Altria Group, Inc. (MO) Earnings Call Transcript & Summary

Good day, and welcome to the Altria Group of 2021 Annual Meeting of Shareholders. Today's meeting is scheduled to last about an hour. We do not expect any technical difficulties or other issues. However, if we experience a technical issue, please stand by for a resolution. If the issue cannot be resolved, the meeting will be adjourned. I would now like to turn it over to Mr. Billy Gifford, Altria's Chief Executive Officer. Please go ahead, sir.

Thank you. Good morning, everyone, and welcome. Due to the recent passing of Tom Farrell, our former Board Chair, as CEO, I will be chairing today's meeting. I call to order Altria's 2021 Annual Meeting of Shareholders. With me today is Brandt Surgner, our Corporate Secretary. Thank you for joining us virtually under the continued challenges posed by COVID-19. We hope you're staying safe and healthy. We will start our meeting with our meeting details and agenda. Our meeting agenda and rules of conduct are located under the Materials tab at the bottom right of the virtual meeting site. The rules of conduct explain how we will conduct the meeting, including our question-and-answer session. We will begin by presenting our meeting documents, move to electing directors and then vote on the selection of PricewaterhouseCoopers as Altria's independent registered public accounting firm. Next, we will move to the nonbinding advisory vote on the compensation of Altria's named executive officers. And finally, we will proceed to the vote on 2 shareholder proposals if properly presented. After the shareholder proposals, we will close the polls and announce the preliminary voting results. I will then present a business update and answer your questions. Only shareholders of record as of the close of business on March 29, 2021, are entitled to vote during the meeting. Shareholders may vote through the virtual meeting site until the polls close. You will need a valid 16-digit control number to vote. If you voted prior to the meeting, there is no need to vote those shares unless you wish to change your vote. If you're voting at the meeting, we suggest you vote on each matter as it is presented. The window for shareholders to submit questions will remain open throughout the meeting. Again, I direct shareholders to our rules of conduct for instructions on how to submit your questions. You must have a valid 16-digit control number to submit a question. Only questions related to the meeting will be answered during the question-and-answer portion, subject to the 30-minute time limit prescribed by the rules of conduct. The rules of conduct provide additional information about the question-and-answer session. So with that introduction, Brandt, please present our meeting documents.

Thanks, Billy. I present, together with the affidavits of mailing, a copy of the notice of meeting, form of proxy, proxy statement as supplemented and annual report, which includes financial statements for the fiscal year ended December 31, 2020. More than 82% of Altria's common stock is represented here today, so a quorum is present.

Thanks, Brandt. Please file the documents with our meeting records. Altria has appointed Broadridge Financial Services to act as the inspector of election. Mr. [ Jim Alden ] has taken the oath of inspector of election and will be tabulating the vote for this morning's meeting. The inspector's responsibility is to determine the number of shares represented at the meeting and to certify the votes. All proxies are confidential unless shareholders have commented on them. Let's now turn to the election of directors. Before doing so, we'd like to share a few words on the passing of our former Chair, Tom Farrell. Tom's keen intellect and insight helped guide Altria over his 13-year tenure on our Board. In addition to serving as Chair, Tom served as Presiding Director for nearly 9 years. He also served as a member of the Compensation and Talent Development and Nominating, Corporate Governance and Social Responsibility Committees. Outside of his service to Altria, Tom's leadership in the community sought to make Richmond and the Commonwealth a better place for all Virginians. His leadership and contributions to our company and to this region will be sorely missed. Last week, the Board elected Kathryn McQuade to serve as our Independent Board Chair, effective at the conclusion of our meeting today. Kathryn joined the Board in 2012 and brings significant expertise in finance, business strategy and working within regulated industries. Notably, Kathryn will also be the first woman in Altria's history to serve as Chair. The management team and I look forward to continuing the pursuit of our vision under her Board leadership. Now let's please welcome our Board of Directors who have joined us virtually. It's an extraordinary and committed group that provides strong leadership and thoughtful oversight to Altria. We value the skills, experiences and perspectives they bring to the boardroom. Brandt, please announce the name of the nominees for director.

The nominees are John Casteen, Dinyar Devitre, Billy Gifford, Debra Kelly-Ennis, Leo Kiely, Kathryn McQuade, George Muñoz, Mark Newman, Nabil Sakkab, Virginia Shanks and Ellen Strahlman, each to hold office until the next Annual Meeting of Shareholders and until his or her successor has been duly elected and qualified.

Thank you. Under our bylaws, the nominations are closed. Our Board recommends that shareholders vote in favor of each nominee for director. Our next item is the ratification of the selection of PricewaterhouseCoopers LLP as Altria's independent registered public accounting firm for 2021. We welcome Russ Moore from PwC, who has also joined us virtually today. Brandt, please present the matter.

I move the adoption of the following resolution. Resolved that shareholders of Altria Group, Inc. ratify the selection of PricewaterhouseCoopers LLP as Altria's independent registered public accounting firm for the fiscal year ending December 31, 2021.

Thank you. Our Board recommends that shareholders vote in favor of this proposal. Let's now move to the advisory vote to approve the compensation of our named executive officers. While this vote is nonbinding, the Compensation and Talent Development Committee will consider its outcome when making future decisions. Our Board recommends that shareholders vote in favor of this proposal. Brandt, please present the matter.

