EX-99.1 2 a4998247ex99_1.txt EXHIBIT 99.1 - PRESS RELEASE Exhibit 99.1 Contact: Nicholas M. Rolli (917) 663-3460 Timothy R. Kellogg (917) 663-2759 ALTRIA GROUP, INC. REPORTS -------------------------- 2005 THIRD-QUARTER RESULTS -------------------------- Diluted Earnings Per Share from Continuing Operations ----------------------------------------------------- Up 7.8% to $1.38 vs. $1.28 in Year-Ago Quarter, ----------------------------------------------- Including the Items Detailed on Schedule 7 ------------------------------------------ Earnings from Continuing Operations Up 9.3% to $2.9 Billion ----------------------------------------------------------- Projects Diluted Earnings Per Share From Continuing Operations -------------------------------------------------------------- To Be At High End of Range of $5.05 to $5.10 For Full-Year 2005 --------------------------------------------------------------- Versus Prior Forecast of $5.00 to $5.10 --------------------------------------- NEW YORK, October 19, 2005 - Altria Group, Inc. (NYSE:MO) today announced third-quarter 2005 diluted earnings per share from continuing operations of $1.38, including the items detailed on Schedule 7, versus $1.28 in the same quarter a year ago. "Overall, 2005 is shaping up to be a year of robust progress for Altria," said Louis C. Camilleri, chairman and chief executive officer of Altria Group, Inc. "During the third quarter, particularly strong results in our tobacco businesses were partially offset by continuing challenges at Kraft. Additionally, Philip Morris Capital Corporation increased its allowance for losses, triggered by recent developments in the troubled airline industry." "Philip Morris USA achieved a retail share of more than 50%, driven by Marlboro's record share, and strong income growth. Philip Morris International increased its share in many key markets and also posted strong income gains, supplemented by the Sampoerna acquisition," Mr. Camilleri said. "Kraft continues to face a difficult operating environment, with higher than anticipated commodity costs negatively impacting income," Mr. Camilleri said. "Nonetheless, Kraft continues to appropriately manage price gaps to position its brands for long-term growth, and achieved revenue and volume growth in line with expectations in the third quarter." 2005 Full-Year Forecast ----------------------- Altria Group narrowed its target for diluted earnings per share from continuing operations for the full year 2005 to a range of $5.05 to $5.10, versus its prior forecast of $5.00 to $5.10. The company believes it will achieve the high end of the new range. The revised forecast includes an additional $0.10 per share of tax benefit related to the repatriation of $6.0 billion of earnings under provisions of the American Jobs Creation Act, which together with the $0.10 per share benefit announced in the second quarter of 2005, totals $0.20 per share from this one-time dividend repatriation; $0.04 per share resulting from lower ongoing income tax rates at PMI due principally to its changing geographic mix of earnings and lower repatriation costs; $0.05 per share favorable impact from the acquisition of PT HM Sampoerna Tbk (Sampoerna); and $0.03 per share favorable impact from the reversal of a 2004 accrual related to tobacco quota buyout legislation. Partially offsetting those items in the revised forecast are Kraft restructuring charges of $0.12 per share and lower earnings at Kraft of $0.03 to $0.05 per share; $0.06 per share for an increase in the provision for credit exposure related to the troubled airline industry; $0.04 per share for the cost of the U.S. pool tobacco buyout; and $0.03 per share for the charge related to the Boeken case (with $0.02 impacting PM USA's operating companies income and $0.01 impacting interest expense). The factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to this projection. Conference Call --------------- A conference call with members of the investment community and news media will be Webcast at 9:00 a.m. Eastern Time on October 19, 2005. Access is available at www.altria.com. ALTRIA GROUP, INC. ------------------ Prior-period results for Altria Group, Inc. have been restated to reflect the impact of discontinued operations, following Kraft's agreement on November 15, 2004, to sell its sugar confectionery business. As such, net revenues and operating companies income for the sugar confectionery business are excluded from the company's results, while the net earnings impact is included as a single line item. All references in this news release are to continuing operations, unless otherwise noted. As described in "Note 15. Segment Reporting" of Altria Group, Inc.'s 2004 Annual Report, management reviews operating companies income, which is defined as operating income before corporate expenses and amortization of intangibles, to evaluate segment performance and allocate resources. Management believes it is appropriate to disclose this measure to help investors analyze business performance and trends. For a reconciliation of operating companies income to operating income, see the Condensed Statements of Earnings contained in this release. 