Altria Group, Inc. · NYSE:MO
Altria — 2009 Barclays Capital Back-To-School Consumer Conference
85 slides from Altria's conference presentation, Sep 9, 2009
Slide 1: 2009 Barclays Capital Back-To-School Consumer Conference Presentation
2009 Barclays Capital Back-To-School Consumer Conference Presentation September 9, 2009 Exhibit 99.2
Slide 2: Cliff Fleet, Vice President Investor Relations
Cliff Fleet Vice President Investor Relations Altria Client Services
Slide 3: Safe Harbor Statement
Safe Harbor Statement Statements in this presentation that are not reported financial results or other historical information are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current plans, estim
Slide 4: Mike Szymanczyk, Chairman and CEO
Mike Szymanczyk Chairman and Chief Executive Officer Altria Group, Inc.
Slide 5: Altria's Executive Management
Altria’s Executive Management Mike Szymanczyk Chairman and Chief Executive Officer, Altria Dave Beran EVP and Chief Financial Officer, Altria Craig Johnson EVP, Altria; and President, PM USA Marty Barrington EVP, Chief Compliance & Administrative Officer, Altria Murray Garnick SVP and Associate Gene
Slide 6: Reshaping Altria
Reshaping Altria Completed the integration of John Middleton Co. Executing the integration of UST LLC Reshaped the corporate structure with three central support organizations Altria Client Services Altria Sales & Distribution Altria Consumer Engagement Services Continuing to reduce cigarette infras
Slide 7: External Environment
External Environment Economy has remained in recession Tobacco excise taxes have significantly increased FDA was granted regulatory authority over tobacco products
Slide 8: Economic Conditions
Economic Conditions Source: U.S. Department of Labor Bureau of Labor Statistics http://stats.bls.gov/news.release/empsit.nr0.htm; Blue Chip Economic Indicators, The Conference Board (http://www.conference-board.org/economics/ConsumerConfidence.cfm) Unemployment Rate Consumer Confidence 3 10 Jan-93 A
Slide 9: Excise Tax Environment
Excise Tax Environment Federal excise tax on cigarettes increased 62¢ per pack to $1.01 per pack
Slide 10: Cigarette State Excise Taxes Enacted in 2009
Cigarette State Excise Taxes Enacted in 2009 Source: ALCS Government Affairs NJ HI WA ID OK LA AL IL IN OH ME VT NY CA OR MT IA NM MI UT NE CO KY TN GA MA AZ NH CT DE FL TX MS MN DC AR ND KS SC MO NC PA AK MD RI VA WV WI WY NV SD Increased SET PR
Slide 11: Weighted State Excise Tax - Cigarettes
Weighted State Excise Tax - Cigarettes Source: ALCS Estimates (SET and User Fees Per Pack –Year End & Quarter-end) * through September 1, 2009 $0.78 $0.87 $0.88 $1.01 $1.12 $1.13 $1.15 $1.24 $0.00 $1.50 2004 2005 2006 2007 2008 1Q 09 2Q 09 3Q 09 TD*
Slide 12: Cigarette Industry Dynamics
C-Store Pack Price +25% Cigarette Industry Dynamics Source: IRI/Capstone Integrated Retail Panel * Adjusted for trade inventory changes Estimated Volume* Change Q2 08 Q2 09 ~ (8%) Q2 08 Q2 09
Slide 13: Long-term Tobacco Category Growth Rates
Long-term Tobacco Category Growth Rates Source: ALCS Estimates: Note: Smokeless is defined as moist smokeless and spit-less tobacco products ~7% ~3% 0% 10% Machine-made Large Cigars Smokeless
Slide 14: Tobacco Manufacturers' Profit Pool
Profit Pool ($ in Billions) Tobacco Manufacturers’ Profit Pool Source: ALCS Estimates +7.5% 48% 55% 0% 100% 1H 2008 1H 2009 Altria’s Share of Profit Pool +7.0pp $5.2 $5.6 $5.0 $6.0 1H 2008 1H 2009
Slide 15: FDA Legislation of Tobacco Products
FDA Legislation of Tobacco Products President Obama signed legislation granting FDA authority to regulate tobacco products Regulation should benefit adult tobacco consumers in the long- term Promote more predictability in tobacco industry
