Good day, and welcome to the Altria Group 2020 fourth quarter and full year earnings conference call. Today's call is scheduled to last about one hour, including remarks by Altria's management and a question and answer session. Representatives of the investment community and media on the call will be able to ask questions following the conclusion of the prepared remarks. To ask a question during this time, simply press star, then the number one on your telephone keypad. If your question has been answered and you wish to remove yourself from the queue, press the pound key. I would now like to turn the call over to Mac Livingston, Vice President of Investor Relations for Altria Client Services. Please go ahead, sir. Thanks, Laurie. Good morning, and thank you for joining us. This morning, Billy Gifford, Altria's CEO, and Sal Mancuso, our CFO, will discuss Altria's fourth quarter and full year business results. Earlier today, we issued a press release providing our results. The release, presentation, and quarterly metrics are all available on our website at altria.com. During our call today, unless otherwise stated, we're comparing results to the same period in 2019. Our remarks contain forward-looking and cautionary statements and projections of future results. Please review the forward-looking and cautionary statements section at the end of today's earnings release for various factors that could cause actual results to differ materially from projections. Future dividend payments and share repurchases remain subject to the discretion of Altria's board. 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 comparisons with reported results. Descriptions of these non-GAAP financial measures and reconciliations are included in today's earnings release and on our website at altria.com. Finally, all references in today's remarks to tobacco consumers or consumers within a specific tobacco category or segment refer to existing adult tobacco consumers 21 years of age or older. With that, I'll turn the call over to Billy. Thanks, Mac. Good morning, thank you for joining us. Altria delivered outstanding results in 2020 and managed through the challenges presented by the COVID-19 pandemic. Our tobacco businesses were resilient, and our employees demonstrated unwavering commitment to their work, colleagues, and communities. Our employees continue to move Altria forward, and we believe we're making steady progress towards our 10-year vision to responsibly lead the transition of adult smokers to a non-combustible future. We continue to execute against the strategies we previously shared, including maximizing profits in our combustible businesses, responsibly expanding our non-combustible products, and demonstrating science-based leadership in the external environment. We've remained active in our communities, supporting relief efforts for the pandemic and the West Coast wildfires. We're committed to driving positive change and addressing racial and economic inequities. Change starts from within, and our employees are leading our efforts to build a more diverse, inclusive, and equitable organization. Our 11 employee resource groups are helping promote cultural awareness and diversity in our workplace and within our communities. Two of these organizations, Mosaic and SEED, were recently recognized for their contributions by the National LGBT Chamber of Commerce and by the Virginia Hispanic Chamber of Commerce, respectively. We also acknowledge the importance of addressing environmental challenges, and we've established ambitious goals for 2030. Last month, we were among the 1% of companies awarded a double A rating from CDP for climate and water stewardship. We're proud of these efforts, and I look forward to sharing more details about our ESG initiatives next month at CAGNY. 2020 was a dynamic year in the tobacco industry, with notable changes in each category. Tobacco consumers continued to adopt non-combustible alternatives to cigarettes, most significantly in the oral tobacco space, with rapid growth in oral nicotine pouches off of a small base and a return to moderate volume growth in moist smokeless tobacco. The heated tobacco category also showed encouraging signs of smoker interest, though it remains in its early stages. The e-vapor category, however, which has been the biggest driver of smoker conversion over the last several years, contracted in 2020 as it continued to undergo a transition period pending FDA market determinations. In combustibles, cigarette volumes were little changed from 2019 as the COVID-19 pandemic altered smoker behaviors and purchasing patterns. Looking at the tobacco space in total, estimated equivalent volumes remain stable. In fact, over the last five years, we estimate that total tobacco volumes have only decreased by 1% on a compounded annual basis. While 2020 represented a pause in some industry trends away from combustible products, our plans to achieve our 10-year vision remain centered around building a deep understanding of evolving tobacco consumer preferences. Meeting these preferences by expanding the awareness and availability of our non-combustible product portfolio, and when authorized by the FDA, engaging with smokers to educate them on the benefits of switching to alternative products. Let's now turn to our 2020 business results. Altria's full year adjusted diluted earnings per share grew 3.6%, driven by strong performance from our tobacco businesses. We also returned nearly $6.3 billion in cash to our shareholders in the form of dividends, and our board increased the dividend for the 55th time in the past 51 years. Our smokable products segment continues to be the engine that powers our 10-year vision, generating significant cash that can be invested in non-combustible products and returned to shareholders. This segment has demonstrated strong profit growth in a variety of marketplace conditions. Over the last five years, smokable segment adjusted OCI has grown by 5.5% on a compounded annual basis, and this segment has delivered excellent financial performance across varied volume and market share dynamics. We continue to be pleased with the performance of our combustible businesses, and Sal will provide more details on this segment in his remarks. Moving to our non-combustible offerings. We're pleased with the continued strength of USSTC's moist smokeless tobacco business and the encouraging results from our other non-combustible products. We believe our products and investments with the oral tobacco, e-vapor, and heated tobacco categories present compelling options for the millions of U.S. smokers looking for alternatives to cigarettes. In oral tobacco, we believe we have an unmatched portfolio of MST and oral nicotine pouch products. Copenhagen remains the leading oral tobacco brand and delivered strong volume and profit performance for the year. We're also excited about the potential for on and believe it's a satisfying product for both smokers and dippers. Helix made significant progress in its first full year of operations. Over the last 12 months, our talented regulatory affairs team assisted Helix in filing PMTAs for the on portfolio, which we believe demonstrate that the products are appropriate for the protection of public health. Our highly skilled engineers and machine operators supported Helix in establishing a manufacturing footprint for on in our Richmond facility. Helix has reached annualized capacity for on of 50 million cans. The team continues to install machinery. Helix expects unconstrained manufacturing capacity for the U.S. market by mid-year 2021. The Helix brand management and AGDC sales teams collaborated to steadily increase the retail distribution of on during the year and executed innovative trial-generating promotions that demonstrated the ability for on to gain traction