2005 Third-Quarter Results -------------------------- Net revenues for the third quarter of 2005 increased 10.4% versus 2004 to $25.0 billion, including favorable currency of $376 million. Operating income increased 4.3% to $4.3 billion, reflecting the items described in the attached reconciliation on Schedule 3, including higher results from operations at Philip Morris USA (PM USA) and Philip Morris International (PMI), $137 million from the impact of acquisitions, primarily Sampoerna, $115 million from the reversal of a 2004 accrual related to tobacco quota buyout legislation and favorable currency of $107 million, largely offset by an increase of $200 million in the provision for airline industry exposure at Philip Morris Capital Corporation (PMCC) and a $138 million charge for PM USA's portion of the losses incurred by the federal government on disposition of its pool tobacco stock. Earnings from continuing operations increased 9.3% to $2.9 billion, reflecting increases at PM USA and PMI, favorable currency and an additional $204 million tax benefit, which resulted from a favorable foreign tax law interpretation that was received in the third quarter related to the repatriation of earnings under the American Jobs Creation Act. The comparison with the year-earlier period was negatively impacted by higher one-time income from SABMiller in the third quarter of 2004 related to gains from investments. The Company's effective tax rate was 27.4% in the third quarter of 2005 compared to 33.4% in 2004. The effective tax rate comparison reflects the one-time impact of the previously mentioned tax benefit related to the American Jobs Creation Act and the lower ongoing PMI tax rate. Net earnings increased 8.9% to $2.9 billion. Diluted earnings per share, including discontinued operations as detailed on Schedule 1, increased 7.0% to $1.38. During the third quarter of 2005, Altria Group, Inc. increased its regular quarterly dividend by 9.6% to $0.80 per common share, which represents an annualized rate of $3.20 per common share. On October 12, 2005, SABMiller plc completed its acquisition of Bavaria SA, the second-largest brewer in South America. As a result, Altria's economic interest has been reduced from 33.9% to 28.7% of the enlarged SABMiller plc. DOMESTIC TOBACCO ---------------- 2005 Third-Quarter Results -------------------------- Philip Morris USA Inc. (PM USA), Altria Group, Inc.'s domestic tobacco business, achieved strong income growth and solid share performance, driven by Marlboro. Shipment volume of 47.9 billion units was down 0.9% from the previous year, but was estimated to be essentially flat when adjusted for the timing of promotional shipments and trade purchases related to the July 4th holiday period. Premium mix for PM USA increased by 0.3 percentage points to 91.7%. Operating companies income increased 4.8%, to $1.2 billion, primarily driven by lower wholesale promotional allowance rates and the reversal of the 2004 accrual related to tobacco quota buyout legislation, partially offset by lower volume, and charges for disposition of pool tobacco stock and a pre-tax provision of $56 million for the Boeken individual smoking case. As shown in the following table, PM USA's total retail share improved in the third quarter of 2005 to 50.1%, driven by Marlboro and Parliament in the premium category. Marlboro's share grew 0.5 share points to a record high of 40.1% in the third quarter. In the declining discount segment, retail share for Basic remained stable. Philip Morris USA Quarterly Retail Share* ---------------------------------------- Q3 2005 Q3 2004 Change ------- ------- ------ Marlboro 40.1% 39.6% 0.5 pp Parliament 1.8% 1.7% 0.1 pp Virginia Slims 2.3% 2.4% -0.1 pp Basic 4.2% 4.2% 0.0 pp ------- ------- ------ Focus Brands 48.4% 47.9% 0.5 pp Other PM USA 1.7% 2.0% -0.3 pp ------- ------- ------ Total PM USA 50.1% 49.9% 0.2 pp *IRI/Capstone Total Retail Panel was developed to measure market share in retail stores selling cigarettes. It is not designed to capture Internet or direct mail sales. For the total industry, premium category share increased 0.5 points to 73.6% in the third quarter of 2005, while the discount category share correspondingly declined to 26.4%. Within the discount category, share was flat at 11.9% for the deep discount segment of the industry, which includes both major manufacturers' private label brands and all other manufacturers' discount brands. In the growing premium category, PM USA's share declined 0.1 point to 62.2% in the third quarter, while PM USA's share in the discount category increased 0.2 share points to 16.2%, driven by Basic. INTERNATIONAL TOBACCO --------------------- 2005 Third-Quarter Results -------------------------- Cigarette shipment volume for Philip Morris International Inc. (PMI), Altria Group, Inc.'s international tobacco business, increased by 9.0% to 217.0 billion units, driven by gains in Eastern Europe, Turkey and the Middle East, and recent acquisitions including Sampoerna in Indonesia and Coltabaco in Colombia, partially offset by lower shipments in the European Union. Excluding acquisitions, PMI's cigarette shipment volume increased 0.8% versus the same period a year ago. PMI's total tobacco volume, which includes 2.0 billion cigarette equivalent units of other tobacco products (OTPs), grew 9.4% versus the prior year quarter, and 1.2% excluding acquisitions. Operating companies income rose 19.7% to $2.2 billion, driven by higher pricing, the impact of acquisitions and favorable currency of $80 million, partially offset by