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

Adam J. Spielman - Citigroup Global Markets Ltd. Owen M. Bennett - Jefferies LLC Vivien Azer - Cowen & Co. LLC Bonnie L. Herzog - Wells Fargo Securities LLC Judy E. Hong - Goldman Sachs & Co. Stephen R. Powers - UBS Securities LLC Christopher Growe - Stifel, Nicolaus & Co., Inc. Matthew C. Grainger - Morgan Stanley & Co. LLC Michael Lavery - CLSA Americas LLC Jennifer Kaplan - Bloomberg LP

Good day, and welcome to the Altria Group 2016 Fourth Quarter and Full Year Earnings Conference Call. Today's call is scheduled to last about one hour, including remarks by Altria's management and a 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 (00:58), 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 fourth quarter and full year business results. 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 to the same periods in 2015. Our remarks contain forward-looking and cautionary statements and projections of future results. Please review the forward-looking and cautionary statement 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 special 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.: Thanks, Bill (2:25). Good morning, everyone. Thank you for joining us. We're pleased to report that Altria had another outstanding year. In 2016, we grew adjusted diluted earnings per share by 8.2%, in line with our long-term objectives, while returning a large amount of cash to shareholders, improving our balance sheet and strengthening our organizational capability, thus well positioning Altria to continue to deliver on our long-term goals. During 2016, we also rewarded our shareholders by paying out over $4.5 billion in dividends, raising our dividend by 8% and repurchasing over $1 billion of our shares under an expanded $3 billion share repurchase program. Since the beginning of 2011, we have returned over $28 billion to shareholders through dividends and share repurchases. And our dividend payout ratio of approximately 80% of adjusted diluted EPS is among the highest in our peer group. In 2016, we strengthened our balance sheet by tendering for high coupon debt and refinancing it with lower coupon longer maturity debt. And in October with Altria's support of Anheuser-Busch InBev's landmark business combination with SABMiller, we enhanced the value of our beer investment and our position in the global brewing profit pool. We continue also to improve our operating efficiency, through a $300 million Productivity Initiative announced in January 2016, and a separate $50 million manufacturing consolidation plan announced in October. These efforts and others have strengthened our organization, streamlined our business processes, and provided greater autonomy to our business leaders in this dynamic environment. For 2016, Altria delivered a total shareholder return of 20.5%, marking the fourth consecutive year that total shareholder return has exceeded 20%. And over the last five years, Altria's total shareholder return was 187%, significantly outpacing both the S&P 500 and the S&P Food, Beverage and Tobacco Index. All these results are made possible by our dedicated and talented employees, so I want to thank them all. Here are some operating highlights. The smokeable products segment produced another year of strong results on the strength and consistency of its leading premium brands. Adjusted operating companies income grew by 5.3% for the year, primarily through higher pricing and effective cost management. The smokeable segment delivered this growth despite very difficult comparisons to last year when it grew adjusted OCI nearly 11%. For the year, PM USA gained one tenth of a retail share point to 51.4%, and Marlboro maintained retail share near record levels at 44%. PM USA continues to bring innovative products, packaging and adult consumer engagement activities to the market to reinforce Marlboro's vibrancy and relevance. For example, the national expansion of Marlboro Menthol Slate, a bold menthol product featuring PM USA's innovative soft touch ink packaging is receiving positive feedback from our trade partners. Last month, we further enhanced our smokeable products segment by acquiring Nat Sherman. Nat Sherman has an excellent and differentiated brand portfolio, which complements the brands in Altria's smokeable products segment. Nat Sherman brands will benefit from the retail distribution, brand management and adult tobacco consumer engagement expertise of Altria's companies. Integration and business plans are already well underway, and we welcome the Nat Sherman team of employees to the Altria family of companies. In cigars, Middleton maintained its leadership position in the profitable tipped segment, posting strong full year volume growth on the strength of the Black & Mild brand. Turning to the smokeless products segment. USSTC delivered a terrific year. The segment grew adjusted OCI 11% for the year, driven by higher pricing and volume, partially offset by higher cost and mix. Consistent with this strategy, USSTC grew retail share of Copenhagen and Skoal combined by 0.9 of a share point to 52.2%, the highest full year share since we acquired USSTC. Our portfolio strategy has enhanced Copenhagen and Skoal's competitive positioning and improved USSTC's efficiency and profitability. In 2016, Copenhagen continued to build on its position as the smokeless category's largest brand with the successful national expansion of Copenhagen Mint. Copenhagen is also the fastest growing smokeless tobacco brand posting a 2.2 retail share point gain for the year, more than offsetting Skoal's 1.3 share point decline. Product innovation was also a focus area in 2016. In e-vapor, Nu Mark made excellent progress this year toward achieving its long-term aspiration of becoming a leader in the e-vapor category. Nu Mark's disciplined test and learn approach to MarkTen's national expansion continues to gain