with smokers and dippers. on was sold in approximately 78,000 stores at the end of 2020, up nearly 40% from the third quarter, and more than five times the store count from the end of 2019. In stores with distribution, on achieved a retail share of 2.4 percentage points of the oral tobacco category in 2020, with significant growth coming in the second half of the year. Helix has strong plans for the year ahead and is focused on removing capacity constraints, reaching its retail distribution targets, building brand equity, and converting smokers. We're confident in the on proposition and believe its satisfying range of nicotine strengths and flavors and unique packaging position it well for success in the rapidly growing nicotine pouch space. Moving to e-vapor, we estimate that total category volumes decreased by 10% for the full year. The category continues to undergo a transition period as FDA prepares to make market determinations on the thousands of PMTAs filed by the September 2020 statutory deadline. We continue to believe that e-vapor products can play an important role in tobacco harm reduction and that sustainable e-vapor category will be one that consists solely of FDA-authorized products. We believe the category's long-term trajectory will be determined by regulatory decisions, legislative and tax policy, and innovation that best addresses smoker and vapor preferences. In the heated tobacco category, PM USA continues to expand IQOS and Marlboro HeatSticks responsibly and in a disciplined manner. PM USA's 2020 accomplishments included launching in Charlotte with a more disruptive retail fixture, expanding the retail distribution of HeatSticks to approximately 1,000 total stores, introducing devices into select Charlotte convenience stores. Developing an array of new digital tools, including mobile video chat capability, which gives PM USA's customer care experts a virtual option to build connections and support age-verified smokers through their conversion journey. Communicating with smokers using the FDA-authorized reduced exposure claim about the benefits of switching from cigarettes. We're excited that the FDA has authorized the IQOS 3 device for sale in the U.S. The new device offers several enhancements compared to the current 2.4 version, including a longer battery life and a faster recharging time. PM USA expects to begin selling the new device shortly, and it will be available across all existing retail channels in the Atlanta, Charlotte, and Richmond markets. PM USA also recently introduced new packaging for HeatSticks and has renamed the three currently authorized HeatSticks SKUs as Amber, Blue Menthol, and Green Menthol. The new packs feature a cleaner look, and PM USA believes the naming convention will facilitate HeatSticks line extensions in the future, should additional variants be authorized by the FDA. PM USA is focused on expanding the availability and awareness of IQOS, achieving its contractual performance requirements, and remains on track with its 2021 plans to expand IQOS and HeatSticks into four new metro markets and surrounding geographies. We believe that PM USA has the right approach to maximize its first-mover advantage, while responsibly positioning the U.S. heated tobacco category for long-term growth and profitability. Let's now turn to our financial outlook for 2021. Our plans for the year ahead include accelerating investments in support of our 10-year vision, which we expect to fund through the financial strength of our tobacco businesses. The external environment remains dynamic, however, and we're monitoring various factors including unemployment rates; fiscal stimulus; tobacco consumer dynamics, including stay-at-home practices, disposable income, purchasing patterns, and adoption of non-combustible products; regulatory and legislative developments; the timing and breadth of COVID-19 vaccine deployment; and expectations for adjusted earnings contributions from our alcohol assets. Taking these factors into consideration, we expect to deliver 2021 full-year adjusted diluted EPS in a range of $4.49 to $4.62. This range represents an adjusted diluted EPS growth rate of 3% to 6% from a $4.36 base in 2020. Our 2021 guidance incorporates planned investments to drive smoker conversion to non-combustible products, including continued marketplace investments to expand the availability and awareness of our non-combustible offerings, building an industry-leading consumer engagement system that enhances data collection and insights in support of conversion, and increased non-combustible product research and development. We expect our 2021 adjusted EPS growth to come in the last three quarters of the year, primarily due to prior year comparisons, which includes one fewer smokable products shipping day in the first quarter. Altria's tobacco businesses delivered excellent results over the past year, and I'd like to thank our employees for their hard work. Their dedication drives our strong performance, and it's their passion and commitment that makes me excited for Altria's future. I'll now turn it over to Sal to provide more detail on the business environment and our financial performance. Thanks, Billy. Let me begin by providing an update on U.S. tobacco consumers. Economic conditions remained challenging for consumers in the fourth quarter as unemployment rates remained high and the enhanced benefits from the original pandemic assistance package were fully exhausted. We believe consumers continued their stay-at-home practices in the fourth quarter, contributing to more tobacco usage occasions and higher tobacco discretionary spending. At retail, we estimate that the fourth quarter, the number of tobacco consumer trips to the store was slightly lower than prior levels. Tobacco expenditures per trip remained elevated versus the year ago period. Turning now to our businesses. The Smokable Products segment delivered excellent financial and marketplace results in 2020. The segment grew full-year adjusted OCI by over 10% and expanded its adjusted OCI margins by almost two percentage points. The smokable segment also achieved robust net price realization of 6.7% for the year, with PM USA's revenue growth management framework continuing to enhance the segment's top-line performance. Smokable segment reported domestic cigarette volumes declined by 0.4% in 2020 versus the prior year. When adjusted for trade inventories, calendar differences, and other factors, we estimate that full year segment cigarette volumes declined by 2%. At the industry level, we estimate that full year domestic cigarette volumes were unchanged versus the prior year after adjusting for the same factors. Looking ahead, we expect 2021 cigarette industry volume trends to be most influenced by smokers' stay-at-home practices, unemployment rates, fiscal stimulus, cross-category movement, the timing and breadth of COVID-19 vaccine deployment, and consumer purchasing behavior following the vaccine. Due to the uncertain timing and magnitude of each of these dynamics, we're not providing a cigarette industry outlook. We believe the degree of cross-category movement will be influenced by several factors, including consumer perceptions of the relative risks of non-combustible products compared to cigarettes, FDA determinations on PMTA filings, and legislative actions. We'll continue to monitor these factors and update you on the pandemic driven and underlying smoker behaviors that we observe in the category. Turning to marketplace performance, Marlboro's fourth quarter retail share was 43.3%, up 0.2% versus the prior year and unchanged sequentially. Marlboro continued to benefit in the fourth quarter from smoker preferences toward familiar products during disruptive times, and continued lower promotional spending among competitive brands versus the