unfavorable mix, higher R&D, marketing and selling expenses, and impairment charges. During the quarter, PMI refined its organizational structure, prompted by the recent enlargement of the European Union (EU). Accordingly, in place of the Western Europe and Central Europe regions, PMI will now report results for an EU region, which includes the original EU countries and the Baltic States, Cyprus, Czech Republic, Hungary, Malta, Norway, Poland, Slovak Republic and Switzerland. Other regions remain essentially unchanged. The region commentary in this press release reflects the revised organizational structure, with prior year results restated for comparability. PMI achieved widespread market share gains in the third quarter, particularly in Egypt, France, Germany, Indonesia, Italy, Japan, Korea, Mexico, Philippines, Russia, Saudi Arabia, Turkey, Ukraine and the United Kingdom. Total Marlboro cigarette shipments increased 0.4% in the third quarter, principally resulting from higher volume in the Eastern Europe, Middle East & Africa region, largely offset by declines in Germany and Italy. Marlboro share increased in many markets, including Egypt, France, Germany, Greece, Italy, Japan, Korea, Mexico, Philippines, Portugal, Russia, Turkey, Ukraine and the United Kingdom. In the EU region, PMI's cigarette volume declined 4.2%, reflecting total market declines, mainly in Germany and Italy. In Germany, the total cigarette market declined 13.1% or 3.8 billion units versus the prior-year quarter. However, this was partially offset by an increase of 2.5 billion units of OTPs, principally tobacco portions, which are taxed at a significantly lower rate than cigarettes. PMI's share of total tobacco shipments declined 0.1 points to 28.7% compared to the third quarter of 2004, reflecting PMI's under-representation in the OTP segment. However, PMI's cigarette industry share of 36.7% increased 0.2 points versus the prior-year quarter, driven by Marlboro and Next. In addition, PMI's share of OTPs increased 6.3 points to 12.9%, with its share of tobacco portions increasing 10.2 points to 18.7%. Later this year, the European Court of Justice is expected to issue its final binding judgment on the taxation of tobacco portions in Germany. The tobacco portions category in Germany is expected to decline sharply, should favored tax treatment be eliminated. In Italy, the total cigarette market was down 8.4%, reflecting lower smoking incidence due to higher cigarette prices and increased smoking restrictions, adverse trade inventory movements and one less selling day. PMI's cigarette shipment volume was down 6.2%; however, market share grew 1.9 points to 52.9%, driven mainly by the continued strong recovery of Diana, the good performance of Chesterfield and the resilience of Marlboro. The total cigarette market in France was down 0.9% compared to the prior year quarter. PMI's shipments were up a strong 9.8% and market share rose 1.7 points to a record 41.7%, driven by the continued success of Marlboro, which added 1.1 points to 30.4%, and the Philip Morris brand, which achieved a share of 5.5%, up 0.5 share points. PMI's shipments in Spain were essentially flat and market share declined 0.7 points to 35.2%, reflecting increased competition in the lowest price segment, which grew from 11.5% to 19.8% share of the market. Marlboro's share in Spain was down 0.4 points to 17.5%. In Poland, where low-price competition continues to be intense, cigarette industry volume rose 1.7% but shipments for PMI were down 2.1%. Market share declined 1.4 points to 37.1%, due to consumer down trading to the super low-price segment. In the Czech Republic, PMI's shipments were up 0.2% versus the prior-year quarter; however, market share was down, reflecting the rapid growth of the low-price segment. In Eastern Europe, the Middle East and Africa, PMI's shipments increased 5.7%, due mainly to Ukraine, Turkey, Egypt and Saudi Arabia. Shipments were flat in Russia versus the same period a year ago, reflecting adverse trade inventory movements. Excluding those inventory changes, volume was up 3.7%. Market share in Russia rose 0.6 points to 27.0%, driven by growth in Muratti, Marlboro, Parliament and Chesterfield. Volume growth of 16.4% in Ukraine and a market share increase of 1.4 points to 32.2% were driven by consumer up-trading stimulated by narrowing price gaps with low-price filter brands, which benefited Marlboro and Chesterfield. Shipment volume was up 12.7% in Turkey and market share increased 5.3 points to 43.0%, fueled by the growth of Lark and the recent launch of Bond Street. In Asia, volume increased 40.4%, primarily because of the acquisition of Sampoerna in Indonesia, as well as gains in the Philippines. Excluding Sampoerna, volume was up 0.8%. PMI achieved a 26.7% share in Indonesia in the third quarter, driven by Dji Sam Soe, A Hijau and A Mild. Shipments increased 0.8% in Japan despite a 2.5% decline in the total cigarette market, and market share rose 0.3 points to 24.9%, driven by Parliament and Virginia Slims and the recent launch of Marlboro Ultra Lights Menthol. In Korea, the total cigarette market declined 4.2%, while PMI's shipments were up 2.8%. PMI's market share in Korea grew 0.5 points to 8.2%, driven by Marlboro and aided by the recent launch of Parliament One. PMI's volume in Latin America increased 12.6%, reflecting the acquisition