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

PM USA's 2012 nine-month reported domestic cigarettes shipment volume declined 0.4% primarily due to the industry's rate of decline, partially offset by volume growth as a result of retail share gains. After adjusting for changes in trade inventories and other factors, PM USA's 2012 nine-month domestic cigarettes shipment volume was estimated to be down approximately 0.5%.

Total cigarette category volume for the third quarter and first nine months of 2012 was estimated to be down approximately 3.5% and 3%, respectively. PM USA's cigarettes volume performance is summarized in Table 5.

Middleton's 2012 third-quarter reported cigars shipment volume declined 14.0% primarily due to the timing of promotional shipments and other changes in trade inventories, and one less shipping day, partially offset by volume growth as a result of retail share gains. Middleton believes the trade built inventories in the third quarter of 2011 prior to Middleton's December 2011 price increase announcement. For the first nine months of 2012, Middleton's reported cigars shipment volume declined 0.6% primarily due to changes in trade inventories, partially offset by volume growth as a result of retail share gains. Middleton's volume performance for machine-made large cigars is summarized in Table 5.
Table 5 - Smokeable Products: Shipment Volume (sticks in millions)
Third Quarter

Nine Months Ended September 30,
  2012     2011     Change     2012     2011     Change  
Marlboro 28,954 28,673 1.0 % 87,248 88,168 (1.0 )%
Other premium 2,177 2,364 (7.9 )% 6,503 7,115 (8.6 )%
Discount   2,571       2,251   14.2 %   7,290       6,151   18.5 %
Total cigarettes   33,702       33,288   1.2 %   101,041       101,434   (0.4 )%
Black & Mild 298 346 (13.9 )% 940 945 (0.5 )%
Other   4       5   (20.0 )%   14       15   (6.7 )%
Total cigars   302       351   (14.0 )%   954       960   (0.6 )%
Total smokeable products   34,004       33,639   1.1 %   101,995       102,394   (0.4 )%

Note: Cigarettes volume includes units sold as well as promotional units, but excludes Puerto Rico, U.S. Territories, Overseas Military, and Philip Morris Duty Free Inc.

In the cigarette category, Marlboro's 2012 third-quarter and nine-month retail share performance continued to benefit from the brand-building initiatives supporting Marlboro's new architecture. Marlboro's 2012 third-quarter and nine-month retail share increased 1.0 and 0.5 share points, respectively. PM USA continued to support Marlboro's new brand architecture within the Marlboro Black family by expanding Marlboro NXT into 27 states at the end of September 2012. Marlboro NXT contains capsule technology that allows adult smokers to switch from non-menthol to menthol taste.

PM USA's 2012 third-quarter and nine-month retail share increased 1.2 and 0.8 share points, respectively, reflecting retail share gains by Marlboro, and by L&M in Discount. These gains were partially offset by share losses on other portfolio brands. PM USA's cigarettes retail share performance is summarized in Table 6.

In the machine-made large cigars category, Black & Mild's 2012 third-quarter and nine-month retail share increased 0.8 and 1.0 share points, respectively. The brand continued to benefit from new untipped cigarillo varieties that were introduced in 2011, including Black & Mild Classic, Sweets and Wine as well as the 2012 third-quarter introduction of Black & Mild Jazz into select geographies and its seasonal offering, Summer Blend. Middleton's retail share performance is summarized in Table 6.
Table 6 - Smokeable Products: Retail Share (percent)
Third Quarter

Nine Months Ended September 30,



Percentage point change



Percentage point change
Marlboro 42.7 % 41.7 % 1.0 42.6 % 42.1 % 0.5
Other premium 3.3 3.7 (0.4) 3.4 3.7 (0.3)
Discount   3.9       3.3       0.6   3.8       3.2       0.6
Total cigarettes   49.9 %     48.7 %     1.2   49.8 %     49.0 %     0.8
Black & Mild 29.9 % 29.1 % 0.8 30.1 % 29.1 % 1.0
Other   0.2       0.3       (0.1)   0.3       0.2       0.1
Total cigars   30.1 %     29.4 %     0.7   30.4 %     29.3 %     1.1

Note: Cigarettes retail share results are based on data from SymphonyIRI Group/Capstone, which is a retail tracking service that uses a sample of stores to project market share performance in retail stores selling cigarettes. The panel was not designed to capture sales through other channels, including the Internet, direct mail and some illicitly tax-advantaged outlets. Retail share results for cigars are based on data from the SymphonyIRI Group (SymphonyIRI) InfoScan Cigar Database for Food, Drug, Mass Merchandisers (excluding Walmart) and Convenience trade classes, which tracks machine-made large cigars market share performance. Middleton defines machine-made large cigars as cigars made by machine that weigh greater than three pounds per thousand, except cigars sold at retail in packages of 20 cigars. This service was developed to provide a representation of retail business performance in key trade channels. It is SymphonyIRI's standard practice to periodically refresh its InfoScan syndicated services, which could restate retail share results that were previously released.


The smokeless products segment grew its 2012 third-quarter and nine-month adjusted OCI and adjusted OCI margins behind the strong performance of Copenhagen. In late September 2012, USSTC announced the fourth quarter expansion of Skoal ReadyCut into over 20 states.

The smokeless products segment's 2012 third-quarter and nine-month net revenues increased 2.6% and 2.8%, respectively, primarily due to higher pricing and higher volume, partially offset by unfavorable mix due to growth in products introduced in recent years at a lower, popular price. 2012 third-quarter and nine-month revenues net of excise taxes increased 2.5% and 2.8%, respectively.

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