Unverified Participant Martin J. Barrington - Altria Group, Inc. William F. Gifford - Altria Group, Inc.

Stephen R. Powers - UBS Securities LLC Vivien Azer - Cowen & Co. LLC Michael Lavery - CLSA Americas LLC Bonnie L. Herzog - Wells Fargo Securities LLC Judy E. Hong - Goldman Sachs & Co. Adam J. Spielman - Citigroup Global Markets Ltd. Christopher Growe - Stifel, Nicolaus & Co., Inc. Nik Modi - RBC Capital Markets LLC

Good day and welcome to the Altria Group 2016 Third 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. Representatives of the investment community and media on the call will be able to ask questions following the conclusion of the prepared remarks. I would now like to turn the call over to Mr. Bill Marshall (00:41), Vice President, Investor Relations for Altria Client Services. Please go ahead, sir.

Thank you, Lori. Good morning and thank you for joining us. We're here this morning with Marty Barrington, Altria's CEO; and Billy Gifford, our CFO, to discuss Altria's 2016 business results for the third quarter and first nine months. Earlier today, we issued a press release providing these results, which is available on our website at altria.com and through the Altria investor app. During our call today, unless otherwise stated, we're comparing results for 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. Adjusted results exclude items that affect the comparability of reported results. Descriptions of these non-GAAP financial measures and reconciliations are included in today's earnings release. Now I'll turn the call over to Marty. Martin J. Barrington - Altria Group, Inc.: Thank you, Bill (01:59). Good morning, everyone. We're pleased to report that Altria delivered excellent performance in the third quarter and for the first nine months of 2016. We grew adjusted diluted earnings per share by 9.3% in the third quarter and 10.3% for the first nine months. Our core tobacco businesses delivered another quarter of strong income growth on the strength of their leading premium brands. Marlboro maintained retail share near record levels, and Copenhagen and Skoal combined delivered yet another quarter of good volume growth and strong retail share growth. We also continue to simplify business processes, streamline infrastructure and invest in important growth initiatives. In August, our Board raised our dividend per share by 8%, marking the fiftieth increase in the past 47 years. And in September, we further strengthened our balance sheet by tendering for high coupon debt and refinancing it with lower coupon, longer maturity debt. Most recently, with Altria's support of Anheuser-Busch InBev's landmark business combination with SABMiller, we've maximized the value of our SABMiller investment, rewarded our shareholders with an expanded and extended share repurchase program, and enhanced our position in the global brewing profit pool. So with that backdrop, let's look at some of the operating highlights from the quarter and first nine months. The smokeable products segment produced solid third quarter results despite difficult year-over-year comparisons. The segment grew adjusted operating companies income 4.2% in the third quarter and 5.8% for the first nine months of 2016. For comparison, you'll remember that in 2015 adjusted OCI grew 11% in the third quarter and over 13% for the first nine months. The strong year-ago results were driven by several factors including the end of the federal tobacco quota buyout payments. In the third quarter and for the first nine months of this year, PM USA's total retail share was 51.4%. This represents a one-tenth of a share point increase for both periods. Marlboro maintained its industry leading retail share of 44%, up one-tenth of a share point in the quarter and stable on a year-to-date basis in line with PM USA's long-term strategy to maximize income, while maintaining modest share momentum on Marlboro. The smokeless products segment is executing very well against its long-term strategy to grow volume at or ahead of the category growth rate, while maintaining modest share momentum on Copenhagen and Skoal combined. The Smokeless Product segment grew adjusted OCI by 9.4% in the third quarter and 13.2% for the first nine months. Further, USSTC grew Copenhagen and Skoal combined retail share by 1.2 share points in the third quarter to 52.6%. It's the highest level since we acquired USSTC. Copenhagen fueled this growth with a retail share increase of 2.7 points in the quarter, due in large part to strong consumer response to Copenhagen Mint. For the first nine months, Copenhagen and Skoal's combined retail share grew 1 share point to 52.2%. In e-vapor, Nu Mark continued its disciplined rollout of MarkTen XL, optimizing its distribution while maximizing marketplace learning. As you know, FDA's final deeming regulations became effective on August 8, about which we'll say more in a moment. Nu Mark has been focused