first half of 2020. For the full year, Marlboro's retail share declined 0.3% to 43%. Marlboro's full year share performance was impacted by the movement of older consumers coming back into cigarettes from e-vapor, which we observed at the beginning of 2020. This demographic has a greater tendency to purchase discount cigarettes than the category average, which increased discount segment share to start the year. We continue to be pleased with Marlboro's performance and believe its leading brand equity positions the brand well to deliver on its long-term profit potential. In discount, total segment retail share was 24.5% in the fourth quarter, unchanged versus the year ago period, and up 2/10 sequentially. For the full year, discount segment retail share increased 3/10 to 24.5%, driven by the cross-category movement observed at the beginning of 2020 in growth in deep discount products. Moving to cigars, Middleton provided a strong contribution to the smokable segment's financial results and continued to successfully navigate the regulatory environment. Reported cigar shipment volumes increased 9% for the year, and Black & Mild remained the leading tipped cigar brand. Middleton has also received market orders or exemptions from FDA covering over 97% of its volume. Turning to non-combustibles. We're very pleased with the performance of the oral tobacco product segment. Segment adjusted OCI increased 7.3% for the year, and it maintained its strong adjusted OCI margin of 71.7 percentage points, despite increased investments behind on. Reported oral tobacco segment volumes increased by 1.2% in 2020, driven by on oral nicotine pouches. In MST, Copenhagen reported shipment volumes were unchanged versus the prior year. When adjusted for calendar differences, trade inventory movements, and other factors, full year oral tobacco segment volumes increased by an estimated 1%. Full year 2020 retail share for the oral tobacco segment was 49.8%, down 2.7 percentage points due to the increased adoption of oral nicotine pouches. We remain pleased with the performance of Copenhagen in the MST category. We're excited about the growth potential of on as we continue to expand capacity and distribution. In alcohol, the pandemic negatively impacted the 2020 financial performance of both Ste. Michelle and our equity investment in ABI. Ste. Michelle's full year adjusted OCI decreased approximately 30%, driven primarily by lower on-premise and direct-to-consumer sales, partially offset by higher pricing. In beer, we recorded $157 million of adjusted equity earnings in the fourth quarter, representing Altria's share of ABI's third quarter 2020 results, and a decrease of more than 19% from the same period last year. For the full year, we've recorded $540 million in adjusted equity earnings from ABI, down over 36% from 2019. In our all other operating category, we recorded $172 million in adjusted losses for the year. More than half of which related to non-cash reductions in the estimated residual value of certain assets at Philip Morris Capital Corporation. As of year-end 2020, the net finance assets balance for PMCC was $320 million. We expect to continue reducing this balance in 2021 through rent and asset sales, and expect to fully complete the PMCC wind down by the end of 2022. Moving to capital allocation. Our balance sheet remains strong and our tobacco businesses are highly cash generative. Dividends remain our primary vehicle for returning cash to shareholders, and our long-term objective is a dividend target payout ratio of approximately 80% of adjusted diluted earnings per share. We believe our dividend target payout ratio provides significant shareholder return while allowing for flexibility in our capital allocation. We perform rigorous analyses to determine the best use of excess cash, including evaluating options for reinvesting behind our 10-year vision, refinancing our long-term debt, and repurchasing shares. Yesterday, our board authorized a new $2 billion share repurchase program, which we expect to complete by June 30th, 2022. The new authorization reflects the significant value the board believes exists in our shares today. With that, we'll wrap up, and Billy 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 on altria.com. We've also posted our usual quarterly metrics, which include pricing, inventory, and other items. Operator, do we have any questions? Thank you. Once again as a reminder if you would like to ask a question, please press star key followed by the number one on your touchtone phone at this time investors, analysts, and media representatives are now invited to participate in the question and answer session. We will take questions from the investment community first. Our first question comes from the line of Nik Modi of RBC. Yeah. Good morning, everyone. Good morning, Nik. Just two questions. Hey, good morning, Billy. Just two questions from my side. Just if you guys can give us maybe a state of the union of what you're seeing from the excise tax front, that would be helpful. The broader question is just on Marlboro, very good share performance, which could be surprising given some of the stimulus was over. We had an air pocket in terms of government stimulus. What really drove that? You spoke in your prepared comments about well-recognized brands, but I'm just trying to get underneath if there's other drivers like price cap management or the Marlboro Rewards Program and how that played a role in terms of shifting the share trajectory, because it's been losing share for a number of quarters now. Thanks. Yeah. Thanks for the questions, Nik. We'll take them in order. On the excise tax front, I would remind you that we had two state excise tax increases happen at the beginning of this year. Certainly, with the bills that the states have racked up responding to COVID, certainly it'll be a little bit more challenging excise tax environment. We have a great government affairs team, as you know, Nik, and they engage on both sides of the aisle across the states and really know how to engage on that. From that standpoint, though, I think right now, most governments are focused on how to get the COVID-19 pandemic under control. There's a little bit of chatter across the states, but nothing to point out at this point. Certainly, it'll be a challenging environment as they look to pay the bills related to their response to COVID-19. On Marlboro, Nik, I think what you saw was, and Sal highlighted it in his comments, people were concerned at the beginning of the year. We tried to highlight for the analysts and investor community that what we saw was consumers moving back from e-vapor back into cigarettes, and both premium brands and discount brands benefited from it. Because it tended to skew older adult smoker coming back, we know that they have a proclivity towards discount brands. We didn't panic when that was taking place. We felt like we knew what was behind that, and I think you've just seen the strength of the Marlboro brand through time. Certainly, there were some competitive premium brands that had some extra resources in the marketplace at the beginning of 2020. We saw those lessen as we progressed through 2020. To your point, the programs we have in place and the Marlboro brand team do an excellent job of engaging with the consumers and really building loyalty through time, whether you mentioned the rewards program, but other programs as well. I think that's the strength of the Marlboro brand, and we're excited about where it stands. Great. Thanks, guys. I'll pass it on Our next question comes from the line of Bonnie Herzog of Goldman Sachs. Thank you. Good morning, everyone. Good morning, Bonnie. I guess my first question is on your EPS guidance. I guess I'd be curious to hear what does your guidance assume in terms of the tax