Altria Reports 2019 Third-Quarter and Nine-Months Results; Announces New 2020 - 2022 Adjusted Diluted EPS Growth Objective to Advance Strategic Business Platform

RICHMOND, Va.--(BUSINESS WIRE)--Altria Group, Inc. (Altria) (NYSE: MO) today announces its 2019 third-quarter and nine-months business results, reaffirms its 2019 full-year adjusted diluted earnings per share guidance and announces a new 2020 - 2022 adjusted diluted earnings per share growth objective.

“Our core tobacco businesses delivered excellent third-quarter financial results,” said Howard Willard, Altria’s Chairman and Chief Executive Officer. “Our 2019 plans remain on track, and we reaffirm our guidance to deliver full-year 2019 adjusted diluted EPS growth of 5% to 7%.”

“We continue to believe the evolution of the tobacco industry represents a significant opportunity for Altria. We marked major milestones in our transformation journey this year, including launching IQOS and completing the on! transaction. We believe that, with current adult smoker trends and e-vapor disruption, it’s an opportune time to expand the availability of these options.”

“In light of these considerations, we announce a compounded annual adjusted diluted EPS growth objective of 5% to 8% for the years 2020 through 2022. We believe this new growth objective provides us the flexibility to make investments in noncombustible offerings for the long term, generate sustainable income growth in the core tobacco businesses, and return cash to shareholders through a strong dividend. We also expect to maintain our dividend payout ratio target of approximately 80% of adjusted diluted EPS during this period.”

As previously announced, a conference call with the investment community and news media will be webcast on October 31, 2019 at 9:00 a.m. Eastern Time. Access to the webcast is available at www.altria.com/webcasts and via the Altria Investor app.

Altria Headline Financials¹

($ in millions, except per share data)	Q3 2019	Change vs. Q3 2018	Q3 YTD 2019	Change vs. Q3 YTD 2018
Net revenues	$6,856	0.3%	$19,103	(0.8)%
Revenues net of excise taxes	$5,412	2.3%	$14,994	1.0%
Reported tax rate	(22.3)%	(47.8) pp	74.1%	49.0 pp
Adjusted tax rate	23.7%	0.4 pp	23.8%	0.7 pp
Reported diluted EPS^2	$(1.39)	(100.0)%+	$0.27	(91.1)%
Adjusted diluted EPS	$1.19	10.2%	$3.19	4.9%

¹ “Adjusted” financial measures presented in this release exclude the impact of special items. See “Basis of Presentation” for more information.

² “EPS” is defined as diluted earnings (losses) per share attributable to Altria.

Cash Returns to Shareholders

• In August, Altria’s Board of Directors (Board) increased Altria’s regular quarterly dividend for the 54th time in the past 50 years. Altria’s current annualized dividend rate is $3.36 per share, representing an annualized dividend yield of 7.3% as of October 28, 2019.
• Altria paid $1.5 billion in dividends in the third quarter. Future dividend payments remain subject to the discretion of the Board.
• Altria did not repurchase any shares in the third quarter and expects to complete the current $1 billion share repurchase program by the end of 2020. Share repurchases depend on marketplace conditions and other factors, and the program remains subject to the discretion of the Board.

Transactions & Financing Matters

• In August, Helix completed its acquisition of Burger Söhne Holding and its subsidiaries as well as certain affiliated companies (Burger Group) that commercialize on! oral nicotine pouches globally. Altria indirectly owns 80% of Helix.
• In August, Altria repaid $1.144 billion aggregate principal amount of 9.25% notes with cash on hand. As of September 30, 2019, the weighted-average coupon rate on Altria’s debt was 4.2%, 0.2% lower than the 4.4% weighted-average coupon rate as of June 30, 2019.

JUUL Investment

• Altria recorded a third-quarter non-cash pre-tax impairment charge of $4.5 billion related to its investment in JUUL. While there was no single determinative event or factor, Altria considered impairment indicators in totality, including: increased likelihood of U.S. Food & Drug Administration (FDA) action to remove flavored e-vapor products from the market pending a market authorization decision, various e-vapor bans put in place by certain cities and states in the U.S. and in certain international markets, and other factors.
• Altria has certified substantial compliance with the Federal Trade Commission second request and expects a resolution in first-quarter 2020.

IQOS Heated Tobacco System

• In September, PM USA began commercialization of IQOS in the Atlanta, Georgia market.
• PM USA announces the expansion of IQOS into the Richmond, Virginia market beginning in fourth-quarter 2019.

Cost Reduction Program

• Altria continues to expect to deliver approximately $575 million in annualized cost savings by the end of 2019 through the cost reduction program announced in December 2018 (Cost Reduction Program). The program includes savings from workforce reductions, third-party spending reductions and the closure of Altria’s Nu Mark operations.

2019 Full-Year Guidance

Altria reaffirms its guidance for 2019 full-year adjusted diluted EPS to be in a range of $4.19 to $4.27, representing a growth rate of 5% to 7% from an adjusted diluted EPS base of $3.99 in 2018, as shown in Schedule 10. Altria’s 2019 guidance reflects its expectation for a higher full-year adjusted effective tax rate, primarily resulting from lower dividends from ABI; increased interest expense from the debt incurred to fund the Cronos and JUUL transactions; savings from the Cost Reduction Program, which Altria expects to build through year-end to an annualized level of approximately $575 million; and increased investments related to PM USA’s lead market plans for launching IQOS. The guidance assumes little-to-no adjusted earnings or cash contributions from the Cronos and JUUL investments.

This guidance range excludes the special items for the first nine months of 2019 shown in Table 1 and additional estimated per share charges of: (i) $0.01 of tax expense resulting from the Tax Cuts and Jobs Act (Tax Reform Act) related to a tax basis adjustment to Altria’s ABI investment; and (ii) $0.01 in charges associated with the Cost Reduction Program.

Altria reaffirms its estimates for the 2019 full-year U.S. cigarette industry adjusted volume decline rate of 5% to 6%. Altria maintains its compounded annual average U.S. cigarette industry adjusted decline rate estimate through 2023 of 4% to 6% until more information is known about how adult tobacco consumers will respond to e-vapor category dynamics, including regulation and legislative developments.

Altria reaffirms its 2019 full-year adjusted effective tax rate to be in a range of 23.5% to 24.5%.

Altria’s full-year adjusted diluted EPS guidance and full-year forecast for its adjusted effective tax rate exclude the impact of certain income and expense items that management believes are not part of underlying operations. These items may include, for example, restructuring charges, asset impairment charges, acquisition-related costs, equity investment-related special items, certain tax items, charges associated with tobacco and health litigation items, and resolutions of certain non-participating manufacturer (NPM) adjustment disputes under the Master Settlement Agreement (such dispute resolutions are referred to as NPM Adjustment Items).

Altria’s management cannot estimate on a forward-looking basis the impact of certain income and expense items, including those items noted in the preceding paragraph, on its reported diluted EPS or its reported effective tax rate because these items, which could be significant, may be infrequent, are difficult to predict and may be highly variable. As a result, Altria does not provide a corresponding U.S. generally accepted accounting principles (GAAP) measure for, or reconciliation to, its adjusted diluted EPS guidance or its adjusted effective tax rate forecast.

