Bill Marshall - Altria Group, Inc. Howard A. Willard - Altria Group, Inc. William F. Gifford - Altria Group, Inc.

Michael S. Lavery - Piper Jaffray & Co. Christopher R. Growe - Stifel, Nicolaus & Co., Inc. Vivien Azer - Cowen & Co. LLC Bonnie L. Herzog - Wells Fargo Securities LLC Nik Modi - RBC Capital Markets LLC Stephen Powers - Deutsche Bank Securities, Inc. Adam J. Spielman - Citigroup Global Markets Ltd. Jennifer Maloney - The Wall Street Journal

Good day, and welcome to the Altria Group's 2018 Third Quarter 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, Vice President, Investor Relations for Altria Client Services. Please go ahead, sir. Bill Marshall - Altria Group, Inc.: Thank you, Laurie. Good morning and thank you for joining us. We're here this morning with Howard Willard, Altria's CEO; and Billy Gifford, Altria's CFO, to discuss Altria's 2018 third quarter and first nine months 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 period in 2017. 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. With that, I'll turn the call over to Howard. Howard A. Willard - Altria Group, Inc.: Thanks, Bill, and good morning, everyone. Altria delivered excellent third quarter adjusted diluted earnings per share growth of 20% and continued to return large amounts of cash to our shareholders. Our tobacco businesses are successfully executing against their strategies, while making strategic investments to drive long-term success. Before moving to our third quarter results, I'd like to address recent FDA activity. In September, the FDA asked several companies, including Altria, to provide plans to address underage use of e-vapor products. We welcomed FDA's action and we agreed that the reported rise in underage use of e-vapor products is alarming and immediate action should be taken. We're also concerned that use of e-vapor products may jeopardize the harm reduction opportunity for e-vapor. We recently met with Commissioner Gottlieb to discuss steps that could be taken to address underage access and use. Consistent with our discussion with the FDA and because we believe in the long-term promise of e-vapor products and harm reduction, we're taking immediate action to address this complex situation. First, Nu Mark will remove from the market MarkTen Elite and Apex by MarkTen pod-based products until these products receive a market order from the FDA or the youth issue is otherwise addressed. Second, for our remaining MarkTen and Green Smoke cig-a-like products, Nu Mark will sell only tobacco, menthol and mint varieties. Nu Mark will discontinue the sale of all other flavor variants of our cig-a-like products until these products receive a market order from the FDA or the youth issue is otherwise addressed. Although we don't believe we have a current issue with youth access or use of our e-vapor products, we are taking this action because we don't want to risk contributing to the issue. Additionally, we will support federal legislation to establish 21 as the minimum age to purchase any tobacco product. We think it makes sense to accomplish this through a phased-in approach. For context, we estimate that approximately 5% of adult tobacco consumers are legal age through 20, and that this age demographic represents approximately 2% of cigarette (4:24) industry volumes, 4% of smokeless industry volumes and 15% of e-vapor industry volumes. We, of course, recognize the impacts these decisions will have on our consumers, trade partners, suppliers and others. We believe these actions are essential to addressing the youth e-vapor epidemic and preserving the long-term harm reduction opportunity for e-vapor products. We support adult tobacco consumer choice and the promise of tobacco harm reduction, and we fully intend to operate compelling portfolio of e-vapor products for adult smokers and vapors. Through the FDA's product review pathways or when underage use of e-vapor is addressed. After removing Nu Mark's pod-based products and cig-a-like flavor variants, approximately 80% of Nu Mark's e-vapor volume in the third quarter of 2018 will remain on the market. These actions are outlined in our written response to the FDA, which was posted earlier this morning to altria.com. With that, let's move now to our operating results. The smokeable products segment performed in line with our expectations, while adjusted operating companies income in the third quarter was essentially flat from the prior year, PM USA continues to make progress stabilizing Marlboro share through investments in the brand's equity. Marlboro's retail share decreased 0.1 of a share point in the third quarter to 43.1%, but is unchanged from its fourth quarter 2017 share. Billy will provide additional detail on our brand equity investments in a minute. Next, the smokeless products segment delivered adjusted operating companies income growth of 7% in the third quarter, largely driven by strong net price realization. USSTC's total smokeless share grew 0.1 of a share point in the third quarter to 54.1%. On a combined basis, Copenhagen and Skoal share was unchanged in the third quarter at 50.7%, and was up 0.30 of a share point (06:40) from the fourth quarter of 2017. In heated tobacco, PM USA's initial lead market plans for IQOS are ready and we remain hopeful for FDA authorization by year-end. So in summary, we remain confident in our ability to deliver long-term value to shareholders by maximizing our core tobacco businesses, pursuing innovative reduced risk products and responsibly leading our industry forward through tobacco harm reduction. We believe our year-to-date performance positions us well to deliver on our full year plans. As a result, we are tightening our guidance, raising the lower end of our full-year 2018 adjusted diluted EPS guidance to $3.95 for a revised range of $3.95 to $4.03, representing a growth rate of 16.5% to 19% from the 2017 base. I'll now turn it over to Billy to provide more detail on our quarterly performance. William F. Gifford - Altria Group, Inc.: Thanks, Howard, and good morning, everyone. Let me start