Altria Group's CEO Hosts Annual Meeting of Shareholders (Transcript)

| About: Altria Group, (MO)

Altria Group, Inc. (NYSE:MO)

Annual Meeting of Shareholders Call

May 16, 2013 9:00 AM ET


Marty Barrington – Chairman and CEO

Brandt Surgner – Corporate Secretary

Denise Keane – EVP and General Counsel


Michael Crosby

Edward Sweda

Glenn McMurray

Paul Bibber

George Calvert

Sam Jones

Marty Barrington

Good morning everyone, and welcome to the Altria Group Inc’s 2013 Annual Meeting of Shareholders. I now call the meeting to order. I’m Marty Barrington, Chairman of the Board and Chief Executive Officer of Altria.

We welcome all shareholders, employees, retirees, and guests, who are here today, who are listening by the audio webcast. The other executives, who will participate this morning, are Denise Keane Altria’s Executive Vice President and General Counsel and Brandt Surgner, our Corporate Secretary.

Our remarks today contain certain forward-looking statements and reference, non-GAAP financial measures. Please direct your attention to the forward looking and cautionary statements and reconciliations of non-GAAP to GAAP measures on

We placed cards on your seats with the agenda and the rules; we’ll follow for our meeting today. We’ll start by presenting certain formal documents proceed to the election of the Board of Directors and then move to the ratification of price Waterhouse Coopers as Altria’s independent registered public accounting firm. We will then give a business update focusing on Altria’s continuing progress against its corporate mission, which enables the company to continue delivering superior returns to your shareholders.

We’ll then have an advisory vote on the compensation of the company’s name executive officers, a question-and-answer session and then we will vote on one shareholder proposal. The corporate secretary will record on the preliminary voting results and then we’ll adjourn. Brandt will now present certain formal documents.

Brandt Surgner

Thank you, Marty. I present to the meeting together with (inaudible) of mailing, a copy of the notice of meeting form of proxy, proxy statement and annual report, which includes financial statements for the fiscal year ended December 31, 2012. The holders of record of common stock at the close of business on March 25th, 2013 are entitled to vote at this meeting, 86% of Altria’s common stock is represented here today, so a quorum is present for the transaction of business.

Marty Barrington

Thank you, Brandt. Please file the documents with the records of the meeting. I point representatives from computer share to transfer agent for Altria’s common stock as Inspectors of Election. Inspectors are instructed to execute the oath and to take custody of all proxies and the certified list of holders of common stock as of the close of business on March 25, 2013.

This list, which is available for inspection throughout the meeting, contains the names and addresses of all shareholders of common stock and the shares of each of them hold. The inspectors’ responsibility is to determine the number of shares represented at the meeting and to certify the vote of all matters presented at the meeting. All proxies and balance are confidential unless shareholders have written comments on them.

We will now distribute proxy cards to any shareholders present, who have not yet returned them. Shareholders who have already returned their proxy cards or voted by the internet, mail, or the telephone do not need to submit a new card. If you need a proxy card, please raise your hands.

Upon conclusion of the voting, please return the proxy card to an usher, who will deliver it to the inspectors. I want to welcome our Board of Directors. The diversity of their skills and experiences provides Altria with strong leadership in oversight.

In addition to the directors elected at the 2012 Annual Meeting of Shareholders, Debra Kelly-Ennis was unanimously elected to the board since last year’s meeting and has been nominated for election by shareholders at this meeting.

As previously announced Doctor Elizabeth Bailey has decided to retire from Altria’s Board of Directors after 24 years of service. We thank Dr. Bailey for her service and the countless contributions she has made to Altria shareholders and our family of companies over the years.

As a result of her retirement, Altria’s five laws have been amended, so that the board will consist of 11 members. The election of the Board of Directors is the first matter as set forth in the notice of meeting. Denise, please announce those nominees names appearing in the proxy.

Denise Keane

The nominees are Gerald L. Baliles, Marty Barrington:, John T. Casteen III, Dinyar S. Devitre, Thomas F. Farrell II, Thomas W. Jones, Debra J. Kelly-Ennis, W. Leo Kiely III, Katherine B McQuade, George Munoz, and Nabil Y. Sakkab each to hold office until the next Annual Meeting of Shareholders or until his or her successor (inaudible) has been duly elected.

Marty Barrington

Thank you, Denise. Under our bylaws, the nominations are now closed. Those in the room, wishing to vote on the nomination of directors should do so now.

The next agenda item is the ratification of price Waterhouse Coopers as Altria’s independent registered public accounting firm, I introduced Bill Brennan of PricewaterhouseCoopers. Denise, please present the matter.

Denise Keane

I moved the adoption of the following resolution resolved at the selection of price Waterhouse Coopers LLP as Altria’s independent registered public accounting firm for the fiscal year ending December 31st, 2013 the ratified.

Marty Barrington

Thank you. Those in the room, wishing to vote on the ratification of the independent registered public accounting firm should do so now. I’m pleased with this time to provide a business update.

Altria delivered strong results and returns for our shareholders in 2012. Despite a continuing challenging external environment, our tobacco operating companies, premium brands, Marlboro, Black & Mild, Copenhagen and Skoal had an excellent year as our companies continued investing in their long term success.

Altria grew its adjusted diluted earnings per share by 7.8% behind the business performance of our operating companies complemented by higher earnings from our equity investments in SABMiller. Our total shareholder return 11.8% for the full year outperformed our US tobacco peers and S&P Food, Beverage and Tobacco Index. Our employees focused on our mission and value continues to drive our results.

