Good morning. Welcome, everyone. I now call to order Altria Group's 2017 Annual Meeting of Shareholders. I'm Marty Barrington, Chairman, CEO and President of Altria Group. I'm joined this morning by Denise Keene, Altria's General Counsel and Brandt Surgner, our Corporate Secretary.
It's really great to see all of you here today and I want to also welcome all of those who are joining us by webcast. 2016 was another outstanding year for Altria and our shareholders, and we look forward to discussing those results shortly. First, though, we ask you to please review the Safe Harbor statement in today's presentation and the forward looking and cautionary statement section in today's press release for the important information that's there. And that's all available on altria.com along with reconciliations and further explanations of the non GAAP financial measures we discuss today. On your seats, you have our agenda and our meeting rules and some 2016 business highlights.
We'll 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. We'll then share a brief business update followed by advisory votes on the compensation of Altria's named executive officers or NEOs and the frequency of future advisory votes on NEO compensation. We'll then take your questions vote on one shareholder proposal if it's profitably presented. And then we'll conclude with a report on the preliminary voting results. So with that introduction, Brent, would you please present the meeting documents?
Thanks, Marty. I present together with the affidavits of mailing a copy of the notice of meeting, form of proxy statement and annual report, which includes financial statements for the fiscal year ended December 31, 2016. Please remember that only shareholders of record as of March 27, 2017 may vote at this meeting. 89% of Voucheria's common stock is represented here today, so a quorum is present.
Thanks, Brian. Please file the documents with our meeting records. I now appoint representatives from Computershare, the transfer agent for Altria's common stock as inspectors of election. The inspector should please take custody of all proxies and the certified list of holders of common stock as of the record date. This list, which is available for inspection throughout our meeting, contains the names and addresses of all shareholders of record and the shares held by each.
The inspector's responsibility is to determine the number of shares represented at our meeting and to certify the votes. All proxies and ballots are confidential unless shareholders are on them. We'll now distribute proxy cards to any shareholders who haven't yet returned them or who have voted but wish to change their vote. If you've already returned your card or otherwise voted, you do not need to submit a new card. So I'd ask you to please raise your hand if you need a proxy card.
Please welcome our Board of Directors. They provide Altria with strong leadership and thoughtful oversight, and we value their diverse skills, experiences and perspectives. And we're about to proceed to the election of directors. But before doing so, it's my privilege to thank Tom Jones for his 15 years of distinguished service on the Altria Board. Mr.
Jones has decided to retire from the Board upon the completion of his term, which is today. We very much appreciate his many significant we very much appreciate his many significant contributions over the years, including his strong chairmanship of the Finance Committee. And I hope you'll join me in thanking him for his service to our Board. Thank you. Denise, please announce the names of the nominees for Director as they appear in the proxy statement.
The nominees are Gerald L. Belisle, Martin J. Barrington, John T. Castine III, Dinares Divitri, Thomas F. Farrell II, Deborah J.
Kelly Ennis, W. Leo Kiley III, Catherine B. McQuade, George Munoz, Nabeel Y. Saqab and Virginia E. Shanks, each to hold office until the next annual meeting of shareholders and until his or her successor has been duly elected and qualified.
Thanks, Denise. Under our bylaws, the nominations are closed. Those in the room wishing to vote on the election of directors should please do so now. Our next item is the ratification of the selection of PricewaterhouseCoopers LLP as Altria's independent registered public accounting firm for 2017. And I want to welcome Ken Lemelin from PwC who's here with us today.
Denise, would you please present the matter? I move the adoption of the following resolution. Resolved that the selection of PricewaterhouseCoopers LLP
as Altria's independent registered public accounting firm for the fiscal year ending December 31, 2017 be ratified.
Thank you. Those in the room wishing to vote on the ratification of the selection of PwC should please do so now. We're now pleased to update you on the business. We know that shareholders stay current on our business and financial results through various means, including our 2016 annual report, our presentation at the CAGNY conference and our Q1 earnings release. All those materials are available at altria.com.
And as I mentioned, we've also provided you today with a card highlighting important 20 16 business results. So we'll briefly summarize those results and then update our progress on some key responsibility initiatives. Altria and its companies had another outstanding year in 2016. We generated adjusted net earnings of $5,900,000,000 or $3.03 per share represented 8.2 percent adjusted diluted earnings per share growth versus the prior year. We delivered a total shareholder return of 20.5%, far outpacing the S and P 500 and the S and P Food, Beverage and Tobacco Index.