with the smokeable products segment. In the third quarter, smokeable adjusted OCI was essentially unchanged from the prior year as higher resolution expenses, lower cigarette volume and higher cost, including strategic business investments, were offset by higher pricing. Smokeable adjusted OCI margins declined 1.4 percentage points to 50.4%. The smokeable products segment's reported cigarette shipment volume declined by 3.7% in the third quarter, primarily driven by the industry's rate of decline and retail share losses, partially offset by trade inventory movements. After adjusting for trade inventory movements, cigarette volumes declined an estimated 5% in the quarter and an estimated 5.5% in the first nine months. We estimate that cigarette industry volumes declined approximately 4.5% in both the third quarter and for the first nine months. While the economic environment remains positive for the adult tobacco consumer, we believe increased gas prices, continued movement by adult smokers among tobacco categories, including e-vapor, and state excise taxes affected cigarette volumes in the quarter. We estimate the state excise tax increases on July 1 in Kentucky and Oklahoma had an impact to cigarette industry volumes of just under 0.5%. As Howard mentioned earlier, PM USA's investments have helped stabilize share for Marlboro. Marlboro's limited time rewards program in Texas, Points West, exceeded PM USA's expectations in creating excitement for the brand by increasing Marlboro's digital engagement with adult smokers. During the nine month enrollment period, over 150,000 adult smokers, 21 and older, in Texas enrolled in the program and entered nearly two million pack codes. And the frequency of engagement on Marlboro.com increased by over 45% in Texas. Building up the success of Points West in Texas, which ended in the third quarter, PM USA plans to launch Marlboro Rewards nationally in January of 2019. PM USA's excited to offer Marlboro Rewards to adult smokers 21 and older, with the goal of increasing its digital leadership, brand engagement and Marlboro's already strong brand equity and loyalty. On the product side, Marlboro Ice has performed well since its national expansion in the first quarter with adult consumers responding favorably to the innovative reseal pack. And this quarter, PM USA is expanding this packaging technology to other offerings, including Marlboro Smooth, a unique menthol offering. PM USA continues to pursue opportunities to use this innovative packaging in the future. In the super-premium tobacco and water segment, Nat Sherman has delivered solid performance following the regional expansion of Nat's across the Western United States earlier this year. And the team is evaluating further expansion opportunities. The cigar business continued to perform well, growing reported shipment volume nearly 7% in the third quarter and more than 4% for the first nine months. As a reminder for the fourth quarter, the smokeable products segment will have an extra shipping day compared to the prior year. Turning to our smokeless products segment, adjusted OCI grew 7% in the third quarter, primarily driven by higher pricing partially offset by higher cost. Smokeless products segment adjusted shipment volume declined an estimated 0.5% for the first nine months. Smokeless industry volume declined an estimated 1% over the past six months. We continue to believe that smokeless industry volume is being affected by higher pricing in the category and adult tobacco consumer movement among tobacco products, including e-vapor products. During the third quarter, USSTC announced plans to expand Copenhagen's Smooth Wintergreen to 22 states. This offering provides a balanced wintergreen flavor for adult dippers seeking a differentiated less intense wintergreen flavor. In September, the FDA accepted and filed, versus standard scientific review, USSTC's modified risk tobacco product application for Copenhagen Snuff. The FDA will now begin this review process, which includes opportunities for public comment. We are looking forward to engaging with FDA on this application. Turning to our alcohol assets. Ste. Michelle's adjusted OCI decreased $7 million in the third quarter primarily driven by higher marketing and sales expenses and lower shipment volume, partially offset by favorable mix. In beer, adjusted earnings from our equity investment in AB InBev were $224 million in the third quarter, which reflects Altria's share of AB InBev's second quarter results. We continue to return cash to shareholders, paying out over $3.9 billion in dividends through the first nine months of 2018. And in August, we increased our dividend by 14.3%, the second increase this year resulting in an overall quarterly dividend rate increase of 21.2% since the beginning of the year. Altria's current annualized dividend rate of $3.20 per share represents an annual dividend yield of 5.2% as of October 19, 2018. We also repurchased approximately $367 million of shares in the third quarter and over $1.3 billion for the first nine months. As of the end of the third quarter, we had approximately $700 million remaining in the current share repurchase program, which we expect to complete by the end of the second quarter of 2019. With that, we'll wrap up and Howard and I will be happy to take your questions. While the calls are being compiled, I'll remind you that today's earnings release and our non-GAAP reconciliations are available in altria.com. We've posted our usual quarterly metrics, which include pricing, inventory and other housekeeping items. We've also included some historical data on the discount category dynamics, we discussed last quarter. Specifically, the churn between deep discount and branded discount. The chart shows that the overall discount category retail share has been relatively stable over time and that deep discount retail share, while experiencing recent growth, has been at even higher levels in the past than currently. With that, I'll open the question-and-answer period. Operator, do we have any questions?