traction. At year end, MarkTen was available in stores, representing about 55% of the e-vapor category volume in retail channels, including c-stores. In heated tobacco, Altria continues to partner with Philip Morris International on its FDA applications for IQOS. In December, PMI submitted a modified risk tobacco product application to the FDA for the heated tobacco product that PM USA will commercialize in the U.S. under our agreement with PMI. PMI plans to file the premarket tobacco product application during the first quarter of 2017 and concurrently, PM USA continues to develop its U.S. plans. For example, a commercialization team is now dedicated to preparing for the launch of IQOS in the U.S., including working closely with PMI, as it gains trade and consumer insights from other markets. In the wine segment, Ste. Michelle delivered another strong year on the performance of its premium brands with adjusted operating income growth of nearly 10%. For the second consecutive year, Ste. Michelle's premium wines received more than 260 ratings of 90 or better. In October, AB InBev completed its business combination with SABMiller, with Altria ultimately securing a 10.2% ownership in AB InBev. This transaction enhanced the value of Altria's beer investment and we expect it to deliver strong long-term financial returns to our shareholders. So to sum up, 2016 was another excellent year for our strong premium brands, our companies and our shareholders. We achieved significant milestones against an ambitious plan and we believe that we have positioned Altria well for continued future success. Let's turn for a moment to the regulatory environment. As you know, we continue to work closely with the FDA as it builds out its regulatory framework. One area is our company's substantial equivalence applications both for provisional and new products, so one of our priorities is to resolve those applications and the pace of work there has picked up. Second, for cigars in e-vapor, we're preparing the product applications now required by the deeming regulations and continuing to advocate for sensible interpretations consistent with the act. Third, our companies continue to develop new and innovative products to meet evolving adult tobacco consumer expectations, including products that advance tobacco harm reduction. This too requires advocating FDA and others to support and foster innovation that will benefit adult consumers. We expect to step-up in investments because of these activities. As you've seen from our press release, we expect to grow our full year adjusted EPS for 2017 to a range of $3.26 to $3.32, representing growth of 7.5% to 9.5% from our 2016 adjusted diluted EPS base of $3.03. So we expect another strong year for Altria. It may be helpful to share some further color on how we're thinking about that. So to begin, we're expecting continued strong performance from our operating companies and we believe that the macroeconomic environment remains largely constructive for adult tobacco consumers. We also will have the benefit of reporting four full quarters of equity earnings from AB InBev. On the other hand, we've seen some cigarette volume declines reverting back to more long-term norms. We also know that in April, California, a high volume state will implement significantly higher excise taxes and there are already proposals in several states to raise excise taxes further. And finally, we've taken into account an expected increase in our effective tax rate for 2017, which Billy will explain in a moment. The most important point is that we are entering 2017 with very good momentum from last year and are expecting another year of growth in line with our long-term financial goals. And so with that, I'll turn the call over to Billy. William F. Gifford - Altria Group, Inc.: Thanks, Marty and, good morning, everyone. Our operating companies delivered solid results in the fourth quarter. In the smokeable products segment, fourth quarter adjusted OCI grew by 3.7%, and adjusted OCI margins increased by 2 percentage points, both driven by higher net pricing and lower benefits cost. For the year, adjusted OCI margins in the segment expanded 1.8 percentage points to 48.2%, driven by higher net pricing and lower benefits cost, partially offset by higher resolution expenses. PM USA maintained its leading retail position in the fourth quarter. PM USA's reported domestic cigarette shipment volume declined 4.8% in the quarter, primarily driven by the industry's rate of decline and one fewer shipping day. After adjusting for calendar differences, PM USA estimates that its cigarette volume declined approximately 3.5% in the quarter, and that total industry cigarette volumes also declined by approximately 3.5%. For the year, PM USA estimates that its adjusted cigarette volume declined approximately 2.5% and that total industry volume also declined by approximately 2.5%. Over the last three quarters, we are seeing the cigarette industry volume decline rate gradually revert to more long-term historical norms. In the machine-made large cigar category, Middleton's focus on the profitable tipped segment continues to yield strong results. Middleton's volumes were up 5.3% in the fourth quarter and 5.9% for the full year. In the smokeless products segment, fourth quarter adjusted OCI grew by 4.3%, driven by higher net pricing and volume, partially offset by higher cost. Fourth quarter adjusted OCI margins decreased by 2 percentage points, due primarily to higher manufacturing costs and promotional investments. For the year, adjusted OCI margins expanded seven-tenths of a percentage point to 64.4%, primarily driven by higher net pricing, partially offset by mix, higher manufacturing cost, and higher promotional investments. In the fourth quarter, USSTC grew volume ahead of the category growth rate, and increased Copenhagen and Skoal's combined retail share by 1.1 share points to 