Our mission is to own and develop financially discipline businesses that are leaders and responsibly providing adult tobacco and wine consumers with superior brand of products. We pursue our mission by focusing on four strategies, investing in leadership, aligning with society, satisfying adult consumers, and creating substantial shareholder, excuse me, creating substantial value for shareholders, five, four values guide our behavior as we pursue this mission and our business strategies.

They are integrity, trust and respect, passion to succeed, executing with quality, driving creativity into everything we do and sharing with others. Altria make significant progress in support of its mission in 2012 as we executed our core strategies and were guided by our values.

Our first strategy invested leadership reflects our focus on having excellent people and leading brands and external stakeholders important to our businesses success. Roughly 9,000 employees drive our company’s success and we invest in programs to attract, develop and retain talented and diverse employees. Our recruiting program, advancement planning process and leadership development programs provide our employees with skills and experience is to help them reach their full potential.

In 2012, the Altria and its companies invested an average of $2,000 per employee for to which in reimbursement, seminars, internal and external training programs and professional memberships to advance our employees professional development and the success of our businesses.

Altria’s investments and people will recognize by several organizations in 2012. Human Resource Executive Magazine named Altria 28 on its list of most admired companies for HR, recognizing its management quality, product quality, innovation and people management.

Last month, Latino Magazine included Altria as part of its first Annual Latino 100 listing recognizing companies that provide the most opportunities for Latinos. Most recently Diversity Inc recognized Altria as one of 25, know where the companies making significant progress and their diversity efforts and as one of its top 10 companies for blacks.

Altria and its companies build relationships with business partners, who promote actions consistent with our mission and values. Our companies work with a diverse base of suppliers including minority and women on businesses. In January, ranked Altria 18th on its list of America’s top organizations for multicultural business opportunities.

We work with growers, who provide high quality tobacco and grapes to our premium products. Our companies invest in the sustainability of their agricultural supply chains, which are critical to their business success. Altria’s tobacco companies are founding members of the Farm Labor Practices Group. This group was formed to help both farmers and farm workers better understand and comply with labor loss and regulations.

This initiative is also focused on improving labor conditions for farm workers. The group includes representatives of the US Department of Labor, grower associations, other tobacco companies and non ornamental organizations like the Interfaith Center on Corporate Responsibility.

Our success is high to the communities where we live and work and we invest our time and resources to support them. Altria has a long history of supporting the arts and continues to support organizations that bring world class cultural experiences to our communities. These organizations include the Virginia Museum of Fine Arts, the Richmond Symphony, the Richmond Valley and the Kennedy Center.

In 2012, we announced a $10 million commitment to support the renovation of Richmond’s historic landmark theater, a project is expected to have a $60 million economic impact initially and then $12 million annually. In 2012, we launched the Altria college opportunity fund that award scholarships to select graduates from the Richmond Public Schools, 12 students were selected for the first class of scholars and we’ll receive support of up to $10,000 per year for all four years of college.

Our commitment of up to $2 million will ensure the same level of support for students in the 2013 and 2014 classes. Altria’s employees also contribute their own time and financial resources to their communities. In 2012, our employees, their families and friends volunteered more than 30,000 hours in company support at service projects, for example more than 100 volunteers help transform a Richmond Middle School with projects to improve the physical and educational environment.

The Altria Company’ employee community fund donated more than $2 million to 120 nonprofit groups in our communities. Our executives contribute their time and talents by serving on the boards of many nonprofit organizations. Last year, almost 40 executives served on the boards of 60 community organizations including the Science Museum of Virginia Foundation, the Thurgood Marshall College Fund and the Center Stage Foundation.

In 2012, Altria ranked 30th on the civic 50, which recognizes companies that best use their resources to improve their local communities and beyond. Our second strategy is to align with society by actively participating and resolving societal concerns that are relevant to our businesses. Significant progress has been made to reduce underage tobacco use. However, we know the trends has slowed in recent years, more work remains to be done and our companies continue to contribute to this effort.

PM USA, US Smokeless Tobacco Company and John Middleton each developed and implement annual plan to help reduce underage tobacco use. They have trained their brand management employees, internal partners and key outside vendors on underage access prevention goals and practices. They support responsible retailing through their trade programs and the v-card program, which provides resources to retailers to help them prevent tobacco sales to underage purchasers.

These tobacco companies provide significant support for youth serving organizations in 2012, combining their brand programs and education and positive youth development into one program we call success 360, this initiative have leading national and local nonprofit organizations effectively support middle school kids, academic achievement and healthy development with the focus on helping them avoid risky behaviors like tobacco use.

Success 360, also provide support for these organizations to work together to better coordinate their efforts. Preventing underage tobacco use is also one of the areas addressed by the law that brand of the food and drug administration, comprehensive, regulatory authority over tobacco products.

Federal Regulations mandate that cigarettes and smokeless tobacco be sold behind the counter to age clarify transactions and prohibit selling tobacco to minors. FDA has partnered with the states to conduct more than 145,000 compliance checks at retail outlets across the country and reports that 94% of them were complying with FDA regulations.

Our tobacco company is focused on complying with this law and constructively engaging with FDA and other stakeholders on issues related to the law. We conducted training sessions, exercises, and discussions to help raise employee awareness of the loss preventions and to strengthen our compliance processes.