Thank you. Our first question comes from the line of Michael Lavery of Piper Jaffray. Michael S. Lavery - Piper Jaffray & Co.: Good morning. Howard A. Willard - Altria Group, Inc.: Hi, Michael. Michael S. Lavery - Piper Jaffray & Co.: Your stance with the FDA and this proactive approach, I think, reinforces the leadership role you've had with regulatory stuff. But can you just elaborate a little bit on your thinking on the pods versus cig-a-likes, and what some of the distinctions between the two might be that you're thinking about as you make this announcement? Howard A. Willard - Altria Group, Inc.: Yes. I mean, I think the way we thought about this was that we believe e-vapor has a lot of opportunity to convert adult cigarette smokers in the short, medium and long term. But clearly, the significant increase in youth usage of the products puts that at risk, and we think rapid and significant action is necessary. And I think as we looked at the data that is available and some of the remarks from the FDA, I think we concluded that the driver of the recent increase, we think, is pod-based products and flavored products. And so we thought that the two actions that we took addressed the drivers of the increased usage here in the short run. And then of course, our decision to support a minimum age to purchase going forward at the federal level of 21, we think, also can help address this issue. Because the data we've seen from the past study shows that the primary source of youth access to these e-vapor products is social access, and we think if the minimum age to purchase is raised to 21 should have a significant impact on that. Michael S. Lavery - Piper Jaffray & Co.: That's helpful. Thank you. And then just one more as you look at some of the brand reinvestments you've been making this year, could you just give a little more color, elaborate some, I know you touched on Points West and the expansion of Marlboro Rewards, can you just give a little more color on what those involved or just maybe bring that to life a little bit and help us understand some of what those programs look like? William F. Gifford - Altria Group, Inc.: Sure, Michael. I think if you would look at the overall brand equity that we've spent on (17:36) as well as product launches. So, from a standpoint of sort of the SKU launches that we had in the beginning part of the year through the third quarter, when you launch something like that, you want to make sure you have the right support in the marketplace and the right call out to consumers. So we have Marlboro Ice, we had Copenhagen Smooth, we had the expansion of Nat's, and so those are product launches that occurred through the first nine months of the year. Howard A. Willard - Altria Group, Inc.: And Michael, specifically on Points West, which I know was only available in Texas so you might not have seen it, essentially, it's a program that drives up engagement between Marlboro consumers and our digital resources, where they can scan or enter unique codes on their pack in order to earn rewards. And we found that it significantly increased consumer engagement with Marlboro.com. And of course, we're going to broaden that to national availability next year, which we think is a big step forward for the engagement with our digital assets. Michael S. Lavery - Piper Jaffray & Co.: And I know that branded merchandise isn't part the rewards program the way I believe it had been long ago, but what are the kind of rewards that the program includes? Howard A. Willard - Altria Group, Inc.: You're exactly right. It's not branded merchandise the way it might have been a couple of decades ago. It includes – we'll make charitable contributions on the behalf of the consumer or they can get a variety of digital rewards, whether it's digital cards or movie passes or those kinds of things. It's a much lower cost way to do it if you use more of a digital approach. Michael S. Lavery - Piper Jaffray & Co.: Okay. Great. Thank you very much. Howard A. Willard - Altria Group, Inc.: Thanks.

Your next question comes from the line of Chris Growe of Stifel. Christopher R. Growe - Stifel, Nicolaus & Co., Inc.: Hi. Good morning. Howard A. Willard - Altria Group, Inc.: Hi, Chris. Christopher R. Growe - Stifel, Nicolaus & Co., Inc.: Hi. Just had a question for you if I could. Just to understand as you enter the year and you had the tax savings, you're spending quite aggressively behind the business this year, seeing some good success behind Marlboro. I had two questions related to that. One would be that part of your spending plans for the year did include IQOS that obviously has not occurred yet, we're hoping it happens by year end, obviously, is that pushing your spending to (19:55) 2019, I guess is question number one. And then related to that, Marlboro's showing some progress and stabilizing its share, are you satisfied with that performance or would you like to spend more behind that to try and accelerate that rate of market share growth? William F. Gifford - Altria Group, Inc.: Yeah. I'll take the first part of that Chris. From the standpoint of the investment spending, you're right, we had tax money and investment related to IQOS. We have made some of that investment to be fully prepared for when that's approved by the FDA so that we're ready to launch. From a standpoint of IQOS, you're right, if we don't spend it this year, it certainly pushes into next year and we're excited to spend that money behind the brand and the launch of that. From a standpoint of the impact to the year, I think we've incorporated that in the guidance. We always have a list of investments that we want to make. So you point out one in IQOS, that's a favorable that allowed us to invest in other parts of the business. Howard A. Willard - Altria Group, Inc.: And if I address your question on how we feel about Marlboro performance in the cigarette category, and I would tell you that we are very pleased with the performance across our portfolio in the cigarette category. And I think that we feel that our investments have generated quite nice outcomes this year. And I might refer you to kind of the long-term performance in the PM USA portfolio and I'll take you back to 2011 before the launch of the Marlboro architecture and compare it to the first nine months of 2018. Marlboro's up 0.40 of a share point, the Altria Group share in the discount category is up 1.5 share points, and the total discount category is down 0.60 of a share point. And of course, both Marlboro and our discount brand, L&M, are at much higher margins in 2018 than they were in 2011. So even though there's a little bit of movement a 0.10 or 0.20 (21:47) this year compared to last year, we tend to manage for the long term and feel very good about the performance of the cigarette business. Christopher R. Growe - Stifel, Nicolaus & Co., Inc.: Okay, great. Thank you. And if I could just ask one quick one in relation to these pod-based products, is that something that you're prepared to seek approval for – to going through the PMTA process to the FDA, or will you wait to do that? Just curious kind of where you stand and your ability to seek that approval. Howard A. Willard - Altria Group, Inc.: Yes. I think you're right. What we announced is that we're going to withdraw those products either until we file a PMTA or until FDA takes other action to address youth usage. And that means that one path to get those products or new pod-based products on the market for us is to file a PMTA. I don't know that we're in a position to announce when we expect to file that today, but we really feel like in light of this dramatic increase in youth usage, withdrawing those products until the PMTA is filed is one path forward. Christopher R. Growe - Stifel, Nicolaus & Co., Inc.: Okay. Thanks so much.