The factors described in the “Forward-Looking and Cautionary Statements” section of this release represent continuing risks to Altria’s forecast.

2020 - 2022 Adjusted Diluted EPS Growth Objective

To advance Altria’s strategic business platform for the long-term, Altria replaces its long-term adjusted diluted EPS growth aspiration of 7% to 9% with a compounded annual adjusted diluted EPS growth objective of 5% to 8% for the years 2020 through 2022. Altria expects to maintain a dividend payout ratio target of approximately 80% of adjusted diluted EPS during this period. Full-year 2020 adjusted diluted EPS guidance will be provided in January in connection with Altria’s fourth quarter 2019 financial results.

ALTRIA GROUP, INC.

See “Basis of Presentation” below for an explanation of financial measures and reporting segments discussed in this release.

Financial Performance

Third Quarter

• Net revenues increased 0.3% to $6.9 billion, primarily due to higher net revenues in the smokeless products segment. Revenues net of excise taxes increased 2.3% to $5.4 billion.
• Reported diluted EPS decreased 100%+ to ($1.39), primarily driven by the impairment of JUUL equity securities, 2019 Cronos-related special items and higher interest expense, partially offset by higher reported operating companies income (OCI), lower income taxes and higher reported earnings from Altria’s equity investment in ABI.
• Adjusted diluted EPS increased 10.2% to $1.19 primarily driven by higher adjusted OCI in the smokeable and smokeless products segments, lower spending as a result of Altria’s decision in 2018 to refocus its innovative products efforts and higher adjusted earnings from Altria’s equity investment in ABI, partially offset by higher interest expense.

First Nine Months

• Net revenues decreased 0.8% to $19.1 billion, primarily due to lower net revenues in the smokeable products segment. Revenues net of excise taxes increased 1.0% to $15.0 billion.
• Reported diluted EPS decreased 91.1% to $0.27, primarily driven by the impairment of JUUL equity securities, 2019 Cronos-related special items, higher interest expense (which includes acquisition-related costs associated with the JUUL and Cronos transactions) and lower reported earnings from Altria’s equity investment in ABI, partially offset by higher reported OCI and lower income taxes.
• Adjusted diluted EPS increased 4.9% to $3.19, primarily driven by higher adjusted OCI in the smokeable and smokeless products segments, lower spending as a result of Altria’s decision in 2018 to refocus its innovative products efforts and higher adjusted earnings from Altria’s equity investment in ABI, partially offset by higher interest expense.

Table 1 - Altria’s Adjusted Results
	Third Quarter							Nine Months Ended September 30,
	2019			2018		Change		2019			2018			Change
Reported diluted EPS	$	(1.39	)	$	1.03	(100.0)%+		$	0.27		$	3.02		(91.1	)%
NPM Adjustment Items	—			—				—				(0.06	)
Asset impairment, exit, implementation and acquisition-related costs	—			—					0.08		—
Tobacco and health litigation items	—				0.01				0.02			0.05
ABI-related special items		(0.01	)		0.01			—				(0.06	)
Cronos-related special items		0.23		—					0.44		—
Impairment of JUUL equity securities		2.41		—					2.41		—
Loss on ABI/SABMiller business combination	—			—				—				0.01
Tax items		(0.05	)		0.03				(0.03	)		0.08
Adjusted diluted EPS	$	1.19		$	1.08	10.2	%	$	3.19		$	3.04		4.9	%

Note: For details of pre-tax, tax and after-tax amounts, see Schedules 7 and 9.

Special Items

The EPS impact of the following special items is shown in Table 1 and Schedules 7 and 9.

NPM Adjustment Items

• In the first nine months of 2018, Altria recorded pre-tax income of $145 million (or $0.06 per share) for NPM adjustment settlements with 10 states.

Asset Impairment, Exit, Implementation and Acquisition-Related Costs

• In the first nine months of 2019, Altria recorded pre-tax charges of $215 million or ($0.08 per share), primarily due to acquisition-related costs associated with the JUUL and Cronos transactions and the Cost Reduction Program.

Tobacco and Health Litigation Items

• In the first nine months of 2019, Altria recorded pre-tax charges of $48 million (or $0.02 per share) for tobacco and health litigation items and related interest costs.
• In the third quarter and first nine months of 2018, Altria recorded pre-tax charges of $21 million (or $0.01 per share) and $119 million (or $0.05 per share), respectively, for tobacco and health litigation items and related interest costs.

ABI-Related Special Items

• In the first nine months of 2018, earnings from Altria’s equity investment in ABI included net pre-tax income of $154 million (or $0.06 per share), consisting primarily of Altria’s share of ABI’s estimated effect of the Tax Reform Act and gains related to ABI’s merger and acquisition activities, partially offset by Altria’s share of ABI’s mark-to-market losses on ABI’s derivative financial instruments used to hedge certain share commitments.

Cronos-Related Special Items

• In the third quarter of 2019, Altria recorded net pre-tax losses of $549 million ($0.23 per share), consisting of the following: (i) Altria’s mark-to-market losses of $636 million due to the non-cash change during the quarter in the fair value of Cronos-related derivative financial instruments to acquire additional shares of Cronos, partially offset by (ii) income of $87 million (included in earnings from Altria’s equity investment in Cronos), substantially all of which related to Altria’s share of Cronos’s non-cash change in the fair value of Cronos’s derivative financial instruments associated with the issuance of additional shares.
• In the first nine months of 2019, Altria recorded net pre-tax losses of $1.1 billion ($0.44 per share), consisting of the following: (i) Altria’s mark-to-market losses of $1.3 billion primarily due to the non-cash change during the year in the fair value of Cronos-related derivative financial instruments to acquire additional shares of Cronos, partially offset by (ii) income of $0.2 billion (included in earnings from Altria’s equity investment in Cronos), substantially all of which related to Altria’s share of Cronos’s non-cash change in the fair value of Cronos’s derivative financial instruments associated with the issuance of additional shares.

Impairment of JUUL Equity Securities

• In the third quarter of 2019, Altria recorded a non-cash pre-tax impairment charge of $4.5 billion ($2.41 per share) due to the impairment of Altria’s equity securities in JUUL. A full tax valuation allowance was recorded for this charge that offset the tax benefit associated with the impairment charge.

Tax Items

• In the third quarter and first nine months of 2019, Altria recorded income tax benefits of $97 million (or $0.05 per share), and $56 million (or $0.03 per share), respectively, primarily related to tax benefits of $91 million for the reversal of tax accruals no longer required and $30 million for the release of a valuation allowance on Altria’s equity investment in Cronos, partially offset by tax expense of $21 million and $63 million, respectively, related to a tax basis adjustment to Altria’s equity investment in ABI.
• In the third quarter and first nine months of 2018, Altria recorded income tax charges of approximately $57 million (or $0.03 per share) and $152 million (or $0.08 per share), respectively, primarily related to a tax basis adjustment to Altria’s equity investment in ABI and for a valuation allowance on foreign tax credit carryforwards that are not realizable. Additionally, the 2018 first nine months income tax charges included a first quarter tax benefit related to prior audit years.

