Good day and welcome to the Altria Group 2016 First Quarter Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Altria's management and the question-and-answer session. I would now like to turn the call over to Ms. Sarah Knakmuhs, Vice President, Investor Relations for Altria Client Services. Please go ahead, ma'am.

Thank you. Good morning and thank you for joining us. We are here this morning with Marty Barrington, Altria's CEO; and Billy Gifford, Altria's CFO, to discuss Altria's 2016 first quarter business results. Earlier today we issued a press release regarding these results. For additional review, please see the earnings release on our website at altria.com or through the Altria investor app. During our call today, unless otherwise stated, we are comparing results to the same period in 2015. Our remarks contain forward-looking and cautionary statements and projections of future results. Please review the forward-looking and cautionary statements section at the end of today's earnings release for various factors that could cause actual results to differ materially from projections. Future dividend payments and share repurchases remain subject to the discretion of Altria's board. The timing of share repurchases depends on marketplace conditions and other factors. Altria reports its financial results in accordance with U.S. generally accepted accounting principles. Today's call will contain various operating results on both a reported and adjusted basis, which excludes items that affect the comparability of reported results. Descriptions of these non-GAAP financial measures and reconciliations are included in today's release, which is available on our website and via the Altria investor app. Now I'll turn the call over to Marty. Martin J. Barrington - Chairman, President & Chief Executive Officer: Thanks, Sarah. Good morning, everyone. Altria is off to an excellent start in 2016, growing adjusted diluted earnings per share by 14.3% despite a tough 2015 comparison. Both the smokeable and smokeless product segments saw robust, adjusted operating companies income growth and expanded margins. Altria paid over $1.1 billion in dividends. So once again, our first quarter results illustrate the strength of our core tobacco businesses and our focus on execution. Here are the highlights…

Thanks, Marty, and good morning, everyone. As Marty mentioned, we saw great results across our core tobacco businesses, led by our smokeable products segment. The smokeable products segment increased adjusted OCI margins by 1.7 percentage points in the first quarter to 48.1%, due primarily to higher net pricing, higher volume, and lower SG&A and manufacturing cost, partially offset by higher resolution expense. For the quarter, PM USA's reported cigarette shipment volume increased 1.2%. After adjusting for an extra shipping day, trade inventory changes, and other factors, PM USA estimates that its cigarette volume decreased approximately 0.5%. PM USA estimates that total industry cigarette volumes decreased approximately 1% in the first quarter. In the smokeless product segment, adjusted OCI margins expanded by 2.4 percentage points to 65.5%, driven principally by higher net pricing. For the quarter, USSTC reported shipment volumes grew 7.8%. After adjusting for trade inventory changes, including Copenhagen Mint pipeline volume and other factors, USSTC estimates its smokeless volume increased approximately 3%. Both Copenhagen and Skoal grew volumes, which were partially offset by declines in other brands. USSTC estimates that smokeless industry volume grew at approximately 2.5% over the past six months. In wine, net revenues grew 8.2%, driven by solid volume growth of 8.1%. Volume growth was primarily driven by strong performance among its core premium brands and the timing of the early Easter holiday. Ste. Michelle's operating companies income grew 3.7%, while segment margin contracted 0.9 of a percentage point to 20% due to increased costs. In beer, Altria recorded reported equity earnings from our SABMiller investment of $66 million, down from $134 million last year. This decrease is due to Altria's share of SABMiller pre-tax special items, primarily reflecting asset impairment charges. Finally, we continue to make returning cash to shareholders a priority, paying over $1.1 billion in dividends and repurchasing $168 million in shares. As of March 31, Altria had approximately $797 million remaining in the current $1 billion share repurchase program. We continue to expect to complete the program by the end of 2016. An important part of our strategy is to manage our strong balance sheet to deliver consistent financial performance. We are pleased to report that last month, Moody's and Standard & Poor's both upgraded Altria's long-term corporate credit rating one notch, to A3 and A-, respectively, reflecting our solid balance sheet, strong business fundamentals and the leading market positions of our businesses. That wraps up our results. Marty and I will now take your questions. While the calls are being compiled, I'll direct your attention to altria.com. Along with today's earnings release, for your reference we've posted a list of quarterly metrics, including pricing, inventory and other housekeeping items. Operator, do we have any questions?