I move the adoption of the following resolution. Resolved that shareholders of Altria Group, Inc. approve on an advisory basis the compensation of Altria's named executive officers as described in the proxy statement.

Thank you. We will now turn to the 2 shareholder proposals and if properly presented, vote on them. The Board recommends a vote against both proposals for the reasons explained in the proxy statement. We encourage all shareholders to read each proposal and our responses. Operator, please open the line for Mr. Tom McCaney, who will be presenting the shareholder proposal regarding a review and report on the company's underage tobacco prevention policies and marketing practices on behalf of The Sisters of St. Francis of Philadelphia. Welcome to the meeting, Mr. McCaney. Please proceed with your proposal. Mr. McCaney?

Can you hear me? Hello?

Yes, we can now. Yes, we can hear you. Thank you. Welcome to the meeting.

Okay. Thank you. Good morning, Mr. Gifford, members of the Board and fellow shareholders. My name is Tom McCaney, and I want to present proxy item #4 on behalf of The Sisters of St. Francis of Philadelphia and 4 co-filers, all members of the Interface Center on Corporate Responsibility. The shareholder proposal requests the company report on its adherence to its policies and principles designed to discourage the use of nicotine delivery products to young people. In its statement of opposition to this proposal, the company declares that reporting on underage tobacco prevention and marketing practices is unnecessary given "our long-standing commitment to underage tobacco prevention and responsible marketing." However, our proposal does not question Altria's statement of commitment, only its policy's effectiveness in deterring tobacco use among youth. Because despite the efforts of Altria and other companies involved in the manufacturing, distribution and sale of tobacco products, more than 86,000 new underaged daily smokers emerge each year in the U.S. according to the Department of Health and Human Services. We acknowledge and appreciate that CDC statistics published this year show a slow decline in tobacco use among middle and high school students. But each year, there are still thousands of young people that are initiated and eventually addicted to cigarettes, cigars, vaping products and smokeless tobacco. Considering the many years that Altria and other tobacco companies have touted their efforts to discourage youth from tobacco, this incremental progress is not sufficient. This proposal also asks that the Board report on the marketing practices aimed at communities of color and low-income populations. Altria's rebuttal notes that many -- the many federal, state and local regulations designed to keep them in line, but does not address the long history of targeting African-American communities with the marketing of menthol cigarettes or the use of price promotions and point-of-sale advertising to increase sales. Our goal with this proposal is to learn of the successes, failures and limitations of Altria's underage tobacco prevention and responsible marketing policies. Without a true accounting of the efficacy of these policies, they are nothing more than a showpiece. We ask shareholders to vote for item #4. Thank you.

Thank you. Operator, please open the line for Ms. Cathy Rowan, who will be presenting the shareholder proposal regarding disclosure of lobby -- lobbying policies and practices on behalf of Trinity Health. Welcome to the meeting, Ms. Rowan. Please proceed with your proposal.

Good morning. Can you hear me?

Yes, we can. Thank you. Welcome to the meeting.

Okay. Thank you, Mr. Gifford. Thanks so much. Good morning, Mr. Gifford, members of the Board, fellow shareholders. I'm Cathy Rowan, and on behalf of Trinity Health and the co-filers, Reynders, McVeigh Capital Management and The Sisters of St. Joseph of Carondelet of the St. Paul, Minnesota province, I ask for your vote in favor of proposal 5, which requests a report on Altria's policy and procedures governing grassroots lobbying communications, payments for direct or indirect lobbying or grassroots lobbying communications, Altria's membership in and payments to any tax-exempt organization that endorses model legislation and a description of our company's management and oversight of these activities. We truly appreciate the ongoing dialogue we have with the company regarding this issue. It's led to recent improvements in disclosure, which we commend, but important gaps remain. Altria does not disclose a complete list of its membership and trade associations or other advocacy groups nor the portion of dues and other payments used for lobbying purposes. Investors have repeatedly sought greater transparency in this regard because a company's political activity might be contrary to its stated goals or pose reputation risk. Altria's failure to disclose its trade association payments used for lobbying lags many of its peers, including 3M, Coca-Cola and Mondelez. For years, public companies have used money from investors to finance secretive social welfare, trade association and third-party groups in Washington. Our proposal captures dark money spending, where there are no limits on what a company can give, whether through trade associations or social welfare groups. While donations to politicians and traditional political action committees have strict limits, their payments to trade associations and social welfare nonprofits have no restrictions. This means that companies can give unlimited amounts to third-party groups that spend millions on lobbying and often undisclosed grassroots activity. For example, Altria provided funds to the California Coalition for Fairness, which has campaigned for a referendum to repeal that state's law banning the sale of flavored cigarettes. And through the end of last year, the coalition received nearly $10 million from Philip Morris USA. The dark money connections to the January 6 riot at our nation's capital indicate that social welfare groups can impact and pose risks to shareholders. The Rule of Law Defense Fund is a social welfare group that helped organize the protest before the riot, and it is an arm of the Republican Attorneys General Association. Altria reportedly gave that association over $600,000 in contributions in 2019 and 2020. We have no way to know if Altria has made direct contributions to the Rule of Law Defense Fund because Altria fails to provide disclosure of its contributions to social welfare groups. Improved disclosure of Altria's membership and trade associations and other advocacy groups and its expenditures for grassroots lobbying communications would help take away the blind spot that shareholders experience when trying to see and understand Altria's participation in the public policy arena. Therefore, we respectfully request your support for Proposal 5. Thank you.