SMOKEABLE PRODUCTS

Revenues and OCI

Third Quarter

• Net revenues were essentially unchanged as higher pricing and lower promotional investments were mostly offset by lower shipment volume. Revenues net of excise taxes increased 2.5%.
• Reported and adjusted OCI increased 12.5% and 12.6%, respectively, primarily driven by higher pricing, lower costs and lower promotional investments, partially offset by lower shipment volume. Adjusted OCI margins increased 4.9 percentage points to 55.3%.

First Nine Months

• Net revenues decreased 0.9%, primarily driven by lower shipment volume, partially offset by higher pricing and lower promotional investments. Revenues net of excise taxes increased 1.1%.
• Reported OCI increased 5.3%, primarily driven by higher pricing, lower costs (which includes lower tobacco and health litigation items) and lower promotional investments, partially offset by lower shipment volume, higher resolution expenses (which includes 2018 NPM Adjustment Items) and higher asset impairment, exit and implementation costs.
• Adjusted OCI increased 8.1%, primarily driven by higher pricing, lower costs and lower promotional investments, partially offset by lower shipment volume and higher resolution expense. Adjusted OCI margins increased 3.5 percentage points to 54.4%.

Table 2 - Smokeable Products: Revenues and OCI ($ in millions)
	Third Quarter								Nine Months Ended September 30,
	2019			2018			Change		2019			2018			Change
Net revenues	$	6,049		$	6,035		0.2	%	$	16,837		$	16,995		(0.9	)%
Excise taxes		(1,406	)		(1,505	)				(3,998	)		(4,294	)
Revenues net of excise taxes	$	4,643		$	4,530		2.5	%	$	12,839		$	12,701		1.1	%
Reported OCI	$	2,561		$	2,277		12.5	%	$	6,864		$	6,516		5.3	%
NPM Adjustment Items	—			—					—				(145	)
Asset impairment, exit and implementation costs		4			(6	)				79			(3	)
Tobacco and health litigation items		3			10					43			94
Adjusted OCI	$	2,568		$	2,281		12.6	%	$	6,986		$	6,462		8.1	%
Adjusted OCI margins ^1		55.3	%		50.4	%	4.9 pp			54.4	%		50.9	%	3.5 pp

¹ Adjusted OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.

Shipment Volume

Third Quarter

• Smokeable products segment reported domestic cigarette shipment volume decreased 6.6%, primarily driven by the industry’s rate of decline, retail share losses and trade inventory movements, partially offset by calendar differences.

• When adjusted for calendar differences, trade inventory movements and other factors, smokeable products segment domestic cigarette shipment volume decreased by an estimated 7%.

• When adjusted for calendar differences, trade inventory movements and other factors, total domestic cigarette industry volumes declined by an estimated 5.5%.
• Reported cigar shipment volume increased 4.1%.

First Nine Months

• Smokeable products segment reported domestic cigarette shipment volume decreased 6.9%, primarily driven by the industry’s rate of decline and retail share losses, partially offset by trade inventory movements.

• When adjusted for trade inventory movements and other factors, smokeable products segment domestic cigarette shipment volume decreased by an estimated 7.5%.

• When adjusted for trade inventory movements and other factors, total domestic cigarette industry volumes declined by an estimated 5.5%.
• Reported cigar shipment volume increased 2.7%.

Table 3 - Smokeable Products: Shipment Volume (sticks in millions)
	Third Quarter				Nine Months Ended September 30,
	2019	2018	Change		2019	2018	Change
Cigarettes:
Marlboro	24,081	25,611	(6.0	)%	68,347	72,793	(6.1	)%
Other premium	1,302	1,473	(11.6	)%	3,772	4,286	(12.0	)%
Discount	2,349	2,614	(10.1	)%	6,564	7,407	(11.4	)%
Total cigarettes	27,732	29,698	(6.6	)%	78,683	84,486	(6.9	)%
Cigars:
Black & Mild	426	408	4.4	%	1,231	1,197	2.8	%
Other	2	3	(33.3	)%	7	9	(22.2	)%
Total cigars	428	411	4.1	%	1,238	1,206	2.7	%
Total smokeable products	28,160	30,109	(6.5	)%	79,921	85,692	(6.7	)%

Note: Cigarettes volume includes units sold as well as promotional units, but excludes units sold for distribution to Puerto Rico, and units sold in U.S. Territories, to overseas military and by Philip Morris Duty Free Inc., none of which, individually or in the aggregate, is material to the smokeable products segment.

Brand Activity and Retail Share

Third Quarter

• Marlboro retail share declined 0.1 share point to 43.1%.
• PM USA’s Marlboro Rewards has reached 2.5 million enrollees since its launch in January.

First Nine Months

• Marlboro retail share declined 0.1 share point to 43.2%.

Table 4 - Smokeable Products: Cigarettes Retail Share (percent)
	Third Quarter					Nine Months Ended September 30,
	2019		2018		Percentage point change	2019		2018		Percentage point change
Cigarettes:
Marlboro	43.1	%	43.2	%	(0.1)	43.2	%	43.3	%	(0.1)
Other premium	2.4		2.6		(0.2)	2.5		2.6		(0.1)
Discount	4.1		4.4		(0.3)	4.1		4.4		(0.3)
Total cigarettes	49.6	%	50.2	%	(0.6)	49.8	%	50.3	%	(0.5)

Note: Retail share results for cigarettes are based on data from IRI/MSAi, a tracking service that uses a sample of stores and certain wholesale shipments to project market share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes. For other trade classes selling cigarettes, retail share is based on shipments from wholesalers to retailers (STARS). This service is not designed to capture sales through other channels, including the internet, direct mail and some illicitly tax-advantaged outlets. It is IRI’s standard practice to periodically refresh its services, which could restate retail share results that were previously released in this service.

SMOKELESS PRODUCTS

Revenues and OCI

Third Quarter

• Net revenues increased 5.8%, primarily driven by higher pricing and lower promotional investments, partially offset by lower shipment volume. Revenues net of excise taxes increased 6.3%.
• Reported and adjusted OCI increased 12.7% and 10.2%, respectively, primarily driven by higher pricing, lower promotional investments and lower costs, partially offset by lower shipment volume. Adjusted OCI margins increased 2.5 percentage points to 71.9%.

First Nine Months

• Net revenues increased 4.3%, primarily driven by higher pricing and lower promotional investments, partially offset by lower shipment volume. Revenues net of excise taxes increased 4.8%.
• Reported and adjusted OCI increased 10.1% and 9.7%, respectively, primarily driven by higher pricing, lower promotional investments and lower costs, partially offset by lower shipment volume. Adjusted OCI margins increased 3.3 percentage points to 72.7%.

Table 5 - Smokeless Products: Revenues and OCI ($ in millions)
	Third Quarter								Nine Months Ended September 30,
	2019			2018			Change		2019			2018			Change
Net revenues	$	620		$	586		5.8	%	$	1,762		$	1,690		4.3	%
Excise taxes		(33	)		(34	)				(96	)		(100	)
Revenues net of excise taxes	$	587		$	552		6.3	%	$	1,666		$	1,590		4.8	%
Reported OCI	$	417		$	370		12.7	%	$	1,195		$	1,085		10.1	%
Asset impairment, exit, implementation and acquisition-related costs		5			3					16			9
Tobacco and health litigation items	—				10				—				10
Adjusted OCI	$	422		$	383		10.2	%	$	1,211		$	1,104		9.7	%
Adjusted OCI margins ^1		71.9	%		69.4	%	2.5 pp			72.7	%		69.4	%	3.3 pp

¹ Adjusted OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.