of Coltabaco in Colombia and higher shipments in Mexico, partially offset by declines in Argentina and Brazil. Excluding Coltabaco, volume was down 1.4%. The total market increased 4.5% in Argentina, but PMI's shipments were down 2.6% and share declined 4.5 points to 60.3%, due to a surge in the low-price segment. The cigarette industry in Mexico was essentially flat and PMI's shipments increased 3.7%, while market share rose 2.3 points to 61.9%, due mainly to Marlboro's continued momentum. Worldwide Duty Free cigarette shipments grew a strong 11.3% compared to the same period last year, driven by gains in Turkey, Romania and the Middle East. FOOD ---- 2005 Third-Quarter Results -------------------------- Yesterday, Kraft Foods Inc. (Kraft) reported 2005 third-quarter results. Kraft's net revenues were up 4.4% to $8.1 billion, due to volume growth, positive mix and net pricing, together with favorable currency of $118 million. Ongoing volume was up 1.3%, resulting from growth in the U.S., Eastern Europe and Latin America, partially offset by a decline in Central and Western Europe, especially Germany, where pricing impacted category consumption. Operating income declined 6.8% to $1.1 billion, due to higher commodity costs net of pricing and higher pension and post-retirement costs, partially offset by volume growth, positive mix, cost reductions and favorable currency of $27 million. NORTH AMERICAN FOOD ------------------- 2005 Third-Quarter Results -------------------------- For the third quarter of 2005, Kraft North America Commercial (KNAC) net revenues grew 3.4% to $5.6 billion, reflecting volume gains in several businesses, positive mix and favorable currency of $45 million. Ongoing volume increased 1.9%, reflecting growth in the beverages, meats, desserts and cereals categories, partially offset by declines in frozen pizza, snack nuts and foodservice. Operating companies income declined 10.2% to $948 million, as higher costs were partially offset by the contributions from volume growth and currency of $8 million. INTERNATIONAL FOOD ------------------ 2005 Third-Quarter Results -------------------------- For the third quarter of 2005, net revenues for Kraft International Commercial (KIC) increased 6.8% to $2.5 billion, due primarily to favorable currency of $73 million, net pricing and positive mix, partially offset by the impact of divestitures. Revenues were up 10% in developing markets overall. Ongoing volume was down 0.2%, as declines due to the impact of pricing in Central and Western Europe, particularly Germany, were largely offset by growth in Latin America, Eastern Europe and Southeast Asia. Operating companies income increased 12.5% to $252 million, reflecting the positive impact of lower restructuring and impairment charges, the absence of a loss on sale of a business in the prior year, positive mix and favorable currency of $19 million, partially offset by higher commodity costs net of pricing and the negative impact of lost income from divested businesses. FINANCIAL SERVICES ------------------ 2005 Third-Quarter Results -------------------------- Philip Morris Capital Corporation (PMCC) reported an operating companies loss of $121 million for the third quarter of 2005 versus operating companies income of $55 million for the same period in 2004. Results reflect an increase of $200 million in the allowance for losses related to the troubled airline industry, partially offset by the impact of gains from asset sales and lower interest expense. Consistent with its strategic shift in 2003, PMCC is focused on managing its existing portfolio of finance assets in order to maximize gains and generate cash flow from asset sales and related activities. PMCC is no longer making new investments and expects that its operating companies income will fluctuate over time as investments mature or are sold. Altria Group, Inc. Profile -------------------------- Altria Group, Inc. owns approximately 86.5% of the outstanding common shares of Kraft Foods Inc. and 100% of the outstanding common shares of Philip Morris International Inc., Philip Morris USA Inc. and Philip Morris Capital Corporation. In addition, Altria Group, Inc. has a 28.7% economic interest in SABMiller plc. The brand portfolio of Altria Group, Inc.'s consumer packaged goods companies includes such well-known names as Kraft, Jacobs, L&M, Marlboro, Maxwell House, Nabisco, Oreo, Oscar Mayer, Parliament, Philadelphia, Post and Virginia Slims. Altria Group, Inc. recorded 2004 net revenues of $89.6 billion. Trademarks and service marks mentioned in this release are the registered property of, or licensed by, the subsidiaries of Altria Group, Inc. Forward-Looking and Cautionary Statements ----------------------------------------- This press 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. The following important factors could cause actual results and outcomes to differ materially from those contained in such forward-looking statements. Altria Group, Inc.'s consumer products subsidiaries are subject to changing prices for raw materials; intense price competition; changes in consumer preferences and demand for their products; fluctuations in levels of customer inventories; the effects of foreign economies and local economic and market conditions; and unfavorable currency movements or changes to income tax laws. Their results are dependent upon