Thank you. All matters to be voted on have now been presented. If you wish to vote, please do so at this time. We will pause momentarily to allow final votes to be cast. [Voting]

Since all shareholders have had the opportunity to vote, the polls are now closed. Brandt, please summarize the inspector's report.

The inspector of election has completed the preliminary count of the vote. The preliminary voting results are as follows. Shareholders have elected each of the nominees for director with more than 96% of the shares voting, voting for their election. The selection of PricewaterhouseCoopers LLP as Altria's independent registered public accounting firm for the fiscal year ending December 31, 2021, has been ratified with more than 96% of the shares voting, voting in favor. Shareholders have approved on an advisory basis the compensation of Altria's named executive officers with more than 85% of the shares voting, voting in favor. Proposal 4 has been defeated with 64.19% of shares voting on the proposal voting against and 35.8% voting in favor. Proposal 5 has been defeated with 67.01% of shares voting on the proposal voting against and 32.98% voting in favor. That concludes the report.

Thanks, Brandt. Please file the inspector's report and the proxies with our meeting records. We will post the final voting result on Altria's website and file them with the SEC on a Form 8-K in the next few days. This concludes the business portion of the meeting, and that portion of the meeting is adjourned. We will now provide a business update followed by a question-and-answer session. Before I begin, please review the safe harbor statement in today's presentation and the forward-looking and cautionary statements section in our prepared remarks posted on altria.com. Reconciliations and further explanations of the non-GAAP financial measures we discuss today are also available on altria.com. I'll now briefly recap our 2020 and first quarter 2021 results before moving to a discussion of our corporate responsibility priorities and environmental, social and governance, or ESG, efforts. Altria delivered outstanding results in 2020. Our tobacco businesses were resilient, and our employees rose to the challenges together to navigate the COVID-19 pandemic, political and social unrest and an uncertain economic outlook. In that environment, we grew adjusted diluted earnings per share by 3.6%, continued to reward our shareholders by increasing our dividend for the 55th time in 51 years and laid the groundwork for our noncombustible product portfolio to make significant progress toward our vision to responsibly lead the transition of adult smokers to a noncombustible future. We're moving beyond smoking and leading the way by taking actions to transition millions of adult smokers to potentially less harmful choices. Last year, we executed against our vision strategies that we previously shared, including maximizing profits in our combustible businesses and responsibly expanding our noncombustible products. Our smokeable products segment is the engine that enables investments behind our noncombustible portfolio and rewards our shareholders with a strong dividend. This segment delivered adjusted operating company's income growth of 10.2% in 2020. Marlboro remained strong throughout the year against a dynamic backdrop. Cigarette volumes were little changed from 2019 as the pandemic altered adult smoker behaviors and purchasing patterns. And while 2020 represented a pause in some industry trends away from combustible products, we continue to believe that adult tobacco consumer preferences are evolving toward noncombustible offerings that hold the potential for reduced harm. To address those preferences, we believe we have made significant progress last year to set our noncombustible portfolio up for success in the years to come. In 2020, Helix expanded on! nicotine pouches to 78,000 retail stores, a significant increase from the 15,000 stores at the beginning of the year. Helix also submitted to FDA premarket tobacco applications for the on! portfolio ahead of the September deadline. PM USA launched IQOS and Marlboro HeatSticks in Charlotte and introduced the IQOS tobacco heating system for sale in select Charlotte convenience stores. And on the regulatory front, FDA granted a modified risk exposure claim for the IQOS 2.4 system. Additionally, in December, FDA authorized the IQOS 3 system for sale in the U.S. While we're investing in building awareness and distribution of our noncombustible portfolio, we're also returning cash to shareholders. In 2020, we paid more than $16 billion (sic) [ $6 billion ] in cash dividends to shareholders. And this past January, our Board authorized a new $2 billion share repurchase program that we expect to complete by June 30, 2022. Of course, future dividend payments and share repurchases remain subject to the discretion of our Board, and share repurchases depend on marketplace conditions and other factors. Moving to our 2021 first quarter results. We're off to a strong start to the year and believe our businesses are on track to deliver against their plans. Altria delivered adjusted diluted EPS of $1.07, a 1.8% decline from first quarter 2020. Our tobacco businesses continued to produce strong results while facing difficult year-over-year comparisons. In noncombustible products, Helix continued to expand availability of on!, which is available in 93,000 retail stores at the end of the quarter. We also announced the completion of transactions that resulted in Altria obtaining full ownership of the global on! business. We're excited to bring on! to more adult tobacco consumers throughout the balance of 2021. In heated tobacco, during the month of April, PM USA expanded Marlboro HeatSticks and IQOS devices statewide within Georgia, Virginia, North Carolina and South Carolina. Last week, an administrative law judge in the U.S. International Trade Commission issued an adverse determination and a patent dispute related to IQOS between Philip Morris International, Altria and British American Tobacco. We plan to seek review of the judge's determination in the ITC this fall. Turning to guidance. Altria reaffirms its expectations for 2021 full year adjusted diluted EPS to be in a range of $4.49 to $4.62, representing a growth rate of 3% to 6% from an adjusted diluted EPS base of $4.36 in 2020. How we achieved the results is as important as what we achieved. The pursuit of our vision is about creating a more sustainable enterprise that's aligned with stakeholder expectations for responsibly managing our businesses. We know that shareholders expect us to deliver strong results while making progress against our corporate responsibility priorities and increased environmental, social and governance expectations. We perform materiality assessments periodically to gather stakeholder perspectives on the most important ESG issues facing our businesses. Our latest assessment identified the following focus areas: reducing the harm of tobacco products, preventing underage use, protecting the environment, supporting our people and communities, driving responsibility through our value chain and engaging and leading responsibly. Leading in these areas isn't new for Altria, and we believe we are making significant progress across all 6 focus areas. We will now briefly highlight our efforts. The materiality assessment overwhelmingly affirmed that the most important social issues for our companies to address are harm reduction and preventing underage use. To be clear, kids should not use any tobacco products, and adults who don't use tobacco products today should not start. For adult tobacco consumers concerned about the health risk of tobacco use, the best thing to do is quit. And we offer expert cessation support through our QuitAssist online resources. For those who continue to smoke, our goal is to transition them to FDA-authorized noncombustible products. And we believe we are making substantial progress, expanding both availability and awareness of our noncombustible portfolio. We are also enhancing our understanding of purchasing behaviors as