Your next question comes from the line of Judy Hong of Goldman Sachs.

Hi everyone. This is Jack (23:01) on the line for Judy. So I have a couple of questions just to start off, I was wondering if you could dig a little bit more into your underlying performance of minus 5% versus industry of minus 4.5%, is that slight share loss from down trading, or maybe is that all we're seeing from Kentucky and Oklahoma? So if you could just generally give some color there, that'd be great. Howard A. Willard - Altria Group, Inc.: Sure. You're right, the adjusted cigarette industry volume on a year-over-year basis was down 4.5% and our adjusted cigarette volumes were down 5%. I think that is literally just a little bit further decline because on a year-over-year basis, our share was down a bit. But I would point out that our share has been stable since fourth quarter of this year, and we really feel now that we've lapped the impact of the California state excise tax increase that Marlboro's performance is stable and quite satisfying.

Okay. And then briefly just on the ABI dividend cut, like given the volatility in their results and now there's less cash flowing through, how do you assess your investment in ABI going forward, as well as what their payout policy, based on net income, might mean for your share of the dividend going forward? William F. Gifford - Altria Group, Inc.: Yeah. I think when you look at that, we still think it's a great investment for the long term. From a standpoint of the actual dividend cut that they rebased that they announced today, if you think about where we were last year, the dividends received, 50% of that, it really has no significant impact to our liquidity, our earnings stream or our dividend policy.

Okay, got you. And then if I could just sneak one more in there. What are your thoughts on margin flow-through this quarter? Is there anything you'd call out in terms of where those expenses were going and what might we expect for the balance of the year on that? William F. Gifford - Altria Group, Inc.: Yeah. I think when you look at that from a standpoint of where those are going, it's the business investments we've been calling out all year. So you'll recall, we were investing around R&D capabilities and applications that we filed. It's around the product launches and the reinvestment in the brands that have taken place through the first three quarters. As far as the fourth quarter, I can point you to the overall guidance, but we don't guide to margins looking forward.

All right, great. Thank you so much. Howard A. Willard - Altria Group, Inc.: Thank you.

Your next question comes from the line of Vivien Azer of Cowen. Howard A. Willard - Altria Group, Inc.: Hi, Vivien. Vivien Azer - Cowen & Co. LLC: Hi, good morning. So I also wanted to talk about volumes. I totally appreciate the incremental headwind from tax and from gas, but if I think back prior to 2010, because we've obviously been kind of in a benign state excise tax environment for much of the last decade, and that's changing and reverting back to kind of normal course. But prior to 2010, state excise taxes, if I recall correctly on a weighted-average basis, used to go up like 8% to 12% a year, and the cigarette industry volume declines were down 3% to 4%, and so that was kind of embedded in the underlying price elasticity. So the thing I'm having a hard time reconciling is your commentary over the past year, the price elasticities are generally holding up, but these incremental excise taxes are driving cigarette volume declines outside of the historical range. So any color you can offer would be helpful there. Thanks. Howard A. Willard - Altria Group, Inc.: Sure. I think that we continue to have ample evidence that price elasticities have not changed. And you are right that with the exception of the California excise tax increase, which was significant, even the more recent state excise tax increases have not been out of line with the excise tax increases we had in the deep history. So I think it is less – again, setting aside California, it is less increased price elasticity action that is causing the 4.5% decline in the category. And I think it's really – it's a bit of a tick up in the secular decline here over the last quarter, and I think it's related partially to movement into the e-vapor category. Vivien Azer - Cowen & Co. LLC: Okay, that makes sense. Thank you for that. And have you gotten any color from the FDA on how your competitors are perhaps thinking about action in the e-cigarette category? Howard A. Willard - Altria Group, Inc.: We have not. We met with them last week. And we really spent our time talking about our perspective on how to address the issue, and we briefed them on the actions that, at that time, we were considering. And since then, we firmed them up and announced them this morning. We really don't have any visibility into competitor actions or, frankly, what the FDA will ultimately decide to do, ultimately. Vivien Azer - Cowen & Co. LLC: Terrific. Thanks very much. Howard A. Willard - Altria Group, Inc.: Thank you.

