2015 CAGNY Investor Presentation February 18, 2015 For Investor Relations Purposes Only
Management Team Participants Howard Willard Dave Beran EVP and Chief Financial President and Chief Operating Officer, Altria Group Officer, Altria Group Billy Gifford Murray Garnick SVP, Strategy and Business Sr. Vice President and Associate Development, Altria Group General Counsel, ALCS For Investor Relations Purposes Only
Safe Harbor Statement Statements, including earnings guidance, in this presentation that are not reported financial results or other historical information are “forward - looking statements” within the meaning of Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on current plans, estimates and expectations, and are not guarantees of future performance. They are based on management’s expectations that involve a number of business risks and uncertainties, any of which could cause actual results to differ materially from those expressed in or implied by the forward-looking statements. Altria undertakes no obligation to publicly update or revise any forward- looking statement other than in the normal course of its public disclosure obligations. The risks and uncertainties relating to the forward-looking statements in this presentation include those described under “Risk Factors” in its Annual Report on Form 10 -K for the year ended December 31, 2013 and under “Cautionary Factors That May Affect Future Results” in its Quarterly Report on Form 10 -Q for the period ended September 30, 2014. Reconciliations of non-GAAP financial measures included in this presentation to the most comparable GAAP measures are available on Altria’s website at altria.com. For Investor Relations Purposes Only
2014 Results Altria Results Segment Results Grew adjusted diluted earnings Smokeable products segment grew per share* 8% adjusted operating companies income* 6.7% Grew dividend 8.3% Marlboro achieved retail share of Paid shareholders $3.9 billion in 43.8% dividends Copenhagen & Skoal achieved combined retail share of 51.2% Altria delivered total shareholder return of 34.5%. *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports For Investor Relations Purposes Only
Agenda Financial Goals Strategies Performance Outlook for 2015 For Investor Relations Purposes Only
Long-Term Financial Goals Grow adjusted diluted EPS at average annual rate of 7% to 9% For Investor Relations Purposes Only
Adjusted Diluted EPS* Performance +8.0% CAGR $2.57 $1.75 2009 2014 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports For Investor Relations Purposes Only
Long-Term Financial Goals Grow adjusted diluted EPS at average annual rate of 7% to 9% Maintain a target dividend payout ratio of approximately 80% of adjusted diluted EPS For Investor Relations Purposes Only
Dividend Payout Ratio S&P Food, Beverage and Tobacco Index MO 80.9% 79.7% PM 78.4% RAI 73.2% LO 70.3% KRFT 60.7% GIS 59.8% KO 57.1% PEP 53.8% HSY 52.6% DPS NOTE: Altria’s dividend payout ratio is based on the current annualized dividend (Last increased August 2014) of $2.08 / $2.5 7 2014 adjusted diluted EPS. In addition, Altria’s announced targeted dividend payout ratio is ~80% of adjusted EPS. All dividend payout ratios have been calculated using each company’s current annualized dividend rate / 2014 actual and estimated consensus adjusted diluted EPS. Dividend payout ratio ranks companies in the Food, Beverage and Tobacco Index in these respective categories as of February 10, 2015. Source: Bloomberg and Thomson Reuters Source: Bloomberg and Thomson First Call For Investor Relations Purposes Only
Dividend Per Share Growth +8.9% CAGR $2.08 $1.36 2009 2014 Altria increased its dividend 48 times in the past 45 years. Note: Year-end annualized rate: 5-year CAGR. Dividend is based on the current annualized dividend (Last increased August 2014) Source: Altria company reports For Investor Relations Purposes Only
Altria’s Strategies Maximize income from core premium tobacco businesses over the long term Grow new income streams with innovative tobacco products Manage diverse income streams and strong balance sheet to deliver consistent financial performance For Investor Relations Purposes Only