Slide 16: FDA Legislation of Tobacco Products
FDA Legislation of Tobacco Products Do not agree with every element of new law Supported enactment Intend to work constructively with agency and others in the industry
Slide 17: FDA Regulation Implementation
FDA Regulation Implementation Implementation of law will take place over time Several areas require the FDA to take action through rule making
Slide 18: FDA Regulation Timeline
FDA Regulation Timeline 2009 September Initial quarterly User Fee 2010 March FDA issues regulations on sale, promotion & advertising 2011 June FDA issues color graphic warning requirements 2010 June Remove descriptors from cigarette packs Source: FDA legislation (HR 1256) 2010 August Report on Menth
Slide 19: Altria's Approach to FDA Regulation
Altria’s Approach to FDA Regulation History of successfully adapting to change Preparing for federal regulation for many years Created Regulatory Affairs department
Slide 20: Cigarettes Segment's First-half 2009 Performance
Cigarettes Segment’s First-half 2009 Performance +8.8% Source: Altria company reports, IRI/Capstone Integrated Retail Panel Adjusted OCI* ($ in Billions) * For reconciliations of non-GAAP to GAAP numbers visit www.altria.com 41.9% 41.9% 40% 43% 1H 2008 1H 2009 +0.0pp Marlboro Retail Share $2.7 $2.4
Slide 21: Smokeless Segment's First-half 2009 Performance
Smokeless Segment’s First-half 2009 Performance Adjusted Operating Companies Income* of $339 million Integration proceeding smoothly Enhanced value equations on Copenhagen & Skoal Source: Altria company reports * For reconciliations of non-GAAP to GAAP numbers visit www.altria.com
Slide 22: USSTC's Premium Retail Share
USSTC’s Premium Retail Share Source: InfoScan Smokeless Tobacco Database (4wm) Q2 2009 Premium MST Retail Share 48.5% 48.5% 43% 52% March 28, 2009 June 27, 2009
Slide 23: Cigars Segment's First-half 2009 Performance
Cigars Segment’s First-half 2009 Performance Adjusted OCI* ( $ in Millions ) +3.2% Black & Mild Retail Share 29.2% 27.3% 25% 31% 1H 2008 1H 2009 +1.9pp Source: Altria company reports * For reconciliations of non-GAAP to GAAP numbers visit www.altria.com $97 $94 $85 $105 1H 2008 1H 2009 ’s
Slide 24: Wine Segment's First-half 2009 Performance
Wine Segment’s First-half 2009 Performance Adjusted OCI* of $24 million Continues to show underlying strength Negatively impacted by trade inventory depletions and weakness in on-premise sales Source: Altria company reports * For reconciliations of non-GAAP to GAAP numbers visit www.altria.com
Slide 25: Financial Services Segment's Performance
Financial Services Segment’s Performance Source: Altria company reports OCI ($ in Millions) $104 $203 $0 $250 1H 2008 1H 2009
Slide 26: Altria's Cost Management Program
Altria’s Cost Management Program ($ in Millions) Source: Altria company reports $805 $695 $1,500 $0 $1,500 2007- 1H 2009 Savings Add. Cost Savings Expected by 2011 2007 - 2011
Slide 27: Altria's Headcount
Altria’s Headcount Source: ALCS; Note: Includes headcount for Altria and all its subsidiary companies ~10,200 ~10,400 0 13,000 Dec-08 Aug-09
Slide 28: Altria's Dividend
7.5% 8.7% 10.3% 6.3% 9.6% 2005 2006 2007 2008 2009 Historical Increase Altria’s Dividend $1.28 $1.36 $1.00 $1.50 Aug-08 Aug-09 2009 Increase +6.3% Source: Altria company reports and press releases (Note: Annualized Dividend Rate)
Slide 29: Altria's First-half 2009 Performance
Altria’s First-half 2009 Performance +8.5% Source: Altria company filings; Total Shareholder Return – Bloomberg ending 8.31.09 Adjusted Earnings Per Share* * For reconciliations of non-GAAP to GAAP numbers visit www.altria.com 26% 15% 10% 0% 30% Altria S&P 500 S&P Food, Beverage & Tobacco Total Shar