Thank you. Our first question comes from the line of Matthew Grainger of Morgan Stanley. Matthew C. Grainger - Morgan Stanley & Co. LLC: Hi. Good morning, everyone. Thanks for the questions. Martin J. Barrington - Chairman, President & Chief Executive Officer: Good morning, Matt. Matthew C. Grainger - Morgan Stanley & Co. LLC: I just had two. First, with 14% EPS growth this quarter – and, Marty, I think you characterized it as a relatively tough comp versus last year, and a continuation of the volume and pricing trends that we saw last year still carrying through, did you consider taking up full year guidance, or taking up the low end of the range at all? And, what are the arguments against getting a bit more optimistic at this point in the year? Martin J. Barrington - Chairman, President & Chief Executive Officer: Listen, we are 12 weeks in, I guess is the honest answer. It's a great start. The businesses are in good shape, Matt. We're very pleased with the performance. I want to congratulate the teams at Altria for the work they've done. But we're 12 weeks in, and we are always careful as we start out the year. Remember, we've also got some state excise tax threats that remain out there that we are working our way through. And so that's how I would recommend that we think about that right at this moment. Matthew C. Grainger - Morgan Stanley & Co. LLC: Okay. Thanks, Marty. And from a legislative standpoint, there continues to be a fair amount of activity around efforts to raise the smoking age to 21 in a few states. There was a bill that didn't make it through in New Jersey, and now there's another bill in Massachusetts this week. I know…

Your next question comes from the line of Steve Powers of UBS.

Great. Good morning. So, obviously, strong volumes this quarter across the board. But drilling down into smokeable and smokeless, what do you think accounts for the sequential volume acceleration versus where you were in Q4, even on the more difficult year-over-year comparisons? And how do you think your shipments compare to sell-through? In other words, was there any degree of catch-up from last quarter or any degree of selling ahead of demand in Q1? Maybe I'll just start there. Martin J. Barrington - Chairman, President & Chief Executive Officer: Okay. Thanks for the questions, both. Let me separate out the categories, I think, which might be helpful for precision. Let's start with smokeable. So on a – if we look back at full year of 2015, PM USA actually grew its volume, right, by roughly 0.5%, if memory serves. And then in this quarter, Steve, what we've got is on an adjusted basis down actually 0.5%. So it's obviously well below the historical trends of 3% to 4%, but actually on a sequential basis in cigarettes, the decline has picked up a little bit, but just a little bit. I think that's the way we'd think about smokeable. The smokeless volumes, our industry estimate is, on a six-month trailing basis, we estimate about 2.5%. That's actually relatively consistent with our estimate, I think, for the last two years if you look at it on an average basis. Our shipments were flattered a little bit, obviously, because we had the launch of Copenhagen Mint. So that's how we look at the volume. I guess what I would say is the volumes continue to be strong on both segments, and that's good for our business.

Okay. If I shift gears a little bit – and you alluded to it in your opening prepared remarks, but there's obviously a lot of chatter and excitement around iQOS and heat-not-burn generally. Based on what you're seeing in other markets around the world and the progress that you've made yourselves here, could you just update us in a little more detail on your thinking about that platform and what a launch in the U.S. will sort of ultimately look like in terms of its cadence over time? Thanks. Martin J. Barrington - Chairman, President & Chief Executive Officer: Sure. Thanks for those questions. We continue to be excited about iQOS. As you know, we will have the exclusive rights to that product in the United States. We are working on two tracks. We mentioned this, I think, in our remarks. We are working closely with PMI on the FDA application to get it approved in the United States, and hopefully approved as a reduced-harm claim. And that's an important strategic development for the category generally and certainly for Altria. The other thing that we're doing is we're working on our branding plans and our go-to-market plans and how we intend to commercialize it in the United States. And I don't want to get ahead of the work, because we haven't announced anything yet, but I continue to be very excited about what I see. I think it's important to bring these kinds of products to the adult tobacco consumers. And I think it represents a major opportunity for FDA to work with the industry on harm reduction. So we're excited about all that.