increases that you just touched on? I'm wondering, Billy, if it does consider a potential federal excise tax increase, maybe at the low end. I guess I'm a bit surprised you were unable to provide even a wide range for your cig volume expectations this year. I certainly understand there's a lot of uncertainty right now in our world, but you must have, I guess, some sense of the range of your cig volumes, again, given your EPS guidance. Maybe you could touch on. that for us a bit, just at a high level, whether or not you expect cig volumes this year will possibly revert back to historical declines, maybe below historical declines, given the tough comps and the potential for greater excise tax increases. Thanks. Yeah. Thank you, Bonnie. We'll take those in turn as well. On the EPS guidance, really, when you think about the EPS guidance. I know you're including kind of the cigarette volume in that. Look, we run a range of scenarios around that. We really look at what are our base expectations. We have a very strong forecasting group. They forecast across the various categories. We run a range of scenarios around that, upside and downside. We think about, okay, what do we feel confident about in providing a assured range of EPS guidance for the year? That's where we landed. As far as cigarette volume, it wasn't that we didn't have a forecast for volume. We feel very good about the way we go about forecasting volume. To your point, there are a lot of uncertainties and a lot of fluidness in the environment, whether that's the consumer and how they'll engage with some of these non-combustible categories as they continue to grow, or to the things we highlighted in our remarks, whether it's unemployment or the fiscal stimulus, if the government passes that. There are a range of factors there. What we think, really focusing on the consumer, and that's what we tried to do and are trying to do, is really give more information about how we're focused on the consumer and want to win where they go. That's exactly why we implemented the portfolio strategy, is really looking at the consumer's going to make different decisions, depending on where they're at in their journey, and how do we really focus on. the consumer and have the best products and best brands in each of those categories as they make decisions. Don't get me wrong, the cigarette, as I said in my remarks, really fuels, it's the engine. Yeah for fueling the 10-year vision. We think what you should hold us accountable to is our success in meeting the consumer where they're at, regardless of what category they're in. Okay. That's helpful. I appreciate that. Speaking of your 10-year vision, I did want to just maybe ask you to help us with that and maybe update us on where you're at with it. I know it's in the beginning, are there any guideposts you could share with us that you're expecting to see for your business, maybe even the next three to five years? I'm asking because obviously, per your guidance and your comments, you're entering a period near term here where you're stepping up spend to kind of accelerate this plan. It would help us to understand maybe some targets, like for you to convert your business to the non-combustible products, as you mentioned. Is it fair to assume 20%, 25%, for instance, in the next, I don't know, again, three, five or five plus years? As you execute on that vision, are you also open to or considering future M&A to even accelerate this further? Should we just assume this will all be done organically? I do want to hear about how you're incentivizing your employees to execute. Thanks. Sure. Look, I'll take them in reverse order. As far as the employees, they have such passion, but you're right, incentivizing them in the right direction certainly directs that passion. We've shared that 10-year vision that we have and how we expect to progress through time with our employee base. They're passionate about it. They're excited to support that, and we think we have the right incentive program in place, to warrant that excitement. As far as milestones, again, I won't go into a specific numerical value. Remember, from an overall objective, we're looking to balance strong growth, EPS growth for our investors and the associated cash involved with that. At the same time, making investments over the long term to advance our non-combustible portfolio. What we're really trying to do is have that balance. We're certainly going to share with you through time how we're making progress, but it's really about the journey of the consumer. If you think about really driving awareness of the consumer for new categories, incenting trial, ultimately purchase, and then at the final stage, conversion to these new categories, that's the way we're thinking about the consumer journey, and we're really investing to get to as close to the consumer as we can, because each consumer is going to be at a different point in that journey and make different decisions across the categories. That's exactly the portfolio approach. As different actions are taken, whether they're regulatory actions, whether they're consumers really enjoying a category, is being able to be agile enough to not starve any category that's growing and make the appropriate investments there. That's how we're thinking about the consumer journey, and you'll see us share more through time of how we're progressing with those consumer journeys. Okay, thanks. Just maybe quickly on the M&A, would you be open to that? As you know, I guess I'm thinking about over the next few years, if there's a way to just further accelerate that, whether you've developed it internally, or would you be open to looking outside capabilities? Yeah, we'll keep our eyes open for everything, but we're extremely excited about the portfolio of products that we have currently, and it's really a focus on execution. To your point, that's exactly why we talked about the investments in our product development, is making sure that we're staying abreast with the consumer and really keeping pace and meeting their needs and desires. All right. Thank you. I'll get back in queue. Appreciate it. Thank you. Your next question comes from the line of Vivien Azer of Cowen. Hi, good morning. Good morning, Vivien. I wanted to also switch base on combustibles, please. If we're looking at wholesale inventories for both you and the industry, they remain elevated at year-end relative to where you guys closed out each of the last two years. Appreciate that some of that probably is just safety stock because of COVID-19, but how should we think about inventory levels as we head into 2021, please? Thanks. Yeah. Thanks for the question, Vivien. I think you nailed it. I think it was as wholesalers and retailers were making decisions around where they stood with the COVID-19 pandemic, because at different parts across the U.S., the surges that are taking place and different state government decisions about shutdowns and the consumer mobility in the marketplace. I think certainly there was a slight level of increase over what you've seen in previous years as they took those things into consideration. Certainly, as we've always said, through time, those wholesale inventories tend to balance out. We'll see as we progress through the COVID-19 pandemic and the vaccination rollout, how wholesalers and retailers decide what levels are appropriate for them. Understood. Thank you so much for that. My follow-up question is on oral nicotine. 