Your next question comes from the line of Bonnie Herzog of Wells Fargo. Bonnie L. Herzog - Wells Fargo Securities LLC: All right. Thank you. Good morning. Howard A. Willard - Altria Group, Inc.: Hi, Bonnie. Bonnie L. Herzog - Wells Fargo Securities LLC: Hi. My first question is on Marlboro. I guess, I want to hear, in your opinion, would you characterize Marlboro as now stabilized as you set out to achieve or what more would you like to see with the brand? Howard A. Willard - Altria Group, Inc.: I would characterize it as stable. I mean, if you look at it, it has been stabilizing since the third quarter of last year. And I wouldn't draw any alarm from the fact that it was down 0.1 of a share point (28:49) on a sequential basis. I think that the share trend is stabilized and we feel good about the investments we're going to make with the brand going forward. Bonnie L. Herzog - Wells Fargo Securities LLC: And so given those investments, is it fair to assume that acceleration behind Marlboro is something that you're expecting to see? I guess I would answer yes, given you're going to increase investments behind the brand. So we should see Marlboro accelerate in the future. Would that be correct? Howard A. Willard - Altria Group, Inc.: Yeah. I don't know that I would agree with that. I think that – we've been pretty happy with stable performance, and in a business where we're trying to maximize our profitability, I think we're pretty comfortable with stability. And I don't think that we're trying to significantly grow Marlboro share going forward. And, frankly, I think that we did have a bit of a stepped-up investment in Marlboro, among many other things, particularly on the equity side, but we don't feel like an increase in Marlboro investment going forward is necessary to retain that stability. Bonnie L. Herzog - Wells Fargo Securities LLC: Okay. That's actually really helpful. And then I have a question on a completely different topic. On cannabis, you've recently commented that you guys might be exploring this category, so maybe first confirm this. And then second, could you share for us why you see this as a potentially interesting opportunity, and then how you might approach the category, what competitive advantages you might have? Howard A. Willard - Altria Group, Inc.: Yeah. I think I can confirm what we said at the Barclays conference, which is that we are exploring opportunities in the category. And we acknowledge that it is currently federally illegal in the U.S., but I think we think it's worth exploring the category because that might change in the future. And I'll hold back on explaining, in more detail, kind of how we view the category because we're relatively early in our exploration. Bonnie L. Herzog - Wells Fargo Securities LLC: Okay, that's fair. And then one final question for me, if I may, it's on your wine business. Constellation has made some comments recently about the state of the industry, noted a lot of challenges especially at the value end of the spectrum, and it's causing them to rethink their strategy and rationalize that into their business. So I'd like to hear from you guys what trends you're seeing in wine broadly, and then how you're positioning yourself to maybe take advantage of ongoing (31:26) trends? And then just comment for us what your outlook is for this business. And in terms of your – or the (31:34) potential for you to add brands to your portfolio, really essentially, what's your long-term strategy there? Thanks. Howard A. Willard - Altria Group, Inc.: Sure. I think you are right that, I would say, over the last two years, the wine business has gone through some choppy water. First of all, what had been a nice long-term growth rate slowed down. And then secondly, there had been very nice growth in the premium end of the wine business, which was $7 and above, which was where Ste. Michelle had a strong position. And essentially, the strong growth rates actually moved from $7 and above to $10 and above. And as a result of that, I think not only our business, but many of the other wine businesses, are investing to reposition their portfolios to respond to that consumer activity. And that's part of what drove weaker performance this year than we've had in the long term past. We are confident that the wine team is increasing investment and innovation in the $10 and above category, so we think we'll get the performance strengthened next year. But it is clearly not the same favorable category dynamics that we saw two or three years ago. I would also tell you that with regard to the wine business, it's a nice business for us. Historically, it's been a nice contributor to our growth, but we do view it as a non-core business where we're not going to make significant investments to add to that portfolio. Bonnie L. Herzog - Wells Fargo Securities LLC: Okay. Thank you.

Your next question comes from the line of Nik Modi of RBC Capital Markets. Nik Modi - RBC Capital Markets LLC: Yeah. Good morning, everyone. Just... Howard A. Willard - Altria Group, Inc.: Good morning. Nik Modi - RBC Capital Markets LLC: ...a quick question on – good morning, Howard – just a quick question on your commentary regarding IQOS that you made in your prepared remarks, you suggested that you're expecting to get approved by the end of the year. And I'm just curious on, in your meetings with FDA, was there something specifically said? Because we've been waiting for quite some time for this approval to happen, so just wanted to get some more clarity around that. Howard A. Willard - Altria Group, Inc.: I think what I said was I was hopeful that it would be approved by the end of the year. I have to tell you that, as you know, I've been rather patient knowing that the FDA is reviewing this heated tobacco application in a category that's relatively new to them, but I really feel like, given the strength of the PMI application and the passage of time, that the answer should be due here in the near term. But of course, as you know, we're already beyond sort of the guidance the FDA gave on how quickly they'd respond. So I think it's really hard to pin down exactly when that would come out. But it wouldn't surprise me at all if it came out between now and the end of the year. I think that the passage of time says that it's got to be getting ready to get an answer. We have not gotten any specific information from the FDA that something would come out in the near term, but I wouldn't necessarily expect that. Normally, when FDA is getting ready to act, you'd hear about it because they tell you the definitive response. Nik Modi - RBC Capital Markets LLC: Thanks. Very helpful, Howard. And then the other question just on the category growth – or decline rates, you have a situation where it's a little bit above the normalized trend, but the pricing realization that's been taken in the industry is also higher than what we've normally seen over the last, let's call it, 18 months. So I was wondering if maybe you can comment on that. Do you think there's some increasing kind of deceleration in the category just because the pricing has been higher than normal? Howard A. Willard - Altria Group, Inc.: Yeah. That probably has a small impact given the price elasticity impact of pricing. But I think it's probably a short-term elevation of the secular decline rate that's probably the bigger driver of it being 4.5% rather than the 3% to 4%. But I think you do point out something that I think is – that I believe, which is that I think we have a number of levers to pull in order to continue to drive nice business performance from PM USA even if this elevated decline rate of the category persists for a few more quarters or into the future. Nik Modi - RBC Capital Markets LLC: Great. Thanks, Howard. Howard A. Willard - Altria Group, Inc.: Thank you.

