151 million aggregate principal amount of its senior unsecured 9.70% notes due 2018 and $849 million aggregate principal amount of its senior unsecured 9.25% notes due 2019. This debt repurchase resulted in a pre-tax charge of $874 million against 2012 third-quarter earnings, reflecting the loss on early extinguishment of debt related to the tender offer.

2012 Full-Year Guidance

Altria reaffirms its 2012 full-year guidance for reported diluted EPS in a range of $2.03 to $2.07. The forecast reflects estimated total net expenses of $0.16 per share as shown in Table 1, consisting of the loss on early extinguishment of debt related to the tender offer and asset impairment, exit and implementation costs related to the current cost reduction program, partially offset by SABMiller plc (SABMiller) special items, a Philip Morris Capital Corporation (PMCC) leveraged lease benefit and tax items.

Altria reaffirms its 2012 full-year guidance for adjusted diluted EPS, which excludes special items shown in Table 1, in a range of $2.19 to $2.23, representing a growth rate of 7% to 9% from an adjusted diluted EPS base of $2.05 per share in 2011.

The factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to this forecast. Reconciliations of full-year adjusted to reported diluted EPS are shown in Table 1.

 
Table 1 - Altria's Full-Year Earnings Per Share Guidance Excluding Special Items
   

Full Year

2012 Guidance

    2011     Change
Reported diluted EPS $   2.03     to   $   2.07     $   1.64       24%     to     26%
Loss on early extinguishment of debt 0.28
Asset impairment, exit, integration and implementation costs 0.02 0.07
SABMiller special items (0.08 ) 0.03
PMCC leveraged lease (benefit) charge (0.03 ) 0.30
Tax items* (0.03 ) (0.04 )
Tobacco and health judgments               0.05  
Adjusted diluted EPS $   2.19     to   $   2.23   $   2.05   7% to 9%
 

* Excludes the tax impact of the PMCC leveraged lease (benefit) charge.

ALTRIA GROUP, INC.

Altria reports its financial results, including diluted EPS, in accordance with U.S. generally accepted accounting principles (GAAP). Altria's management reviews operating companies income (OCI), which is defined as operating income before corporate expenses and amortization of intangibles, to evaluate segment performance and allocate resources. Altria's management also reviews OCI, operating margins and EPS on an adjusted basis, which excludes certain income and expense items that management believes are not part of underlying operations. These items include loss on early extinguishment of debt, restructuring charges, SABMiller special items, certain PMCC leveraged lease items, certain tax items, and tobacco and health judgments. Altria's management does not view any of these special items to be part of Altria's sustainable results as they may be highly variable and difficult to predict and can distort underlying business trends and results. Altria's management also reviews income tax rates on an adjusted basis. Altria's effective tax rate on operations may exclude certain tax items from its reported effective tax rate. Altria's management believes that adjusted measures for OCI, operating margins and EPS, as well as the effective tax rate on operations, provide useful insight into underlying business trends and results and provide a more meaningful comparison of year-over-year results. Altria's management uses adjusted measures internally for planning, forecasting and evaluating the performance of Altria's businesses, including allocating resources and evaluating results relative to employee compensation targets. These adjusted financial measures are not consistent with GAAP, and should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. Reconciliations of adjusted measures to corresponding GAAP measures are provided in the release. Comparisons are to the same prior-year period unless otherwise stated.

Effective with the first quarter of 2012, Altria's reportable segments are Smokeable Products, manufactured and sold by Philip Morris USA Inc. (PM USA) and John Middleton Co. (Middleton); Smokeless Products, manufactured and sold by or on behalf of U.S. Smokeless Tobacco Company LLC (USSTC) and PM USA; Wine, produced and/or distributed by Ste. Michelle Wine Estates Ltd. (Ste. Michelle); and Financial Services, provided by PMCC. Prior-period segment data have been recast to conform with the current-period segment presentation.

Altria's net revenues increased 2.2% to $6.2 billion for the third quarter of 2012 primarily due to higher net revenues from smokeable products. For the first nine months of 2012, Altria's net revenues increased 4.0% to $18.4 billion primarily due to higher net revenues from financial services and smokeable products. Altria's revenues net of excise taxes increased 3.2% to $4.5 billion for the third quarter of 2012, and grew 6.2% to $13.0 billion for the first nine months of 2012. Comparisons of Altria's nine-month net revenues and revenues net of excise taxes were impacted by a 2011 charge related to certain PMCC leveraged lease transactions, which reduced 2011 nine-month net revenues by $490 million.

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