adult tobacco consumers engage with their products. Each consumer's journey to a noncombustible product will be different. So we will use responsible, tailored marketing approaches, personalized customer support and evolve our products to advance harm reduction. In addition, we believe it's critical that adult tobacco consumers understand the relative risks of noncombustible products compared to cigarettes. For years, we have agreed with the scientific consensus that tobacco products fall on a continuum of risk. And we are pleased when the FDA adopted this perspective as part of its comprehensive plan to regulate tobacco products. More recently, the relative harm from nicotine-containing products has been described in peer-reviewed literature as a risk cliff to emphasize that there are profound differences in risk between combustible and noncombustible categories. It's important that adult tobacco consumers understand that combustion is the primary driver of tobacco harm and that nicotine is addictive. However, adult smokers have significant misperceptions about the health effects associated with nicotine-containing products. We believe FDA and other public health authorities can help guide millions of adult smokers to potentially less harmful choices by correcting misperceptions about nicotine and product risk. It is also FDA's role to assess the science and evidence supporting messages to adult tobacco consumers about the relative risks of tobacco products. For our part, we are investing in rigorous scientific studies to support these products, advancing our leadership through communications and engagement and advocating for science-based policies and regulation. In support of this effort, we've established a position of Chief Scientific Officer to amplify our voice with the scientific and public health communities. Lastly, as we pursue our vision, we want to make sure that all adult smokers, regardless of background, demographics or financial means, have equitable opportunities to reduce the harm of smoking. Based on the regulatory framework in place and our deep understanding of U.S. adult tobacco consumers and preferences, we believe we can make more progress on harm reduction in the next 10 years than we have in the past 50. We also believe that preventing underage use is directly linked to preserving the long-term tobacco harm reduction opportunity for adult tobacco consumers. For years, we've taken a comprehensive approach to underage tobacco use prevention. We've made significant progress working with stakeholders to drive underage use of additional -- traditional tobacco products down to generational lows. In 2020, national government surveys also showed solid progress in reducing usage of e-vapor products, but we know more must be done. Our newest initiatives include monetary incentives to retailers for age validation technology. We expect this technology to be installed in over 120,000 stores by the end of 2021. We're also investing in marketplace monitoring tools to gather more real-time data on underage usage trends to enable a faster response to potential issues and making that information available on our science website. For businesses that make products intended for adults, we must align with societal expectations of our marketing practices. Our companies build relationships between their brands and adult consumers while taking steps designed to limit the reach to unintended audiences. In addition, for products newly authorized by FDA, like IQOS, our businesses submit marketing plans to FDA in advance of marketplace execution and conduct post-market surveillance to monitor any unintended reach or underage use. We are committed to continue our work with multiple stakeholders to drive down underage use and preserve the harm reduction opportunity that noncombustible tobacco products hold for adult smokers. We have a responsibility to minimize our environmental footprint and work to prevent the most damaging effects of climate change. Last year at this meeting, we announced ambitious 2030 targets, including our goal to significantly reduce our greenhouse gas emissions by 55% off of a 2017 base. Our targets were approved by the Science Based Targets Initiative and represent a key step in our net 0 transition. Later this year, we will assess our ability to establish a net 0 target when the Science Based Targets Initiative releases its methodology. Let's now move to supporting our people and communities. The past year has been a challenging one for our employees and society at large. The pandemic and social unrest led companies to evaluate their commitments to advancing employee and community wellness and addressing social and economic inequities. To address today's environment and enhance our culture, we're focused on supporting the well-being of our workforce and communities, building them inclusive, diverse and equitable culture and helping to address racial and economic inequities in the communities where we operate. We've taken significant steps to advance our people and community efforts, and we're committed to transparency of our progress. I encourage you to learn more in the supporting our people and communities report that was released in April. The important issues of well-being, diversity and equity extend beyond our employees and community partners to how we drive responsibility through our value chain. We partner with growers and manufacturers to develop strong, sustainable supply chain. Our supply chain partners deliver high-quality goods and services, and we value these relationships greatly. We remain steadfast in our commitment to compliance and working with suppliers who respect workers' rights, help protect the environment and comply with our contracts and laws. On the other end of the value chain, our retail trade partners play an important role in responsibly selling our products and preventing youth usage. As we discussed earlier, we're committed to helping retailers expand their capabilities to limit youth access to tobacco products. Altria is committed to making even more progress against our responsibility focus areas. I would direct you to altria.com, where we've already released our reports on engaging and leading responsibly and supporting people and communities. These are the first 2 in a series of 6 reports that we'll release throughout the year to update you on our progress in each of our newly identified responsibility focus areas. In summary, we believe the long-term sustainability of our businesses depends on our ability to deliver comprehensive solutions to critical environmental, social and governance challenges impacting a broad range of stakeholders. As a tobacco company, we know that addressing the harm associated with tobacco use and underage prevention should be our top priorities. We also know that long-term sustainability must be comprehensive and address concerns across our focus areas. And while we made significant progress, we know more needs to be done, and we're up to the challenge. Our progress and leadership in corporate responsibility continues to be recognized externally. In 2020, we were awarded a AA rating for tackling climate change and protecting water security by CDP, named as Civic 50 sector leader among America's most community minded companies and ranked fourth among the S&P 500 for leadership on corporate political disclosure by the Center for Political Accountability Zicklin Index. We also received a number of recognitions for the progress we have made enhancing our culture. Those included being a certified Great Place to Work, a perfect score of 100 on the Human Rights Campaign Corporate Equality Index and being recognized as one of the Best Places to Work for LGBTQ Equality. Credit for all the achievements we described belongs to our deeply talented employees. I'm extremely proud of their efforts through challenging times, and I'm honored to lead this company. Thank you, and now let's move to our question-and-answer session. Mac Livingston, our Vice President of Investor Relations, will present the questions you posed through the meeting site. Let's begin.