Your next question comes from the line of Steve Powers of Deutsche Bank. Howard A. Willard - Altria Group, Inc.: Hi. Steve. Stephen Powers - Deutsche Bank Securities, Inc.: Thank you. Hello. I guess, as we think more about the voluntary actions you took today, just based on your conversations – and I know you don't know – but do you see this conceivably as a kind of template that the FDA itself might follow in terms of incremental regulation on the e-vapor market, as we think about the next few months? And then secondarily, related, do you see it at all as conceivable that the FDA might also consider pulling forward the revised product application deadline timeframe for e-vapor products from now, it is August 2022, to an earlier date? And if they did that, would you be in a position to comply? Howard A. Willard - Altria Group, Inc.: Sure. I have to tell you, we had a good meeting with the FDA last week, and I think we spent quite a bit of time talking about the actions that we were thinking about taking. But I don't know that we have any deeper perspective on what the FDA is ultimately going to do, then I think the rest of the community has been listening to pretty significant comments that FDA has made. So I don't know that we know exactly what actions they're going to take. I would tell you that I am convinced that they are going to take action to address the increase in youth usage and drive it down. I'm not sure exactly how, but I think they're committed to doing that. And frankly, the actions we took were the actions that we thought we could take that would have the biggest impact on addressing the increased use of e-vapor products by youth. Because we think that the long-term opportunity that e-vapor products present to converting adult cigarette smokers is potentially at risk if we don't address this youth issue. And we wanted to make a significant contribution to addressing the issue, and I think FDA is going to help address it as well. Stephen Powers - Deutsche Bank Securities, Inc.: Okay. Thank you. I guess, maybe following up a little bit, the incremental step up in the secular decline rate that you just called out earlier being driven by e-vapor, maybe around about 1 point or so, which is something we agree with. As you look forward, do you think this is more – do you consider this more of a one-time step up? Maybe even it sounds like perhaps even a temporary step up, the way you're talking about it. But do you see that as more transient or fixed in nature? Or do you see that as something that continues to accelerate negatively if e-vapor penetration amongst adult tobacco consumers continues to grow? Howard A. Willard - Altria Group, Inc.: Sure. I don't think I gave an estimate of the actual numerical contribution of increased growth of e-vapor to the decline rate in cigarettes. But I would agree with you that I think that as you look at the decline rate of 4.5%, which is outside the 3% to 4% long-term range, I do think that probably two of the drivers of that are cigarette smokers increasingly trying e-vapor and now, I think also probably the increasing gas prices, most recently, is probably another contributor. I think it's hard to tell how long it's going to persist. What we do know is that the stepped-up growth in e-vapor has been with us for the last, at least, four quarters, and over those four quarters, the rate of decline has been about 4.5%. But we also know that both gas prices and growth in e-vapor has been with us before, and then it significantly moderated, and I think that's had impact on the decline rate of the cigarette category. So I think we're going to have to wait and see what happens with both gas prices on a relative basis and whether or not the growth rate of e-vapor slows down. Stephen Powers - Deutsche Bank Securities, Inc.: Okay, great. If I could squeeze in one more. The incremental data you provided today and the earlier comments you made on the discount portion of the category was definitely useful. I guess, my question around that is do we take that data and your comments as glass half full or glass half empty? In other words, by noting that, especially deep discount share of the category overall has been higher in the past, is that more to say that you think it's relatively stable and sort of the risk of discount proliferation is contained? Or is it more to be read that you're saying there's a precedent for it to go higher and it likely will? Just want to make sure I understand what you're trying to communicate. Howard A. Willard - Altria Group, Inc.: Yeah. We shared the data we did on the discount category because it's been the subject of a lot of discussion over the last three or four months. And I felt like some of our investors felt like there was something to be alarmed about. I have to tell you, we don't feel there's anything to be alarmed about and we provided this data to reinforce that belief. And I would just point out that over the last three periods, 2016, 2017 and 2018 year-to-date, the overall discount category has been stable, and it's much lower than it has been for the last five or six or seven years. When you think about a consumer packaged goods category that has those kinds of discount fundamentals, that's a really good trend, in my opinion. Now I know it's a little bit complicated because you've seen the deep discount portion of that up maybe a little more than 1 share point since 2011, 2012. And I think that was causing a bit of alarm from some folks. But I have to tell you, when you look at the fact that gas prices are back above year-ago levels, and I don't think that given the strong economy that most adult cigarette consumers are at all impacted in their brand choice because of that. But there is a relatively small group of consumers that when it costs them $10 more to gas up their car, they may be very well be deciding to go in and save by buying deep discount rather than branded discount. And given the nice margin expansion we've had on branded discount and the fact that discount doesn't seem to be interacting with premium, we think that's a natural outcome of the environment. And we don't find it alarming, and we don't feel a need to invest to try and address it. Stephen Powers - Deutsche Bank Securities, Inc.: Okay. Perfect. Thank you so much.