Slide 30: Altria Reaffirms 2009 Guidance
Altria Reaffirms 2009 Guidance Due to FET-related pricing strategies, the third and fourth quarters of 2009 are planned to have lower adjusted EPS growth when compared to the first and second quarters of 2009 Altria reaffirms that its 2009 adjusted diluted earnings per share* from continuing operati
Slide 31: Altria's Growth Objectives
Altria’s Growth Objectives Maximize income while maintaining share momentum on Marlboro in cigarette category Return Copenhagen and Skoal to volume growth in-line or slightly ahead of category growth Profitably assume share leadership in the machine-made large cigar category driven by Black & Mild C
Slide 32: Leadership Brands' Characteristics
Leadership Brands’ Characteristics Sizeable share of category Strong adult demographics High brand loyalty Growth opportunities for share and income with innovative products
Slide 33: Cigarettes Segments' First-half 2009 Performance
Cigarettes Segments’ First-half 2009 Performance Source: Altria company filings, IRI/Capstone Integrated Retail Panel Retail Share 50.2%
Slide 34: Cigarette Category Segments
Cigarette Category Segments Source: IRI/Capstone Integrated Retail Panel - 1H 2009 Non-Menthol Segment 71% Menthol Segment 29%
Slide 35: Share of Non-Menthol Segments - Cigarettes
Share of Non-Menthol Segments - Cigarettes Source: IRI/Capstone Integrated Retail Panel - 1H 2009 (Cigarettes) 59% 57% 62% 58% 0% 100% Total Non-Menthol FF Non-Menthol Lights Non-Menthol UL Non-Menthol PM USA Balance of Industry
Slide 36: Menthol Segment's Share Performance - Cigarettes
Source: Maxwell Reports; MSA Shipments; IRI/Capstone (Cigarettes) Menthol Segment’s Share Performance - Cigarettes 10% 40% 1982 1985 1988 1991 1994 1997 2000 2003 2006 1H 09 28.8% 29.0%
Slide 37: Share of Menthol Segments - Cigarettes
Share of Menthol Segments - Cigarettes Source: IRI/Capstone - 1H 2009 (Cigarettes) 28% 20% 41% 0% 100% Total Menthol FF Menthol Lights/UL Menthol PM USA Balance of Industry
Slide 38: Menthol Retail Share Performance - Cigarettes
Menthol Retail Share Performance - Cigarettes 24.5% 28.0% 2002 1H 2009 PM USA’s Share of Menthol +3.5pp 2.8% 5.6% 2002 1H 2009 Marlbor o Menthol’s Retail Share +2.8pp Source: IRI/Capstone - 1H 2009 (Cigarettes)
Slide 39: Smokeless Segments' First-half 2009 Performance
Source: InfoScan Smokeless Tobacco Database – 1H 2009; Note: Smokeless is defined as moist smokeless and spit-less tobacco products, includes smokeless products manufactured by USSTC and PM USA Smokeless Segments’ First-half 2009 Performance Retail Share 55.5%
Slide 40: Smokeless Tobacco Category Flavor Segments
Mint 11% Other 6% 39% Natural 33% Straight 11% Smokeless Tobacco Category Flavor Segments Source: InfoScan Smokeless Tobacco Database – 1H 2009; Note: Smokeless is defined as moist smokeless and spit-less tobacco products Wintergreen
Slide 41: Share of Flavor Segments - Smokeless Tobacco
Share of Flavor Segments – Smokeless Tobacco Source: InfoScan Smokeless Tobacco Database – 1H 2009; Note: Smokeless is defined as moist smokeless and spit-less tobacco products, includes smokeless products manufactured by USSTC and PM USA 35% 79% 44% 51% 82% 0% 100% Wintergreen Natural Straight Mint
Slide 42: Smokeless Tobacco Category - Form Segments
Smokeless Tobacco Category - Form Segments Source: InfoScan Smokeless Tobacco Database – 1H 2009; Note: Smokeless is defined as moist smokeless and spit-less tobacco products Pouches 10% Fine Cut 28% Long Cut 62%
Slide 43: Share of Form Segments - Smokeless Tobacco
Share of Form Segments – Smokeless Tobacco Source: InfoScan Smokeless Tobacco Database – 1H 2009; Note: Smokeless is defined as moist smokeless and spit-less tobacco products, includes smokeless products manufactured by USSTC and PM USA 46% 76% 59% 0% 100% Long Cut Fine Cut Pouches USSTC & PM USA Ba