on preparing for deeming and positioning itself to succeed in the new regulatory environment. It has a pipeline of promising e-vapor products and it continues to enhance its infrastructure and systems to move those products through the required regulatory approval processes. In the heated tobacco space, we continue to partner with Philip Morris International on its FDA applications for PMI recently announced that it remains on track to submit a modified risk tobacco product application to the FDA by the end of this year, with a pre-market tobacco product application following early next year. At Altria, we continue to make progress on our commercialization strategies for the U.S. market. We're excited about this opportunity and are working closely with PMI to incorporate insights from other iQOS markets. Speaking of the FDA, a word of color might be useful now that the August effective date of the deeming regulations has passed. First, we're pleased to report that John Middleton and Nu Mark have taken the necessary steps to comply with the regulations, and we believe they are well-positioned to move forward with their strategies in the new environment. More generally, all tobacco products are now FDA regulated. For us and others in the industry, this means greater regulatory complexity and more resource commitment. For the agency, this also means more work and the need to make progress on the existing backlog of substantial equivalents in new product applications, particularly as it prepares for a large volume of applications for newly deemed products. To that end, the agency now appears to be resourced and staffed, which we're seeing reflected in the increased pace of its work across all regulated segments. Our strategy continues to be to focus on complying with the requirements of the act, while engaging constructively with the FDA to urge sensible interpretations consistent with the act. We also are encouraging FDA to promote good public policy like harm reduction, and to create a regulatory environment that fosters innovation. Through this approach, we aim to maintain a constructive relationship with FDA while protecting the rights of adult tobacco consumers and other important stakeholders. In other areas, we remain focused on simplification and cost management to improve our core businesses and invest in future growth initiatives. Today we announced plans to consolidate certain of our operating companies' manufacturing facilities to streamline operations and achieve greater efficiencies. John Middleton will transfer its Limerick, Pennsylvania, operations to the Manufacturing Center site in Richmond, Virginia. USSTC will transfer its Franklin Park, Illinois operations to its existing factory in Nashville, Tennessee and to the Manufacturing Center site in Richmond. Employees affected by the consolidation will be offered the opportunity to transfer into available positions, and our hope is that many of them will want to do so. For employees who do not transfer, they will be eligible for enhanced severance and benefits. We expect to complete the consolidation by the first quarter of 2018, and to deliver approximately $50 million in annualized cost savings by the end of 2018 over and above the previously announced productivity initiative. Finally, let's touch briefly on our beer investment. We are very excited that on October 10, Anheuser-Busch InBev completed its business combination with SABMiller. Following the transaction, the new combined grouped retained the name AB InBev. In connection with the closing, Altria received roughly 185 million restricted shares of AB InBev, representing a 9.6% ownership of the first truly global beer company and one of the world's largest consumer packaged goods companies. We also received approximately $5.3 billion in pre-tax cash, resulting from the terms of the partial share alternative including proration, and proceeds from the currency derivatives we entered into to hedge our British pound exposure. As you saw, we also announced our Board's decision to expand and extend our previous $1 billion share repurchase program to $3 billion, which we expect to complete by the end of the second quarter of 2018, and Billy will say more about our investment in the combined AB InBev in a moment. As to guidance, we reaffirm this morning our 2016 full year adjusted diluted EPS guidance to be in the range of $2.98 to $3.04, representing a growth rate of 6.5% to 8.5% from a 2015 adjusted diluted EPS base of $2.80. Long-term, our financial goals remain unchanged. So in summary, we had an excellent third quarter and first nine months and firmly believe that we are on track to achieve our full-year financial goals. So with that, I'll turn things over to Billy for more detail on our performance. William F. Gifford - Altria Group, Inc.: Thanks, Marty, and good morning, everyone. I'll start with the smokeable products segment. PM USA's