6% adjusted industry volume growth in the quarter and the year. I was wondering whether you could unpack that at all and provide some color on how much of that growth came from modern oral so we could have a better sense of what's happening with underlying MST. Thanks. I would say, look, both pieces of that category did grow during the year, but certainly the vast majority was the onset of the novel oral products, whether it be on or ZYN or other products in that space. That's the vast majority, but both segments of that category did grow. We feel good about the offerings we have and brands in the traditional MST, and Copenhagen continues to lead that category, and we feel great about its position. Understood. Thank you very much. Our next question comes from the line of Michael Lavery of Piper Sandler. Good morning. Thank you. Good morning, Michael. Could you just talk a little bit about what you're seeing with IQOS and what engagement is really proving the most effective, whether it's in the stores or digital or mail or anything else? How does the IQOS 3 launch impact any of your marketing approach? Yeah, it's a great question, Michael. Look, we're very excited about what we've experienced in the first three lead markets. From a standpoint of the exact way to engage with the consumer, what's most important we found is the consumer education. That they understand what the IQOS device delivers and the Marlboro HeatSticks, what flavor expectations they can have, and then really how to use the device. From that standpoint, we're trying many things because remember, we launch in densely populated areas. You have one strategy there, as you move from those densely populated areas out, that's exactly why we were testing the device sales in convenience stores to really meet consumers where they are. As you get to more rural locations, really having an outlet to engage with the consumer. We actually use all of those measures that you mentioned, whether it's direct mail, whether it's retail stores, the devices in the convenience stores, whether it's corners in various places or whether it's the mobile units. Certainly in Charlotte, we have used the mobile units to a larger extent because what we found is as you meet a certain capacity, you can actually move those mobile units from one location to another and really maximize the number of consumers you're engaging with. Certainly in the COVID world, we had some challenges there because there's a lot of engagement one-on-one with the consumer, but our team implemented digital tools. We talked about the mobile chat capability that they installed. We're excited to continue to expand, and we'll have more to say on that. Okay, great. That's helpful. Could you just give your latest thinking on Cronos, and would you expect to take full control if federal law were to change? Yeah, I'm not going to speak to taking control or any M&A activities. Certainly, we think Cronos has positioned themselves well to take a role in the U.S. if it becomes federally legal. I think it's important to step back and really state what we believe. We believe it should be legal at the federal level, it's got to have the right regulatory framework. If you think about that total framework, what it should address is it should address underage use. It should establish industry product standards, that includes safety standards. It really needs to be guided by the science so that from a standpoint of everything should be science-driven, it really should deal with the social justice issues that are involved in that space. We believe it should be federal at the legal level. We support that. We're engaged with that. It's got to have the right comprehensive framework surrounding it. Okay, great. Thanks very much. Our next question comes from the line of Chris Growe of Stifel. Hi, good morning. Good morning, Chris. Hi. I just had a question for you, first of all, on, you've had an elevated rate of price realization in the cigarette business in particular. As we enter the year, certainly as you lap increases that occurred in 2020 as well as. Presuming you take increases in 2021 beyond what you've done already, it would seem to provide the backdrop for an even stronger rate of profit growth. I want to understand, without getting into numbers, I realize that's going to be hard to get into, but just understand the concept of the desire behind the higher level of pricing and what you can do with that. Is there a heavier rate of investment in the business? Is this going to help fund more of your expansion of on and the non-combustible part of the 10-year vision? I'm just trying to understand the pricing strategy as it's evolving here. Yeah, I appreciate the question, and I'll be careful, Chris, as you mentioned, not to get into the future pricing strategies. Look, we recognize that pricing is an important part of the algorithm. I would remind you that the strategy for the combustible segment, both cigarettes and cigars, is to maximize profitability over the long term while balancing investments in Marlboro and funding the growth of our non-combustible portfolio. Certainly, profitability in the traditional tobacco spaces is what we're using to invest in the future in these non-combustible product arena. Certainly we look at that. From a standpoint of when you look at pricing, a couple of the factors that we think about pricing as we move forward is really where are our consumers on an economic standpoint? What are they feeling? How do they feel? What are they thinking about? It's the strength of our brands. How do we think about our brands and the strength in the consumer's mind? Certainly business performance and objectives factor into that. I think when you look at price realization over the past couple of years, I think it's important to remember, that's not all list price. It also has the price efficiencies we've been able to garner from the advanced analytics that we put in place. With the amount of data that we get in and the advanced analytics that we've invested in, I think you're seeing the benefit in price realization of being more efficient, but just as effective, if not more, in the marketplace with the promotional spend that we have. It's a combination of both, and we are extremely excited about what our advanced analytics team has been able to accomplish. Okay. Yeah, thank you for that. I had one other question that's, and I hope it's not too general, but I'm just curious as I look at the cross-category movement, which was a modest factor throughout 2020. Is that more difficult to forecast in 2021? Again, I hope that's not obvious, meaning that, but I guess what I'm getting to, is this a year where your categories such as modern oral or heated tobacco, especially as they grow and become larger, could have a larger effect on the cigarette category, as an example. Is this a year where you see the potential for that transition or acceleration in some of those categories that could further influence cigarette volumes in 2021, or is it just too soon for that? I don't think it's too soon for that, Chris. I'm hesitant to try to give much more on cigarette volume guidance. I think you're exactly right, though. The success of those categories and our success in them will certainly impact the cigarette category. It's in line with our vision. When you step back, Chris, that's exactly why we really went with this portfolio approach of products. It's about meeting the consumer where they're at. Each consumer's going to make different decisions, and that's that objective we have of balancing strong growth in the associated cash for our investors and investing in these categories. As we progress through the year and we see a consumer following of one of these categories, we want to make sure we're not starving it for investment. It provides us the flexibility we need, we feel, to make the right decisions as we progress through the year. Okay. Thank you for your time today. Thank you, Chris. Your next question comes from the line of Owen Bennett of Jefferies. Morning, guys. Hope all well. Good morning, Owen. Just a quick one from me on. You note the increase in the R&D spend around non-combustibles. I'm