Thanks, Billy. As we described in our rules of conduct, we will take questions in the order in which they're received, subject to the 30-minute time limit. To conserve our time, we may group questions submitted by multiple shareholders on the same topic. The rules of conduct explain how we will handle questions if we run out of time. Your first shareholder question comes from [ Lindsey Crump ]. The CDC says that the top brand in the U.S. that is favored by youth is Marlboro. This is an Altria brand. The CDC also states that the packaging and design of certain cigarette brands, such as Marlboro, appeal to adolescents and young adults. A solution to this problem may be to quit packaging your product in this way. Do you plan to take action in this manner to help further prevent youth from smoking your products?

Lindsey, thank you for joining the meeting. You may have heard in my remarks -- you bring up an important topic of underage use of tobacco products. And you may have heard in my remarks, to be clear, kids should not use any tobacco products. From a standpoint of steps we've taken, I would encourage you to look at altria.com for the many steps that we've taken, but I'll highlight a few. We advocated for the minimum age to purchase of any tobacco product to be 21 years of age or older. And we believe raising the minimum age for tobacco products has been one of the single most effective policy change for reducing teen use of all tobacco products. And today, underage use of conventional tobacco products is at the lowest level in generations. That passed at the federal level, and we continue to advocate that -- for that at the state level. And I'm proud to say our government affairs team being very strong has had that happen in 36 states plus DC, but we continue to advocate for all the remaining states to align with the minimum age laws. From the standpoint of -- you also heard in my remarks, we're investing in technology at retail. Raising the minimum age to 21 shut off one of the ways that underage consumers had access to tobacco, which was through social access. That's from friends. And so raising the age to 21 has helped prevent social access to those types of products. And so the technology is another investment we're making [ incentive ] retailers to install it to allow retailers to help prevent underage use at the point of purchase. And so there's just a few of the many ways that we're trying to prevent and partnering with others to prevent underage use of tobacco products. But I would encourage you to look at altria.com, and you can see many of the ways that we go about that. Thank you for your question.

Your next question comes from Ann Gurkin. Management has highlighted its vision to responsibly transition tobacco users from combustible to noncombustible options. Given the recent development in the patent case in the U.S. with BAT, would you please comment on the risk to both rolling out IQOS in the U.S. and importing IQOS? Would you share any additional developments or specifics related to FDA's recent announcement to pursue a ban on the use of menthol and tobacco products nationwide? And how does cannabis fit into Altria's portfolio strategy given its investment in Cronos? And would you expect federal legalization of cannabis in the U.S. within the next 1 to 2 years?