reported domestic cigarette shipment volume declined 1% in the third quarter, primarily driven by the industry's rate of decline, partially offset by trade inventory movements. After adjusting for trade inventory movements, PM USA estimates that its cigarette volume declined 3% in the third quarter, in line with PM USA's estimate for total industry decline rate. For the first nine months, PM USA estimates that its adjusted cigarette volume declined 2%, in line with the industry. As you know, we have seen a moderation in cigarette industry volume declines over the last 18 months or so, as positive macroeconomic factors have benefited the adult tobacco consumer. While some of these factors are still present, the decline rate appears to be gradually reverting back to long-term historical norms as we expected. Smokeable segment adjusted OCI margins expanded by seven-tenths in the third quarter to 47.7%. The margin expansion was driven by higher net pricing and lower manufacturing cost, partially offset by higher resolution expenses and higher SG&A cost as a result of valid initiative spending. For the first nine months, adjusted OCI margins in the segment expanded 1.6 percentage points to 48.6%, driven by the same factors. Marlboro continues to innovate to maintain the brands vibrancy and relevance. Adult smokers and retailers are responding enthusiastically to Marlboro's digital engagement efforts, as Marlboro mobile coupon redemptions continue to increase in line with expectations. And recently, PM USA announced the national expansion of Marlboro Slate, a bold menthol product in the Marlboro Black family, with innovative packaging featuring soft touch ink. In cigars, Black & Mild remained the overwhelming leader in the profitable tipped segment though it lost some share overall. Middleton grew Black & Mild's reported volume by 5% in the quarter and 6.7% for the first nine months, contributing to the smokeable segment's income growth. In the smokeless products segment, reported shipment volume increased 5.6% in the third quarter and 5.9% for the first nine months of the year. After adjusting for trade inventory movements and other factors, USSTC estimates that its shipment volume grew by approximately 6% in the third quarter and 5.5% for the first nine months. This growth outpaced the estimated industry volume growth of approximately 3% over the past six months. Smokeless segment adjusted OCI margins declined slightly in the quarter, down three-tenths to 63.5%, due primarily to higher manufacturing costs and valid initiative spending. For the first nine months, adjusted OCI margins expanded 1.6 percentage points to 66.1%, primarily driven by higher net pricing partially offset by mix and higher marketing investments. In wine, Ste. Michelle grew adjusted OCI by 8.6% in the quarter and 6.2% for the first nine months. Ste. Michelle's reported wine shipment volume grew 6.3% in the third quarter and 5.8% for the first nine months. Now for a bit more detail about our beer investment. Altria's investment in SABMiller contributed $299 million in equity earnings in the third quarter and $564 million for the first nine months. After the closing of the transaction and through October 24, we used a portion of the cash proceeds to purchase approximately 12 million ordinary shares of AB InBev for a total cost of approximately $1.6 billion. Including these shares, Altria now has approximately 10.2% ownership of AB InBev. For ownership levels at or above 10%, Altria is entitled to foreign tax credits available in connection with the dividends we receive from AB InBev as we were with SABMiller previously. As a reminder, we will use the equity method of accounting for our investment in AB InBev and we'll report Altria's share of AB InBev's results using a one quarter lag because AB InBev's results will not be available in time to record them in the concurrent period. Previously, Altria recorded results for its SABMiller investment concurrently with Altria's reporting calendar. As we wrap up our results, let me provide a few additional thoughts as we move forward. In the fourth quarter, PM USA will have one fewer shipping day and Altria will, of course, have the impact of the AB InBev accounting lag. Beyond the fourth quarter, state excise tax increases remain an ongoing challenge. We are closely watching four ballot initiatives that will go to vote in November, including a proposed $2 per pack tax increase in California. We're actively engaged on this issue and are preparing for all potential outcomes. That wraps up our results. Marty and I are now happy to take your questions. While the calls are being compiled, I'll direct your attention to altria.com. Along with today's earnings release and our non-GAAP reconciliations, we've posted, for your reference, a usual list of quarterly metrics, including pricing, inventory and other housekeeping items. Operator, do we have any questions?