Shipment Volume

Third Quarter

• Smokeless products segment reported domestic shipment volume declined 2.5%, primarily driven by the industry’s rate of decline and retail share losses, partially offset by trade inventory movements and calendar differences. When adjusted for trade inventory movements and calendar differences, smokeless products segment shipment volume declined an estimated 4%.

First Nine Months

• Smokeless products segment reported domestic shipment volume declined 2.8%, primarily driven by the industry’s rate of decline, calendar differences and retail share losses, partially offset by trade inventory movements. When adjusted for trade inventory movements and calendar differences, smokeless products segment shipment volume declined an estimated 3%.
• Total smokeless industry volume declined by an estimated 1.5% over the past six months.

Table 6 - Smokeless Products: Shipment Volume (cans and packs in millions)
	Third Quarter					Nine Months Ended September 30,
	2019	2018	Change			2019	2018	Change
Copenhagen	135.2	135.7		(0.4	)%	393.1	398.2	(1.3	)%
Skoal	55.7	59.7		(6.7	)%	164.2	174.5	(5.9	)%
Copenhagen and Skoal	190.9	195.4		(2.3	)%	557.3	572.7	(2.7	)%
Other	17.2	18.0		(4.4	)%	50.2	52.1	(3.6	)%
Total smokeless products	208.1	213.4		(2.5	)%	607.5	624.8	(2.8	)%

Note: Volume includes cans and packs sold, as well as promotional units, but excludes international volume and oral nicotine pouch (tobacco-derived nicotine) volume, which are currently not material to the smokeless products segment. New types of smokeless products, as well as new packaging configurations of existing smokeless products, may or may not be equivalent to existing moist smokeless tobacco (MST) products on a can-for-can basis. To calculate volumes of cans and packs shipped, one pack of snus, irrespective of the number of pouches in the pack, is assumed to be equivalent to one can of MST.

Brand Activity and Retail Share

Third Quarter

• Copenhagen retail share grew 0.2 share points to 34.7%.
• Skoal retail share declined 0.7 share points to 15.6%

First Nine Months

• Copenhagen retail share grew 0.4 share points to 34.8%.
• Skoal retail share declined 0.7 share points to 15.6%.

Table 7 - Smokeless Products: Retail Share (percent)
	Third Quarter					Nine Months Ended September 30,
	2019		2018		Percentage point change	2019		2018		Percentage point change
Copenhagen	34.7	%	34.5	%	0.2	34.8	%	34.4	%	0.4
Skoal	15.6		16.3		(0.7)	15.6		16.3		(0.7)
Copenhagen and Skoal	50.3		50.8		(0.5)	50.4		50.7		(0.3)
Other	3.6		3.5		0.1	3.4		3.4		—
Total smokeless products	53.9	%	54.3	%	(0.4)	53.8	%	54.1	%	(0.3)

Note: The smokeless products retail share results exclude international volume and oral nicotine pouch (tobacco-derived nicotine) volume. Retail share results for smokeless products are based on data from IRI InfoScan, a tracking service that uses a sample of stores to project market share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes on the number of cans and packs sold. Smokeless products is defined by IRI as moist smokeless and spit-free tobacco products. New types of smokeless products, as well as new packaging configurations of existing smokeless products, may or may not be equivalent to existing MST products on a can-for-can basis. For example, one pack of snus, irrespective of the number of pouches in the pack, is assumed to be equivalent to one can of MST. Because this service represents retail share performance only in key trade channels, it should not be considered a precise measurement of actual retail share. It is IRI’s standard practice to periodically refresh its InfoScan services, which could restate retail share results that were previously released in this service.

WINE

Revenues, OCI and Shipment Volume

Third Quarter

• Net revenues decreased 7.7%, primarily due to lower shipment volume and higher promotional investments, partially offset by favorable premium mix.
• Reported and adjusted OCI decreased $13 million due to higher promotional investments and lower shipment volume.
• Reported wine shipment volume decreased 9.6% to approximately 2.0 million cases.

First Nine Months

• Net revenues decreased 1.2%, primarily driven by higher promotional investments.
• Reported and adjusted OCI decreased $23 million, primarily driven by higher costs and higher promotional investments.
• Reported wine shipment volume was essentially unchanged at approximately 5.9 million cases.

Table 8 - Wine: Revenues and OCI ($ in millions)
	Third Quarter									Nine Months Ended September 30,
	2019			2018				Change		2019			2018				Change
Net revenues	$	167			$	181		(7.7	)%		483			$	489		(1.2	)%
Excise taxes		(5	)			(6	)				(15	)			(15	)
Revenues net of excise taxes	$	162			$	175		(7.4	)%	$	468			$	474		(1.3	)%
Reported and Adjusted OCI	$	16			$	29		(44.8	)%	$	50			$	73		(31.5	)%
OCI margins ^1		9.9	%			16.6	%	(6.7) pp			10.7	%			15.4	%	(4.7) pp

¹ OCI margins are calculated as adjusted OCI divided by revenues net of excise taxes.

Altria's Profile

Altria’s wholly-owned subsidiaries include Philip Morris USA Inc. (PM USA), U.S. Smokeless Tobacco Company LLC (USSTC), John Middleton Co. (Middleton), Sherman Group Holdings, LLC and its subsidiaries (Nat Sherman), Ste. Michelle Wine Estates Ltd. (Ste. Michelle) and Philip Morris Capital Corporation (PMCC). Altria owns an 80% interest in Helix Innovations LLC (Helix). Altria holds equity investments in Anheuser-Busch InBev SA/NV (ABI), JUUL Labs, Inc. (JUUL) and Cronos Group Inc. (Cronos).

The brand portfolios of Altria’s tobacco operating companies include Marlboro^®, Black & Mild^®, Copenhagen^®, Skoal^® and on!^® . Ste. Michelle produces and markets premium wines sold under various labels, including Chateau Ste. Michelle^®, 14 Hands^® and Stag’s Leap Wine Cellars^™, and it imports and markets Antinori^®, Champagne Nicolas Feuillatte^™ and Villa Maria Estate^™ products in the United States. Trademarks and service marks related to Altria referenced in this release are the property of Altria or its subsidiaries or are used with permission.

More information about Altria is available at altria.com and on the Altria Investor app, or follow Altria on Twitter, Facebook and LinkedIn.

Basis of Presentation

Altria reports its financial results in accordance with GAAP. Altria’s management reviews OCI, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate the performance of, and allocate resources to, the segments. Altria’s management also reviews certain financial results, including OCI, OCI margins and diluted EPS, on an adjusted basis, which excludes certain income and expense items, including those items noted under “2019 Full-Year Guidance.” Altria’s management does not view any of these special items to be part of Altria’s underlying results as they may be highly variable, may be infrequent, are 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 adjusted effective tax rate may exclude certain tax items from its reported effective tax rate. Altria’s management believes that adjusted financial measures provide useful additional insight into underlying business trends and results and provide a more meaningful comparison of year-over-year results. Altria’s management uses adjusted financial measures for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets. These adjusted financial measures are not consistent with GAAP and may not be calculated the same as similarly titled measures used by other companies. These adjusted financial measures 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 historical adjusted financial measures to corresponding GAAP measures are provided in this release.