their continued ability to promote brand equity successfully; to anticipate and respond to new consumer trends; to develop new products and markets and to broaden brand portfolios in order to compete effectively with lower-priced products; to improve productivity; and to respond effectively to changing prices for their raw materials. Altria Group, Inc.'s tobacco subsidiaries (Philip Morris USA and Philip Morris International) continue to be subject to litigation, including risks associated with adverse jury and judicial determinations, courts reaching conclusions at variance with the company's understanding of applicable law, bonding requirements and the absence of adequate appellate remedies to get timely relief from any of the foregoing; price disparities and changes in price disparities between premium and lowest-price brands; legislation, including actual and potential excise tax increases; increasing marketing and regulatory restrictions; the effects of price increases related to excise tax increases and concluded tobacco litigation settlements on consumption rates and consumer preferences within price segments; health concerns relating to the use of tobacco products and exposure to environmental tobacco smoke; governmental regulation; privately imposed smoking restrictions; and governmental and grand jury investigations. Altria Group, Inc. and its subsidiaries are subject to other risks detailed from time to time in its publicly filed documents, including its Quarterly Report on Form 10-Q for the period ended June 30, 2005. Altria Group, Inc. 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. ALTRIA GROUP, INC. Schedule 1 and Subsidiaries Condensed Statements of Earnings For the Quarters Ended September 30,(*) (in millions, except per share data) 2005 2004 % Change ----------------------------- Net revenues $ 24,962 $ 22,615 10.4 % Cost of sales 9,082 8,347 8.8 % Excise taxes on products (**) 7,656 6,751 13.4 % ------------------ Gross profit 8,224 7,517 9.4 % Marketing, administration and research costs 3,459 3,137 Domestic tobacco headquarters relocation charges - 5 Domestic tobacco loss on U.S. tobacco pool 138 - Domestic tobacco quota buy-out (115) - Asset impairment and exit costs 59 45 Losses on sales of businesses - 8 Provision for airline industry exposure 200 - ------------------ Operating companies income 4,483 4,322 3.7 % Amortization of intangibles 6 3 General corporate expenses 160 165 Asset impairment and exit costs 2 17 ------------------ Operating income 4,315 4,137 4.3 % Interest and other debt expense, net 306 288 ------------------ Earnings from continuing operations before income taxes and minority interest 4,009 3,849 4.2 % Provision for income taxes 1,098 1,287 (14.7)% ------------------ Earnings from continuing operations before minority interest 2,911 2,562 13.6 % Minority interest in earnings from continuing operations, and equity earnings, net 28 (75) ------------------ Earnings from continuing operations 2,883 2,637 9.3 % (Loss) earnings from discontinued operations, net of income taxes and minority interest - 11 ------------------ Net earnings $ 2,883 $ 2,648 8.9 % ================== Per share data(***): Basic earnings per share from continuing operations $ 1.39 $ 1.29 7.8 % Basic earnings per share from discontinued operations $ - $ - ------------------ Basic earnings per share $ 1.39 $ 1.29 7.8 % ================== Diluted earnings per share from continuing operations $ 1.38 $ 1.28 7.8 % Diluted earnings per share from discontinued operations $ - $ 0.01 ------------------ Diluted earnings per share $ 1.38 $ 1.29 7.0 % ================== Weighted average number of shares outstanding - Basic 2,072 2,048 1.2 % - Diluted 2,092 2,060 1.6 % (*) Due to a change for Discontinued Operations, prior period results have been restated. (**) The detail of excise taxes on products sold is as follows: 2005 2004 ------------------ Domestic tobacco $ 945 $ 954 International tobacco 6,711 5,797 ------------------ Total excise taxes $ 7,656 $ 6,751 ================== (***) Basic and diluted earnings per share are computed for each of the periods presented. Accordingly, the sum of the quarterly earnings per share amounts may not agree to the year-to-date amounts. ALTRIA GROUP, INC. Schedule 2 and Subsidiaries Selected Financial Data by Business Segment For the Quarters Ended September 30,(*) (in millions) North Domestic International American International tobacco tobacco food food ----------------------------------------------- 2005 Net Revenues $4,731 $12,075 $5,551 $2,506 2004 Net Revenues 4,505 10,316 5,371 2,347 % Change 5.0% 17.1% 3.4% 6.8% Reconciliation: --------------- 2004 Net Revenues $4,505 $10,316 $5,371 $2,347 Divested businesses - 2004 - - (39) (19) Divested businesses - 2005 - - - - Implementation - 2004 - - 5 - Implementation - 2005 - - - - Acquired businesses - 665 - - Currency - 258 45 73 Operations 226 836 169 105 ----------------------------------------------- 2005 Net Revenues $4,731 $12,075 $5,551 $2,506 =============================================== Financial services Total ----------------------- 2005 Net Revenues $99 $24,962 2004 Net Revenues 76 22,615 % Change 30.3% 10.4% Reconciliation: --------------- 2004 Net Revenues $76 $22,615 Divested businesses - 2004 - (58) Divested businesses - 2005 - - Implementation - 2004 - 5 Implementation - 2005 - - Acquired