Slide 44: Smokeless Tobacco Pouches
Smokeless Tobacco Pouches USSTC and PM USA are planning initiatives In market late 2009 and 2010
Slide 45: Machine-made Large Cigars - Size Segments
Source: InfoScan Cigar Database – 1H 2009 Machine-made Large Cigars - Size Segments Tipped Cigarillo 35% Untipped Cigarillo 43% Non- Cigarillo 22%
Slide 46: Share of Machine-made Large Cigars Segments
Share of Machine-made Large Cigars Segments Source: InfoScan Cigar Database – 1H 2009 84% 0% 100% Tipped Cigarillo Untipped Cigarillo Non-Cigarillo Middleton Balance of Industry
Slide 47: Cigar Growth Opportunity
Cigar Growth Opportunity Untipped cigarillos represent the largest incremental opportunity Untipped cigarillo growing segment Middleton currently does not participate in this growing segment Source: InfoScan Cigar Database
Slide 48: New Tobacco Products
New Tobacco Products Build businesses in growing segments Many new products in market by December 2009 Full impact on volume, share and income expected in 2010 and beyond
Slide 49: Altria's Tobacco Operating Companies
Altria’s Tobacco Operating Companies
Slide 50: Tobacco Categories are Important to Retailers
Tobacco Categories are Important to Retailers Cigarettes represented 33% of in-store revenues and 17% of profits Other tobacco products are one of the fastest-growing segments Source: Convenience Store News, Convenience stores in 2008
Slide 51: Altria Sales & Distribution
“a Altria Altria Sales & Distribution
Slide 52: Trade Relationships Principles
Trade Relationships Principles Having the best brands in the best positions Allocating shelf space to brand share to assure in-stock inventory Communicating new products and promotions to adult tobacco consumers Encouraging underage sales prevention through non-self service merchandising Source: Alt
Slide 53: Benefits of Integrated Tobacco Categories
Benefits of Integrated Tobacco Categories Higher profitability per square foot Improving visibility for smokeless tobacco and machine-made large cigars to adult consumers Reducing youth access to tobacco products Source: Altria Sales & Distribution
Slide 54: Cigarette Launch Introductions
Cigarette Launch Introductions Effective introduction of new and innovative products Improved speed to market for new product launches by 30% since 2006
Slide 55: Assisting Retailers
Assisting Retailers Tobacco products important to many retailers’ financial success Altria Sales & Distribution assists retailers by providing them with tools for insights and information
Slide 56: Ste. Michelle Wine Estates
7, ie WINE ESTATES an Altria Company
Slide 57: Litigation Environment
Litigation Environment Substantial success in managing the litigation environment; however significant challenges remain Detailed discussion in Altria’s recent Form 10-Q
Slide 58: Approach to Litigation
Approach to Litigation Approach to litigation remains the same Continue vigorously defending claims
Slide 59: Altria's 2009 Performance
Altria’s 2009 Performance Adjusted EPS* up 8.5% in the first-half of 2009 Increased dividend by 6.3% Altria’s total shareholder return is 26% * For reconciliations of non-GAAP to GAAP numbers visit www.altria.com, adjusted diluted EPS from continuing operations Source: Altria company reports; Bloomb
Slide 60: Long-term Growth Target
Long-term Growth Target of 8% - 10% adjusted EPS per year Continue to believe it is an achievable objective Operating environment impacts ability to reach objective in any given year
Slide 61: Strategies to Achieve Long-term Growth