Thank you, Marty. Martin J. Barrington - Chairman, President & Chief Executive Officer: Okay, Steve. Thanks for calling in.

Your next question comes from the line of Bonnie Herzog of Wells Fargo.

Good morning. Martin J. Barrington - Chairman, President & Chief Executive Officer: Hi, Bonnie.

Hi. I just had a quick follow-on question on your guidance. Other than the potential for state excise tax increases that you mentioned, are there other factors or possible drags you're anticipating in your business over the next three quarters that you could highlight for us, since your guidance implies slower EPS growth of around 6.5% for the remainder of the year at the midpoint of your range? Martin J. Barrington - Chairman, President & Chief Executive Officer: I'm not sure I have much to add to what I said earlier, Bonnie, which is – you know, there's no question we are off to a very good start. We're very pleased about that. The businesses are all in very good shape. We're just 12 weeks in, that's all. And we're trying to be prudent about that. That's the sum total of it, if you want to know the truth.

Okay. No, that helps, that there's no other big headwinds that you're foreseeing. It's just being prudent at this point. And then in terms of Marlboro, I was hoping you could give us a sense of what Marlboro volume was during the quarter, adjusted for the extra shipping day and inventory fluctuations. And I'd love to hear more color on your Marlboro app and where you're at with the rollout, as well as any incremental learnings you have gleaned from this new app in terms of consumer behavior, for instance. Martin J. Barrington - Chairman, President & Chief Executive Officer: Right. So we give reported numbers, as you know, for the brands, which are in the tables in the release. And then we try to do an adjustment at the category level. That's about all I can help you with on that. On a more positive note, we continue to do really good work in the digital space. The Marlboro app has been very well received. We had very good cooperation with a number of our trade partners, who I'd like to thank for that. We now have the Marlboro couponing app, for example, on their platform in many places. The Marlboro coupons are being accepted in more than 100,000 retail locations. It covers about 70% of industry volume. Marlboro.com, the digital platform for age-verified adult smokers, is really doing great things. We had several promotions over on the Marlboro.com side that had some of the biggest interest that we've had in a very long time. So everybody is working in the space. We are very proud of the teams that are doing the work on this. I think it's a terrific and a responsible way to connect with both our Marlboro smokers and competitive adult smokers. So we're very pleased about how digital is going.

Okay. That's helpful. And then just one final, if I may. I was just hoping you could share your thoughts or views on the recently released Royal College of Physician report out of the UK which recommends the widespread promotion of electronic cigarettes for smoking cessation. And then it also states that e-cigs are likely to be beneficial to UK public health. So, Marty, I don't know if you've had a chance to kind of look at that, but I'd love to hear your thoughts on it if you have. Martin J. Barrington - Chairman, President & Chief Executive Officer: No, I was getting ready to take your questions this morning, Bonnie, so I did read the headline. I saw the headline. I think I'm going to read the report when I have some time later today. The headline does seem to be consistent with what many in public health are saying, which is these innovative products hold promise. And they have to be done responsibly, of course, but they do hold promise for helping adult smokers migrate to less harmful products. But I'd like to – if you can allow me, I'd like to read the report in full.

Okay, fair. Thank you. Martin J. Barrington - Chairman, President & Chief Executive Officer: All right. Good to talk to you.

Your next question comes from the line of Michael Lavery of CLSA.

Good morning. Martin J. Barrington - Chairman, President & Chief Executive Officer: Hi, Michael.