businesses - 665 Currency - 376 Operations 23 1,359 ----------------------- 2005 Net Revenues $99 $24,962 ======================= Note: The detail of excise taxes on products sold is as follows: 2005 2004 ------------------- Domestic tobacco $ 945 $ 954 International tobacco 6,711 5,797 ------------------- Total excise taxes $7,656 $6,751 =================== Currency increased international tobacco excise taxes by $161 million. Acquisitions increased excise taxes by $308 million. (*) Due to a change for Discontinued Operations, prior period results have been restated. ALTRIA GROUP, INC. Schedule 3 and Subsidiaries Selected Financial Data by Business Segment For the Quarters Ended September 30,(*) (in millions) North Domestic International American International tobacco tobacco food food ----------------------------------------------- 2005 Operating Companies Income $1,202 $2,202 $948 $252 2004 Operating Companies Income 1,147 1,840 1,056 224 % Change 4.8% 19.7% (10.2)% 12.5% Reconciliation: --------------- 2004 Operating Companies Income $1,147 $1,840 $1,056 $224 Divested businesses - 2004 - - (2) (5) Domestic tobacco headquarters relocation charges - 2004 5 - - - Asset impairment and exit costs - 2004 - 1 5 39 Loss on sales of businesses - 2004 - - - 8 Implementation costs - 2004 - - 4 3 ----------------------------------------------- 5 1 7 45 ----------------------------------------------- Divested businesses - 2005 - - - - Domestic tobacco headquarters relocation charges - 2005 - - - - Domestic tobacco loss on U.S. tobacco pool - 2005 (138) - - - Domestic tobacco quota buy-out - 2005 115 - - - Asset impairment and exit costs - 2005 - (33) (2) (24) Implementation costs - 2005 - - (11) (5) Provision for airline industry exposure - - - - ----------------------------------------------- (23) (33) (13) (29) ----------------------------------------------- Acquired businesses - 137 - - Currency - 80 8 19 Operations 73 177 (110) (7) ----------------------------------------------- 2005 Operating Companies Income $1,202 $2,202 $948 $252 =============================================== Financial services Total ----------------------- 2005 Operating Companies Income $(121) $4,483 2004 Operating Companies Income 55 4,322 % Change NA 3.7% Reconciliation: --------------- 2004 Operating Companies Income $55 $4,322 Divested businesses - 2004 - (7) Domestic tobacco headquarters relocation charges - 2004 - 5 Asset impairment and exit costs - 2004 - 45 Loss on sales of businesses - 2004 - 8 Implementation costs - 2004 - 7 ----------------------- - 58 ----------------------- Divested businesses - 2005 - - Domestic tobacco headquarters relocation charges - 2005 - - Domestic tobacco loss on U.S. tobacco pool - 2005 - (138) Domestic tobacco quota buy-out - 2005 - 115 Asset impairment and exit costs - 2005 - (59) Implementation costs - 2005 - (16) Provision for airline industry exposure (200) (200) ----------------------- (200) (298) ----------------------- Acquired businesses - 137 Currency - 107 Operations 24 157 ----------------------- 2005 Operating Companies Income $(121) $4,483 ======================= (*) Due to a change for Discontinued Operations, prior period results have been restated. ALTRIA GROUP, INC. Schedule 4 and Subsidiaries Condensed Statements of Earnings For the Nine Months Ended September 30,(*) (in millions, except per share data) 2005 2004 % Change -------------------------- Net revenues $73,364 $67,230 9.1 % Cost of sales 26,887 24,929 7.9 % Excise taxes on products (**) 22,271 19,631 13.4 % ---------------- Gross profit 24,206 22,670 6.8 % Marketing, administration and research costs 10,333 9,620 Domestic tobacco headquarters relocation charges 3 25 Domestic tobacco loss on U.S. tobacco pool 138 - Domestic tobacco quota buy-out (115) - International tobacco EC agreement - 250 Asset impairment and exit costs 262 489 (Gains) / Losses on sales of businesses (115) 8 Provision for airline industry exposure 200 - ---------------- Operating companies income 13,500 12,278 10.0 % Amortization of intangibles 14 12 General corporate expenses 484 493 Asset impairment and exit costs 40 41 ---------------- Operating income 12,962 11,732 10.5 % Interest and other debt expense, net 907 885 ---------------- Earnings from continuing operations before income taxes and minority interest 12,055 10,847 11.1 % Provision for income taxes 3,581 3,419 4.7 % ---------------- Earnings from continuing operations before minority interest 8,474 7,428 14.1 % Minority interest in earnings from continuing operations, and equity earnings, net 95 (2) ---------------- Earnings from continuing operations 8,379 7,430 12.8 % (Loss) earnings from discontinued operations, net of income taxes and minority interest(****) (233) 39 ---------------- Net earnings $ 8,146 $ 7,469 9.1 % ================ Per share data (***): Basic earnings per share from continuing operations $ 4.05 $ 3.63 11.6 % Basic earnings per share from discontinued operations $ (0.11) $ 0.02 ---------------- Basic earnings per share $ 3.94 $ 3.65 7.9 % ================ Diluted earnings per share from continuing operations $ 4.01 $ 3.61 11.1 % Diluted earnings per share from discontinued operations $ (0.11) $ 0.01 ---------------- Diluted earnings per share $ 3.90 $ 3.62 7.7 % ================ Weighted average number of shares outstanding - Basic 2,067 2,045 1.1 % - Diluted 2,087 