assuming this obviously can't be around vapor given the agreement with JUUL. I'm just wondering what this R&D centers on. Is it your own heated product? Is it advancements in modern oral? Is it something else entirely? Thank you. Yeah, you're exactly right, Owen. Thank you for the question. You're exactly right from an e-vapor standpoint. With the agreement we have in JUUL, we're not looking at product development in that space. It really is staying the keen focus is on the consumer and staying where the consumer is going. It's across these categories that are growing is where we want to have product development, to make sure we're keeping pace with the consumer's needs and desires. I think any CPG having a strong product development is important, and that's why we think it's important for us to invest in that area. Okay. Would that be even potentially looking at developing your own heated products? Is that a possibility in the future? I'm not going to get into specifics. Know that it's in the non-combustible space is where we're investing, and it's really about looking how the investor is, what they're desiring and what needs are unmet and developing against that. That's about as far as I'm going to go today. I think as we make progress in that space and we feel excited about the progress we made thus far, we'll share more when it's appropriate. Okay. Thanks very much. Appreciate it. Thank you. Your next question comes from the line of Steve Powers of Deutsche Bank. Yes, hey, good morning. Thanks. Good morning. Morning. Billy, I guess when you step back and you sum up the elective investments that you seem to be prioritizing in 2021, both towards the vision of a non-combustible future and the new product development, but also just the enhanced analytics around consumer insights and revenue growth management, is there any way to dimension, maybe even just relative to similar investments in prior years, whether we should be viewing 2021 as a year of investment acceleration on those fronts, or would you frame it more as a steady state glide path if you drew a line through the last few years? I hate to characterize it either way, Steve. We feel like we've made the appropriate investments. Certainly, it's stepped up. I wouldn't say that we're just gliding along. We're going to move where the consumer moves, it's that keen focus on the consumer. It's about driving the portfolio that we have. If you think about investments around on and the heated tobacco space with IQOS and multiple HeatSticks, it's about driving investment there, driving awareness, getting the distribution we desire at retail, and having it in the consumer's consideration. When you go to the next category about this digital platform, it's really about thinking about We've made great strides in analytics, I think you've seen the benefit in the performance of our businesses. Now it's about those insights being really focused on. the consumer and how do we get as close to the consumer and understand where each consumer is at on their journey to conversion for whatever category they're choosing, and making sure that we're able to communicate and keep pace with them in that journey. The final one is, as we've seen in all of these categories, continued development around the product space is extremely important to the consumer, and investing there to make sure we're keeping pace with the consumer. That's how we're thinking about it. We're extremely excited about the portfolio we have. It's about getting it there to have it in the consumer's consideration set, meeting them where they're at, and communicating with them along the journey, and then making sure that our products keep pace with the consumer's future wants and desires. Okay. If I could just maybe, I think this is probably for Sal, just a couple of cleanups. Just as I think about the 2020 cost base, clearly there were some incremental COVID-related costs in that base, also some COVID-related savings. You think about the move into 2021, is there a way to net out those dynamics in your base case? Also, if there's any way, any advice you might have for us on the outside as to how we should think about the earnings impact as we go forward, just as you continue to wind down the PMCC business, just how we should think about that flowing through the P&L. Thanks. Sure, Steve. Good morning. As far as the cost base in 2020, remember, we were lapping the cost reduction program that we implemented in 2019. Of course, cost management remains top of mind for us. When you think about 2021, we think we have the right structure for the business and the right size of the business. It's really about reallocating our spending, right? We're moving spending from the combustible business as we invest into the non-combustible business. Our employees do a terrific job of thinking about efficiencies on their infrastructure and their processes and how that frees up resources to reinvest in our 10-year vision and in our non-combustible platform. The right size organization, we feel really good about it. We have terrific employees. They've done a wonderful job of continuing to provide productivity during the pandemic. That's how I would think about 2021 costs. As far as PMCC, the folks at PMCC over the last many years have done a wonderful job of really unwinding that business. It has been lumpy at times. We're selling assets. When you think about 2021 and 2022, we've got the net finance assets at a low level. It's significantly lower than when we began to wind down that business. Really it's about rents received and the sale of assets. There might be some lumpiness in there, but we feel good about the portfolio that remains and the ability to unwind the business. We expect to be completely wound down in 2022. Okay. Thank you both. Appreciate it. Thank you. Your next question comes from Gaurav Jain of Barclays. Good morning, Billy. Good morning, Sal. Good morning. I have three questions. First is on the EPS guide for next year, which is 3%-6%. In that, there is some component of share repurchases, about 1%-2%. Your pre-tax PBT guide is for 2%-5% growth. How are you incorporating the ABI equity income in that? Because that fell off quite a lot this year. If I just look at consensus numbers, they ask for a very steep bounce back in ABI net income. Could you just help us understand that? Gaurav, I want to be careful not to get into the particular components there. There's always puts and takes across the P&L. I think what's most important is, as I stated earlier, is this objective to have strong growth, make appropriate investments in our non-combustible portfolio. As you think about as we progress through the year, if one area or another performs well, that affords us, as we're progressing through the year, to make changes if necessary, it also affords us the opportunity to invest in areas that we're seeing the consumer gravitate towards so that we're not starving any particular category for investments. Sure. That's helpful. Second is on the price increases in the U.S. industry recently. Your primary competitor is now pricing before you, and it doesn't seem you are following all the price increases in all the states. Is there a risk that the pricing balance in the industry could deteriorate as we go forward? Yeah, Gaurav, to be quite honest, we really don't pay attention to who goes first, who goes second, or what order. Really, I mentioned this earlier, that the major factors that go in there are pricing considerations. Nothing from a competitive standpoint. It's really about how our consumers are from their economic position. What are they feeling? How are they positioned, and how do they feel about their future prospects? The next is the strength of our brands. How do we feel about our brands in the marketplace and in the consumer's mind? Then