52.5 share points (sic) [52.5%]. USSTC's reported shipment volume increased 2.2% in the quarter and 4.9% for the year. After adjusting for trade inventory movements and other factors, USSTC estimates that its shipment volume grew by approximately 4.5% in the quarter and 5% for the year. This growth is well ahead of the estimated industry volume growth of approximately 2.5% over the past six months. In wine, Ste. Michelle grew adjusted OCI by 16.4% in the fourth quarter and 9.9% for the year. Ste. Michelle's reported wine shipment volume grew 4.2% in the quarter and 5.3% for the year. Let me pickup on the tax issue Marty mentioned when discussing our guidance for 2017. For a variety of reasons, we expect that our 2017 full year effective tax rate on operations will be approximately 36% compared to 34.7% for 2016. One of these reasons is because we anticipate fewer foreign tax credits related to AB InBev dividends. Though technical, this is driven by differences in the profit pools between AB InBev and the former SABMiller. 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. Our first question comes from the line of Adam Spielman of Citi. Adam J. Spielman - Citigroup Global Markets Ltd.: Hi. Good morning. Thank you for much for taking my question. Martin J. Barrington - Altria Group, Inc.: Good morning, Adam. Adam J. Spielman - Citigroup Global Markets Ltd.: So, obviously, your main competitor has agreed to be taken over and there's been speculation with respect to your sales. I was wondering, my first question is, can you outline what you would see as the advantages and the disadvantages of being part of a bigger tobacco group? Because there must be some advantages and there must be some disadvantages. Martin J. Barrington - Altria Group, Inc.: No, I think I'm going to steer away from that topic, Adam. As we've discussed previously, I think it's just not appropriate for me to be drawn into either anyone else's transactions or speculation about future transactions. I just don't really know how to discuss that intelligently without going there. So I'm afraid I won't do that. Adam J. Spielman - Citigroup Global Markets Ltd.: Okay. Thank you. It's a clear and sensible answer I would say. Moving on to the domestic cigarette industry, I was wondering if you could talk about a little bit and give some color about how you're seeing the pricing environments? Particularly in the light of the fact that Imperial has said, if anything, it wants to invest a little bit more in pricing to grow market share perhaps a little bit faster. And also in the light of the fact that, at least according to the scanner data, Reynolds market share has stopped growing and is perhaps declined. So it's really a question about the pricing environment in the light of that. Thank you. Martin J. Barrington - Altria Group, Inc.: Yep. Thanks for calling in. I appreciate your questions. I won't talk about anyone else's pricing, but I can tell you how we think about pricing and the numbers that we put out I think demonstrate it. Listen, for us, we're a publicly-traded company. We have growth aspirations and our Master Settlement Agreement payment goes up every year and we have FDA payments that go up every year. And our principal income contributor is the cigarette category where the volume goes down. So the strategy there for us is to take appropriate pricing in order that we can grow in line with our aspirations. And we've been able to do that. You've seen that pricing for the year in the smokeable segment of about 4%. If you look at it slightly longer periods, Adam, I think it's on average somewhere between 4% and 5% – it bounces there – and that algorithm works for us in terms of the profitability we expect from the smokeable segment. So that's how we think about pricing. Adam J. Spielman - Citigroup Global Markets Ltd.: Okay. Thank you very much. Martin J. Barrington - Altria Group, Inc.: Thanks for calling in.

Your next question comes from the line of Owen Bennett of Jefferies. Owen M. Bennett - Jefferies LLC: Good morning, guys. Hope all are well. Martin J. Barrington - Altria Group, Inc.: Hi, Owen. Owen M. Bennett - Jefferies LLC: And just two questions, please. Firstly, I was wondering if you could be a bit more specific on expectations for cigarette industry volume into fiscal year 2017. And secondly, could you comment on the current share and share trends of Nat Sherman and then what are your realistic expectations for the brand going forward? Thanks a lot. Martin J. Barrington - Altria Group, Inc.: Sure. Good questions, both. Listen, I think you know we don't guide on volume, but Billy made reference to this in his prepared remarks. For the year, on an adjusted basis, we've got volume down for us at about 2.5%. But obviously, the declines were higher in the back half of the year than they were in the first half of the year. And you're familiar with all the reasons for that, I know, so I won't repeat them. So we've taken that into account as we thought about our plan for the year. And in addition, of course, we mentioned we've got the California excise tax coming online in April and we've been mindful of that. Listen, we're really happy about the Nat Sherman acquisition. They have a terrific team of people over there. They have a very complementary brand portfolio to us. It's a small share position as you know. It's much more of a niche position. But we believe that when we combine their talented people and brands with the system that we have in terms of retail distribution and brand expertise that we can really make this grow quite nicely. So we haven't put out any targets on that, as you can appreciate from a competitive point of view. But it's a very nice addition to the smokeable segment for us and we're really excited about it. Owen M. Bennett - Jefferies LLC: Cool. Thanks very much. Martin J. Barrington - Altria Group, Inc.: Thanks, Owen. Good to hear your voice.