A View of Altria on Key Measures Net Income Revenues* per Employee Free Cash Flow Revenues per Employee Free Cash Flow* Net Income as a % of Revenues* ($ in Millions) as a % of Revenues* ($ in Millions) (as a % of Revenues) (as a % of Revenues) $1.97 24.9% 24.4% 14.3% 13.8% $0.70 $0.60 8.6% 7.9% Altria S&P S&P Altria S&P S&P Altria S&P S&P Beverage Food Beverage Food Beverage Food *For reconciliation of non-GAAP to GAAP measures visit altria.com Note: Trailing 12-month data from latest reporting date of 1/20/2015. All Altria Group, Inc. calculations use net revenue net of excise taxes Source: FactSet; Altria company reports For Investor Relations Purposes Only
Total Shareholder Return 2010-2014 230% 116% 94% Altria Group S&P Beverage S&P Food Note: Total shareholder return is simple price appreciation plus the reinvestment of the dividend as of the ex-dividend date Source: FactSet, 12/31/2009-12/31/2014 For Investor Relations Purposes Only
U.S. Tobacco Manufacturers’ Profit Pool $ in Billions +5.5% $20 CAGR $15.5 $11.8 $0 2009 2014 Source: Altria company reports; ALCS estimates; other public company reports For Investor Relations Purposes Only
2014 Share of the U.S. Tobacco Profit Pool 51% 23% 14% 12% Altria Reynolds American Lorillard Other Note: Altria’s Profit Pool share is calculated by combining the adjusted OCI* for Altria’s Smokeable & Smokeless Products segments divided by Total Profit Pool. *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports; ALCS estimates; other public company reports For Investor Relations Purposes Only
Altria’s Strategies Maximize income from core premium tobacco businesses over the long term Grow new income streams with innovative tobacco products Manage diverse income streams and strong balance sheet to deliver consistent financial performance For Investor Relations Purposes Only
Smokeable Products Companies’ Strategy Maximize income while maintaining modest share momentum on Marlboro and Black & Mild over time. For Investor Relations Purposes Only
Cigarette Category Decline Rate Estimates Primarily due to FET increase (3.0)% (3.5)% (3.5)% (4.0)% (4.0)% (5.0)% (8.0)% 2008 2009 2010 2011 2012 2013 2014 Source: ALCS estimates For Investor Relations Purposes Only
Smokeable Products Income Growth Adjusted OCI* Adjusted OCI* Margins $ in Billions +6.7% +1.9pp $10.0 60% 44.1% 42.2% $6.9 $6.4 $0.0 0% 2013 2014 2013 2014 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports For Investor Relations Purposes Only
Smokeable Products Income Growth Adjusted OCI* Adjusted OCI* Margins +4.5% $ in Billions +7.0pp $10.0 60% CAGR 44.1% $6.9 37.1% $5.5 $0.0 0% 2009 2014 2009 2014 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports For Investor Relations Purposes Only
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Smokeable Products Segment Pricing Revenues Net of Excise Taxes /1000 Units* +4.4% +5.1% CAGR $122.56 $122.56 $116.60 $98.77 2013 2014 2009 2014 *For reconciliation of non-GAAP to GAAP measures visit altria.com Source: Altria company reports For Investor Relations Purposes Only
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Smokeable Products Cost Management Controllable Costs/1000 Units* +0.6% +3.1% CAGR $29.57 $29.57 $28.69 $28.73 2013 2014 2009 2014 The end of the federal quota buyout will reduce the cost of goods sold by $300 million versus 2014. * For reconciliations of non-GAAP to GAAP measures visit www.altria.com Source: Altria company reports For Investor Relations Purposes Only
2014 Marlboro Retail Share 43.8% Next 10 Largest Brands = 42.6% Marlboro Source: IRI/MSAi For Investor Relations Purposes Only
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Marlboro Mobile Engagement Mobile Logins ~+1,000% This space is blank because brand images which appeared in the original presentation have been removed. 2011 2014 Note: Total mobile interactions (Adult Smokers 21+) Source: PM USA For Investor Relations Purposes Only
Marlboro Digital Engagement Marlboro .com is among the largest This space is blank CPG websites in the because brand images U.S. based on the which appeared in the average number of unique visitors. original presentation have been removed. comScore, 2014 Note: Dec .2014 Top CPG domain comparison of 6 month Unique Visitor avg. from PC traffic For Investor Relations Purposes Only
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