Just back on iQOS, a couple things. Could you just talk a little bit about – I know at one point, if I'm not wrong, you were talking about thinking you might have the FDA application in maybe a little earlier this year. Now it's later in the year. Are you able to work with the FDA offline ahead of that? Or can you just give some color on how the preparations look and what might be driving some of the timing? Martin J. Barrington - Chairman, President & Chief Executive Officer: Sure. Let me separate out for purposes my answer this application, then the process generally. I think that's probably the way to do it. We remain – I think you've seen PMI say this – that I think the schedule remains for late third quarter, perhaps fourth quarter of this year, to file the application, which is consistent with, I think, what we've said before. These applications are quite voluminous. There's a lot of science and clinical – I'm sure you've been briefed on that; it's a lot of work. I don't want to comment about talking to FDA about this application, but generally speaking, I can tell you how it works, which is when you want to have applications like this, you want to partner with FDA. And so we communicate with FDA regularly on our issues and try to get feedback from them. I think in the pharmaceutical side, for example, it's well-known that if you're going to design clinical trials, you want to go in and talk to your regulator and show them your trial protocols and get feedback on that before you go to that time and expense. So I would say generally it's working about the same way. And that's what you would expect if you're going to have a good relationship with your regulators, which is what we see.

Okay. That's very helpful. And then just to follow up on that on iQOS if and when it does get into the market, would that be subject to MSA payments? And could it depend on how you brand it? Martin J. Barrington - Chairman, President & Chief Executive Officer: Yeah, I think there are some questions to be worked through there. I think at a very high level, without getting ahead of ourselves, I think if it's characterized as a cigarette, which, as you know, there's the device, and then the cigarette which is warmed, the cigarettes would be covered by the MSA. I think that's the thinking.

Okay. Thanks. And then just one last one on the cost savings. You've got the $300 million productivity restructuring initiative. Can you give any sense of the pacing of that? You talked about how the reorganization was complete in, I think, March. Would that mean that the bulk of the savings that you expect are now on track to be realized the rest of the year? Martin J. Barrington - Chairman, President & Chief Executive Officer: Let me just start and then I'll hand it to Billy for a word of detail. Remember, the productivity initiative consists of a couple of pieces, one of which is the organizational realignment. I think that is largely completed and our organization is now really in place and going. And then there are other SG&A savings. And, Billy, you may want to say a word about that.

Yeah, Michael. We had a little bit of those savings in the first quarter, but you are correct in thinking that the majority of those savings would be progressing as we move through the year. And that was all incorporated in the guidance.

All right, good. Perfect. Thank you very much. Martin J. Barrington - Chairman, President & Chief Executive Officer: Thanks for calling, Michael.

Your next question comes from the line of Judy Hong of Goldman Sachs. Judy E. Hong - Goldman Sachs & Co.: Thank you. Good morning. Martin J. Barrington - Chairman, President & Chief Executive Officer: Good morning, Judy. Judy E. Hong - Goldman Sachs & Co.: So on the cigarette industry, just from a competitive standpoint, it seems like the environment hasn't really changed all that much since all of the deals have happened. So just wanted to get your color on how you'd characterize the competitive environment today after all of the new contracts from your competitors have been implemented. And then, in that context, how would you characterize Marlboro's share performance? I know you look at it on a longer-term basis, but it looks like Marlboro's share has been relatively stable over the last six or seven quarters. So can you just talk to that situation? Martin J. Barrington - Chairman, President & Chief Executive Officer: Sure. Let's start with the competitive environment. It's always competitive, and it continues to be competitive. But I think you're right that there hasn't been a marked change in that regard subsequent to some owners getting new brands. They're executing the strategies that I think they said they would execute. They are the strategies that we would expect for them to execute. And as you might expect, we have very good plans in place. At a very high level what I would say is we have been the market leader for decades. There's a reason for that, through thick and thin, which is we have very good people, we have the leading brands and the leading positions. And so while we respect our competition, I assure you that our people are ready to compete in this new environment. We haven't seen anything…

Yeah, thanks for the question, Judy. Nothing significantly unusual in that. You hit the first point, which was volume was up, so that drove it up higher. And then every year we have the inflation factor that gets topped on for the MSA. So those are the two major drivers of MSA for the quarter. But thanks for your question. Judy E. Hong - Goldman Sachs & Co.: Got it. Okay. Thank you. Martin J. Barrington - Chairman, President & Chief Executive Officer: See you.