Your next question comes from the line of Vivien Azer of Cowen. Vivien Azer - Cowen & Co. LLC: Hi. Good morning. Martin J. Barrington - Altria Group, Inc.: Hi, Vivien. Vivien Azer - Cowen & Co. LLC: So two questions for me, please. First, Marty, your commentary about your constructive view on the consumer heading into 2017. Just curious your thoughts on how a potential border adjusted tax would impact that view. Obviously, a lot of moving pieces in terms of the tax proposal. But perhaps more broadly, like what do you think would make you more cautious on the consumer in 2017? Thanks. Martin J. Barrington - Altria Group, Inc.: Sure. I don't know that we thought that, that would be material. And I guess it's just so – it's moving around so much, Vivien, in terms of what those proposals are that we haven't really built that into our plan. I'll give that some thought, but nothing comes immediately to mind that would change the view that I expressed. Vivien Azer - Cowen & Co. LLC: Okay. That's fair. And then secondly on the commercialization team for IQOS, just from a regulatory standpoint as you look at what is permissible in terms of product activation in the United States. Can you point us to a couple of countries where PM is already in the market that would most closely mirror the U.S. from a regulatory standpoint in terms of communication and advertising and consumer engagement? Thanks. Martin J. Barrington - Altria Group, Inc.: Yeah. That's a thoughtful question. What we're doing is we're trying to look at each of the markets and see about those parallels and extract the – not just the consumer insight but the trade insight. So, for example, if one goes to Italy, as you know, it's quite a dark market. And because IQOS requires a fair amount of exposition to the consumer to understand what it is, I think that PMI would be the first to tell you that Italy's been a bit more challenging. There are other markets that are more open in terms of the ability to communicate with the consumer. You see the results in Japan and you know the regulatory situation there. Our job at PM USA is to read all of that data, and with our expertise about what is permitted in the United States, including under the Master Settlement Agreement, for example, is to weave that into a plan that will meet our goals. What we're going to try to do, of course, is to introduce adult smokers to the product, try to explain what it is and its attributes and to give them an opportunity to see if it's for them. And we've got very good plans coming together on that and many of which, I think, are drawn from the international market experience. Vivien Azer - Cowen & Co. LLC: That's really helpful. Just to follow up on that. So as you understand it like sampling and execution models similar to Italy with the embassies where IQOS would be permissible in the United States? Martin J. Barrington - Altria Group, Inc.: We'll have to work through all that. I don't want to prejudge the results on that because we'd want to get a good plan together and take advice to make sure that we're staying on the right side of the line. But our aspiration is to use the tools that are available to us to get very good exposure to adult smokers and to explain to them as best we can what it is and what its attributes are. That's the idea. Vivien Azer - Cowen & Co. LLC: Perfect. Thanks very much. Martin J. Barrington - Altria Group, Inc.: Okay. Good to talk to you.

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.: Hi, Bonnie. Bonnie L. Herzog - Wells Fargo Securities LLC: Hi. So I guess my first question, I wanted to talk to you guys a little bit about this smokeless recall and hoping you could talk a little bit more about that and really how extended it could be. Trying to understand the facility that's impacted, I believe it's one out of five facilities, and my understanding is, you're not shipping out of that plant yet. Maybe give us a sense of when you could be or if you can make up some of the volume or supply from your other facilities. Just trying to understand what kind of impact this could be over the near term? And is this factor – just confirm it's factored into your guidance? Martin J. Barrington - Altria Group, Inc.: Well, let me start with that. I think the guidance that was issued this morning, of course, is a range and we've taken everything that we know today into account in issuing that guidance. Listen, I can't tell you much more than what's in the press release because we put in the press release basically what is known. So just to reprise, we've got, as you know, we produce hundreds of millions of cans of smokeless. We have eight consumer complaints with metal objects in the cans and so we've been working closely with the FDA. No one has reported any injuries. What we're trying to do is to make sure that we're doing the responsible thing with respect to the consumers. We want to make sure that we're doing everything we can so that no one is injured as a result of this particular incident. And also, it's important of course to protect the brand trust. So the way I think I would think about it is, of course, it's a short term disruption, but in the long-term what you want to do is to protect the consumer from harm from this and protect the trust of the brand. We actually have two smokeless factories. The Franklin Park facility is the only one that is affected, Bonnie, and it is the smaller of our factories. So the Nashville factory has not been implicated and that's actually where most of the volume goes through. We want to make sure that we've got this buttoned up before we ship any more product out of Franklin Park and we'll do that as soon as we feel like we have our arms around it. And I just can't give you that date while we're on the call this morning because I don't have it. Bonnie L. Herzog - Wells Fargo Securities LLC: Okay. Well, that's helpful. And then switching gears to IQOS. You mentioned that the expectation for the PMTAs to be filed during the first quarter. So in your mind then a realistic timeframe, when do you expect to commercialize IQOS? Would it be Q4? And then just trying to get a sense for the resources PM might be sharing with you and maybe your