it is around business performance and objectives. Those are the three factors we think about when we build our plan around pricing, and that's what drives our pricing decisions. Sure. That is very helpful. My last question is just on this IQOS packaging, which you shared on slide 15. I don't see any of the MRTP risk messages that were authorized by the FDA. Would there be a new packaging which will incorporate that? Is Philip Morris involved in this redesign, or is this under your sort of consideration that you could put whatever branding and packaging that you would like? Yes, certainly, we collaborate with PMI, but those decisions are ours. From that standpoint, we wanted to make sure we had the flexibility as we move forward. We will be communicating the MRTP with consumers, and we want to do it in the most effective way that has an impact on them. We'll be rolling that out, and we've started that process in some of our markets. What we saw in research is it does bear into the consumer's mind of deciding to engage with the concept of the IQOS and the Marlboro HeatSticks, as well as their desire to stick with it. We're looking forward to bringing that MRTP, and we'll use the avenues that we think are most advantageous for us to get that message across to the consumer. Okay. Thanks a lot. Thank you. Hey, Laurie before we go to the next question, we're aware that we've had a technical issue on the webcast, just want to make sure that investors listening on the webcast are aware that we're going to work to get our transcript and replay up very quickly, following the call. We appreciate your patience on that. Your next question comes from the line of Robert Rampton of UBS. Hi. Good morning. Thank you very much for taking my questions. Three questions from me. The first is, looking at over the quarter, I mean, for the first time, it seems like lowest effective price and the net pack price moved in opposite directions. Curious to understand what drove this. Does it mean you're broadening the Marlboro price ladder, and if so, interested to hear why now? I think when you think about our pricing decisions, as I mentioned earlier, the things that factor into our pricing decisions and then our price realization is really around the list price increases we take and the efficiencies garnered across our promotional spend. I think when you look at the rest of the pricing decisions, they're independent of us, as manufacturers make those pricing decisions. Of course, you have state excise taxes that get added to that, and then how retailers themselves are competitive in the marketplace. There are a lot of factors that go into that, and we feel good about where we're at. Okay, cool. Second question. In the annex, you suggest that macro factors were a 4% tailwind to industry volumes for 2020, which you said was primarily driven by stay-at-home. In the event stay-at-home ends, I'm just trying to get an understanding of how that evolves. Does it go to minus four or zero? I'm not looking for a guide here. I'm just trying to better understand what you think the sensitivities are around the big uncertainties that you flagged. Anything you can share here, maybe the experience in given states would be very helpful. Sure. Really what we think drove that was exactly what you mentioned and we had highlighted, which was stay-at-home practices, which consumers themselves face less social friction. They also were benefiting from more discretionary income related to those stay-at-home practices. Less discretionary, whether it be movie tickets or going out to eat or even gas. As we progress through the year, as we see consumers respond to how their behaviors related to how comfortable they feel returning to some of those discretionary other items, or even they decided to go fully back to work versus work remotely, it's something that we'll be monitoring and whether the consumer decides to adapt their life a bit to those changes or whether they go back to, I'll call it a completely normal state pre-COVID-19. That's something that we'll be monitoring. Certainly in our guidance, we ran a range of scenarios and feel comfortable that we have levers across the business to be able to respond to that regardless of whether those scenarios occur. Okay. Sorry, my final question, just on heated tobacco, any chance you can give us an update on the tax reductions you've secured in terms of number of states and the magnitude? Thank you very much. Yeah. Our government affairs team has been able to secure that reduction in six states. Of course, there's a slight definition change in the state of Virginia. If you count that as a reduction, it would be seven states, but six that are part of, if you will, once it receives designation from the FDA, a step-down taxation. Just a quick follow-up on that. Because I understand there was a kind of tiering element there with some saying 25-50, depending on what type of MRTP -you get. Is that still a fair way of thinking about it? It is. It varies by state, but that is a fair way to think about it. Great. Thank you very much. Appreciate you taking the time. Thank you. Your next question comes from the line of Adam Spielman of Citi. Hello, thank you. Just a handful of questions really, two or three, just to make sure I understand what you said. The first one is talking about slide 10 of the presentation. That's the one where you have, it's about on and the heading is building on momentum. I just want to make sure I've understood it. I think the left-hand side is saying there are more stores where you sell on, and the right-hand side is saying within stores, you have a higher market share. The question is, am I right to believe this is a double effect? You've got a high percentage in more stores and therefore it's a sort of multiplicative effect, and overall, it looks better than either of those two charts alone. Is that the right way of thinking about that slide? That is the right way of thinking about it, Adam. What we show on the left side is cumulative distribution in stores, and then on the right side, what we're showing is the quarterly share in those stores with distribution. Yes. Fine. on the slide, I don't know what number it is. There's a slide on the sort of extra pack you give that shows oral tobacco industry volume growth estimates. In Q4, it's 6% versus Q3, it was 7%. It's grown and then shrunk again. I was just wondering if there's any explanation about why it's slightly lower in Q4. Yeah, I think you'll see fluctuations through time, Adam. Nothing grows in a straight line, and so you're going to have distribution efforts that will accelerate that in periods of time. You'll have, as distribution levels out in some areas, you'll have fluctuations. I think we try to provide this, but if you think of this more as a line through time is a better way to think about continued distribution and growth in oral. I think it shows the desire of the consumer to find a non-combustible product that satisfies them. As they move to those, you're going to see through time growth in these categories. Fine. Thank you. Just a final clarification question. I think Sal said, I just want to make sure I've got this right, that although there is clearly an incremental investment in 2021 in non-combustibles, we should think about this mainly as a reallocation from expense that would have been spent on combustibles as, for example, some of the sales force transition across and spend more time. Good morning, Adam. Let me clarify for you. We are increasing some of our investments in our non-combustible. Some of that will be offset through reallocation, but I don't want you to take away from my comments that is 100% funded by reallocation. It helps us be more efficient across the full P&L. As we stated in our earlier remarks, we are increasing our investment to