Our companies continue to work constructively with FDA by sharing our experience, knowledge, and expertise. We have submitted comments to FDA covering a variety of important issues met numerous times with FDA and presented to the tobacco products Scientific Advisory Committee.

PM USA, USSTC also hosted FDA representatives at their facilities to share information with the agency on manufacturing processes. We will continue to engage and share science space information with FDA and other stakeholders about regulatory issues important to our business.

Compliance with FDA regulation is the one aspect of our commitment to compliance. We believe a strong culture of compliance starts with leadership at the top, so we recently launched a new training program for our senior leaders called leading with integrity. An infective compliance program also depends on employee speaking up when they have a concern.

Well, most system is perfect we have seen good progress on this measure from surveys of our salary employees. Our companies work to reduce their impact on the environment after making significant progress against multiyear goal through 2012, we established new long term goals to further reduce energy use and greenhouse definitions, implement, sustainable water programs, increase recycling of waste from company facilities and to reduce the amount of material in product packaging.

In 2012, Altria partnered with the National Fish and Wildlife Foundation in a water conservation project in Washington State, home of St. Michelle Wine Estates. Altria’s $100,000 contribution helped raise $950,000 in additional funding and resulted in more than 1.1 billion gallons of water being conserved.

Last year Newsweek, Altria first among tobacco companies and sixth among food beverage and tobacco companies in its cream rankings of the largest publically traded companies. Our first strategy is to satisfy adult consumers by converting our deep understanding of adult tobacco and wine consumers into better and more creative products that satisfy their preferences.

Marlboro is the truly iconic cigarette brand, men smoke for flavor. In 2012 PM USA introduced Marlboro’s new architecture that focuses on the brand four product families, red, gold, green, and black. The architecture allows PM USA to express Marlboro’s essence and positioning in new ways, enabling the brand to expand its retained breath among adult smokers.

PM USA updated Marlboro’s retail look to communicate the new architecture and highlight the four product families. PM USA also communicated the architecture with brand building activities that use Marlboro’s website, sweet sticks, one to one programs, direct mail, and e-mail, all limited to smokers 21 and older.

PM USA also offered updated packaging on Marlboro 83s in the red family and expanded distribution of Marlboro NXT in the Marlboro black family. Black & Mild is positioned as the best any day cigar adults enjoy for smooth taste and pleasant aroma. Middleton has introduced new Black & Mild products that it helped the brand maintain its leadership position in the tip cigarillo segment and expanded its present in growing un-tipped cigarillo segment.

In the smokeless product segment, USSTC has two strong premium brands Copenhagen and Skoal, and it’s focused on managing their combined performance. Copenhagen is the original moist smokeless tobacco brand that has provided the adult dipper satisfaction since 1822.

The brand’s equity is built around its core values of masculinity, heritage, authenticity, tradition and craftsmanship. In recent years, Copenhagen maintained its leadership position in the natural segment, and introduced, or expanding products including Copenhagen long cut wintergreen, long cut straight and extra long cut natural to broaden its product portfolio.

Beginning in 2012, the USSTC expanded Copenhagen southern blend into new geographies offering adult dippers militate in a manageable long cut form.

These products help drive Copenhagen’s excellent retail share performance over the last few years. USSTC’s other premium brand Skoal is the contemporary smokeless brand that provides a smooth smokeless tobacco experience. Its products are offered great test and forms better easy to manage.

In November of 2012, the USSTC expanded Skoal ready cut in 20 additional states offering adults dippers and innovative moist smokeless tobacco form. These portions are preformed and provide great taste. Skoal ready cut is available in mint, wintergreen, and straight at a premium price. USSTC is supporting Skoal with equity building communications across multiple channels including online, mobile, direct mail and in adult only facilities, all limited to adult tobacco consumers 21 and older.

In February, Skoal began to refresh its packaging to better reflect the brands contemporary, premium qualities and to differentiate its product offerings. Altria’s tobacco companies have a deep understanding of adult tobacco consumers and work to develop the products that need their preferences. Adult tobacco consumers continue to express interest in tobacco alternatives.

We are closely monitoring adult tobacco consumer interest in alternative products and our companies are working internally and through partnerships to develop innovative new products for them. Some of our innovative products are available in lead markets, where we are learning while making disciplined financial investments.

In addition, Altria’s subsidiary new mark plans to introduce an electronic cigarette into a lead market in the second half of this year. We believe that FDA regulations presents an opportunity relating to certain tobacco product innovation because the law expressly recognizes the potential role that modified risk tobacco products may play in reducing the harm cause by tobacco use. We have engaged with FDA expensively on this important topic, encouraging the agency to develop scientific standards that are rigorous, yet feasible for evaluating potentially less hazardous products.

Our tobacco companies continue to communicate about the health effects of their products. PM USA’s website for example acknowledges the overwhelming medical and scientific consensus that cigarette smoking is addictive and causes serious disease in smokers and provides links to reports by the US surgeon general and other public health authorities. The side also highlights the online quit assist resource, which offers cessation information to smokers.

Our fourth strategy is to create substantial value for shareholders, in the smokable product segment, PM USA and Middleton strategy is the maximize income, while maintaining modest share momentum overtime on Marlboro and Black & Mild. The companies grew adjusted operating companies income for the segment by 4.2% and expanded adjusted operating companies income margins by 9/10th of a percentage to 41.2% for 2012.

Marlboro grew with retail share by 6/10th of a share point to 42.6% for the full year supported by PM USA’s brand building initiative for Marlboro’s new brand architecture. Black & Mild retail share increased by 1.5% of a share point to 30% for 2012 as the brand benefited from new un-tipped cigarillos introduced in 2011 and seasonal offerings.