plans for opening retail stores to educate consumers about this technology. And any color on that in terms of how many and maybe potential locations and just again, wanted to confirm that the expenses of this are also factored into your 2017 guidance. Martin J. Barrington - Altria Group, Inc.: I'll take that again last, which is the answer is yes. Everything that we know about right now is factored into the range of the guidance that we issued this morning. That includes the work that we're doing to get ready to commercialize IQOS. As you know, we can commercialize IQOS when the FDA rules on its applications and you know what the schedule for that is. I don't want to really tell folks what our competitive plans are about how we're going to do that. But I would go back to what we were discussing earlier, I guess, which is that the object is to make sure that we get the product to adult smokers and explain how it works and what its attributes are so that they can make a choice about whether it's for them. And there's a whole range of activities that you can use to do that. I just don't want to lay them out, as you can appreciate, for competitive reasons. But we're well underway. We have a crackerjack team on it. We're very excited about the technology. We're working closely with PMI. So from my read, I think all the signals from a commercial point of view are in the right direction and we're just going to have to work through the FDA process. Bonnie L. Herzog - Wells Fargo Securities LLC: Understood. That's helpful. And just maybe one final quick question on circling back on cig volumes. I was just curious to hear from you what you saw in December, specifically on volumes. The reason I'm asking is because the scanner data was very weak for that month in particular. I'm just curious if that's consistent with your business and what you think could have been the reason for that. Thanks. Martin J. Barrington - Altria Group, Inc.: I'm not sure I can help you on a month by month basis, but you did see that the volume decline accelerated in the fourth quarter. And, of course, I know you know this, but we had one fewer shipping day. So I think that's the way to think about it. It's just hard to grind into it on a monthly basis. Bonnie L. Herzog - Wells Fargo Securities LLC: All right. Thank you. Martin J. Barrington - Altria Group, Inc.: All right. Thanks for calling.

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 - Altria Group, Inc.: Good morning, Judy. Judy E. Hong - Goldman Sachs & Co.: So when – just a quick follow up on the smokeless recall. If I kind of look at the SKUs that you highlighted in the press release, are we in the ball park in thinking the volume impacted is around 10% to 15% of the total smokeless volume? William F. Gifford - Altria Group, Inc.: I wouldn't hazard a number because we're not there yet. Judy E. Hong - Goldman Sachs & Co.: Okay. I was just taking all of the SKUs and trying to extrapolate the volume. But... Martin J. Barrington - Altria Group, Inc.: Yeah, I mean, to explain that we'd have to get into what factory makes what SKUs and at what percentages and that – I just don't think that's a good use of our time. Judy E. Hong - Goldman Sachs & Co.: Okay. And then, Marty, I think it came up a little bit earlier in the call, but just in terms of some of the potential changes that you may be expecting both kind of on the regulatory front and also on the tax front as it relates to some of the changes that are potentially going on at the agency level as well as some of the corporate tax reform policies, how are you thinking about the base case scenario for those outcomes? And then sort of how that impacts the investments or any kind of decision to invest more into the business or return cash more to shareholders going forward. Martin J. Barrington - Altria Group, Inc.: Got it. Well, let me talk about the long-term, Judy, and then maybe I'll try to talk about 2017. Listen, to the extent that corporate income tax rates could be reformed as we've discussed previously, that would be a good thing for American business obviously and, as you know, Altria, it would be a good thing for Altria. And so we've had a program underway to try to urge that as a matter of public policy to reduce the corporate income tax rate. We have not built that into our 2017 plans because I think the best thinking is corporate tax reform is pretty complicated. It's likely to take 2017 to do it. But obviously, it would be a material step up for Altria if we got significant corporate tax reforms. So that would be important for us to think about if and when it occurs. I think it's the same thing on a regulatory basis. Both at the FDA and for regulatory agencies, generally there appears to be a movement to try to lessen the regulatory burden on business. Our view that would be good. But those things take time to work their way through the agency. Take HHS for example. We don't even have a cabinet appointee yet much less changes that would occur down the line. So our government affairs team and our regulatory affairs team are working very hard on that. But I would think of those more in the long-term than in the short. Judy E. Hong - Goldman Sachs & Co.: Got it. Okay. And then just when you talked about the speed in which some of the SC applications are just getting decided is improving. I mean, just elaborate on what's driving that and did you say you're also spending more resources to make that happen from your perspective? Martin J. Barrington - Altria Group, Inc.: We have been investing in both regulatory capability and in R&D capability and I was trying to provide some color around the guidance in that regard because there's more of it than there used to be. The SC process has picked up. Look, if you're at the agency, you're not only looking now at working your way through substantial equivalents, but you have under your deeming regulation a lot of product applications that are going to be heading your way. So we see a pickup in the activity, and our activity naturally has picked up commensurate with that. Judy E. Hong - Goldman Sachs & Co.: Got it. Okay. Thank you. Martin J. Barrington - Altria Group, Inc.: Okay. Good to talk to you.