Thank you. Investors, analysts and media representatives are now invited to participate in the question-and-answer session. We will take questions from the investment community first. Your first question comes from the line of Steve Powers of UBS. Stephen R. Powers - UBS Securities LLC: Hey. Good morning. Martin J. Barrington - Altria Group, Inc.: Good morning, Steve. Stephen R. Powers - UBS Securities LLC: So, I guess, just to start, even with the one quarter lag in ABI's contribution to earnings this year, your current guidance is within your long-term 7% to 9% target range. But as we look forward, I guess the question that I'm getting a lot of is, is the goal to make up for that lag as we think about fiscal 2017 and over deliver on the long-term algorithm next year, or do you want investors to think more about discontinuing 7% to 9% off the reported fiscal 2016 base? Because I think acknowledging some of the excise tax uncertainty, et cetera, smokeable trends seem very solid, both price and volume. Smokeless and wine appear strong and you seem to have a little bit more flexibility than might be usual when we think about your productivity programs and the excess cash that you have to deploy post the ABI. So can you just help us weigh those puts and takes as we think about the next 12 months to 15 months? Martin J. Barrington - Altria Group, Inc.: Sure. Thanks, Steve. I can help you some and we'll be able to help you more when it's time for guidance. Listen, our long-term financial goals haven't changed. As you know, we're trying to grow long-term, 7% to 9%. That's not a guidant. That's a long-term growth aspiration. You see we've been able to do that pretty consistently about 8% over the last several years. That's basically what the model has been producing. And then as we get into each year, we look at all of the factors that we put into our guidance for a given year, and you've pointed out some factors that we're going to have to put into the guidance for 2017 given the transaction. What I would like to communicate to investors as opposed to getting ahead of guidance before it's due is how well the businesses are performing. You're right to point out that the businesses are strong and we're doing well, but there are some puts and takes every year when you do your guidance, and we'll do that when we release our guidance in January. So that's how I would encourage investors to think about it. We'll have more to say about that in a little while. Stephen R. Powers - UBS Securities LLC: Okay. That's very fair. And then just if I zoom in on the quarter-to-quarter dynamics, especially in the smokeable segment, it looks like you finished Q3 with trade inventories a bit elevated versus what might even be considered normal alongside industry decline normalization. So I guess in that context, is it fair to assume that shipment declines, as we think about Q4, will be at least in line with consumption declines, and maybe even a bit more severe than consumption trends given those inventories and the one less selling day? Martin J. Barrington - Altria Group, Inc.: Well, we don't give volume guidance forward on the quarter but there was a trade inventory build in the third quarter. If you look at the housekeeping items especially, Steve, you can see that there was a bigger build there than there was for the year-ago period. And Billy's already pointed out, I think that there's going to be one fewer trade – shipping day for PM USA, so that's how I think probably about the volume for the quarter without getting into numbers. Stephen R. Powers - UBS Securities LLC: Okay. And then one last one if I could, and this is actually on e-vapor. And I guess it's a longer term question about how far away you may be from moving towards more automated manufacturing versus hand assembly in brands like MarkTen, and how might sort of deeming in that context impacted your path towards achieving better scale and better profitability on e-vapor over time? Thanks. Martin J. Barrington - Altria Group, Inc.: Yeah, that's an interesting question. The long-term desire, of course, is to be as efficient as you can in manufacturing, and that would include our desire to have automation for the e-vapor products that are appropriate for that. You have to get the product right before you can scale to automation. But there's no question, we've been working very hard on our cost base for the e-vapor products, and automation ultimately would help us to do that. We've got some more investing to do so I probably wouldn't expect that in the short-term but it's on our list of things to think about for sure. Stephen R. Powers - UBS Securities LLC: Thanks very much. Martin J. Barrington - Altria Group, Inc.: Thanks for calling, Steve.

Your next question comes for the line of Vivien Azer of Cowen and Company. Vivien Azer - Cowen & Co. LLC: Hi. Good morning. Martin J. Barrington - Altria Group, Inc.: Good morning, Vivien. Vivien Azer - Cowen & Co. LLC: So another good quarter for Marlboro in terms of your long-term aspirations from a market share perspective, but the price gap is about as low as I've seen it going back through my model, and the retail pricing growth of 1.9% was a little bit lower than we've seen over the last few quarters. So I was hoping can you just comment on some of the activity that's ongoing in retail, number one, and number two, your level of comfort with Marlboro's price gap? Thanks. Martin J. Barrington - Altria Group, Inc.: Thanks for those questions. Well I guess I'd start out by saying that it's always competitive out there and it continues to be competitive, but I don't think there's anything particularly material to call out that's different than what we've talked about already in the year. And with respect to Marlboro, we're very happy with how Marlboro is performing. We've pointed out, I think, in the remarks we just made that it's up a tenth through the third quarter and it's hovering at near record share for the year. Our strategy in this category is to increase our income while maintaining modest share momentum. And actually, if you look at Marlboro from a share perspective, pick one period, say from 2011 forward, we've grown two share points. We look at it over time. It's doing its job and I would say it's doing its job especially well in light of the fact that we had a transaction last year and some owners got new the brands and they've obviously been working hard in the marketplace to try to advance them. So we're very happy with how Marlboro is doing. Vivien Azer - Cowen & Co. LLC: That's very helpful. Thank you for that. On the ballot initiatives that you called out, obviously you guys are actively working to affect a favorable outcome, but to the extent that perhaps the California ballot measure does pass, can you give us a sense of how you think that would impact 2017 industry volumes? Thanks. Martin J. Barrington - Altria Group, Inc.: Well, I'm reluctant to predict that, I guess. I guess what I should say about the ballot initiatives, California's not the only one. As you know, Vivien, we're working really hard on them. We're engaging with people to try to persuade them that, that's not the right approach to do because our consumers are already very heavily taxed. There's a fair amount of volume in California, obviously, and you know the elasticities and so I think that you can work out what that would be. We remain hopeful in California but it's a challenging environment. Vivien Azer - Cowen & Co. LLC: That's fair. Thanks. And last one for me, if you could just remind us of your expectations around the timing of the iQOS submissions to the FDA? Thanks. Martin J. Barrington - Altria Group, Inc.: Yeah, they remain on track. I think we've pointed out in our release this morning, as well as in our remarks, I think that they remain on track as PMI has previously outlined, and that's the last that we have on that. And it looks just like it's go. Vivien Azer - Cowen & Co. LLC: Terrific. Thank you very much. Martin J. Barrington - Altria Group, Inc.: Thanks for calling.