In the smokeless product segment USSTC and PM USA seek to increase income by growing volume at or ahead of the category growth rate, while maintaining modest share momentum on Copenhagen and Skoal combined. Our companies grew the adjusted operating companies income and segment by 7% for 2012. Copenhagen and Skoal’s combined full year retail share increased 1.6 percentage points to 50.6%. In the wine segment, Ste. Michelle Skoal is to grow income by expanding the share and distribution of its premium lines. Ste. Michelle grew its adjusted operating company’s income by 9.5% for 2012.

Our companies remained focused on managing cost structures, following the completion of a multiyear $1.5 billion cost reduction program in late 2011. Altria announced a cost reduction initiative to achieve an additional $400 million in annualized savings versus previously planned spending by the end of 2013. Altria’s companies made significant progress in 2012 on this program.

Altria took a number of steps in the last year to help maintain its balance sheet strength, for example Altria completed a tender offer and repurchased high coupon debt that it replaced with new lower cost debt. Altria’s strong balance sheet supports our ability to return cash to shareholders primarily in the form of dividends. In August of 2012, the Altria increased its dividend by 7.3% to an annualized rate of a $1.76 per share.

In 2012, Altria paid $3.4 billion in dividends to shareholders and our payout ratio of approximately 80% of adjusted diluted EPS was the highest in the S&P Food Beverage & Tobacco Index. While all dividend payments remained subject to the discretion of Altria’s Board of Directors. The company aims to increase its dividend and lying with adjusted diluted EPS growth. Altria joined with the broad correlation of businesses, associations, and shareholders to support making permanent, the lower personal tax rates on dividend income and maintain imparity between the tax treatment of dividends and capital of gains.

Many of you contacted your elected official on these issues. And we thank you for making your voices heard. We are pleased imparity was maintained between the tax treatment of dividends and capital gains. Altria also has repurchased stock when we have concluded that it’s the best use of cash to maximize shareholder value.

In 2012, Altria repurchased 34.9 million shares of its common stock at an average price of $32 per share, where your total cost of approximately $1.1 billion. Last month, the Board of Directors authorize a new $300 million share repurchase program that the company expects to complete by the end of 2013 like dividends or repurchases remained subject to the discretion of Altria’s Board of Directors.

In 2012, we continue to achieve success in managing litigation, although we continue to face substantial challenges as we have for many years. Our trial is currently underway in California in the lights class action case known as brown. And PM USA continues to defend Engle Progeny cases in Florida.

We believe we have substantial defenses in all these cases, a comprehensive discussion of tobacco related litigation maybe found in Altria’s 2013 first quarter Form 10-Q filing, which can be easily located in the investors section of Our goal remains to protect the interest of our shareholders by vigorously defending these claims.

Altria deliver strong financial results for the first quarter of 2013, as our diverse business model deliver the 10.2% increase in adjusted diluted EPS. Higher pricing contributed to adjusted operating company’s income and margin growth in all three of our reportable segments.

Higher earnings from our equity investment in SABMiller and lower interest expense also drove adjusted diluted EPS growth.

PM USA continued to support Marlboro’s new brand architecture with brand building activities that contributed the Marlboro’s retail share gain of two tenths of a percentage point for the first quarter.

Black & Mild’s retail share decreased 3.1 percentage points for the first quarter due to heightened competitive activity including high levels of low priced imported machine made large cigars.

In the smokable product segment, first quarter adjusted operating company’s income increased 1.3% to $1.4 billion and adjusted operating company’s income margins increased nine tenths of a percentage point to 41.9%.

In smokeless products, Copenhagen and Skoal grew their combined volume by 4.9% in their combined retail share by half a percentage point for the first quarter. The smokeless product segment’s adjusted operating company’s income of $222 million was up 5.2% the quarter.

In wines St. Michelle’s operating company’s income increased 33% to $20 million. We’re pleased with Altria’s results for the first quarter. Altria reaffirms that it expects its 2013 full year adjusted, diluted EPS to increase by 6% to 9% to a range of $2.35 to $2.41 from an adjusted and diluted base of $2.21 per share in 2012.

Altria’s pursuit of its mission has supported the consistent delivery of solid annual adjusted EPS growth in excellent total returns to its shareholders. From 2007 through 2012, Altria grew its adjusted diluted EPS at a compounded annual rate of 7.9%. This is consistent with Altria’s goal to grow adjusted diluted EPS at an average annual rate of 7% to 9% over time.

From the spin-off of Philip Morris International in early 2008 through the end of 2012 Altria paid $14.4 billion in dividends and repurchased $3.6 billion in shares.

During this timeframe, Altria increased its dividend six times for a compounded annual growth rate of 8.7%. Our consistent adjusted diluted EPS growth and strong and growing dividend supported total shareholder returns that have exceeded the returns of the broader market and similar companies. The company’s total shareholder return from the end of 2007 through the end of 2012 was 84.2%, outperforming the S&P 500s total return for the same period of 8.6% in the S&P Food, Beverage and Tobacco Indexes return of 54.9%.

A number of organizations have recognized our strong performance in pursuit of our mission. For example, Altria has been named to Dow Jones Sustainability North America Index and Corporate Responsibility Magazine ranked Altria 20th on its list of top 100 corporate citizens.

Other organizations have recognized Altria for its disclosure of political activities, including contributions by its companies and its political compliance program.