Your next question comes from the line of Steve Powers of UBS. Stephen R. Powers - UBS Securities LLC: Good morning. Thanks. Martin J. Barrington - Altria Group, Inc.: Hi, Steve. Stephen R. Powers - UBS Securities LLC: So you – hey. So you finished 2016 with $1.9 billion remaining on the buy-back and about $2.2 billion more cash on the balance sheet than when you exited 2015. So it seems reasonable to assume you'd expect to execute the vast majority, if not all of the remaining authorization in 2017. But at the same time there are some restructuring costs to consider and we've recently seen you prioritize M&A in the form of Nat Sherman. So and I appreciate you're not going to want to give guidance on this, but just a little bit more color on how to think about cash priorities in the coming year just given all those moving parts. Martin J. Barrington - Altria Group, Inc.: Sure. Billy? William F. Gifford - Altria Group, Inc.: Yeah, thanks for the question, Steve. You're right. We had $1.9 billion left over at the end of last year. From a standpoint of cash needs or the way we think about capital allocation, nothing has changed. And so, when we announced that program, we said we would complete it by the middle of 2018 and you can see with the progress we've made, we're on track to do that. And so really nothing has changed either from a cash needs or cash priorities or from the capital allocation process. Thank you for the question. Stephen R. Powers - UBS Securities LLC: Great. Thank you. And just one more on IQOS and thanks for the prior updates that you've been providing on this call. But you'd mentioned Marty, some of the learnings you're drawing from other markets as you look around the world and plan for the launch in the U.S. I was wondering if there are anything unique to your strengths in the U.S. that you might also be uniquely positioned to deploy? And I'm thinking specifically of your mobile app and your digital activation capabilities and how that may play into any rollout of IQOS and how that may differ from other rollouts we've seen around the world? Thanks. Martin J. Barrington - Altria Group, Inc.: Yeah, that's a good question. We do, as you know we've discussed previously, we have a strong digital marketing team and I'm really proud of the work they're doing on the core business. And you're right to think that there are lots of applications that if you're trying to communicate and educate consumers about what products are, that digital is the way to go. It has to be done empirically and responsibly of course and I don't think anybody would be surprised to learn that we're considering that and others. We have, I think, a significant competitive advantage in our sales force. It's large, they're very talented, they're very well led and so naturally we would be thinking as we go to market about how we can use that to help IQOS be successful. I think we have excellent relationships with our trade partners. That's another area that's going to require a lot of thinking about how we take IQOS to market and working with our trade partners. So those are all areas of inspection. And you're thinking about it the right way which is, what is it that we have that we can use to the best effect to make IQOS a big success. Stephen R. Powers - UBS Securities LLC: Very good. Thank you. Martin J. Barrington - Altria Group, Inc.: All right. Thanks for calling in.

Your next question comes from the line of Chris Growe of Stifel. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Hi. Good morning. Martin J. Barrington - Altria Group, Inc.: Hi, Chris. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Hi. I had a question for you if I could first in relation to pricing. There was a little larger price increase taken back in November. And I know that could be beneficial for profitability, but I suspect you want to reinvest some of that. At the same time, you have a couple of cost savings plans that you're also reinvesting back in the business. So I wanted to understand with that incremental pricing, do we think about that as being another lever, if you will, for you to reinvest back in the business? And are there any areas you're trying to accelerate your investment beyond what you already talked about? William F. Gifford - Altria Group, Inc.: Yeah, thanks for the question, Chris. This is Billy. From a standpoint of our productivity, as we previously talked about, some of that productivity would fall to the bottom line, some from a reinvestment. I wouldn't read too much into any specific individual price increase. We think about pricing over the long term. And so we make those decisions for that in that regards. And it's really to balance for our long-term financial goals, so that seven to nine through time. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. You have a very narrow price gap today as well between say Marlboro and discount products. And is that playing into the view that you could take a little bit more pricing in the short run while that gap is quite low. Martin J. Barrington - Altria Group, Inc.: Yeah. I was looking at the housekeeping that we put out. If you look, Chris you've probably seen this this morning, but when you look at what happened to the Marlboro net pack price, year-over-year was up $0.12 and the lowest effective – that was $0.12, and then lowest effective was up $0.16. So it's really just the math that narrowed the price gap. But as you know, we're trying to maximize income and to the extent that pricing is an element of that we're always mindful of that. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. I had just one follow-up question. As we think about the California tax increase going into place in April, should we think of – can you – are you likely to experience an inventory build prior to that or anything that could really distort the first quarter and maybe actually help it if they're able to build inventory prior to the tax increase? William F. Gifford - Altria Group, Inc.: Yeah, Chris, this is Billy. We don't project any significant changes in inventory. You know they always fluctuate over a shorter time period. That SET does go into place April 1. I do think it has a floor tax provision in it that tends to moderate any inventory movements in a short term basis. Christopher Growe - Stifel, Nicolaus & Co., Inc.: Okay. Thank you for your time. Martin J. Barrington - Altria Group, Inc.: Thanks for calling, Chris.