Your next question comes from the line of Michael Lavery with CLSA. Michael Lavery - CLSA Americas LLC: Good morning. Martin J. Barrington - Altria Group, Inc.: Hey, Michael. Michael Lavery - CLSA Americas LLC: Just following up on iQOS. Actually, I wanted to see if you could help us understand. You say you're putting in the modified risk application first and then the PMTA. The PMTA seems a little bit – if I understand it right, maybe more straightforward or almost like a predecessor to the modified risk one. Can you help us understand how you think about the timing there? Martin J. Barrington - Altria Group, Inc.: Yeah. I actually would direct you to PMI because they're – obviously, it's their application, Michael. But I can help you a little bit which is – I think it's simply the volume of work that has to go into those two applications. As you know, they're quite voluminous in terms of the documentation and I think the sense is, if the MRTP application is ready given the timelines on those, that the thinking is to go ahead and to get it in and then swiftly follow up with the PMTA. But I think it's just the volume of work to get the two applications in. I'm not sure I would read anything particularly into that, but you could follow-up with PMI. Michael Lavery - CLSA Americas LLC: No. That's helpful. That does help. And then just related to iQOS and the consolidation of the manufacturing announcement that you made. Obviously, approval is needed before you even commercialize the product, and only then, I think, would it probably make sense for you to think about production. But assuming at some point you're interested in production here in the U.S. for iQOS, do you have any sense of whether that also still has room in Richmond, or might that be a separate facility? Or is it too early to say, or just how you're thinking about how you might look ahead a little bit on that? Martin J. Barrington - Altria Group, Inc.: Sure. It is too early to say, but I can give you a high-level strategic viewpoint which is, what we're trying to do, obviously, is to make the best use of our manufacturing footprint that we can. We have a world-class manufacturing facility here in Richmond with the MC, as you know. And to the extent that those facilities can be used for other purposes, we've been mindful of that, particularly as cigarette volume goes down. Michael Lavery - CLSA Americas LLC: Okay. Thank you very much. Martin J. Barrington - Altria Group, Inc.: Thanks for calling.

Your next question comes from the line of Bonnie Herzog of Wells Fargo. Bonnie L. Herzog - Wells Fargo Securities LLC: Good morning. Martin J. Barrington - Altria Group, Inc.: Morning, Bonnie. Bonnie L. Herzog - Wells Fargo Securities LLC: I guess my first question is about your smokeless margins, which were down in the quarter. So I was hoping you could talk a little bit more about what some of the drivers of the 30 bps decline were, especially, I guess, given the strength you had with Copenhagen, and really how you're balancing those share gains with your profitability in the business? William F. Gifford - Altria Group, Inc.: Yeah, Bonnie. This is Billy. I'll take that one. When you look at a shorter-term period, you can be affected by timing of spending. So I pointed out in the remarks the manufacturing cost. If you look at manufacturing costs on a year-to-date basis in the smokeless category, it's virtually flat. Again, if you look at the margins through the first nine months, they're up 1.6 percentage points. So again, in a shorter time period, you can be affected by the timing of the spending. Thanks for the question. Bonnie L. Herzog - Wells Fargo Securities LLC: Okay. All right. And then I have another quick question for you I guess on your wine business. I was hoping you guys could drill down a little further on some of the things that are going well in that business and then maybe not so well, and then an update on your plans for this business over the next several years in terms of further investments, and if you guys plan to increase your investments whether that be organically or via acquisitions. William F. Gifford - Altria Group, Inc.: Well, thanks for the question about the wine business, which is really a terrific business and so it gives us an opportunity to call that out for our colleagues in the wine business. You've seen the numbers. It performs extremely well, they have tremendous brands and they've been growing their adjusted operating company income strongly over time. We have previously said that it is not our strategic intent to be a consolidator of the wine industry, which is, as you know, a highly fractured business. But what we do is we provide sufficient capital to the wine company from time to time so that if they want to make a small acquisition in order to improve their business or to invest in their sales force, or to help their distribution capability and the like, we do that. And they're a very nice, if small, contributor to Altria. So I want to commend the work they do, they do a terrific job but I wouldn't want to leave anyone with the idea that we're trying to be a big consolidator in wine because we are not. Bonnie L. Herzog - Wells Fargo Securities LLC: All right. Thank you. William F. Gifford - Altria Group, Inc.: Thanks for calling, Bonnie.