In 2012, the Center for Political Accountability-Zicklin Index ranked Altria 14th among the S&P 100 in terms of the voluntary disclosure of its political spending. The Baruch Index of Corporate Political Disclosure described the company in 2011 as a leader in publicly disclosing its political activities.

We’re pleased with our business performance and we’re proud of the results we’ve achieved. We believe that our executive compensation programs are an important contributor to them and to our strong shareholder returns. These programs are designed to align the interest of executives and shareholders to promote the company’s mission and business strategies into reward the achievement of corporate and individual performance goals.

At the 2012 Annual Meeting of Shareholders, more than 94% of the shares past approved on an advisory basis a compensation of our named executive officers demonstrating strong support for our alignment of shareholder interest with our executive compensation programs and philosophy.

The next item on the agenda is an advisory vote to approve the compensation of our named executive officers. While this is vote is non-binding the compensation committee intends to consider the outcome of this vote when making future compensation decisions for our named executive officers. The board recommends the shareholders’ approve on an advisory basis the compensation for our names executive officers as described in the compensation discussion in analysis section of the proxy statement.

Those in the room wishing to vote on this matter shall do so now.

Okay. We’ll now begin our 30-min question-and-answer session.

Question-and-Answer Session

Marty Barrington

We placed two microphones in the isles for your use in asking questions. We’ll alternate between the microphones until our time is up or we’ve run out of questions. The ushers will assist you in getting to the microphones. We welcome the opportunity to hear from our shareholders and want to provide everyone who wishes to ask a question an opportunity to do so.

We thus ask that each speaker limit his or her questions to two minutes to allow time for others to participate. And Brandt will help us watch our time. As a courtesy to our questioners, our lighting system will help guide our time. When a speaker has 30 seconds remaining, the light in front of his stage will turn from green to yellow, when a speaker’s time is expired, the light will turn red and the speaker should please conclude his or her question. Thank you in advance for your cooperation.

You may ask a follow-up question after all other shareholders have asked their questions. And if there is not enough time for all the questions in today’s meeting, please complete the comment card which an usher can provide you and then return the card to him or her. We would respond to you promptly.

Please be sure to identify yourself and address your question to me. So, let’s begin. Perhaps, we’ll start up with here to my left, good morning.

Michael Crosby

Good morning. Welcome to the Chair. My name is Michael Crosby, and I’m going to be presenting a shareholder resolution later. But I want to comment on your sharing under investing in leadership about the Farm Labor Practices Group.

We are part of that group, the interface centered on corporate responsibility. And our discussions are progressing slowly. But I think surely. And we’re moving in a good direction. I think that probably one of the big issues is going to be the right of farm workers to organize and for collective bargaining but that’s always a big issue when you’re dealing with commodity workers like this.

I just wanted to make that comment and thank you for the progress they made. The question that I have actually came out about reading this morning’s Richmond Times dispatch and a letter to the editor. It seems that local town council is thinking of raising taxes. But the writer in the letter, the editor raised an issue that I wasn’t thinking about.

The Center for Disease Control holds that almost 40% of adult smokers in Virginia make less than 15% a year. That triggered something in me because where I live in Milwaukee we’re serving a meal, a free meal to 300 to 500 a day. Our headquarters in Detroit serves meals and works for 2,000 to 3,000 people a day. And a lot of these, a lot more in percentage with them our guess, are low income who are smoking rather than the higher income.

My question is that in the alignment when society section where there is a real concerted effort to help reduce under-age product use, it seems the brunt of our property are coming from not the under-age but from lower income. This says 40% of those…

Marty Barrington

I’m sorry to interrupt, but I see your light has turned, could you perhaps close with your question, thank you.

Michael Crosby

So, my question is, is there discussion in the company about how to reduce usage among the lower income who also are less educated around such things in the health consequences of their behavior?

Marty Barrington

Thank you very much for your question. I want to welcome you back to our meeting. I also want to begin by commending the works that you’re doing with the Farm Labor Practices Group, we very much appreciate your leadership there and like you I believe we’re making a good progress on the issues in the farm which are so important so thank you for that.

I also want to commend you for the work that you – in your order do with low income populations to make sure that they’re participating fully in this economy of ours.

I think that when you look at the approach Altria, it takes totally to its mission and its values to what you see there is the total approach. We market to adults obviously who are in the category particularly in our direct marketing programs who were 21 and older.

As you know, we’ve worked very hard to make sure that’s done in an age verified kind of a way. We’re working very hard on under-age tobacco prevention programs. We’re working very hard on the issues with respect to farm workers. There are a number of issues in our society.

Obviously, that are being worked through particularly during these difficult economic times. But I think those are the issues for Altria Group and those are the ones that we’re focused on. I appreciate you coming to the meeting again. It’s nice to see you and thank you for your question.

Over here sir.

Edward Sweda

Good morning Mr. Barrington. I’m Edward Sweda, a shareholder from Massachusetts. And my question is on Tobacco Litigation, I know you’ve of course touched on it during your presentation. While, the company back did win a victory yesterday and save the West Virginia. It suffered a major setback a couple of months ago on March 14, when the Florida Supreme Court ruled 6 to 1 in the Douglas case. And basically rejected the industry’s arguments that the way that the angle fraudulent cases are being tried or have been tried since 2009 violate the fundamental due process rights.