2,061 1.3 % (*) Due to a change for Discontinued Operations, prior period results have been restated. (**) The detail of excise taxes on products sold is as follows: 2005 2004 ---------------- Domestic tobacco $ 2,761 $ 2,764 International tobacco 19,510 16,867 ---------------- Total excise taxes $22,271 $19,631 ================ (***) Basic and diluted earnings per share are computed for each of the periods presented. Accordingly, the sum of the quarterly earnings per share amounts may not agree to the year-to-date amounts. (****) Discontinued operations 2005 includes $(255) from loss on sale, and $22 of earnings, net of minority interest impact. In 2004 income from discontinued operations was $39 of earnings, net of minority interest impact. ALTRIA GROUP, INC. Schedule 5 and Subsidiaries Selected Financial Data by Business Segment For the Nine Months Ended September 30,(*) (in millions) North Domestic International American International tobacco tobacco food food ----------------------------------------------- 2005 Net Revenues $13,667 $34,985 $16,855 $7,595 2004 Net Revenues 13,091 30,423 16,259 7,125 % Change 4.4% 15.0% 3.7% 6.6% Reconciliation: --------------- 2004 Net Revenues $13,091 $30,423 $16,259 $7,125 Divested businesses - 2004 - - (128) (65) Divested businesses - 2005 - - 69 12 Implementation - 2004 - - 5 - Implementation - 2005 - - (1) - Acquired businesses - 1,022 41 1 Currency - 1,447 128 339 Operations 576 2,093 482 183 ----------------------------------------------- 2005 Net Revenues $13,667 $34,985 $16,855 $7,595 =============================================== Financial services Total ----------------------- 2005 Net Revenues $262 $73,364 2004 Net Revenues 332 67,230 % Change (21.1)% 9.1% Reconciliation: --------------- 2004 Net Revenues $332 $67,230 Divested businesses - 2004 - (193) Divested businesses - 2005 - 81 Implementation - 2004 - 5 Implementation - 2005 - (1) Acquired businesses - 1,064 Currency - 1,914 Operations (70) 3,264 ----------------------- 2005 Net Revenues $262 $73,364 ======================= Note: The detail of excise taxes on products sold is as follows: 2005 2004 ----------------------- Domestic tobacco $ 2,761 $ 2,764 International tobacco 19,510 16,867 ----------------------- Total excise taxes $22,271 $19,631 ======================= Currency increased international tobacco excise taxes by $893 million. Acquisitions increased excise taxes by $529 million. (*) Due to a change for Discontinued Operations, prior period results have been restated. ALTRIA GROUP, INC. Schedule 6 and Subsidiaries Selected Financial Data by Business Segment For the Nine Months Ended September 30,(*) (in millions) North Domestic International American International tobacco tobacco food food ----------------------------------------------- 2005 Operating Companies Income $3,501 $6,301 $2,916 $792 2004 Operating Companies Income 3,329 5,143 2,923 633 % Change 5.2% 22.5% (0.2)% 25.1% Reconciliation: --------------- 2004 Operating Companies Income $3,329 $5,143 $2,923 $633 Divested businesses - 2004 - - (4) (19) Domestic tobacco headquarters relocation charges - 2004 25 - - - International tobacco EC agreement - 2004 - 250 - - Asset impairment and exit costs - 2004 1 24 289 175 Loss on sales of businesses - 2004 - - - 8 Implementation costs - 2004 - - 13 4 ----------------------------------------------- 26 274 298 168 ----------------------------------------------- Divested businesses - 2005 - - 2 3 Domestic tobacco headquarters relocation charges - 2005 (3) - - - Domestic tobacco loss on U.S. tobacco pool - 2005 (138) - - - Domestic tobacco quota buy-out - 2005 115 - - - Asset impairment and exit costs - 2005 - (57) (124) (81) (Losses) / Gains on sales of businesses - 2005 - - (1) 116 Implementation costs - 2005 - - (43) (18) Provision for airline industry exposure - - - - ----------------------------------------------- (26) (57) (166) 20 ----------------------------------------------- Acquired businesses - 220 - - Currency - 342 22 50 Operations 172 379 (161) (79) ----------------------------------------------- 2005 Operating Companies Income $3,501 $6,301 $2,916 $792 =============================================== Financial services Total ----------------------- 2005 Operating Companies Income $(10) $13,500 2004 Operating Companies Income 250 12,278 % Change NA 10.0% Reconciliation: --------------- 2004 Operating Companies Income $250 $12,278 Divested businesses - 2004 - (23) Domestic tobacco headquarters relocation charges - 2004 - 25 International tobacco EC agreement - 2004 - 250 Asset impairment and exit costs - 2004 - 489 Loss on sales of businesses - 2004 - 8 Implementation costs - 2004 - 17 ----------------------- - 766 ----------------------- Divested businesses - 2005 - 5 Domestic tobacco headquarters relocation charges - 2005 - (3) Domestic tobacco loss on U.S. tobacco pool - 2005 - (138) Domestic tobacco quota buy-out - 2005 - 115 Asset impairment and exit costs - 2005 - (262) (Losses) / Gains on sales of businesses - 2005 - 115 Implementation costs - 2005 - (61) Provision for airline industry exposure (200) (200) ----------------------- (200) (429) ----------------------- Acquired businesses - 220 Currency - 414 Operations (60) 251 ----------------------- 2005 Operating Companies Income $(10) $13,500 ======================= (*) Due to a change for Discontinued Operations, prior