Your next question comes from the line of Pamela Kaufman of Morgan Stanley.

Hi, good morning. This is Rose (43:12) on for Pam. Appreciate the detail you've given with regard to the volume levels, even after removing the pod-based products and then discontinuing some flavors. If you could just give us a sense for how much of an impact you anticipate on revenue and profitability from removing these products. Howard A. Willard - Altria Group, Inc.: Yes, go ahead, Billy. William F. Gifford - Altria Group, Inc.: Yeah, I think from a standpoint of the actual impact, I think it's clearly immaterial, I'm not going to quote numbers here. When you think about the standpoint of the pod-based, we were in the launch of those products, and Apex was available through e-commerce. We think the way – taking the proactive approach, allows us to sell through those products in the marketplace and have an orderly transition with withdrawal of those products from the marketplace.

Okay, thanks. And just to clarify, is this sort of removal of all flavored products in e-vapor or is it strictly the cig-a-likes? Howard A. Willard - Altria Group, Inc.: Yes. Our action results in us removing, for our pod products, we're going to remove the whole branded pod business. With regard to our cig-a-like products, most of our volume is in tobacco flavored menthol or mint products, which we think are particularly appealing to adult cigarette smokers that are moving into our cig-a-like e-vapor products, those will stay on the market. And then we had other flavors that were not brown or green, I guess, you would say, that we're going to remove pending a PMTA or other action to addresses the youth increase in e-vapor.

That's really helpful, thank you. And if I can just sneak one more in there. You talked about wanting to be proactive about addressing the youth issue, just how much of this decision was driven by the FDA's request versus your actions to proactively volunteer to take these products off the market? Howard A. Willard - Altria Group, Inc.: Yes. Our announcement is a set of actions that we came into the FDA contemplating. And I think when we met with FDA, when we emerged from the meeting, we were more certain that this was the right thing to do. But I think if there's any further action on the part of the FDA, we'll certainly take a look at whether or not there's more we should do, but we felt like this was a good first step.

Great. Thank you.

Your next question comes from the line of Adam Spielman of Citi. Adam J. Spielman - Citigroup Global Markets Ltd.: Thank you very much. I have a couple of questions. First of all, in answer to Bonnie Herzog, you said on Marlboro, you didn't feel you needed to increase investment to maintain share. I suppose the other question is if you were to cut your equity investment in Marlboro, do you think that would result in a decrease in market share, or do you think the equity is sufficiently strong you could do that cutting (46:32) within reason and still hold share? So that's my first question. Howard A. Willard - Altria Group, Inc.: Yeah. I don't know that I think about it that way. I think we feel – we make a variety of decisions around promotional investments, pricing and equity investments at any given year, and I think that our focus is on always maintaining four elements with regard to Marlboro. We want to make sure we have stable overall share, we want to make sure we continue to have a strong equity, we want to make sure that we have good demographics, and we want to grow the profitability. And we feel like we're having success against those four things next year and we think we're well equipped to do that in the future. I think the question about brand equity, I think you can always cut brand equity in the short run to save money, but in the long run, it catches up with you. So we feel like the long-term approach we've had with Marlboro makes sense and we feel like it's well positioned to be able to deliver against that in the future. Adam J. Spielman - Citigroup Global Markets Ltd.: Okay. Thank you very much. And then I've got a question on your non-Marlboro portfolio. Now I know sequentially, quarter-on-quarter, it was flat this quarter, which I was quite impressed a bit by because this has been declining, I think, for previous three quarters. And at the same time it's interesting that deep discount also grew. So, on the one hand, you got deep discount growing 20 bps this quarter. But on the other hand, your portfolio was stable. And I was just wondering if you've taken any action to allow you to move from a declining trend to a flat trend. William F. Gifford - Altria Group, Inc.: Yeah. I think it's tough to call it a trend, Adam, in the short term, when you're looking at sequential quarter-to-quarter. I think to call it a trend, we would look over a longer period of time but certainly, we've become more effective and efficient with the way we allocate our resources across those other brands. And you recall as well that we launched Nat's in the smokeable segment and expanded that to basically the western part of the U.S. So we think we're seeing the benefit of that as well. Adam J. Spielman - Citigroup Global Markets Ltd.: And can you just be a little bit more specific on the other actions? I get the Nat's thing that you might have taken again, and you said you're a little bit efficient on your portfolio recently. William F. Gifford - Altria Group, Inc.: Yeah. I think we sharpened our tools from a standpoint of allocating resources to where they have the greatest impact and became more efficient with those resources around those other portfolio brands including L&M. And so with those tools and the sharp end of the (49:14) analytics around that, we're able to have a greater impact with even the same resources or less. Howard A. Willard - Altria Group, Inc.: I would also tell you, Adam, that when you look at, for instance, some of our other premium brands, like Virginia Slims or Parliament, I think we are at the stage where we have a very loyal core smoker base that chooses those brands. And I think that's part of the reason why you might see a moderation in the decline rate. Adam J. Spielman - Citigroup Global Markets Ltd.: Okay. Thank you. And then my final question is, coming back to this long-term chart you gave us on the deep discounts and branded discounts, and you said you were very comfortable with where things are now, it's not causing you really much concern. Is there any level of deep discount that would start to concern you? I mean, if you got to back to 9%, would that be an issue for you, do you think? Howard A. Willard - Altria Group, Inc.: Yeah, I have to tell you that we are primarily focused on our premium portfolio, and I think that what would concern us would be a dramatic increase in growth of the overall discount category that would impact our premium brands. I think if the trend growth of deep discount continued to grow a bit more, I think as long as our Marlboro portfolio is performing well and we were getting the kind of profit growth we wanted, I don't think that would be particularly alarming. In the past, we have had quite nice business performance at PM USA with a discount share that's significantly lower than today. So we know that formula works. Although I have to tell you that I'm delighted – and this is a shout-out to the L&M brand management team, I'm delighted with the success we've had with L&M over the last five or six years, it's got strong equity. But one of the reasons I'm delighted about it is not only has it grown its share and grown its margin, but it's done it, in my opinion, without taking share away from Marlboro. Adam J. Spielman - Citigroup Global Markets Ltd.: Okay, thank you very much.