achieve our 10-year vision. Okay. That's very helpful, thank you. Very clear. Can I just come back to clarify an answer that I didn't really understand before? I know you're not going to give me the precise number of dollars and cents, but if I think about the increment in investment in 2021, is that roughly the same as the increment of investment in 2020 in the non-combustible area? Is it more or less? In other words, is the investment accelerating or moving at the same speed, or are we moving to a sort of a more steady state situation? Yeah, Adam, I'd be hesitant to compare it. We think we're making the appropriate investments, and it goes back to really balancing strong growth for the investor and the related cash and the appropriate investments there. We're going to make the appropriate investments. We're never going to starve a category for investment that we think we're making significant progress in. We're going to make the appropriate investments. I hesitate to say, because the timing can be different during the year, and so one quarter compared to our previous quarter or vice versa. Certainly, we feel good about the investments we've made. Okay. Thank you. Once again if you would like to ask a question, please press star then number one on your telephone keypad. Your next question comes from the line of Priya Ohri-Gupta of Barclays. Hey, good morning, and thank you so much for the question. Good morning. Morning. I was wondering if you could walk us through how we should think about your cash balance, just given the elevated nature of it at year-end. You have a few sort of things that are earmarked for that use. You have a billion and a half maturity coming up, the share repurchase program, increased investments behind the non-combustible side. How should we think about each of those relative to the elevated cash balance and sort of that cash balance getting back to more normalized levels? Thank you. Good morning. This is Sal. I think you characterized it fairly. We do have an elevated cash balance than we have had typically. Billy and I have talked about throughout 2020, the desire to have an elevated cash balance as we manage through the pandemic. Remember last year, the board of directors rescinded the share buyback program, we were very focused on it. I think you've articulated the uses of cash for this year. We're excited and really pleased that the board of directors authorized a new $2 billion share repurchase program, which we expect to complete by June 30th, 2022. We're excited about that. I think it's the appropriate level. It reflects the value in our shares and enhances shareholder value. We also maintain capital allocation flexibility. We remain committed to the 80% target payout ratio for our dividends against adjusted earnings per share. When you think about our cash position, in a typical year after paying the dividend, making the necessary capital investments in our business, we traditionally have about $1 billion in excess cash, and we will run through our capital allocation analysis to determine the best use of that cash. That's helpful. I guess if we think about refinancing versus using the cash to pay down your upcoming maturity, could you walk us through some of the considerations that go into that specific decision? I don't want to get ahead of myself on how we think about debt refinancing or debt retirement. What I would tell you is that we take into a lot of factors, as many companies do, market conditions, best use of capital to enhance shareholder value. We have a very talented treasury team. They work really hard on staying ahead of our debt maturities and thinking about capital allocation and the best use of our capital going forward. Okay, that's helpful. One final just follow-up for me. How do you think about share repurchases in an accelerated manner versus at an ongoing rate over the course of the next 18 months? I don't think it's helpful for me to share how quickly or the pace that we buy our shares back in a share repurchase program. I would tell you that we have communicated that it's an 18-month program. We will buy our shares. You're right, it does depend on market conditions when it comes to the pace of share buyback. I really don't think I should really provide much more detail than that. Thank you so much. Your next question comes from the line of Jennifer Maloney of The Wall Street Journal. Hi, good morning. Good morning, Jennifer. I wonder if you could talk about how you think consumer behavior may or may not change. I know that you talked about different scenarios that you could envision. A lot of consumer goods companies say that they expect there to be some permanent change in the way we behave moving forward, even after the vaccine. People might continue to snack more, or they'll work home part of the week. What's your best guess as to how much of this change in consumer behavior is sticky, and how much we go back to the way things were? Yeah, it's a great question, Jennifer. It is something that we're going to monitor, engage with our consumers on a regular basis to be able to assess that. When you think about our consumer, they tend to be a bit at the lower end of the economic status, and so from that standpoint, they definitely need to be able to work. It depends on their trade of what they are participating in the workforce in, of how readily available they can choose to be completely remote versus having to report in at times. I think it's going to vary greatly, and it remains to be seen how much they adjust their lifestyle back to, I'll call it, normal pre-COVID to now even past a COVID pandemic, how much they adapt and change. I think it remains to be seen, and it's something that we'll be engaged with our consumers to be able to assess through time. If people are smoking more now and their discretionary spending goes down because they want to spend more at the movie theater, how much of a lever is the discretionary spending, and how much of a lever is the fact that they are now sort of accustomed to and dependent on a higher number of cigarettes per day, and that might be difficult to cut back moving forward? Yeah, I think you can go back to 2015, and if you look at that, really what we saw take place was that the precipitous drop in gas prices gave our consumers extra discretionary spend. To be able to answer your discretionary spend, I would go back in time. As we saw them adapt to that, certainly they added occasions to their day, they adapted those occasions back out. I think it's important to remember the underlying trend of prevalence, that trend is pretty steady. It hasn't changed. It really is extra tobacco usage occasions in their day. It goes back to your first question is, how do they adapt their lifestyle? How quickly do they return to other types of discretionary spend? That would be dependent on how they think about their usage occasions in a day. All right. Thanks very much. Thank you. Thank you. At this time, I would like to turn the call back to management for closing comments. Thank you, Laurie. Altria's tobacco businesses have a track record of delivering strong and consistent financial performance in challenging environments. Our outstanding 2020 results demonstrate the resilience of our business, and we continue to reward our shareholders by returning a significant amount of cash in the form of dividends. We have strong plans for 2021 in pursuit of our 10-year vision and believe our tobacco business platform has the winning brands and is unmatched. Thanks again for joining us. Please stay safe and contact our investor relations team if you have any further questions. Thanks very much. Thank you for participating in the Altria Group 2020 fourth quarter and full year earnings conference call. You may now disconnect your lines and have a wonderful day.