Good day and welcome to the Altria Group 2015 Second Quarter Earnings Conference Call. Today's conference call is scheduled to last about one hour, including remarks by Altria's management and the question-and-answer session. Representatives of the investment community and media will be able to ask questions following the conclusion of the prepared remarks. I would now like to turn the call over to Ms. Sarah Knakmuhs, Vice President, Investor Relations for Altria Client Services. Please go ahead, ma'am.

Good morning and thank you for joining us. We're here this morning with Marty Barrington, Altria's CEO and Billy Gifford, Altria's CFO to discuss Altria's 2015 second quarter and first half business result. During our call today, unless otherwise stated, we're comparing the results to the same period in 2014. Earlier today, we issued a press release regarding our second quarter and first half results. For a detailed review of them, please see our earnings release on our website at altria.com or via the Altria investor app. 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, which excludes items that effect the comparability of reported results. Descriptions of these non-GAAP financial measures and reconciliations are included in today's earnings release, which is available on our website and via the Altria investor app. Now I'll turn the call over to Marty. Martin J. Barrington - Chairman, President & Chief Executive Officer: Thanks, Sarah. Good morning everyone. Altria delivered excellent second quarter and first half results, allowing us to raise our 2015 full year guidance earlier this morning. We grew adjusted diluted earnings per share almost 14% in the second quarter and more than 13% for the first half of 2015 with a very strong performance from the smokeable product segment and solid contributions across our other businesses.…

Thank you. Investors, analysts and media representatives are now invited to participate in the question-and-answer session. We will take question from the investment community first. Our first question comes from the line of Chris Growe of Stifel. Christopher R. Growe - Stifel, Nicolaus & Co., Inc.: Hi. Good morning. Martin J. Barrington - Chairman, President & Chief Executive Officer: Morning, Chris. Christopher R. Growe - Stifel, Nicolaus & Co., Inc.: Hi. Nice results today. Congratulations on those. I just had two questions for you if I could. The first one just to understand on the inventory movements and certainly a benefit in the first half, should we therefore assume they come out in the second half? And I guess related to that, inventory, I should say volumes for the category, have been quite strong. Has there been any net/net increase in inventory at retail because of the strength in volume across the category? Martin J. Barrington - Chairman, President & Chief Executive Officer: Chris, I think you're right to believe that the inventories will smooth themselves out in the back half. You know, for PM U.S.A, as you know, generally they do smooth themselves out over the course of the year. Billy has called out the inventory movements that we saw in the quarter, and so on a comparative basis we benefited from that in the second quarter and those should smooth themselves out. Christopher R. Growe - Stifel, Nicolaus & Co., Inc.: Okay. I had just one question if I could on all the division and really on MarkTen. Just to understand, obviously now you're rolling out MarkTen XL and certainly Green Smoke, so you're still going to be it, seems like, in sort of a trial building phase. So I'm just trying to understand the investments and the…

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

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

Hi. I guess my first question is on your new guidance. I'm trying to get a sense for how conservative it might be since you mentioned it implies slower EPS in the second half of this year, which suggests only around 5% EPS growth, I guess, at the midpoint of your range. So given the strength of your underlying business, I'm trying to understand how big of a drag on earnings you really expect from some of the items you mentioned this morning and then that were in your press release. I was hoping you could drill down a little bit more on some of these headwinds for us, please. Martin J. Barrington - Chairman, President & Chief Executive Officer: Okay, well, let me try to give you some context for that. I mean to begin, the guidance that we have now for 2015 is above our long-term growth aspiration of 7% to 9%. Indeed, I think it's the highest that it's been in some period of time. So there's no question that we are having a strong year. We're very pleased with the performance of the business. So I think we should begin with that. But we grew 13% in the first half, and so we've recognized that we're starting to lap some benefits that likely contributed for example to the volume. So we know that the consumer, the adult tobacco consumer, began to feel better in the back half of the year. We had the sharp drop in gasoline prices, and that's going to be lapped in the back half. Billy has called out the end of FETRA payments in the fourth quarter. We're going to have an increase in our tax rate. And so those kind of benefits have all been taken into account. As we said regularly when we've talked about guidance, it's always a series of puts and takes. And in addition, we have some excise tax increases that we're going to have to see. So we think that represents our best judgment. I think it's a very strong performance, 7.5% to 9.5% off of a already high Altria base. So that's the way we're thinking about it for the second half.