Now, when one of your fellow companies, Reynolds – J Reynolds submitted its petition for certiorari to the US Supreme Court in the Morgan case a little over a year ago. The attorney in there said that the companies, the defendants in the angle fraudulent cases faced potential liability of billions of dollars. And that these angle fraudulent cases would continue to trial with “with no end in sight”. Do you – any potential appeal to the Supreme Court of the United States in the Douglas case as the long-shot given that they declined to consider a very similar appeal in the Morgan case last year.

So, my question is why shouldn’t shareholders believe the tobacco company’s attorney appealing to the Supreme Court who have warned about potential massive liability with billions of dollars with thousands of cases still in the pipeline with no end in sight rather than believing it’s the optimistic assurances for Managers about this issue?

Marty Barrington

Okay. Thank you Mr. Sweda, welcome back to meeting, I’m glad you’re here. Thank you again for your question.

I think what shareholders should be guided by are the disclosures. I mean, we go as you know to considerable length in the queues to lay out and got, I think here is maybe 30 pages and the last one that describes in detail our litigation status, the status of the cases including the cases that you mentioned.

I tried to point out in our remarks this morning though that we believe that the company has demonstrated the capability to manage that litigation and in your right to point out the substantial case that was decided yesterday in West Virginia which I think just makes an inflexion point on the company’s ability in that regard.

But you’re right to point out litigation remains a significant issue for the company. It has been for some time. We work very hard on managing it in shareholder’s interest. And I would direct shareholders to the queue. I think that’s what they should rely on in the disclosures to draw their own judgments about that issue. Thank you again for coming and thank you for your questions. Yes sir.

Glenn McMurray

Good morning Mr. Chairman and good morning to the board. I’m Glenn McMurray, I’m a resident of Richmond for 40 years and I’m a longtime stockholder.

I go back to the last two to three decades you had the stockholder’s meeting over at Bell’s Road at Philip Morris, which is now Philip Morris USA. The name changed, you came here, you came down from New York. You’re in Henrico County. I’m a retired police officer. If you’ll take and look at the reality of attendance, you’ll notice that the attendance is continuously and significantly dropped. You take the gentlemen and ladies in the, front rows, that’s basically executives and associated with corporations. And look at this average stockholder, we have diminished considerably.

I don’t know the reason, I suppose and with my time because this a minor issue but yeah, this is an important issue. I spoke of Michael Dees who’s on our committee. I respectfully ask you and the board, some of your minutes meeting to the future minds to give consideration, Altria Corporation is in Henrico County, I know there is political balances between the city and the county and you have your facilities here in the city, you have the corporate in the county.

I respectfully ask that you look at enthuses of this and give consideration of going to your corporate if possible or maybe back over there. I’m a retired police officer, I’m proud of the City of Richmond. But there is people I know personally that don’t want to come downtown to have a perception of not being safe downtown. City does a fine job of providing us security for the community including this specifically. And this particular area is respectfully better than it was in the years past.

But I think you should look at going to your home place with very expression when you came to the home place of Philip Morris. You’re not in a home place here. This is different than going to your new facility. So I’ll shut up and say, give it some thought and maybe next year will it be somewhere else and maybe not. Thank you, sir.

Marty Barrington

Well, thank you for coming. It’s very nice to have you here. Thank you for your loyalty to our company and thank you for your public service as a police officer. I remember like you well when we had the meeting down at Bell’s Road and it was a much bigger event at that time.

We will take your comments on board. We have found over the last several years at this location has worked for us. But there is nothing that we’re committed to in that regard. And I’m glad that a shareholder comes and shares his views about what might be other locations. So we will certainly take you up on your offer to think about it. And I appreciate you coming again this morning.

You have a question over here?

Paul Bibber

Good morning Mr. Chairman.

Marty Barrington

Good morning.

Paul Bibber

My name is Paul Bibber, I’m a retiree of Philip Morris last Altria. And looking into the future I know the company is probably working on its concept but cutting back in some jobs here and there. And I just want to know that that’s – is that going to be a big undertaking in the future?

And also being a veteran, I want to ask that the company goes out of the way to seek out veteran’s service manager, getting out of service and also service women to looking for employment. And I want is there something to job at expressed to go out and try to do. And I guess that concludes it.

Marty Barrington

Okay. Welcome to the meeting, nice to have you here. Let me begin by saying thank you very much for your service to our company. And I know there are other retirees here this morning. And to all of you I want to say welcome back to the family meeting. Thank you all so much for what you’ve done for our great company.

You pointed out that the company does have to be disciplined about the way it runs the company in terms of the number of people that we will employ at any one point in time. We don’t like to do way-offs, in fact we much rather manage that over time through natural attrition. From time to time there were disruptive events like large federal excise tax, increases for example that causes to have to do something more problematically.

But like you, we would like to avoid that if we can. We try to manage that over time and if we have to do it, we try to do it square up with our employees and provide good transition benefits.

I’m so glad when you raised the issue of veterans, this has been an issue for the last several years actually a focus for us. We owe our returning service members and people who serve in our own force, is such a debt. And we do have programs in fact that we seek out actively to hire men and women who are served in our armed forces.

We have actually good programs in place actually. It’s quite a moving event there is some Veteran’s Day event for example at our companies where we have our co-employees who have been proud to wear the uniform, come and talk about what it means to be a veteran. I’m glad you’ve raised it. I’m with you on that. Our veterans are owe to grade that. Thank you for coming to the meeting.

We’ll go back over to my left.