Your next question comes from the line of Priya Ohri-Gupta of Barclays.

Thank you so much for taking the question. Given your recent upgrade to A3/A-, is there any change in your philosophy around balance sheet management and shareholder returns? Martin J. Barrington - Chairman, President & Chief Executive Officer: Billy?

Yeah, thanks for your question. No, no change in strategy or philosophy. Look, we want to maintain our investment-grade credit rating, and that's what we strive to do. We are pleased with the upgrades because we think it's recognition of the strong balance sheet that we have and the strength of the businesses. But yeah, no change in the underlying strategy.

Thank you so much. Martin J. Barrington - Chairman, President & Chief Executive Officer: Thanks for calling.

Your next question comes from the line of Greg Chwatko of Goldman Sachs. Gregory Chwatko - Goldman Sachs & Co.: Thanks so much for the question. Maybe just following up on the credit questions. In terms of use of cash, or of the prospect of paying down some of the high coupon debt given the recent upgrade – I know you've done that previously. How are you thinking about your maturities and, in particular, the potential for enacting another tender for some of the higher coupon debt? Martin J. Barrington - Chairman, President & Chief Executive Officer: Yeah, thanks for your question. Here's the way we think about it. We feel very comfortable where we're at. We always monitor market conditions and try to take advantage of market conditions. So I'm not going to commit to any future actions one way or the other, but that's the way we think about it. We are comfortable where we're at, but we do monitor the market conditions. Gregory Chwatko - Goldman Sachs & Co.: Thank you.

Your next question comes from the line of Nik Modi of RBC Capital Markets.

Good morning, guys. Martin J. Barrington - Chairman, President & Chief Executive Officer: Hi, Nik.

A couple questions. The extra selling day, any way you can just give us the impact it had on volume et cetera? And then the other two question is L&M, just curious, it looks it picked up some market share. Just curious if there was any discrete initiatives going on that's driving that. And then the last question for you, Marty, is Mitch Zeller was speaking at a conference recently. Looked like he made some pretty constructive comments regarding relative risk and risk continuum. And just wanted to get your reaction and thoughts on that now that he's being a lot more vocal about the positioning of the FDA on that. Martin J. Barrington - Chairman, President & Chief Executive Officer: Sure. Thanks for those, Nik. Look, we did have an extra shipping day for PM USA, so it obviously flattered the volume a little bit. We have one fewer in the fourth quarter. So, on the yearly basis, which is how we think about it, it will wash itself out. On L&M, I would say that it's doing exactly what we want it to do. We want to have L&M participate in the declining discount segment. That industry segment continues to decline as the premium effect in the category obtains. But L&M is doing a very good job there, but we don't want to grow the discount category. And L&M is doing exactly that. I read with interest and listened to the reports about Director Zeller. I've seen his presentation. We continue to be encouraged and optimistic that the FDA will adopt the continuum of risk with respect to products. It's the right thing for consumers. I think it's the right public policy, and it should promote innovation. This is a category in which the FDA, in our opinion, should be promoting innovation to bring new products to smokers in particular. And I thought it was great that Director Zeller went out and shared his views at the conference.

Great. Thanks, Marty. Martin J. Barrington - Chairman, President & Chief Executive Officer: Thanks for calling, Nik.

Media representatives are now invited to participate in the question-and-answer session. Thank you. At this time I'd like to turn the call back over to Ms. Sarah Knakmuhs for any closing remarks.

Thank you, everyone, for joining our call this morning. If you have any follow-up questions, please contact us at investor relations.