Altria uses the equity method of accounting for its investment in ABI and Cronos and reports its share of ABI’s and Cronos’s results using a one-quarter lag because ABI’s and Cronos’s results are not available in time to record them in the concurrent period. The one-quarter reporting lag for ABI and Cronos does not affect Altria’s cash flows. Altria accounts for its investment in JUUL as an investment in an equity security. If and when antitrust clearance is obtained, Altria expects to account for its investment in JUUL under the equity method of accounting.

Altria’s reportable segments are smokeable products, including combustible cigarettes and cigars manufactured and sold by PM USA, Middleton and Nat Sherman; smokeless products, including moist smokeless tobacco and snus products manufactured and sold by USSTC, and oral nicotine pouches sold by Helix; and wine, produced and/or distributed by Ste. Michelle. Results for innovative tobacco products and PMCC are included in “All Other.”

Comparisons are to the corresponding prior-year period unless otherwise stated.

Forward-Looking and Cautionary Statements

This release contains projections of future results and other forward-looking statements that involve a number of risks and uncertainties and are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.

Important factors that may cause actual results and outcomes to differ materially from those contained in the projections and forward-looking statements included in this release are described in Altria’s publicly filed reports, including its Annual Report on Form 10-K for the year ended December 31, 2018 and its Quarterly Report on Form 10-Q for the period ended March 31, 2019. These factors include the following:

• unfavorable litigation outcomes, including risks associated with adverse jury and judicial determinations, courts reaching conclusions at variance with our and our subsidiaries’ understanding of applicable law, bonding requirements in the jurisdictions that do not limit the dollar amount of appeal bonds, and certain challenges to bond cap statutes;
• government (including FDA) and private sector actions that impact adult tobacco consumer acceptability of, or access to, tobacco products;
• the growth of the e-vapor category and other innovative tobacco products contributing to reductions in cigarette and smokeless tobacco product consumption levels and sales volume;
• tobacco product taxation, including lower tobacco product consumption levels and potential shifts in adult consumer purchases as a result of federal and state excise tax increases;
• the failure by our tobacco and wine subsidiaries to compete effectively in their respective markets;
• our tobacco and wine subsidiaries’ continued ability to promote brand equity successfully; to anticipate and respond to evolving adult consumer preferences; to develop, manufacture, market and distribute products that appeal to adult tobacco consumers (including, where appropriate, through arrangements with, and investments in third parties); to improve productivity; and to protect or enhance margins through cost savings and price increases;
• changes in economic conditions that result in consumers choosing lower-priced brands;
• the unsuccessful commercialization of adjacent products or processes by our tobacco subsidiaries and investees, including innovative tobacco products that may reduce the health risks associated with current tobacco products and that appeal to adult tobacco consumers;
• significant changes in price, availability or quality of tobacco, other raw materials or component parts;
• the risks related to the reliance by our tobacco subsidiaries on a few significant facilities and a small number of key suppliers, including an extended disruption at a facility or of service by a supplier;
• required or voluntary product recalls as a result of various circumstances such as product contamination or FDA or other regulatory action;
• the failure of our information systems or service providers’ information systems to function as intended, or cyber-attacks or security breaches;
• unfavorable outcomes of any government investigations;
• a successful challenge to our tax positions;
• the risks related to our and our investees’ international business operations, including failure to prevent violations of various United States and foreign laws and regulations such as laws prohibiting bribery and corruption;
• our inability to attract and retain the best talent due to the impact of decreasing social acceptance of tobacco usage and tobacco control actions;
• the adverse effect of acquisitions or other events on our credit rating;
• our inability to acquire attractive businesses or make attractive investments on favorable terms, or at all, or to realize the anticipated benefits from an acquisition or investment;
• the risks related to disruption and uncertainty in the credit and capital markets, including risk of access to these markets both generally and at current prevailing rates which may adversely affect our earnings or dividend rate or both;
• impairment losses as a result of the write down of intangible assets, including goodwill;
• the risks related to Ste. Michelle’s wine business, including competition, unfavorable changes in grape supply and governmental regulations;
• the adverse effects of risks encountered by ABI in its business, foreign currency exchange rates and ABI’s stock price on our equity investment in ABI, including on our reported earnings from and carrying value of our investment in ABI and the dividends paid by ABI on the shares we own;
• the risks related to our inability to transfer our equity securities in ABI until October 10, 2021, and, if our ownership percentage decreases below certain levels, the adverse effects of additional tax liabilities, a reduction in the number of directors that we have the right to have appointed to the ABI Board of Directors, and our potential inability to use the equity method of accounting for our investment in ABI;
• the risk of challenges to the tax treatment of the consideration we received in the ABI/SABMiller business combination and the tax treatment of our equity investment;
• the risks related to our inability to obtain antitrust clearance required for the conversion of our non-voting JUUL shares into voting shares in a timely manner or at all, including the resulting limitations on our rights with respect to our investment in JUUL and our inability to account for our investment in JUUL using the equity method;
• the risks generally related to our investments in JUUL and Cronos, including our inability to realize the expected benefits of our investments in the expected time frames, or at all, due to the risks encountered by our investees in their businesses, such as operational, compliance and regulatory risks at the international, federal, state and local levels, including actions by the FDA, and adverse publicity; potential disruptions to our investees’ management or current or future plans and operations; domestic or international litigation developments, government investigations, tax disputes or otherwise; and impairment of our investments;
• the risks related to our inability to acquire a controlling interest in JUUL as a result of standstill restrictions or to control the material decisions of JUUL, restrictions on our ability to sell or otherwise transfer our shares of JUUL until December 20, 2024, and non-competition restrictions for the same time period;
• the risks related to any decrease of our percentage ownership in JUUL, including the loss of certain of our governance, consent, preemptive and other rights; and
• the risks, including criminal, civil or tax liability for Altria, related to Cronos’s failure to comply with applicable laws, including cannabis laws.

Altria cautions that the foregoing list of important factors is not complete and does not undertake to update any forward-looking statements that it may make except as required by applicable law. All subsequent written and oral forward-looking statements attributable to Altria or any person acting on its behalf are expressly qualified in their entirety by the cautionary statements referenced above.

							Schedule 1
ALTRIA GROUP, INC. and Subsidiaries Consolidated Statements of Earnings For the Quarters Ended September 30, (dollars in millions, except per share data) (Unaudited)
	2019			2018			% Change
Net revenues	$	6,856		$	6,837		0.3	%
Cost of sales ^1		1,915			2,037
Excise taxes on products ^1		1,444			1,545
Gross profit		3,497			3,255		7.4	%
Marketing, administration and research costs		494			619
Asset impairment and exit costs		1			(2	)
Operating companies income		3,002			2,638		13.8	%
Amortization of intangibles		12			20
General corporate expenses		46			61
Operating income		2,944			2,557		15.1	%
Interest and other debt expense, net		293			159
Net periodic benefit income, excluding service cost		(24	)		(21	)
Earnings from equity investments ^1		(333	)		(189	)
Impairment of JUUL equity securities		4,500		—
Loss on Cronos-related financial instruments		636		—
Earnings (losses) before income taxes		(2,128	)		2,608		(100.0)%+
Provision for income taxes		474			664
Net earnings (losses)		(2,602	)		1,944		(100.0)%+
Net (earnings) losses attributable to noncontrolling interests		2			(1	)
Net earnings (losses) attributable to Altria	$	(2,600	)	$	1,943		(100.0)%+
Per share data:
Basic and diluted earnings (losses) per share attributable to Altria	$	(1.39	)	$	1.03		(100.0)%+
Weighted-average diluted shares outstanding		1,868			1,883		(0.8	)%

¹ Cost of sales includes charges for resolution expenses related to state settlement agreements and FDA user fees.