Michael Crosby

Yes Mr. Barrington. I don’t think you answered my question and that’s why I’m taking the occasion to come back. This was a surprise for me, and I’ve been involved in issues around tobacco since 1980. I did not know that the Center for Disease Control says that almost 40% of adult smokers in Virginia make less than $15,000 a year. So that would mean 40% of smokers in this state would probably be using tobacco and a lot of percentage of that would be our product.

Now we know the Affordable Care Act is going to be coming after the tobacco companies but you can see why it might because the profits are coming from the poor and from the uneducated. The poorer you are the more uneducated you are, the more uneducated you are, the more you’re going to be smoking. Our experience is that a lot of the lower educated and less income – lower income people are racial minorities.

So, the question that I had asked coming out of today not even thinking I was going to say anything about this, but it came to me in today’s Richmond Times dispatch. The question is, you’re doing a good job I think on underage smoking – since so much of our profits are coming from uneducated poor less income, lower income people, don’t the conscious have an obligation to try to find ways to educate them, to help them get off the addictive dimension of our cigarettes and be able to address that issue as clearly as we have the underage issues.

It just came to me today and I think it’s a key issue and a key challenge the company not only this company but all tobacco companies if this data from Center for Disease Control is right. Our profits are coming from uneducated and lower income people up to 40%. So that’s a huge part, okay. I think we have an obligation.

Marty Barrington

Thank you again for asking your question. I guess, what I would say to you is the approach that we take is laid out in our mission, in our values statement. And you can see there for example, we do communicate the health effects of our tobacco products. And we do it on our website. We do it on our packaging. We do provide cessation information to people.

And so, anyone who’s interested in knowing about the health effects of our products or who is trying to quit, they can go to the Altria website and they can be informed about resources that are available to them there. I share with you the concern of course that people who have less, we need to help them and I would point out, that’s one of the reasons we run our philanthropy programs the way we do.

And why we went to the trouble to point out the generosity of the Altria employees through the community fund and their own efforts to try to help those who are in need. So I hope that’s helpful to you and that’s how we think about it. And again, welcome back to the meeting. Thank you for your comments.

We have a question over here, yes, sir.

George Calvert

Thank you. My name is George Calvert, I’m a resident of Richmond stockholder since 1976. Like most stockholders I’m just thrilled with the company’s performance over the last 35 years. And I hate to have to vote against advisory reference of votes on compensation. But it takes 30 pages and a proxy statement to cover it all. I wonder whether we haven’t done enough. Could you comment on that the whole issue of compensation and more thrills in that especially the compensation community?

Marty Barrington

Sure. Welcome, thank you for your loyalty to Altria. I’m glad you’re here this morning.

With respect to the length and the materials and the proxy, we have to comply with all the rules and regulations respecting that and that’s I think in large part accounts for the length. It’s also to give good disclosure to shareholders about how we think about executive compensation.

I mentioned in the remarks briefly, these are programs that are designed to require pay for performance to align the interest of management and shareholders, and to try to attract the kind of people that we want to attract, retain and develop to run a business of the scale of Altria Group. And I think that they do support our efforts in that regard.

And then disclosure is most important. And so if you report to the proxy, I know it’s long, but if you refer to it, I think how the compensation committee thinks about executive compensation, the philosophy, the design of the program, the structure of the program, the metrics of the program. We think it’s important that that all be laid out, so shareholders can see that and that’s what we’re trying to do and that’s our approach to executive compensation. Thanks for your question.

I have a question over here to my left.

Sam Jones

Yes sir, Mr. Chairman. My name is Sam Jones, from Anderson, North Carolina. I just want to thank you for the invitation to come here today. And I like to ask you, how in (inaudible) did you beat lower large the wheel. And I would also like to ask you on the spin-off coming from Altria in the near future or any talk of that. Thank you.

Marty Barrington

Well, welcome to the meeting, welcome to Richmond, thanks for traveling in to see us. I think that’s the results that we achieved in 2012 belong correctly with the executive team that’s here today and over set of board of directors and the 9,000 employees standing behind us who come and do really good work every day.

We have terrific brands, we have terrific people, we’re very focused on the business and we’re trying to do our best for shareholders like you. So I think that counts for the business performance. And Altria Group as you know has been through a series of spin-off but I believe that we’re probably done for a while. Thank you for asking your question.

All right, are there any other questions in the room? Okay I think that we had them all. Thank you very much all of you for your questions. And I’d ask everybody to please return to their seats.

As a reminder, if you have another question, just fill out a comment card and return it to an usher and we’ll get back to you.

We will now hear a presentation on the shareholder proposal included in the proxy statement and then vote on this proposal. We believe shareholders should vote against this proposal for the reasons set forth fully in the proxy statement. In the interest of time, I will not elaborate on our views today but we encourage all shareholders to read the proposal and our response.

We ask that the proponent limit his or her presentation to 4 minutes or less. And each speaker commenting on the proposal to limit comments to 2 minutes or less, we’ll do vote no more than 8 minutes to the proposal. And as before, the lighting system will help speakers manage their time. Thank you again in advance for your cooperation.

With the proponent for the proposal, please proceed to a microphone and identify yourself and your proposal.

Michael Crosby

I’m here to submit our resolution propitiation. It is asking the company to provide a report on the state and federal lobbying expenditures including indirect funding of lobbying through trade associations and support for tax exempt organizations the right model legislation.