Your next question comes from the line of Matthew Grainger of Morgan Stanley. Matthew C. Grainger - Morgan Stanley & Co. LLC: Hi. Good morning. Thanks for the question. Martin J. Barrington - Altria Group, Inc.: Hey, Matt. Matthew C. Grainger - Morgan Stanley & Co. LLC: I just – hi. I just had two follow-ups on things that have come up earlier in the call. First, on IQOS. You've talked about a number of dynamics that you've taken into account in the EPS guidance for next year. Beyond the equity income and the tax rate, et cetera, how much of a spending contingency are you building into your 2017 plans for some of that commercialization spending on IQOS and continuing to build up that infrastructure? Martin J. Barrington - Altria Group, Inc.: Well, gosh, Matt, if I told you I'd have to tell everyone, wouldn't I? So I appreciate the question, but we can't – we're just not going to lay that out as you can appreciate. Matthew C. Grainger - Morgan Stanley & Co. LLC: Yeah, I know. Martin J. Barrington - Altria Group, Inc.: Yeah, good try though. Matthew C. Grainger - Morgan Stanley & Co. LLC: Yeah, small, medium or large, I don't really need an absolute dollar figure. Martin J. Barrington - Altria Group, Inc.: (39:18) yeah, sure. Matthew C. Grainger - Morgan Stanley & Co. LLC: Okay. I'm digging deep here. I don't know if anyone's after me but on California, just from a portfolio standpoint, is there any sense you can give us of whether you're materially over-indexed or under-indexed in any way to the state? My sense is that you're moderately over-indexed to California from a volume perspective. But not sure if that's a fair characterization. Martin J. Barrington - Altria Group, Inc.: We're strong in California. You're right. Matthew C. Grainger - Morgan Stanley & Co. LLC: Okay. All right. I'll leave it there. Thanks. Martin J. Barrington - Altria Group, Inc.: All right. Thanks, Matt. Appreciate your questions. See you.

Your next question comes from the line of Michael Lavery of CLSA. Michael Lavery - CLSA Americas LLC: Good morning. Martin J. Barrington - Altria Group, Inc.: Hey, Michael. Michael Lavery - CLSA Americas LLC: Just wanted to follow up on the Nat Sherman expansion a little bit. Can you just give some sense of your execution plans there? Is it primarily a distribution push? Where is it strong now? Where would it sit on the shelf set? Would you integrate it with your current shelf set? And what kind of timing would that take? And what are some of the marketing initiatives you would expect to put behind that? Martin J. Barrington - Altria Group, Inc.: Yeah, I'd like to tell you more but, honestly, the close was just so recently we're working through all of that now. But I can help you, I think, understand what we're trying to do, which is they've got very nice brands and they are differentiated from the current portfolio on smokeable. They tend to be sold a lot, as you probably know, in tobacco stores and some other niche locations. There's no reason that they can't be distributed more widely and I think that would definitely help the brand. I think when you put them in a sales force, like the one that Altria has, you would expect for there to be a good distribution growth there. And we're very excited about it, but we're just not in a position to lay out sort of the strategy for 2017. We've just really closed on it, although they're fast added over there. Michael Lavery - CLSA Americas LLC: Okay. That's helpful. And then on IQOS, I know we've touched on some of these, but can you give some context around some of the potential economics for that and how it might compare to the rest of the portfolio? Is there a substantial royalty? And if so, is there flexibility in how you would think about pricing? Or what's the right way to think about how you manage that relative to the other pieces of your portfolio? William F. Gifford - Altria Group, Inc.: Yeah, I think, Michael, when you think about the way we manage our portfolio, we like high margin businesses. We like profitability. You can see from the strategies we reiterate over and over again, it's way too early to get into that discussion with IQOS. Remember that application was just filed. Commercialization would be towards the end of this year, at the earliest, into next year. So we still have a while to go before we can get into those details, but thank you for the question. Michael Lavery - CLSA Americas LLC: And then just one last one. On any costs associated with the smokeless recall, would it be reasonable to assume that those would be treated as one-time items excluded from adjusted earnings? William F. Gifford - Altria Group, Inc.: I think, again, Michael, not to push you off into the future, but we just announced that recall. We're in the process of garnering all of that. Rest assured, we felt comfortable issuing the guidance we did this morning, but to talk about how we're going to treat that cost on a go forward basis, it's too early. Michael Lavery - CLSA Americas LLC: Okay. Thank you very much. Martin J. Barrington - Altria Group, Inc.: Thanks for calling in.

