Altria’s 2013 third-quarter reported diluted EPS increased over 100% to $0.70 primarily due to the 2012 loss on early extinguishment of debt and higher reported OCI in the smokeable products segment, including the impact of the NPM Arbitration Panel Decision. Higher reported OCI in the smokeless products segment, a lower income tax rate, higher earnings from Altria’s equity investment in SABMiller and fewer shares outstanding also contributed to reported diluted EPS growth for the period. Altria’s third-quarter adjusted diluted EPS, which excludes the impact of the special items shown in Table 2, grew 12.1% to $0.65 primarily due to higher OCI in the smokeable and smokeless products segments, a lower income tax rate, higher earnings from Altria’s equity investment in SABMiller and fewer shares outstanding. The lower income tax rate reflects the reduction of certain consolidated tax benefits in 2012 resulting from the debt tender offer in the third quarter of 2012.

For the first nine months of 2013, Altria’s reported diluted EPS increased 33.8% primarily due to the 2012 loss on early extinguishment of debt and higher reported OCI in the smokeable products segment. Higher reported OCI in the smokeable products segment was driven primarily by PM USA’s settlement with certain states of the NPM Adjustment disputes for 2003-2012 (NPM Adjustment Settlement) and the NPM Arbitration Panel Decision (the NPM Adjustment Settlement and the NPM Arbitration Panel Decision are collectively referred to as the NPM Adjustment Items). Higher reported OCI in the smokeless products segment, lower interest and other debt expense and fewer shares outstanding also contributed to reported diluted EPS growth for the period. These factors were partially offset by lower earnings from Altria’s equity investment in SABMiller, primarily due to gains from SABMiller’s strategic alliance transactions in the first quarter of 2012. Altria’s adjusted diluted EPS, which excludes the special items shown in Table 2, increased 9.0% for the first nine months of 2013 primarily due to higher OCI in the smokeable and smokeless products segments, a lower income tax rate, lower interest and other debt expense, higher earnings from Altria’s equity investment in SABMiller and fewer shares outstanding.
 
Table 2 - Altria’s Adjusted Results
 
    Third Quarter  

Nine Months Ended September 30,
2013       2012     Change 2013 2012 Change
Reported diluted EPS $     0.70       $     0.32     100 %+ $     2.02 $     1.51 33.8 %
NPM Adjustment Items 1 (0.05 ) (0.21 )
Asset impairment, exit and implementation costs 0.01
SABMiller special items 0.01 0.01 0.01 (0.08 )
Loss on early extinguishment of debt 0.28 0.28
PMCC leveraged lease benefit (0.03 )
Tax items 2 (0.01 )       (0.03 ) (0.01 ) (0.03 )
Adjusted diluted EPS $     0.65         $     0.58   12.1 % $     1.81   $     1.66   9.0 %
                                                                 

1 Includes the NPM Arbitration Panel Decision (third quarter and nine months) and the NPM Adjustment Settlement (nine months only).

2 Excludes the tax impact of the PMCC leveraged lease benefit (nine months only).

NPM Adjustment Items

Comparisons of Altria’s third-quarter and nine-month reported diluted EPS were impacted by the NPM Arbitration Panel Decision discussed above. As a result of the decision, PM USA recorded a $145 million reduction to cost of sales for the third quarter of 2013.

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