This isn’t about political contribution it’s more about the lobbying. I understand I might be wrong but for every dollar in political contribution there is up to 8 dealing with lobbying. And so we think there is a need for even greater transparency than as the company has already shown. The company is spending in 2011 and ’12 $21 million on federal lobbying. And we found that $6.3 million in 2012 went to state lobbying expenditures by the company in 34 states.

But the disclosure about this is out there but its patch work and isn’t presenting a full picture itself. It might direct to some other source like a state or a government, federal but not on the website.

The research that we have also shows that between 2003 and 2012, I’ll try ahead at least 629 lobbyists in 49 states. So there is a need for disclosure with the best amount of transparency on this that there can be. Altria doesn’t disclose as adequately as we think it should, its trade association memberships and payments, nor the portions of those payments used for lobbying. And so we don’t exactly know what is going on, is clearly as we would like.

Now, it belongs to ALEC and the Chamber of Commerce, it is also – we know that it serves on ALEC the American Legislative Exchange Council’s private enterprise board.

And so, there is a need for greater transparency especially when the company is involved with an organization like ALEC that has had so many other members pull out of ALEC because of the negative image. It’s hard enough with the company, with an image like this to be able not to be with a company – with an entity like ALEC that has compounded problems.

The proxy advisor ISS supports this proposal. Our same proposal Laura Lard on Tuesday got 44.2% of the votes. Now we don’t think we’re going to get quite that amount here. But a lot of shareholders and institutional investor advisors are saying this is a legitimate request of a company.

So, ISS says Altria “does not provide examples of the types of trade association the company belongs to or identify any specific trade associations the company is a member of”. Disclosure of such information with each shareholders in understanding the company’s trade association participation and any potential related political lobbying activities.

So, with that I submit the resolution and ask if you have not considered voting with us to reconsider and support this resolution that is asking for greater transparency and disclosure. The company is doing good but we think again it could do better. Thank you very much.

Marty Barrington

Thank you Father Crosby. Are there any comments on this shareholder component?

Edward Sweda

Again, Edward Sweda, a shareholder from Massachusetts. So much of this issue has come forward particularly in the last few years, we have the momentum landmark, decision by the US Supreme Court and the citizens of United States. And in that ruling for the majority is Justice Anthony Kennedy, made the case for transparency and he said “shareholders can determine whether their corporation’s political speech advances the corporation’s interest in making profits and citizens can see whether elected officials are in the pocket of so called moneyed interest”.

But as an editorial earlier this month in USA Today pointed out, alas the world that he described does not exist. Citizens and shareholders cannot make these determinations because they lack the basic information to do so. And while Altria certainly has provided some information on the website that has been sighted and there is still more to be done.

I think it is the opposition to this core transparency resolution is, it’s fundamentally short sighted. I think it’s critical for shareholders of any company to know information regarding the company’s lobbying expenditures and payments to groups such as ALEC that Father Crosby mentioned.

And actually in last week, I was within Winston Salem, I attended the North American Shareholder Meeting and that company had already settled with responses of similar resolution so the vote did not need to take place. So, for these reasons I concur with Father Crosby and the Rich shareholders to support the resolution.

Marty Barrington

Thank you for your comment. Are there any other comments? Seeing none, those who are in the room wishing to vote on the shareholder proposal should do so now. All matters to be voted on have now been formally presented to the meeting. If you need to do so, please complete your proxy card. After you have done so raise your hand and the ushers will collect all the cards and deliver them to the Inspectors of Election.

Since all shareholders have now had the opportunity to vote, I declare the polls closed. The ushers should now have collected all the proxies and they are directed to deliver them to the Inspectors of Election for counting.

While the Inspectors of Election count the proxies, let me make a few concluding remarks.

We believe that Altria’s mission and the strengths of our diverse business model, position the company well to create value for our shareholders into the future. Our tobacco companies have strong premium brands in today’s largest tobacco categories. Their knowledge of adult tobacco consumers will support their ability to innovate for future growth.

Our alcohol assets compliment our tobacco company’s performance. Altria’s strong balance sheet supports our ability to return significant amounts of cash to shareholders. We also have talented, dedicated and hard working employees who drive progress and support of our mission and demonstrate our values. Their efforts are at the heart of Altria’s success. And I thank them for a job well done.

Finally, I want to thank you, our shareholders for your continuing support of Altria. It is a privilege to serve as Chairman and CEO of this great company.

I now ask that the Inspectors of Election deliver their report to the Corporate Secretary. Brandt, will you please read the report.

Brandt Surgner

The Inspectors of Election have completed their preliminary count of the vote which I have received. The preliminary voting results are as follows. Each of the nominees for Director has been elected with more than 93% of the shares voting for their election.

The selection of PricewaterhouseCoopers LLP is Altria’s independent registered public accounting firm for the fiscal year ending December 31, 2013 has been ratified with more than 98% of the shares voting, voting in favor.

Shareholders have approved on an advisory basis the compensation of the company’s named executive officers with more than 95% of the shares voting, voting in favor. The shareholder proposal has been defeated, 78.18% of the shares voting on the proposal voted against the proposal and 21.82% voted in favor.

That concludes the report.

Marty Barrington

Thank you Brandt. Please file the Inspectors’ report, the Oath of the Inspectors of Election, their certificate and the proxies with the records of the meeting. We will post voting results on our website with a press release following the meeting. And final voting results will also be filed in a Form 8-K.

I want to thank all of you for coming today and listening on our webcast. We appreciate the opportunity to hear from you and to respond to your questions about Altria. Please travel safely on your way home. The meeting is adjourned.

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