Your next question is a follow-up from the line of Michael Lavery of Piper Jaffray. Michael S. Lavery - Piper Jaffray & Co.: Thanks. I have just two quick ones. I know the approval from the FDA hasn't come yet, but the HeatSticks would have Marlboro branding, if it is approved and gets into the market, how do you think about your Marlboro share objectives and HeatSticks, would that be considered a part of it? Howard A. Willard - Altria Group, Inc.: I think the way we'll measure it is, is we will distinguish between our cigarette volumes and cigarette share versus our HeatStick volume and share. So we'll provide clarity as to which is heated tobacco products versus traditional cigarettes. Michael S. Lavery - Piper Jaffray & Co.: Okay. And again, I'm recognizing it's not approved yet, but looking ahead just a bit, if you got the approval, it would be on an earlier generation of the device. Can you just speak to the FDA process and what you would have to do to be able to get a newer device subsequently launched? Is the SE application process an option that's available there, or does it even entirely new PMTA? Howard A. Willard - Altria Group, Inc.: No, I don't think it needs an entirely new PMTA. I think we believe that we can bridge the information in the original application to the new product, particularly given that some of the changes between the current device and HeatSticks versus the one that we filed on, they don't tend to change the vapor, it's just a better piece of hardware. And we are working with PMI on doing that bridging work and we'll file that when we get that done. Michael S. Lavery - Piper Jaffray & Co.: Okay, great. Thank you very much. Howard A. Willard - Altria Group, Inc.: Thank you.

Your next question comes from the line of Jennifer Maloney of The Wall Street Journal. Howard A. Willard - Altria Group, Inc.: Hi, Jennifer. Jennifer Maloney - The Wall Street Journal: Hi. How are you? Howard A. Willard - Altria Group, Inc.: Good. Jennifer Maloney - The Wall Street Journal: I'm wondering if you could clarify what you mean in your letter to the FDA when you support user fees for e-vapor products? Howard A. Willard - Altria Group, Inc.: Sure. The products in the tobacco category that are regulated by the Food and Drug Administration require the manufacturers of certain products to make payments to fund the cost of FDA regulation. And I think because the initial set of products was on the minds (53:59) when the legislation was passed, even though there are now significant numbers of e-vapor products on the market, they do not pay into the FDA to support the cost of regulation. And we think as long as we're opening up the legislation, it's time to update that and have everybody pay their fair share. Jennifer Maloney - The Wall Street Journal: Okay. Thanks. That's helpful. Also wonder what you think of Commissioner Gottlieb's indications over the past couple of weeks that he may support restricting online sales of e-cigarettes or restricting sales of e-cigarettes through vape shops, in other words, banning their sale in convenience stores and gas stations. Howard A. Willard - Altria Group, Inc.: Yeah. I would tell you that I know that whatever action the FDA takes is going to be based on science and evidence and data, and it was not intuitive to me when he talked about taking the products out of convenience stores, but I'm reserving judgment here until we understand what data he has. And I think there's been a lot said and from that I have concluded that the FDA is going to take action to address this youth epidemic, but I think we're going to have to wait until they communicate their comprehensive plan to really understand exactly what they're going to do. Jennifer Maloney - The Wall Street Journal: Okay. Thanks for your help.

Thank you. At this time, I would like to turn the call back over to Mr. Bill Marshall, for closing comments. Bill Marshall - Altria Group, Inc.: 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.