Supplemental information concerning those items, excise taxes on products sold and earnings from equity investments is shown in Schedule 5.

													Schedule 2
ALTRIA GROUP, INC. and Subsidiaries Selected Financial Data For the Quarters Ended September 30, (dollars in millions) (Unaudited)
	Net Revenues
	Smokeable Products			Smokeless Products			Wine			All Other			Total
2019	$	6,049		$	620		$	167		$	20		$	6,856
2018	6,035			586			181			35			6,837
% Change	0.2		%	5.8		%	(7.7		)%	(42.9		)%	0.3		%
Reconciliation:
For the quarter ended September 30, 2018	$	6,035		$	586		$	181		$	35		$	6,837
Operations	14			34			(14		)	(15		)	19
For the quarter ended September 30, 2019	$	6,049		$	620		$	167		$	20		$	6,856
	Operating Companies Income (Loss)
	Smokeable Products			Smokeless Products			Wine			All Other			Total
2019	$	2,561		$	417		$	16		$	8		$	3,002
2018	2,277			370			29			(38		)	2,638
% Change	12.5		%	12.7		%	(44.8		)%	100.0%+			13.8		%
Reconciliation:
For the quarter ended September 30, 2018	$	2,277		$	370		$	29		$	(38	)	$	2,638
Asset impairment, exit and implementation costs - 2018	(6		)	3			—			—			(3		)
Tobacco and health litigation items - 2018	10			10			—			—			20
	4			13			—			—			17
Asset impairment, exit, implementation and acquisition-related costs - 2019	(4		)	(5		)	—			—			(9		)
Tobacco and health litigation items - 2019	(3		)	—			—			—			(3		)
	(7		)	(5		)	—			—			(12		)
Operations	287			39			(13		)	46			359
For the quarter ended September 30, 2019	$	2,561		$	417		$	16		$	8		$	3,002

							Schedule 3
ALTRIA GROUP, INC. and Subsidiaries Consolidated Statements of Earnings For the Nine Months Ended September 30, (dollars in millions, except per share data) (Unaudited)
		2019			2018		% Change
Net revenues	$	19,103		$	19,250		(0.8	)%
Cost of sales ^1		5,367			5,509
Excise taxes on products^1		4,109			4,409
Gross profit		9,627			9,332		3.2	%
Marketing, administration and research costs		1,472			1,777
Asset impairment and exit costs		73			2
Operating companies income		8,082			7,553		7.0	%
Amortization of intangibles		28			30
General corporate expenses		154			152
Corporate asset impairment and exit costs		1		—
Operating income		7,899			7,371		7.2	%
Interest and other debt expense, net		989			503
Net periodic benefit income, excluding service cost		(40	)		(37	)
Earnings from equity investments ^1		(866	)		(759	)
Impairment of JUUL equity securities		4,500		—
Loss on Cronos-related financial instruments		1,327		—
Loss on ABI/SABMiller business combination	—				33
Earnings (losses) before income taxes		1,989			7,631		(73.9	)%
Provision for income taxes		1,473			1,915
Net earnings (losses)		516			5,716		(91.0	)%
Net (earnings) losses attributable to noncontrolling interests	—				(3	)
Net earnings (losses) attributable to Altria	$	516		$	5,713		(91.0	)%
Per share data^2:
Basic and diluted earnings (losses) per share attributable to Altria	$	0.27		$	3.02		(91.1	)%
Weighted-average diluted shares outstanding		1,871			1,891		(1.1	)%

¹ Cost of sales includes charges for resolution expenses related to state settlement agreements and FDA user fees.

Supplemental information concerning those items, excise taxes on products sold and earnings from equity investments is shown in Schedule 5.

² Basic and diluted earnings (losses) per share attributable to Altria are computed independently for each period. Accordingly, the sum of the quarterly earnings (losses) per share amounts may not agree to the year-to-date amounts.

													Schedule 4
ALTRIA GROUP, INC. and Subsidiaries Selected Financial Data For the Nine Months Ended September 30, (dollars in millions) (Unaudited)
	Net Revenues
	Smokeable Products			Smokeless Products			Wine			All Other			Total
2019	$	16,837		$	1,762		$	483		$	21		$	19,103
2018		16,995			1,690			489			76			19,250
% Change		(0.9	)%		4.3	%		(1.2	)%		(72.4	)%		(0.8	)%
Reconciliation:
For the nine months ended September 30, 2018	$	16,995		$	1,690		$	489		$	76		$	19,250
Operations		(158	)		72			(6	)		(55	)		(147	)
For the nine months ended September 30, 2019	$	16,837		$	1,762		$	483		$	21		$	19,103
	Operating Companies Income (Loss)
	Smokeable Products			Smokeless Products			Wine			All Other			Total
2019	$	6,864		$	1,195		$	50		$	(27	)	$	8,082
2018		6,516			1,085			73			(121	)		7,553
% Change		5.3	%		10.1	%		(31.5	)%		77.7	%		7.0	%
Reconciliation:
For the nine months ended September 30, 2018	$	6,516		$	1,085		$	73		$	(121	)	$	7,553
NPM Adjustment Items - 2018		(145	)	—			—			—				(145	)
Asset impairment, exit and implementation costs - 2018		(3	)		9		—			—				6
Tobacco and health litigation items - 2018		94			10		—			—				104
		(54	)		19		—			—				(35	)
Asset impairment, exit, implementation and acquisition-related costs - 2019		(79	)		(16	)	—				(7	)		(102	)
Tobacco and health litigation items - 2019		(43	)	—			—			—				(43	)
		(122	)		(16	)	—				(7	)		(145	)
Operations		524			107			(23	)		101			709
For the nine months ended September 30, 2019	$	6,864		$	1,195		$	50		$	(27	)	$	8,082

							Schedule 5
ALTRIA GROUP, INC. and Subsidiaries Supplemental Financial Data (dollars in millions) (Unaudited)
	For the Quarters Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
The segment detail of excise taxes on products sold is as follows:
Smokeable products	$	1,406	$	1,505	$	3,998	$	4,294
Smokeless products	33		34		96		100
Wine	5		6		15		15
	$	1,444	$	1,545	$	4,109	$	4,409
The segment detail of charges for resolution expenses related to state settlement agreements included in cost of sales is as follows:
Smokeable products	$	1,146	$	1,221	$	3,195	$	3,199
Smokeless products	2		3		7		7
	$	1,148	$	1,224	$	3,202	$	3,206
The segment detail of FDA user fees included in cost of sales is as follows:
Smokeable products	$	73	$	71	$	218	$	212
Smokeless products	2		1		4		3
	$	75	$	72	$	222	$	215
The detail of earnings from equity investments is as follows:
ABI	$	252	$	189	$	640	$	759
Cronos	81		—		226		—
	$	333	$	189	$	866	$	759