period results have been restated. ALTRIA GROUP, INC. Schedule 7 and Subsidiaries Net Earnings and Diluted Earnings Per Share For the Quarters Ended September 30,(*) ($ in millions, except per share data) Net Diluted Earnings E.P.S. (**) --------- --------- 2005 Continuing Earnings $ 2,883 $ 1.38 2004 Continuing Earnings $ 2,637 $ 1.28 % Change 9.3 % 7.8 % Reconciliation: --------------- 2004 Continuing Earnings $ 2,637 $ 1.28 2004 Domestic tobacco headquarters relocation charges 3 - 2004 Asset impairment, exit and implementation costs, net of minority interest impact 31 0.02 2004 Loss on sales of business, net of minority interest impact 4 - 2004 Corporate asset impairment and exit costs 11 - 2004 Tax items, net of minority interest impact (64) (0.03) 2004 Gains from investments at SABMiller (111) (0.05) -------- -------- (126) (0.06) -------- -------- 2005 Domestic tobacco headquarters relocation charges - - 2005 Domestic tobacco loss on U.S. tobacco pool (87) (0.04) 2005 Domestic tobacco quota buy-out 72 0.03 2005 Asset impairment, exit and implementation costs, net of minority interest impact (51) (0.02) 2005 Corporate asset impairment and exit costs (2) - 2005 Provision for airline industry exposure (129) (0.06) 2005 Tax items, net of minority interest impact 204 0.10 -------- -------- 7 0.01 -------- -------- Currency 69 0.03 Change in shares - (0.02) Change in tax rate 125 0.06 Operations 171 0.08 -------- -------- 2005 Continuing Earnings $ 2,883 $ 1.38 -------- -------- 2005 Discontinued Earnings $ - $ - -------- -------- 2005 Net Earnings $ 2,883 $ 1.38 ======== ======== (*) Due to a change for Discontinued Operations, prior period results have been restated. (**) Basic and diluted earnings per share are computed for each of the periods presented. Accordingly, the sum of the quarterly earnings per share amounts may not agree to the year-to-date amounts. ALTRIA GROUP, INC. Schedule 8 and Subsidiaries Net Earnings and Diluted Earnings Per Share For the Nine Months Ended September 30,(*) ($ in millions, except per share data) Net Diluted Earnings E.P.S. (**) --------- --------- 2005 Continuing Earnings $ 8,379 $ 4.01 2004 Continuing Earnings $ 7,430 $ 3.61 % Change 12.8 % 11.1 % Reconciliation: --------------- 2004 Continuing Earnings $ 7,430 $ 3.61 2004 Domestic tobacco headquarters relocation charges 16 0.01 2004 Asset impairment and exit costs, net of minority interest impact 279 0.13 2004 International tobacco EC agreement 161 0.08 2004 Loss on sales of businesses, net of minority interest impact 4 - 2004 Corporate asset impairment and exit costs 26 0.01 2004 Tax items, net of minority interest impact (414) (0.20) 2004 Gains from investments at SABMiller (111) (0.05) -------- -------- (39) (0.02) -------- -------- 2005 Domestic tobacco headquarters relocation charges (2) - 2005 Domestic tobacco loss on U.S. tobacco pool (87) (0.04) 2005 Domestic tobacco quota buy-out 72 0.03 2005 Asset impairment, exit and implementation costs, net of minority interest impact (195) (0.11) 2005 Gains on sales of businesses, net of minority interest impact 64 0.03 2005 Corporate asset impairment and exit costs (27) (0.01) 2005 Provision for airline industry exposure (129) (0.06) 2005 Tax items, net of minority interest impact 470 0.23 -------- -------- 166 0.07 -------- -------- Currency 267 0.13 Change in shares - (0.05) Change in tax rate 226 0.11 Operations 329 0.16 -------- -------- 2005 Continuing Earnings $ 8,379 $ 4.01 -------- -------- 2005 Discontinued Earnings $ (233) $ (0.11) -------- -------- 2005 Net Earnings $ 8,146 $ 3.90 ======== ======== (*) Due to a change for Discontinued Operations, prior period results have been restated. (**) Basic and diluted earnings per share are computed for each of the periods presented. Accordingly, the sum of the quarterly earnings per share amounts may not agree to the year-to-date amounts. ALTRIA GROUP, INC. Schedule 9 and Subsidiaries Condensed Balance Sheets (in millions, except ratios) September 30, December 31, 2005 2004 ------------- ------------- Assets ------ Cash and cash equivalents $ 6,195 $ 5,744 Assets of discontinued operations held for sale - 1,458 All other current assets 19,327 18,699 Property, plant and equipment, net 16,318 16,305 Goodwill 32,191 28,056 Other intangible assets, net 11,006 11,056 Other assets 13,826 12,485 ------------ ------------ Total consumer products assets 98,863 93,803 Total financial services assets 7,227 7,845 ------------ ------------ Total assets $ 106,090 $ 101,648 ============ ============ Liabilities and Stockholders' Equity ------------------------------------ Short-term borrowings $ 3,412 $ 2,546 Current portion of long-term debt 2,155 1,751 Accrued settlement charges 3,336 3,501 All other current liabilities 16,088 15,776 Long-term debt 17,067 16,462 Deferred income taxes 7,070 7,677 Other long-term liabilities 14,480 14,905 ------------ ------------ Total consumer products liabilities 63,608 62,618 Total financial services liabilities 7,976 8,316 ------------ ------------ Total liabilities 71,584 70,934 Total stockholders' equity 34,506 30,714 ------------ ------------ Total liabilities and stockholders' equity $ 106,090 $ 101,648 ============ ============ Total consumer products debt $ 22,634 $ 20,759 Debt/equity ratio - consumer products 0.66 0.68 Total debt $ 24,720 $ 22,980 Total debt/equity ratio 0.72 0.75