Well, Ann, thank you for joining the meeting, and thank you for the questions. It's somewhat multipart, so I'll try to take those in turn. The first part was related to the vision, and I'm very confident in the vision. I mean, when you think about it, we have the leading core tobacco businesses with iconic brands that generate significant amount of cash. And this allows us the flexibility to both invest in the future of the business as well as reward our shareholders. From a talent standpoint, we have extremely talented employees with deep knowledge and experience of all of the industries we participate in. And to your point, the opportunities are in front of us. Tobacco harm reduction is still in the very early stages. And to your point, the cannabis industry is still being formed. Specific to your patent question on IQOS, and you heard in my remarks, we had -- we received the unfavorable determination from the administrative law judge. But I'd just remind you that this is a first step in a multi-step process. I highlighted that we plan to seek review of the judge's determination with the ITC. From a standpoint, there's no change -- from a standpoint of the rollout, I mentioned that we rolled out statewide in the 4 states and that we're moving towards Northern Virginia and launching there and have launched. From a standpoint of importation, once the ITC makes their determination, that would be the point in time where import bans could take place. And we would expect that to be later this year or potentially the beginning of next year. In the meantime, as any good company would do, we've been working with PMI on contingency plans. And of course, I'm not in a position to state what those contingency plans are today. But we'll share those as appropriate. From the FDA on menthol, you saw that statement that the FDA made publicly. From that standpoint, that's -- all that's transpired to this point. I think it's fair to say, though, overall, I think the FDA and us share a common goal to move all adult smokers beyond smoking. The rub is in the method. We just don't believe prohibition works because of the unintended consequences. We believe a better approach is to proactively and responsibly transition adult smokers to a noncombustible future. And I think the last part of your question was dealing with cannabis. Certainly, we believe that legalization should happen in the U.S. but certainly, the legalization, we believe, should be wrapped in the appropriate regulatory framework. And that regulatory framework really should focus on preventing underage use, promote responsible consumption by adult consumers, ensure quality standards across the industry, both at the manufacturing level as well as usage standards. It should advance the science and innovation and important as well, address any social justice issues related to the category. As far as timing, Ann, your guess is as good as mine, we'll have to see how the new administration takes it up and the new Congress. Thank you very much for your questions, Ann.

Your next question comes from [ Theresa Ng ]. On your website, a page is dedicated to harm reduction, which quotes the FDA explaining the addictive role of nicotine. It further states that echo smoke contains thousands of chemicals. It is this mix of chemicals, not nicotine, that causes serious disease and death in tobacco users, including fatal lung diseases like chronic obstructive pulmonary disease, COPD and cancer. The website further displays a graphic that shows a steep drop in risk if using only noncombustible products. One can reasonably assume from this that noncombustible Altria products are "safe to use." However, flavored e-cigarettes, a noncombustible product, contain carcinogenic chemicals like [indiscernible], diacetyl and heavy metals. This is all listed on the CDC website. Furthermore, the effects of nicotine span beyond addictiveness as it harms the prefrontal cortex of adolescent brains, interfering with adolescent cognitive development, executive functioning and inhibitory control. It is important to note that from 2012 to 2020, Altria spent more than $2 million on campaign donations and lobbying to defeat Hawaii legislation that would have made it more difficult for youth to access tobacco products. Can you explain why our website shows an incomplete and misleading picture of the effects of nicotine, especially towards youth, which Altria has politically interfered in while conveniently leaving out the other carcinogenic and harmful elements in noncombustible tobacco products?

Well, Theresa, welcome to the meeting. I think you bring up an important subject about the health effects of using any tobacco product. And you referenced our website, and we lay that out in great detail so that all of our consumers have access to the dangers of using tobacco products. That was the very reason we supported FDA legislation so that you would have an independent third party now assesses the science evidence related to all nicotine-containing products that we sell in the U.S. And so therefore, they will evaluate whether it's proper to authorize or not authorize any tobacco products and then put in place post-market surveillance and things of that nature for the companies, including us, to report to them. You mentioned the risk lift. I think the -- really, the way to think about that risk lift is combustible versus noncombustible categories. And what that portrays is the significant risk reduction and its relevant risk taken as a whole of a combusted product versus a noncombusted product. And you can see with that risk lift, there's a significant reduction in risk because you're no longer combusting the tobacco. And so that's what that risk lift represents. And that's the way it should be interpreted is the relevant risk of combustible taken as a whole against the noncombustible products taken as a whole. Thanks very much for your question.

Your next question comes from Amber Updike. Why you continue to not only market your products in ways that appeal to youth, but also continue to fund prevention programs that show no evidence of being effective, which has been stated before by the surgeon general, yet you claim that you do not want youths using your products.

Amber, thanks for joining the meeting, and thanks for your question. I would repeat, just to be clear, kids should not use any tobacco products. And so from a prevention method and support of prevention methods, that's why I would disagree with you just slightly. I think if you look at the results from the latest government surveys, what you'll see is that underage use of cigarette, let's just take that as a category, are at generational lows. And so I would give credit to the third parties that we partnered with that those prevention efforts have had a great impact on underage use of cigarettes. To your point, there's always more to be done. And I mentioned some of the investments we're making at retail to continue to prevent any access of underage consumers to tobacco products or nicotine-containing products. I would also mention the -- remind you that we advocated for the minimum age to purchase to be 21. We committed $100 million to address underage use of e-vapor products. And so those are just some of the efforts. Again, I would encourage you to go to altria.com to see the many efforts we take to prevent underage use. Thanks very much for your question.