				Schedule 6
ALTRIA GROUP, INC. and Subsidiaries Net Earnings (Losses) and Diluted Earnings (Losses) Per Share - Attributable to Altria Group, Inc. For the Quarters Ended September 30, (dollars in millions, except per share data) (Unaudited)
	Net Earnings (Losses)			Diluted EPS
2019 Net Earnings (Losses)	$	(2,600	)	$	(1.39	)
2018 Net Earnings (Losses)	$	1,943		$	1.03
% Change	(100.0)%+			(100.0)%+
Reconciliation:
2018 Net Earnings (Losses)	$	1,943		$	1.03
2018 ABI-related special items		27			0.01
2018 Asset impairment, exit and implementation costs		(2	)	—
2018 Tobacco and health litigation items		16			0.01
2018 Tax items		57			0.03
Subtotal 2018 special items		98			0.05
2019 ABI-related special items		11			0.01
2019 Asset impairment, exit, implementation and acquisition-related costs		(5	)	—
2019 Tobacco and health litigation items		(2	)	—
2019 Impairment of JUUL equity securities		(4,500	)		(2.41	)
2019 Cronos-related special items		(432	)		(0.23	)
2019 Tax items		97			0.05
Subtotal 2019 special items		(4,831	)		(2.58	)
Fewer shares outstanding	—				0.01
Change in tax rate		(13	)		(0.01	)
Operations		203			0.11
2019 Net Earnings (Losses)	$	(2,600	)	$	(1.39	)

													Schedule 7
ALTRIA GROUP, INC. and Subsidiaries Reconciliation of GAAP and non-GAAP Measures For the Quarters Ended September 30, (dollars in millions, except per share data) (Unaudited)
	Earnings (Losses) before Income Taxes			Provision for Income Taxes			Net Earnings (Losses)			Net Earnings (Losses) Attributable to Altria			Diluted EPS
2019 Reported	$	(2,128	)	$	474		$	(2,602	)	$	(2,600	)	$	(1.39	)
ABI-related special items		(14	)		(3	)		(11	)		(11	)		(0.01	)
Asset impairment, exit, implementation and acquisition-related costs		11			6			5			5		—
Tobacco and health litigation items		3			1			2			2		—
Impairment of JUUL equity securities		4,500		—				4,500			4,500			2.41
Cronos-related special items		549			117			432			432			0.23
Tax items	—				97			(97	)		(97	)		(0.05	)
2019 Adjusted for Special Items	$	2,921		$	692		$	2,229		$	2,231		$	1.19
2018 Reported	$	2,608		$	664		$	1,944		$	1,943		$	1.03
ABI-related special items		35			8			27			27			0.01
Asset impairment, exit and implementation costs		(3	)		(1	)		(2	)		(2	)	—
Tobacco and health litigation items		21			5			16			16			0.01
Tax items	—				(57	)		57			57			0.03
2018 Adjusted for Special Items	$	2,661		$	619		$	2,042		$	2,041		$	1.08
2019 Reported Net Earnings (Losses)										$	(2,600	)	$	(1.39	)
2018 Reported Net Earnings (Losses)										$	1,943		$	1.03
% Change										(100.0)%+			(100.0)%+
2019 Net Earnings (Losses) Adjusted for Special Items										$	2,231		$	1.19
2018 Net Earnings (Losses) Adjusted for Special Items										$	2,041		$	1.08
% Change											9.3	%		10.2	%

				Schedule 8
ALTRIA GROUP, INC. and Subsidiaries Net Earnings (Losses) and Diluted Earnings (Losses) Per Share - Attributable to Altria Group, Inc. For the Nine Months Ended September 30, (dollars in millions, except per share data) (Unaudited)
	Net Earnings (Losses)			Diluted EPS^1
2019 Net Earnings (Losses)	$	516		$	0.27
2018 Net Earnings (Losses)	$	5,713		$	3.02
% Change		(91.0	)%		(91.1	)%
Reconciliation:
2018 Net Earnings (Losses)	$	5,713		$	3.02
2018 NPM Adjustment Items		(109	)		(0.06	)
2018 Tobacco and health litigation items		89			0.05
2018 ABI-related special items		(122	)		(0.06	)
2018 Asset impairment, exit and implementation costs		5		—
2018 Loss on ABI/SABMiller business combination		26			0.01
2018 Tax items		152			0.08
Subtotal 2018 special items		41			0.02
2019 ABI-related special items		(8	)	—
2019 Tobacco and health litigation items		(36	)		(0.02	)
2019 Asset impairment, exit, implementation and acquisition-related costs		(163	)		(0.08	)
2019 Impairment of JUUL equity securities		(4,500	)		(2.41	)
2019 Cronos-related special items		(816	)		(0.44	)
2019 Tax items		56			0.03
Subtotal 2019 special items		(5,467	)		(2.92	)
Fewer shares outstanding	—				0.03
Change in tax rate		(55	)		(0.03	)
Operations		284			0.15
2019 Net Earnings (Losses)	$	516		$	0.27

¹ Basic and diluted earnings per share attributable to Altria are computed independently for each period.

Accordingly, the sum of the quarterly earnings per share amounts may not agree to the year-to-date amounts.

										Schedule 9
ALTRIA GROUP, INC. and Subsidiaries Reconciliation of GAAP and non-GAAP Measures For the Nine Months Ended September 30, (dollars in millions, except per share data) (Unaudited)
	Earnings (losses) before Income Taxes			Provision for Income Taxes			Net Earnings (Losses)			Net Earnings (Losses) Attributable to Altria			Diluted EPS^1
2019 Reported	$	1,989		$	1,473		$	516		$	516		$	0.27
ABI-related special items		10			2			8			8		—
Tobacco and health litigation items		48			12			36			36			0.02
Asset impairment, exit, implementation and acquisition-related costs		215			52			163			163			0.08
Impairment of JUUL equity securities		4,500		—				4,500			4,500			2.41
Cronos-related special items		1,093			277			816			816			0.44
Tax items	—				56			(56	)		(56	)		(0.03	)
2019 Adjusted for Special Items	$	7,855		$	1,872		$	5,983		$	5,983		$	3.19
2018 Reported	$	7,631		$	1,915		$	5,716		$	5,713		$	3.02
NPM Adjustment Items		(145	)		(36	)		(109	)		(109	)		(0.06	)
Tobacco and health litigation items		119			30			89			89			0.05
ABI-related special items		(154	)		(32	)		(122	)		(122	)		(0.06	)
Asset impairment, exit and implementation costs		6			1			5			5		—
Loss on ABI/SABMiller business combination		33			7			26			26			0.01
Tax items	—				(152	)		152			152			0.08
2018 Adjusted for Special Items	$	7,490		$	1,733		$	5,757		$	5,754		$	3.04
2019 Reported Net Earnings (Losses)										$	516		$	0.27
2018 Reported Net Earnings (Losses)										$	5,713		$	3.02
% Change											(91.0	)%		(91.1	)%
2019 Net Earnings (Losses) Adjusted for Special Items										$	5,983		$	3.19
2018 Net Earnings (Losses) Adjusted for Special Items										$	5,754		$	3.04
% Change											4.0	%		4.9	%

¹ Basic and diluted earnings per share attributable to Altria are computed independently for each period.

