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Altria Reports 2012 Fourth-Quarter And Full-Year Results; Delivers 2012 Full-Year Adjusted EPS Growth Of 7.8%

PM USA's 2012 full-year reported domestic cigarettes shipment volume declined 0.2% primarily due to the industry's rate of decline, partially offset by volume growth as a result of retail share gains and one extra shipping day. After adjusting for an extra shipping day and changes in trade inventories, PM USA's 2012 full-year domestic cigarettes shipment volume was estimated to be essentially unchanged.

After adjusting for an extra shipping day and changes in trade inventories, PM USA estimates total cigarette category volume for both the fourth quarter and full year of 2012 to be down approximately 3%. PM USA's cigarette volume performance is summarized in Table 5.

Middleton's 2012 fourth-quarter reported cigars shipment volume declined 1.0% primarily due to changes in trade inventories and retail share losses. For the full year of 2012, Middleton's reported cigars shipment volume declined 0.7% 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)
                                                                                     
Fourth Quarter Full Year
2012 2011             Change 2012 2011             Change
Cigarettes:                        
Marlboro 29,129               29,033 0.3 % 116,377               117,201 (0.7 )%
Other premium 2,126 2,266 (6.2 )% 8,629 9,381 (8.0 )%
Discount 2,578               2,405   7.2 % 9,868               8,556   15.3 %
Total cigarettes 33,833 33,704   0.4 % 134,874               135,138   (0.2 )%
 
Cigars:
Black & Mild 279 281 (0.7 )% 1,219 1,226 (0.6 )%
Other 4   5   (20.0 )% 18               20   (10.0 )%
Total cigars

283

  286   (1.0 )% 1,237               1,246   (0.7 )%

 

                 
Total smokeable products

34,116

  33,990   0.4 % 136,111               136,384   (0.2 )%
                                                                                       

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 fourth-quarter and full-year retail share performance continued to benefit from the brand-building initiatives supporting Marlboro's new architecture. Marlboro's 2012 fourth-quarter and full-year retail share increased 1.0 and 0.6 share points, respectively. Earlier this month, PM USA expanded distribution of Marlboro Southern Cut nationally. Marlboro Southern Cut, part of the Marlboro Gold family, has a uniquely rich and smooth flavor.

PM USA's 2012 fourth-quarter and full-year retail share increased 1.0 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 cigarette retail share performance is summarized in Table 6.

In the machine-made large cigars category, Black & Mild's retail share decreased 1.4 share points for the fourth quarter of 2012 and increased 0.5 share points for the full year. For the full year of 2012, the brand benefited from new untipped cigarillo varieties that were introduced in 2011, Black & Mild seasonal offerings and the 2012 third-quarter introduction of Black & Mild Jazz untipped cigarillos into select geographies. In December, Middleton announced plans to launch nationally Black & Mild Jazz cigars in both plastic tip and wood tip in the first quarter of 2013. Middleton's retail share performance is summarized in Table 6.

 
 
Table 6 - Smokeable Products: Retail Share (percent)
                                                                                     
Fourth Quarter Full Year
2012             2011            

Percentage point change

2012             2011            

Percentage point change

Cigarettes:                                                
Marlboro 42.6 % 41.6 % 1.0 42.6 % 42.0 % 0.6
Other premium 3.3 3.6 (0.3 ) 3.4 3.7 (0.3 )
Discount 3.9               3.6               0.3   3.8               3.3               0.5  
Total cigarettes 49.8 %             48.8 %             1.0   49.8 %             49.0 %             0.8  
 
Cigars:
Black & Mild 29.3 % 30.7 % (1.4 ) 30.0 % 29.5 % 0.5
Other 0.3               0.3                 0.2               0.2                
Total cigars 29.6 %             31.0 %             (1.4 ) 30.2 %             29.7 %             0.5  
                                                                                                   

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.

SMOKELESS PRODUCTS

The smokeless products segment delivered excellent adjusted OCI growth for the fourth quarter of 2012 behind Copenhagen and Skoal's combined volume and retail share performance and higher pricing. For the full year, the smokeless products segment delivered strong adjusted OCI growth driven by higher pricing, Copenhagen and Skoal's combined volume and retail share performance and effective cost management.

The smokeless products segment's 2012 fourth-quarter and full-year net revenues increased 7.2% and 3.9%, 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 fourth-quarter and full-year revenues net of excise taxes increased 6.9% and 3.9%, respectively.

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