Your next question comes from the line of Judy Hong of Goldman Sachs. Judy E. Hong - Goldman Sachs & Co.: Hey. Good morning, everyone. Martin J. Barrington - Altria Group, Inc.: Good morning, Judy. Judy E. Hong - Goldman Sachs & Co.: So Marty, I guess the big elephant in the room here is the potential consolidation of rentals or the full ownership of BAT of rentals. So I know it's a little bit early and there's a lot of different scenarios that can play out but what do you think are sort of the implications for you guys as you think about both the smokeable and the e-vapor business? Martin J. Barrington - Altria Group, Inc.: Yeah. Listen, I'm sure you can appreciate. We're just not going to comment on that. It's just been announced that there's been an approach and we make a policy of not commenting on other folks' transactions. So I hope you forgive me but I'm not going to say nothing more about that. Judy E. Hong - Goldman Sachs & Co.: Okay. I forgive you. Martin J. Barrington - Altria Group, Inc.: Thank you. Judy E. Hong - Goldman Sachs & Co.: And then I guess maybe switching to your cash balance. So Billy, can you just clarify the net proceeds that you've gotten as it relates to the ABI deal? William F. Gifford - Altria Group, Inc.: Yeah. So as Marty mentioned, with the ABI deal and the closing of the hedged positions, we got $5.3 billion in pre-tax. We'll pay the full tax burden on that, so approximately $3.5 billion net cash proceeds after-tax from the transaction. Judy E. Hong - Goldman Sachs & Co.: Okay. And then post the deal, you've bought another $1.6 billion additional shares. So I guess if I sort of work through the cash balance, you're probably somewhere around $4 billion, $4.5 billion at this point? William F. Gifford - Altria Group, Inc.: That's correct. And then we have the tax burden that'll come out of that. Judy E. Hong - Goldman Sachs & Co.: Okay. So I guess, first my question is just, I mean, it seems like it's a pretty sizable amount even considering the stepped-up buyback program that from a timing standpoint actually extends to 2018 anyway. So can you just help us frame sort of other potential uses of cash as you think about your pretty sizable cash balance that you have currently, and then obviously the cash generation that will continue to step up as you go forward? William F. Gifford - Altria Group, Inc.: Sure. It's a good question, Judy, and I would just step back from that and kind of remind you how we think about capital allocation and cash follows them. So you know, we – first and foremost is the 80% dividend target payout ratio. And then after that we put that excess cash to use. You've seen us in the past do debt tenders, you saw us do a debt tender refi even this year. At times we look at our pension plan and fund it. Marty mentioned small tack-on acquisitions from time to time such as Green Smoke or small wins in wine. So we try to put that money to use to the best use for our shareholders. In the most current period, you saw us put some of that to use managing the diverse income streams and buying additional shares in ABI. So that's the way we think about it and that's the way we put it to use. Judy E. Hong - Goldman Sachs & Co.: Okay. And then just one clarification, the treatment of the – so the impact on the cash flow from the ABI investment, so I guess, obviously, the equity income is more from a P&L perspective but you'll get the cash benefit from the dividend. And so the treatment of the tax on that dividend, can you just help clarify the ownership threshold and how that impacts the actual cash proceeds from the dividend? William F. Gifford - Altria Group, Inc.: Sure, Judy. As you mentioned, the dividends will be unaffected. The lag that I mentioned is an accounting lag based on the recognition of the equity income. As far as the dividends received, if you own over 10% of the company, you are entitled to any foreign taxes that they paid associated with those dividends and you can take a credit for those. So being about the 10% allows us the opportunity to use foreign tax credit against those available dividends. Judy E. Hong - Goldman Sachs & Co.: So it's pretty straightforward. You take the 10.2% of the dividend and then that flows completely through the P&L – to the cash flow? William F. Gifford - Altria Group, Inc.: Whatever dividend they declare against our share, so it's a rate per share, that's the dividends we will receive when they declare dividends. As far as foreign tax credits, it's based on what's available to be applied against the dividends that we receive. Judy E. Hong - Goldman Sachs & Co.: Okay. Got it. All right. Thank you. Martin J. Barrington - Altria Group, Inc.: Thanks, Judy.