Accordingly, the sum of the quarterly earnings per share amounts may not agree to the year-to-date amounts.

													Schedule 10
ALTRIA GROUP, INC. and Subsidiaries Reconciliation of GAAP and non-GAAP Measures For the Year Ended December 31, 2018 (dollars in millions, except per share data) (Unaudited)
	Earnings (losses) before Income Taxes			Provision for Income Taxes			Net Earnings (Losses)			Net Earnings (Losses) Attributable to Altria			Diluted EPS
2018 Reported	$	9,341		$	2,374		$	6,967		$	6,963		$	3.68
NPM Adjustment Items		(145	)		(36	)		(109	)		(109	)		(0.06	)
Tobacco and health litigation items		131			33			98			98			0.05
ABI-related special items		(85	)		(17	)		(68	)		(68	)		(0.03	)
Asset impairment, exit, implementation and acquisition-related costs		538			106			432			432			0.23
Loss on ABI/SABMiller business combination		33			7			26			26			0.01
Tax items	—				(197	)		197			197		0.11
2018 Adjusted for Special Items	$	9,813		$	2,270		$	7,543		$	7,539		$	3.99

			Schedule 11
ALTRIA GROUP, INC. and Subsidiaries Condensed Consolidated Balance Sheets (dollars in millions) (Unaudited)
	September 30, 2019		December 31, 2018
Assets
Cash and cash equivalents	$	1,604	$	1,333
Inventories		2,188		2,331
Other current assets		499		635
Property, plant and equipment, net		1,962		1,938
Goodwill and other intangible assets, net		17,950		17,475
Investments in equity securities		27,346		30,496
Other long-term assets		1,364		1,430
Total assets	$	52,913	$	55,638
Liabilities and Stockholders’ Equity
Short-term borrowings	$	—	$	12,704
Current portion of long-term debt		1,000		1,144
Accrued settlement charges		3,094		3,454
Other current liabilities		3,568		3,891
Long-term debt		26,903		11,898
Deferred income taxes		5,240		5,172
Accrued postretirement health care costs		1,764		1,749
Accrued pension costs		352		544
Other long-term liabilities		316		254
Total liabilities		42,237		40,810
Redeemable noncontrolling interest		39		39
Total stockholders’ equity		10,637		14,789
Total liabilities and stockholders’ equity	$	52,913	$	55,638
Total debt	$	27,903	$	25,746

	Schedule 12
ALTRIA GROUP, INC. and Subsidiaries Calculation of Total Debt to Adjusted EBITDA and Net Debt to Adjusted EBITDA Ratios For the Twelve Months Ended September, 2019 (dollars in millions) (Unaudited)
	Twelve Months Ended September 30, 2019
Consolidated Net Earnings (Losses)	$	1,767
Equity earnings and noncontrolling interests, net		(998	)
Impairment of JUUL equity securities		4,500
Loss on Cronos-related financial instruments		1,327
Dividends from less than 50% owned affiliates		401
Provision for income taxes		1,932
Depreciation and amortization		212
Asset impairment and exit costs		455
Interest and other debt expense, net		1,151
Consolidated EBITDA ^1	$	10,747
Current portion of long-term debt	$	1,000
Long-term debt		26,903
Total Debt^2		27,903
Cash and cash equivalents^3		1,604
Net Debt^4	$	26,299
Ratios:
Total Debt / Consolidated EBITDA		2.6
Net Debt / Consolidated EBITDA		2.4

¹ Reflects the term “Consolidated EBITDA” as defined in Altria’s senior unsecured revolving credit agreement.

² Reflects total debt as presented on Altria’s Condensed Consolidated Balance Sheet at September 30, 2019. See Schedule 11.

³Reflects cash and cash equivalents as presented on Altria’s Condensed Consolidated Balance Sheet at September 30, 2019. See Schedule 11.

⁴ Reflects total debt, less cash and cash equivalents at September 30, 2019.

																		Schedule 13
ALTRIA GROUP, INC. and Subsidiaries Supplemental Financial Data for Special Items For the Quarters Ended September 30, (dollars in millions) (Unaudited
	Cost of Sales			Marketing, administration and research costs		Asset impairment and exit costs			General corporate expenses		Interest and other debt expense, net		Earnings from equity investments			Impairment of JUUL equity securities		Loss on Cronos- related financial instruments
2019 Special Items - (Income) Expense
ABI-related special items	$	—		$	—	$	—		$	—	$	—	$	(14	)	$	—	$	—
Asset impairment, exit, implementation and acquisition-related costs		1			7		1			2	—		—			—		—
Tobacco and health litigation items	—				3	—			—		—		—			—		—
Impairment of JUUL equity securities	—			—		—			—		—		—				4,500	—
Cronos-related special items	—			—		—			—		—			(87	)	—			636
2018 Special Items - (Income) Expense
ABI-related special items	$	—		$	—	$	—		$	—	$	—	$	35		$	—	$	—
Asset impairment, exit and implementation costs		(1	)	—			(2	)	—		—		—			—		—
Tobacco and health litigation items	—				20	—			—			1	—			—		—

Note: This schedule is intended to provide supplemental financial data for certain income and expense items that management believes are not part of underlying operations and their presentation in Altria’s consolidated statements of earnings. This schedule is not intended to provide, or reconcile, non-GAAP financial measures.

																					Schedule 14
ALTRIA GROUP, INC. and Subsidiaries Supplemental Financial Data for Special Items For the Nine Months Ended September 30, (dollars in millions) (Unaudited)
	Cost of Sales		Marketing, administration and research costs		Asset impairment and exit costs		General corporate expenses		Corporate asset impairment and exit costs		Interest and other debt expense, net		Net periodic benefit income, excluding service cost		Earnings from equity investments		Impairment of JUUL equity securities		Loss on Cronos- related financial instruments		Loss on ABI/SABMiller business combination
2019 Special Items - (Income) Expense
Tobacco and health litigation items	$	—	$	43	$	—	$	—	$	—	$	5	$	—	$	—	$	—	$	—	$	—
ABI-related special items	—		—		—		—		—		—		—		10		—		—		—
Asset impairment, exit, implementation, and acquisition-related costs	(1)		30		73		4		1		96		12		—		—		—		—
Impairment of JUUL equity securities	—		—		—		—		—		—		—		—		4,500		—		—
Cronos-related special items	—		—		—		—		—		—		—		(234)		—		1,327		—
2018 Special Items - (Income) Expense
NPM Adjustment Items	$	(145)	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Tobacco and health litigation items	—		104		—		—		—		15		—		—		—		—		—
ABI-related special items	—		—		—		—		—		—		—		(154)		—		—		—
Asset impairment, exit and implementation costs	4		—		2		—		—		—		—		—		—		—		—
Loss on ABI/SABMiller business combination	—		—		—		—		—		—		—		—		—		—		33

Note: This schedule is intended to provide supplemental financial data for certain income and expense items that management believes are not part of underlying operations and their presentation in Altria’s consolidated statements of earnings. This schedule is not intended to provide, or reconcile, non-GAAP financial measures.