Strategies to Achieve Long-term Growth Grow income by investing in four strong brands, Marlboro , Copenhagen , Skoal and Black & Mild , while continuing to optimize cost structures
Slide 62: Strategies to Achieve Long-term Growth
Strategies to Achieve Long-term Growth Return cash to shareholders in the form of dividends Grow income by investing in four strong brands, Marlboro , Copenhagen , Skoal and Black & Mild , while continuing to optimize cost structures
Slide 63: Altria's Dividends
Altria’s Dividends Plans to maintain its targeted 75% payout ratio and increase dividends in-line with future adjusted EPS growth Increased dividend 42 times in 40 years Commitment to return a large amount of cash to shareholders through dividends
Slide 64: Strategies to Achieve Long-term Growth
Strategies to Achieve Long-term Growth Preserve strong balance sheet Grow income by investing in four strong brands, Marlboro , Copenhagen , Skoal and Black & Mild , while continuing to optimize cost structures Return cash to shareholders in the form of dividends
Slide 65: SABMiller Investment
SABMiller Investment Helping solidify Altria’s investment grade credit rating Growing earnings per share Strengthening Altria’s financial profile
Slide 66: SABMiller Investment
SABMiller Investment (Pre-tax $ - Billions) Source: Bloomberg as of August 31, 2009 $10.0 $3.4 $0 $14 Jul-02 Aug-09
Slide 67: SABMiller Investment Benefits to Altria
SABMiller Investment Benefits to Altria Contributed $3.1 billion in equity earnings since 2002 Paid $1.3 billion in dividends since 2002 Currently plan to maintain economic interest in SABMiller
Slide 68: Strategies to Achieve Long-term Growth
Strategies to Achieve Long-term Growth Grow income by investing in four strong brands, Marlboro , Copenhagen , Skoal and Black & Mild , while continuing to optimize cost structures Return cash to shareholders in the form of dividends Preserve strong balance sheet Focus on reducing the cost of debt
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Slide 70: Non-GAAP Financial Measures
Non-GAAP Financial Measures Altria reports its consolidated financial results in accordance with generally accepted accounting principles (GAAP). Today’s remarks may contain various operating results on both a reported basis and on an adjusted basis, which excludes items that affect the comparabilit
Slide 71: Cigarettes Segment's Adjusted OCI, Six Months Ended June 30, 2008
Cigarettes Segment’s Adjusted Operating Companies Income (OCI) for Six Months Ended June 30, 2008 (dollars in millions) Reported OCI $2,377 Exit costs 29 Implementation costs 32 Adjusted OCI $2,438 Source: ALCS Finance, reconciliation between GAAP and non-GAAP financial measures
Slide 72: Cigarettes Segment's Adjusted OCI, Six Months Ended June 30, 2009
Cigarettes Segment’s Adjusted Operating Companies Income (OCI) for Six Months Ended June 30, 2009 (dollars in millions) Reported OCI $2,569 Exit costs 34 Implementation costs 50 Adjusted OCI $2,653 Source: ALCS Finance, reconciliation between GAAP and non-GAAP financial measures
Slide 73: Cigarettes Segment's Adjusted OCI, Six Months Ended June 30
Cigarettes Segment’s Adjusted Operating Companies Income (OCI) for Six Months Ended June 30 (dollars in millions) 2008 adjusted OCI $2,438 2009 adjusted OCI $2,653 % change 2009 adjusted OCI versus prior-year period 8.8% Source: ALCS Finance, reconciliation between GAAP and non-GAAP financial measur
Slide 74: Smokeless Products Segment's Adjusted OCI, Six Months Ended June 30, 2009
Smokeless Products Segment’s Adjusted Operating Companies Income (OCI) for Six Months Ended June 30, 2009 (dollars in millions) Reported OCI $175 Exit costs 123 Integration costs 28 UST acquisition-related costs* 13 Adjusted OCI $339 Source: ALCS Finance, reconciliation between GAAP and non-GAAP fin