Your next question comes from [ Jonathan Chaffee ]. On Altria's website, under racial and economic equity it states, we are committed to showing up with humility as we address systemic racism and advance social and economic equity. We hope to lend our voices and help drive necessary change. On April 29, the FDA announced they are working on issuing proposed standards within the next year to ban menthol as a characterizing flavor in cigarettes and ban all characterizing flavors in cigars. Mitch Zeller, Director of FDA's Center for Tobacco Products, stated for far too long, certain populations, including African Americans, have been targeted and disproportionately impacted by tobacco use. Despite tremendous progress we've made in getting people to stop smoking over the past 55 years, that progress hasn't been experienced by everyone equally. The CDC's website page, menthol and cigarette states, young people and African-Americans are more likely to smoke menthol cigarettes than other groups. 7 out of 10 African-American youth ages 12 to 17 who smoke use menthol cigarettes. Non-Hispanic Black adults have the highest percentage of menthol cigarette use compared to other racial and ethnic groups. Tobacco-related illness is still the primary cause of death for African-Americans. My question is with Altria's focus on racial and economic equity, moving beyond smoking to transition adult smokers to a potentially less harmful, noncombustible future and preventing underage use from starting to smoke, what reasons could Altria have to not support the FDA ban on menthol cigarettes and flavors in cigars?

Well, thank you for joining the meeting, and thank you for your question. I think if you take a step back initially, and look, we share the common goal, and you mentioned it. It's about moving all adult consumers beyond smoking. It's just the methodology of how do you get there? And again, not to be repetitive, but I'll repeat it because I think it's important. We just don't believe prohibition or outright bans work because of the unintended consequences. We really believe that the better process is to proactively and responsibly transition adult smokers to noncombustible products. From a standpoint of ratio equity, we really believe that all adult smokers, regardless of background, demographics or financial means, should have equal access to both cessation resources, and I mentioned the QuitAssist resources we have available on our website and equal opportunity to reduce the harm associated with using tobacco and nicotine by having access to these noncombustible products once authorized by the FDA. And so that is our focus. Thanks very much for your question.

Your next question comes from [indiscernible]. Reducing harm by offering smokers better alternatives to bring lower-risk items to the market and limiting access to youth are points of key importance noted on Altria's website. Yet from 2012 to 2020, Altria spent more than $2 million on campaign donations and lobbying to defeat legislation in Hawaii, my state, that would ban flavored products, including menthol, and make it more difficult for youth to access these products. It is a particular concern since native Hawaiians, like myself, are disproportionately impacted by tobacco products. Altria claims it is an industry leader in preventing underage use of adult products, yet based on 2019 Hawaii youth tobacco survey data, among those under 18 who smoke cigarettes on 1 or more days of the past 30 days, Marlboro was their top choice. If the goal is to bring lower risk to the market and prevent underage use, can you explain the millions spent to intervene in the political process to work against legislation in Hawaii that works to further Altria's goal by ridding the market of high-risk products, considering the disproportionate health impacts?

Well, [indiscernible] thanks for your question, and thank you for joining the meeting. That had a couple of topics in there about harm reduction underage use. And I would refer back to an answer I gave to an earlier question, it's really about how do we provide adult consumers with the products they want, but at the same time, move them towards or transition them to less harmful products from combustible to noncombustible, you heard me refer to earlier, at the same time preventing underage use. And again, I would refer you to the government surveys that show underage use of cigarettes are at generational lows. We increased by $100 million or committed an additional $100 million our commitment to address underage use in e-vapor, which was a new category that was appearing in the U.S. and had underage use. And so there, we are expanding what we're trying to do and accomplish by preventing underage use. I think the biggest policy change we advocated for was raising the minimum age to purchase to 21. And it really did, as I mentioned earlier, shut off the social access that underage consumers had to tobacco products. But we went a step further this year and are incenting retailers to put technology at retail, where once they have that technology, so for instance, if somebody was using a fake ID, it would be able to see that and alert the retail clerk to that transaction that wasn't a valid ID. So we're continuing -- we agree with you, more work to be done, and we are committed to tackling that more work. But I would invite you to altria.com to see the many steps that we've taken in partnering with third parties to help prevent underage use. Thanks very much for your question.

Your next question comes from Darryl Warner. In light of the international issues with trade and COVID-19, has Altria considered transitioning over the next 5 years their main Marlboro brands to having 100% of the tobacco grown and processed in America? This would not only provide traceability for a high market product, but also meet the social and environmental standards that are guaranteed from American growers that are GAAP certified. This would protect and ensure a steady market for American tobacco producers working hard to provide a high-quality product and be a win to the company branding a high-quality, traceable, socially responsible, 100% American cigarette.

Well, Mr. Warner, thank you for joining the meeting, and thank you for being a tobacco farmer for us. I know that our growers, including you, take great pride in what they do in delivering the finest tobacco in the world. And I thank you for that. We work on building relationships with our growers that promote the mutual success of both us and our growers. We're committed to all our growers. We're committed to the U.S. growers, and I think you can see that with the approach that we take to the marketplace. We maintain a direct contracting model, which we believe provides higher revenue streams to growers, offers them the availability of long-term contracts that has consistent rating in that process. And we offer competitive tobacco pricing package. It includes a base price that is at or near the top of the industry and offer targeted assistant programs that assist with cost and compliance initiatives, and aid, we believe, and grow our sustainability. So we are committed to the U.S. grower. Thank you for being a grower. We really appreciate the high-quality tobacco that you continue to deliver, and thank you for your question.