Okay. And then I have a two-part question on Marlboro. First, I was hoping you could drill down further on what drove the impressive share gains behind the brand. And then how much of the gains were driven by some of your relatively new line extensions? Or has your core Marlboro continued to improve and contribute to some of these gains? And then secondly, I guess I'd be curious to hear more about your innovation pipeline. You did touch on this recently at your Investor Day, but do you have any more details to share with us at this time of potential new products that might hit the market later this year? Martin J. Barrington - Chairman, President & Chief Executive Officer: Okay. Good questions. Thanks. Let me take the second one first, because it's easiest. We do have lots of innovation in the Marlboro pipeline, but we're not prepared to announce it this morning. So I will announce it in due course. Listen, the fact on Marlboro is Marlboro is strong across the franchise. The Marlboro architecture has done its work and continues to do its work. So we are strong both at the core, and we are strong on the innovative products that you've made reference to. And in particular, Marlboro Black just continues to do gangbusters. It's the eighteenth quarter in a row that we've gained share there. It's doing a very nice job in the important 21 to 29 segment. So we're very pleased with total Marlboro. And I think Marlboro is performing as well as we've seen it, record share this quarter.

All right. Thank you. Martin J. Barrington - Chairman, President & Chief Executive Officer: Thanks for calling, Bonnie.

Your next question comes from the line of Vivien Azer of Cowen. Vivien Nicole Azer - Cowen & Co. LLC: Hi. Good morning. Martin J. Barrington - Chairman, President & Chief Executive Officer: Good morning, Vivien. Vivien Nicole Azer - Cowen & Co. LLC: So I wanted to ask a question about the health of the consumer. I think it seems reasonable that the benefits clearly are going to lap. But as you think about the back half of the year and your expectations around the health of the consumer, is it that the consumer doesn't get any healthier from here? Or are you expecting a weakening in the consumer landscape given rising retail gas prices? Martin J. Barrington - Chairman, President & Chief Executive Officer: No, I think it's more the lapping effect, Vivien, for us. I mean, there's no question that the adult tobacco consumer is stronger in 2015 as I think we predicted earlier in the year. We're getting some moderate benefit from that. We're simply pointing out that for example, does anybody think there's going to be another $0.80 drop in gasoline prices in the second half of 2015 compared to what happened to gasoline prices in 2014. So we're merely pointing out the comparative effect of 2014 over 2015. But to be clear, we think that the adult tobacco consumer continues to feel better. Housing starts are up. Unemployment is down. Consumer confidence, aside from maybe a little squiggle yesterday, consumer confidence is over 100. That all bodes well for the consumer. Vivien Nicole Azer - Cowen & Co. LLC: Terrific. That's very helpful. And my second question has to do with the cigarette landscape. Premium continues to gain share. Clearly, that is benefiting Marlboro. Is that a dynamic that you expect to continue? And if not, what would disrupt that? Martin J. Barrington - Chairman, President & Chief Executive Officer: I sure hope so. And you're right that the premium segment has never been stronger. I saw a number the other day, I think it's as high as it's been in the last 15 years. And that's good for us because of our premium positioning. It's great for Marlboro. There's no question that there's been some uptrading across CPDG generally when you look at the data, as you know, and certainly that has been true for our franchise. So you would hope and expect that will continue as long as the adult tobacco consumer continues to feel like they're in a better economic circumstance. Vivien Nicole Azer - Cowen & Co. LLC: Terrific. Thank you very much. Martin J. Barrington - Chairman, President & Chief Executive Officer: Thanks for the call.

Your next question comes from the line of Owen Bennett of Nomura.

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

I have a couple of questions, please. And firstly, I know early days, but are you seeing any disruption at trade as a result of the Reynolds/Lorillard deal? And if so, do you think you will be able to take advantage of this with regards to taking share? And then secondly, just coming back to e-vapor and the business progression there, is this any nearer to becoming profitable, or are we still some way from that and investment remains the priority at present? Thank you. Martin J. Barrington - Chairman, President & Chief Executive Officer: Bill, you want to take the first one? William F. Gifford - Chief Financial Officer & Executive Vice President: Sure. Owen, thanks for the question. As far as the disruption in the marketplace, what we're really focused on is our kind of flawless execution in the marketplace. So we focus on executing our initiatives at retail. If there is disruption, we're not paying attention to it. We're really focused on how do we execute flawlessly. Martin J. Barrington - Chairman, President & Chief Executive Officer: And on vapor, we're going to be in investment mode for a while. The category is early. I made reference earlier I think to product development, building distribution, building the brand. So we'd expect that this is going to be an investment category for us.

Okay. Thanks very much. Martin J. Barrington - Chairman, President & Chief Executive Officer: Thanks for the questions.

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

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

So Marlboro's doing extremely well and the uptrading is obvious and premium is healthy, but I guess maybe switching gears just a bit, L&M was up sharply and certainly had outsized share gains for the size of that business. Can you just give a little color on maybe what's driving that? Is there anything in particular there? Martin J. Barrington - Chairman, President & Chief Executive Officer: Yes. I think L&M is consolidating share in the declining discount segment. That segment goes down, which of course for us is fine because we're in the premium end of the business, but L&M is a terrific offering for adult tobacco consumers there and it's picking up share in that segment.