Our next question comes for the line of Adam Spielman of Citi. Adam J. Spielman - Citigroup Global Markets Ltd.: Hi. Thank you for taking my question. Martin J. Barrington - Altria Group, Inc.: Good morning. Adam J. Spielman - Citigroup Global Markets Ltd.: I'd like to go back to the elephant, if I may. And I appreciate that you don't talk about other companies, but one of the things BAT said was there were benefits from being an integrated global company. And so I'm wondering just from talking about Altria, not talking about them, can you talk about the positives and also the negatives that would be involved if you were to somehow be combined with a big international tobacco company? Martin J. Barrington - Altria Group, Inc.: Adam, I very much appreciate your invitation to get me comment on it through another means, but I'm afraid I'm not going to do it. It's just not appropriate at this time. You have to indulge me, I'm sorry. Adam J. Spielman - Citigroup Global Markets Ltd.: It was about you not them, but would you – I mean, do you see any synergies in operating with another company? Martin J. Barrington - Altria Group, Inc.: Listen, those are so fact specific as to any transaction that might ever be proposed that it would just be wrong for me to start hypothesizing about that. Adam J. Spielman - Citigroup Global Markets Ltd.: Okay. Fair enough. Talking about Middleton, I know it's a very small part of your business. Volumes were up quite nicely in the quarter, but you also lost a little bit of share. I was just wondering if you could talk in more detail about trends you're seeing in the large cigar market, obviously large machine-made cigar market? Martin J. Barrington - Altria Group, Inc.: Sure. I can tell you exactly how we've been thinking about it, which is at the highest level there's essentially two segments in that category, Adam. There's the tipped segment and then there's an untipped segment. And in the tipped segment, which is where the bulk of the profitability is, we are the overwhelming leader there both in terms of share and in terms of the profit pool. The untipped has been, for several years now, following a federal excise tax increase subject to very, very heavily promotions and the profit pool has been diminishing there. So our strategy is to be the leader where the profit pool is and that's in the tipped segment. So you can see that the overall share goes down a little bit, but actually in terms of our share of the profit pool, it's in the tipped segment, where we're doing great. Adam J. Spielman - Citigroup Global Markets Ltd.: Thank you very much. Martin J. Barrington - Altria Group, Inc.: Okay. Thank you for your question.

Your next question comes from the line of Chris Growe of Stifel. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Thank you. Good morning. Martin J. Barrington - Altria Group, Inc.: Good morning, Chris. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Hi. I just had a couple questions. First off, maybe a question to Billy. When you adjusted your EPS guidance for the accounting change in the ABI-SAB transaction, that's roughly $0.03 change that occurred, it was less than expected. I was just curious if there's anything unique that may – are you going to have several days in the quarter where you report some profit, but you won't have a full quarter's worth of profit? Is there anything unique to that calculation or the amount of profit you'll show? And if I could just add to that, I'm more interested in just how it may affect the going forward? Is there anything that would maybe take away from something in the first quarter if it helps you here in the fourth quarter, if that makes sense? William F. Gifford - Altria Group, Inc.: Yeah, Chris. Nothing particularly unique but you mentioned a period that we'd still own SAB in the fourth quarter. That is a true statement and we would recognize that the way we used to recognize SAB earnings. The remaining part of the quarter will be a lag, and that'll be recognized in the first quarter. But yeah, that's what we adjust the guidance for. That was what was included in there. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. Okay. And I had a question on – as you think about the applications from Philip Morris into the FDA for iQOS or heat not burn products, and I'm just curious how you're sharing maybe in the duties, if you will, the costs associated with that? And will your costs that you bear for the eventual launch of those products, will those really pick up as the applications go into place? Are you getting quite involved in those and therefore your costs could accelerate say in Q4 and Q1? William F. Gifford - Altria Group, Inc.: Well, I won't get into the costs necessarily, Chris, but you're right to point out that we're working together on it. It's PMI's application, but obviously we have substantial expertise with the FDA and the FDA processes. And I would say that the teams are working together very, very nicely on the work, and there's a great deal of collaboration. And then of course on the Altria side, what we have is our plans with respect to commercialization and branding and go-to-market and the like. And again, the collaboration between us and PMI has been very high including, as I think we've pointed out in our remarks, getting the benefits of the various learnings and their markets. And so the teams are working well together but I'm not – you'll forgive me, I just don't want to get into the cost at this time. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Sure. Thank you. And then just one quick one if I could, there was a little bit of – and if you just look at like the ending inventory for this quarter versus the period a year ago, a little bit of increase in inventory year-over-year. My question relates to – I know that always can vary, but is there anything related to these potential excise tax increases? Is that too early to be showing any inventory build that may occur prior to excise tax increases? William F. Gifford - Altria Group, Inc.: I don't think there's anything remarkable to call out there. As you know, it does vary from quarter-to-quarter and year-over-year. It just looks like the trade built more inventory in the third quarter than they did in the year ago. So you've got that comparison of that I think is the honest answer. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. Thank you for the time. William F. Gifford - Altria Group, Inc.: Thanks for calling.

Your next question comes to the line of Nik Modi of RBC Capital Markets. Nik Modi - RBC Capital Markets LLC: Thanks. Good morning, everyone. Martin J. Barrington - Altria Group, Inc.: Hi, Nik. Nik Modi - RBC Capital Markets LLC: So a couple of quick questions for you guys. Is it conceivable that we will even see iQOS in the U.S. in 2017 just given the application process? That's the first question and then I have two more. Martin J. Barrington - Altria Group, Inc.: Okay. I guess anything's conceivable but the applications do take time, Nik. It's probably more likely to be after that. Nik Modi - RBC Capital Markets LLC: Okay. Perfect. And then, Marty, can you remind us what happened with the California ballot initiative the last couple of times? I mean, I recall that the margins were pretty tight in terms of the vote and the ballot. Just give us a little case study on what happened the last two times if you remember? Martin J. Barrington - Altria Group, Inc.: I can do the last one for you for sure which is that you always start out behind in these things so you ask people if you want to raise cigarette taxes. Because many people don't use the products, it sounds like a good idea. You wait your campaign and what happened last time, Nik, was that the margins closed over time and it was very close. I can't remember what the exact percentage was but I believe it was less than 1 percentage point last time. And the no votes basically, I think, crossed that line late probably like the last week. Nik Modi - RBC Capital Markets LLC: Perfect. And then the final question, I never thought I'd ask this question but just given what's going on globally and things that – almost like we're going back in history with the globalization of the tobacco industry. But philosophically, like how do you guys think about getting into non-tobacco businesses? Like I'm not talking about wine because you've made that very clear, but I'm just thinking about some of the core capabilities and competencies that you have, your expanse of distribution, footprint in C-stores. I'm just trying to get a sense, have you ever considered or do you consider ever kind of diversifying out of tobacco into other fast-moving goods? Martin J. Barrington - Altria Group, Inc.: I can tell you the model we use which is the adjacency model. You're right to point out core competencies. Our history is that this is a company that owned a lot of different businesses over time, food businesses and other businesses. And I think what we learned over time was that while we have terrific people and lots of resources, we're very, very good at the tobacco business and we know how to run it. That doesn't mean that it's the only business we could run, but you have to be disciplined about what you have to bring to the party so that you can run a business better than somebody else can run the business. So that's the model we used. We're also mindful, of course, of the margins we have and how you're going to deploy capital if you get into other businesses. So we have a highly developed model. Our business development team is consistently running scans to look for what might work, but we have to be pretty disciplined about it. Nik Modi - RBC Capital Markets LLC: Very clear, Marty. Thank you. Martin J. Barrington - Altria Group, Inc.: Okay. Thanks, Nik. Appreciate it.

Members of the media are now invited to participate in the question-and-answer session. Thank you. I would now like to turn the call back over to Mr. Bill Marshall (42:01) for closing comments.

Thank you all for joining our call this morning. If you have any follow-up questions, please contact us at Investor Relations.

Thank you. This does conclude today's conference call. You may now disconnect.