Your next question comes from [ Oxley Cynthia ]. The CDC states that approximately 480,000 people die from nicotine products annually. What can you as a company do to make up for the people and families of people whose lives have been taken by your products?

Thank you for your -- joining the meeting. I think you raised an important matter, and that's tobacco and health. Just to be clear on our position is, we believe, on matters of tobacco and health, the public should be guided by the conclusions of the public health authorities. You may have heard in my comments how we think about it. It's -- kids should not use any tobacco products. Adults who don't use tobacco today should not start. Adult tobacco consumers concerned about the health risk of tobacco use, the best thing to do is quit. And then you hear me go on and say for those who continue to smoke, our goal, Altria's goal, is to transition them to FDA-authorized noncombustible products. Thanks very much for your question.

Your next question comes from [ Mark Shasha ]. How is Altria handling the wine portion of the portfolio? Is it better to sell this area and concentrate on cannabis or some other developing areas in the company? Can you provide the latest news on the patent of PMI and if there's a major effect on Altria?

Well, Mark, thank you for joining the meeting. From a wine perspective, we think we have a great asset in the wine portfolio that we have. We just implemented a new management team there. The individual, that CEO has significant years of wine expertise. We believe they have great plans in place. Certainly, we stated before, we don't see that as a core asset, but we certainly want to operate it to its fullest extent. And we think we have the right team and the right brands in place to do that. As far as the patent litigation, I mentioned earlier in the answer to a question, this is really a first step in a multistep process. We will be seeking review of the judge's determination with the ITC. And so we're in the process of doing that, and that will be the next step in that multistep process. Thanks very much for your question.

Your next question comes from [ Nick Pasek ], high school student from Wisconsin. According to a 2019 FDA survey, 5 million middle and high school teens had used an e-cigarette within the previous 30 days. Personally, I feel surrounded by vaping. Bathrooms, band class, school field trips, you name it. I have probably witnessed someone using a vape product. When I ask them how they get involved with vaping, most of the answers are seeing social media influencers vaping, Snapchat and TikTok advertisements and their friends. I want to focus on the advertisement because that is something Altria can control. When I scroll through TikTok, I cannot go 15 videos without seeing an ad or video involving vaping. The minimum age for TikTok is 13. Teens seeing these videos can cause them to see vapes as normal and harmless or even as cool or trendy. And before we know it, they are addicted for the rest of their lives. In 2018, JUUL executives said it would quit social media. 2019, JUUL was under SEC investigations for its marketing practices. Despite these clear liabilities, Altria invested $12.8 billion in JUUL in December 2018, acquiring a 35% stake as it looked to expand beyond traditional cigarettes. Last month, JUUL and Altria are being accused of using false and misleading statements in the scheme to addict teens using JUUL. As Altria states, marketing -- as Altria states that marketing responsibly is a key pillar to your underage tobacco prevention framework, to what extent was Altria involved in the marketing plans of JUUL? And how will you ensure marketing strategies do not market to youth in any way?

Well, Nick, thanks for joining the meeting, and thanks for your questions. I think, first, I'll answer your direct question, which is did Altria play a role in JUUL's marketing? And that answer is no. We're a minority investment in JUUL. And so they have their own Board, their own executive teams that makes those decisions. We are a shareholder. From a standpoint of e-cigarette and underage use, I think it's important to look at the latest government survey, and you actually see numbers coming down. Again, not satisfied. There's more to be done there. And I mentioned earlier some of the actions that we're taking to try to prevent underage use, whether it'd be advocating for the minimum age to purchase to be raised to 21 years or older, some of the additional funds we committed to addressing underage access to the use and use of e-vapor products and even the technology at retail. I think when you step back from all of that, though, our support of the FDA and now all e-vapor products that contain tobacco-derived nicotine are under regulatory authority of the FDA. And so all manufacturers had to submit their application to keep those products on the marketplace. And the FDA is in the process of their scientific review. As part of that scientific review, we predict similar to what they did with IQOS, there will be some marketing limitations. And you'll have to send your marketing materials ahead to the FDA before their -- before you're able to execute those in the public, and so there's more to come. We're in the beginning of the FDA regulatory authority over the e-vapor products, and they're in scientific review. Thanks very much for your question.

Your final question comes from [ Philip Johnson ]. Can you please discuss the safety of the dividend?

Well, [ Philip ], thanks for joining the meeting, and I would thank you for being a shareholder because if you have a concern of being -- the dividend, then you must be a shareholder. We know that our dividend is a top priority for our investors, and it remains a top priority for us. We're committed to the 80% dividend target payout ratio. So from that standpoint, we know it's a top priority for our investors, and it remains a top priority for us. Thanks very much for joining the meeting. This concludes the question-and-answer session. Thank you for all your questions and for your continued interest in Altria. From all of us at Altria, please stay safe. The meeting is now adjourned.