Okay, great. Thanks. And then just looking at iQOS, can you give us a sense of the timing towards, the steps towards an eventual launch? And I know that obviously it involves the FDA, so it's inherently unpredictable, but maybe just handicap kind of what your guess is of when that might be able to take place. Martin J. Barrington - Chairman, President & Chief Executive Officer: Yeah, we're continuing to work very hard with PMI on iQOS, and I would say there's two tracks, Michael. The first track is the FDA track. The first milestone there will be the filing of an application to seek a claim on that, and then hopefully the second milestone will be the approval of that claim. Meanwhile and contemporaneously we are working on marketing plans and go-to-market strategies, packaging, branding. We're doing that work side by side so that we'll be ready hopefully to go when the FDA approves an application.

Okay, great. Thanks. And then just lastly on 3Q, we've got roughly a month already in. Have you seen any change yet in consumer sentiment? I know that sort of measured consumer sentiment score is only kind of a wiggle. Are you seeing anything in terms of retail changes yet as far as a slowdown, or is it still holding up quite nicely? Martin J. Barrington - Chairman, President & Chief Executive Officer: You know, that's a nice try to get me to talk about the quarter that's not yet done, Michael. So just hang on for me, will you, and we'll talk about Q3 when we get to Q3.

All right. No problem. Martin J. Barrington - Chairman, President & Chief Executive Officer: Thanks.

Thanks for your time. Martin J. Barrington - Chairman, President & Chief Executive Officer: All right. See you.

Media representatives are now invited to participate in the question-and-answer session. Your next question comes from the line of Judy Hong of Goldman Sachs. Judy E. Hong - Goldman Sachs & Co.: Thank you. Good morning. Martin J. Barrington - Chairman, President & Chief Executive Officer: Hi, Judy. Judy E. Hong - Goldman Sachs & Co.: So, Marty, I guess just in terms of thinking about pricing, so obviously your manufacturer pricing continues to be pretty healthy. If I just look at retail pricing, though, it's been going up more in the low single-digit rate and the gap has sort of continued to trickle down between Marlboro and the lowest priced brands. So just conceptually, what are some of the milestones that you're looking to get to sort of perhaps widen that gap going forward and with related to obviously the SET going up, how you think that the gap will kind of play out over the next six months or so? Martin J. Barrington - Chairman, President & Chief Executive Officer: Yeah, we'll have to see over the next six months. I mean you know our strategy is we're trying to maximize income, so from a manufacturer's pricing point of view, we're always trying to do our part on pricing and you see that with pricing up nearly 5% for the first half. So the SETs do have some effect, of course. I think the estimate of the volume of the SETs we've seen is it's on about 10% of the volume and the rates varied kind of widely. So we'll have to see what the effect of that is. And then of course, pricing at retail ultimately is up to the retailers and the strategies that they employ in the cigarette category. So we're focused obviously on manufacturer…

Your next question comes from the line of Bill Marshall of Barclays.

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

Just wondering if we could talk a little bit about the smokeless segment. We've seen that category -- obviously the run rate on growth has remained a little bit lower than the historic norm for a couple of quarters consecutively. I think in the past, we've talked about the interplay between smokeless and some of the new products like e-cigarettes, so I'm curious to get your thoughts on if that's still the case. And then looking at your portfolio, obviously Copenhagen doing very, very well. Just the interplay between Copenhagen and Skoal and kind of your plans for those two brands going forward. Martin J. Barrington - Chairman, President & Chief Executive Officer: Sure. Good questions both. I think tobacco consumers are trying different categories and you have to measure these things over time. And so if you look, it was growing at about 5.5%. This is industry volume. It fell back to about 2% and now we've seen an uptick to 3%. So some of that probably is due to both movement of dual users between combustible products and smokeless products, as well as people experimenting with vapor and a few people sticking with vapor. So those are probably the right factors to think about there. Listen, Copenhagen is doing terrific work and I think that we're on the path to stabilizing Skoal. Our strategy is to grow them together and actually we did that. So you can see it grew 0.3% for the half for share together and actually and their combined volume was higher than our estimate for industry volume. So Copenhagen is a terrific brand. Skoal has a little bit of a harder job in that it has to compete with its principal competitor and it competes with Copenhagen. And so we've been working on the value equation and we're encouraged by what we've seen there. I think the way to think about this is the long-term strategy is well in place and it continues to deliver. You see the income growth for the half.

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

Thank you. At this time, I will turn the call back over to Sarah Knakmuhs for closing remarks.

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