Slide 75: Cigars Segment's Adjusted OCI, Six Months Ended June 30, 2008
Cigars Segment’s Adjusted Operating Companies Income (OCI) for Six Months Ended June 30, 2008 (dollars in millions) Reported OCI $91 Integration costs 3 Adjusted OCI $94 Source: ALCS Finance, reconciliation between GAAP and non-GAAP financial measures
Slide 76: Cigars Segment's Adjusted OCI, Six Months Ended June 30, 2009
Cigars Segment’s Adjusted Operating Companies Income (OCI) for Six Months Ended June 30, 2009 (dollars in millions) Source: ALCS Finance, reconciliation between GAAP and non-GAAP financial measures Reported OCI $90 Integration costs 7 Adjusted OCI $97
Slide 77: Cigars Segment's Adjusted OCI, Six Months Ended June 30
Cigars Segment’s Adjusted Operating Companies Income (OCI) for Six Months Ended June 30 (dollars in millions) 2008 adjusted OCI $94 2009 adjusted OCI $97 % change 2009 adjusted OCI versus prior-year period 3.2% Source: ALCS Finance, reconciliation between GAAP and non-GAAP financial measures
Slide 78: Wine Segment's Adjusted OCI, Six Months Ended June 30, 2009
Wine Segment’s Adjusted Operating Companies Income (OCI) for Six Months Ended June 30, 2009 (dollars in millions) Reported OCI $10 Exit costs 2 Integration costs 2 UST acquisition-related costs* 10 Adjusted OCI $24 Source: ALCS Finance, reconciliation between GAAP and non-GAAP financial measures * E
Slide 79: Adjusted Diluted EPS, Six Months Ended June 30, 2008
Adjusted Diluted Earnings per Share (EPS) from Continuing Operations Attributable to Altria for Six Months Ended June 30, 2008 Reported diluted EPS from continuing operations $0.73 Exit, integration and implementation costs 0.09 Gain on sale of corporate headquarters building (0.12) Loss on early ex
Slide 80: Adjusted Diluted EPS, Six Months Ended June 30, 2009
Adjusted Diluted Earnings per Share (EPS) from Continuing Operations Attributable to Altria for Six Months Ended June 30, 2009 Reported diluted EPS from continuing operations $0.77 Exit, integration and implementation costs 0.08 UST acquisition-related costs* 0.06 SABMiller gains on issuances of com
Slide 81: Adjusted Diluted EPS, Six Months Ended June 30
2008 adjusted diluted EPS from continuing operations $0.82 2009 adjusted diluted EPS from continuing operations $0.89 % change in 2009 adjusted diluted EPS from continuing operations versus prior-year period 8.5% Source: ALCS Finance, reconciliation between GAAP and non-GAAP financial measures Adjus
Slide 82: Adjusted Diluted EPS, Year Ended December 31, 2008
Adjusted Diluted Earnings per Share (EPS) from Continuing Operations Attributable to Altria for Year Ended December 31, 2008 Reported diluted EPS from continuing operations $1.48 Tax Items (0.03) Gain on sale of corporate headquarters building (0.12) Loss on early extinguishment of debt 0.12 SABMill
Slide 83: Projected Full-Year Adjusted Diluted EPS, 2009
Projected Full-Year Adjusted Diluted Earnings per Share (EPS) from Continuing Operations Attributable to Altria for Year Ending December 31, 2009 Projected reported diluted EPS from continuing operations $1.51 to $1.56 Exit, integration and implementation costs 0.17 UST acquisition-related costs* 0.
Slide 84: Projected Full-Year Adjusted Diluted EPS Change
Projected Full-Year Adjusted Diluted Earnings per Share (EPS) from Continuing Operations Attributable to Altria for Year Ending December 31 2008 adjusted diluted EPS from continuing operations $1.65 2009 projected adjusted diluted EPS from continuing operations $1.72 to $1.77 % change in 2009 projec
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Altria Group — 2009 Barclays Capital Back-To-School Consumer Conference on 6ix