We will now open the call to members of the media. Your next question comes from the line of Adam Spielman of Citi. Adam J. Spielman - Citigroup Global Markets Ltd.: Thank you for the follow-up question. Very quickly, if I look at your guidance this year, you've got a $0.06 range. Previous years you've had a $0.05 range. I guess that implies that you see a little bit more uncertainty for 2017 than you did this time last year. I was just wondering where you think this range of uncertainty has widened? Martin J. Barrington - Altria Group, Inc.: Thanks. I actually wouldn't read that into our guidance at all. As a matter of fact, what I would read into the guidance, just for historical reference, this is the strongest guidance we have come out with in January, I think, in the last eight or nine years and I think that's actually what should be read into the guidance. I wouldn't read anything into that range at all. Adam J. Spielman - Citigroup Global Markets Ltd.: Okay. Thank you. And actually a follow-up question related to the previous one. Obviously when you're preparing your guidance, you have to make some assumptions about your beer business, previously SAB now ABI. And I'm just wondering whether the way you thought about the range of outcomes that you're going to get from beer has altered or whether you're adopting exactly the same mechanical approach now with ABI as you used to with SAB? William F. Gifford - Altria Group, Inc.: Yeah, I think from a standpoint of, you know we don't guide down to that level, but to explain how we build it into our guidance, you're right. We build a range of scenarios for all of the factors that we incorporate into guidance. So we ran a range of scenarios on those, very similar to the way we would have with SAB. The only difference is we have a one quarter accounting lag. And so the fourth quarter of 2016 will be recognized in 2017, and then that lag will carry forward. We'll have a full four quarters in 2017. One quarter will be from the fourth quarter 2016 and the first three quarters of 2017. That's the way we incorporate into guidance. Adam J. Spielman - Citigroup Global Markets Ltd.: Okay. Thank you. Martin J. Barrington - Altria Group, Inc.: Appreciate you calling back in.

Your next question comes from the line of Jenny Kaplan of Bloomberg. Jennifer Kaplan - Bloomberg LP: Hi. Thank you so much for taking the call. Martin J. Barrington - Altria Group, Inc.: Good morning. Jennifer Kaplan - Bloomberg LP: Good morning. Given the potential timeline for IQOS in the U.S., I'm wondering what are your plans for bulking up customer support given some of the technical difficulties faced by PMI, for example, when they first launched in Japan? And kind of the growing pains in getting customers accustomed to the new product? I mean, how do you deal with creating that, sort of, tech support that's obviously not needed for cigarettes? Martin J. Barrington - Altria Group, Inc.: Well, thanks for that question. I guess I'd refer back to the remarks I made earlier this morning which is, all of that's under consideration right now. We have the benefit of working closely with PMI to gain the learnings that they've gained in that regard. And we're looking at the tools that we have available at our disposal and thinking about how best to match those goals with the tools that we have. And I'm confident that with the great work we're doing with PMI, and our existing business, we know a lot about this consumer set that we'll be able to solve for a great deal of that. So we're working on that now. Jennifer Kaplan - Bloomberg LP: Got it. Just a quick follow up. Is there any sense of a need to hire more people, or different kinds of people, in order to deal with that? Martin J. Barrington - Altria Group, Inc.: I guess the way I would think about it is you always have a – it's a question of how you're going to deploy your resources against your most important initiatives. And you may have heard us say earlier in the call that the dedicated commercialization team, for example, to work on IQOS, because it's their job to get up every day, and come to work, and think about how to make IQOS a success. So it's not about more, as much as it is, I think about having the right people working in the right focused way. And I'm pretty confident that we have that. Jennifer Kaplan - Bloomberg LP: Thank you so much. Martin J. Barrington - Altria Group, Inc.: Okay. Thanks for calling.

Thank you. At this time, I would like to turn the call back over to Mr. Bill Marshall (46:40) for any 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 concludes today's conference call. You may now disconnect.