It marks the 4th consecutive year that total shareholder returns exceeded 20%. We paid shareholders over $4,500,000,000 in dividends, increased our dividend by 8%, and we repurchased over $1,000,000,000 of Altria shares. We also took advantage of favorable capital market conditions to further strengthen our balance sheet. Our smokeable product segment delivered excellent performance in 2016, growing adjusted operating company's income by 5.3% following almost 11% growth in 20 15. Marlboro remains the retail share leader across all 50 states and has industry leading and growing equity scores.
The Smokeless Products segment grew volume nearly 5% last year, well ahead of the category, and increased adjusted operating company's income by 11%. USSTC grew Copenhagen and Skol's combined market share, and Copenhagen was both the largest and the fastest growing brand in the MST category. In e vapor, Newmark made excellent progress toward establishing Mark 10 as a leading brand in the category, continued to improve its supply chain and took the necessary steps to comply with FDA's deeming regulations. By year end, MarkTen had reached a number 2 market share position in retail stores where it's sold. And we continue to benefit from our alcohol assets.
St. Michel Wine Estates grew adjusted operating company's income by nearly 10% in 20 16, and we're very excited to celebrate this year the 50th anniversary of Chateau Ste. Michelle, Washington State's founding winery. In beer, our 10.2 percent ownership in Anheuser Busch InBev makes us a significant shareholder in the world's first truly global brewer. And we'd like to thank our talented employees for their passion, their focus and despite some short term headwinds.
We grew 1st quarter adjusted diluted earnings per share by 1.4% against a very difficult comparison in the year ago period. The Smokeable Products segment continued to generate strong results, which offset lower equity earnings from our beer investment and the effect of the voluntary product recall in the Smokeless product segment. Our business fundamentals remain strong, and we believe we are well positioned for the rest of 2017, and we thus reaffirm our guidance for 2017 full year adjusted diluted EPS to be in a range of $3.26 to 3 point 7.5% to 9.5% from our 2016 adjusted diluted EPS base of $3.03 We're proud of our business success, and we're also proud of how we achieved it, responsibly and in line with our company values. We have 4 principal responsibility focus areas: to reduce the harm of tobacco products, to market responsibly, to manage our supply chain responsibly and to develop our employees and our culture. Let's look at 2 of these in more detail.
First, harm reduction. A group of leading public health researchers has concluded that there is a continuum of risk among tobacco products, with conventional combustible cigarettes at the highest end of that spectrum and other products lower. Our long term goal is to achieve a leadership position in innovative tobacco products, including those with the potential to reduce harm. We own, of course, the world's largest manufacturer and marketer of smokeless tobacco. We also believe e vapor holds promise, and we've briefly touched on the progress Newmark is making with Mark 10.
Another promising technology is heated tobacco. Through our agreement with Philip Morris International, Altria has the exclusive commercial rights to the ICOS system in the United States. We partnered with PMI on FDA applications to designate IQOS as a modified risk tobacco product and for a market order. Once approved for commercialization by the FDA, we plan to launch a lead market. Ultimately, it's the FDA's role to evaluate potentially reduced harm products and decide what manufacturers may communicate to consumers about them.
So we're actively engaging with the FDA and others to advocate for science and evidence based policies and actions that advance harm reduction. In addition to developing potentially reduced harm products, we continue to provide cessation resources to adult tobacco consumers who wish to quit, we continue to dedicate resources to helping reduce underage tobacco use. We invested more than $22,000,000 in 2016 in leading youth serving organizations like 4 H, Big Brothers Big Sisters and Boys and Girls Club, which help young people build life skills and avoid risky behaviors like tobacco use. According to government studies, underage use of traditional tobacco products continues to decline. However, work always remains, including in the area of reducing underage e vapor use.
A second focus area is supply chain responsibility. We've been working diligently with tobacco growers to improve the safety and working conditions on their farms. Our role is to set clear expectations, monitor compliance with them and then help the growers address any gaps in compliance. We've continued to enhance our approach in these areas, For example, to reinforce our expectations around safety and working conditions, we recently distributed an updated supplier code of conduct and new tobacco good agricultural practice guidelines. In 2016, we expanded and we enhanced our grower assessments, which now include a review of wage and time records and 3rd party interviews with farm workers about their working conditions.
We encourage you to learn more about these efforts through altria.com and our upcoming 2016 Corporate Responsibility Report. We operate in competitive businesses and the environment continues to evolve and it always presents new challenges and opportunities. But the leadership team and I feel very good about Altria's performance and so do others. For example, the large convenience chain Speedway, recently named Altria Group Distribution Company, its Supplier of the Year. And just last month, we were ranked 4th on Corporate Responsibility Magazine's 100 Best Corporate Citizens list.
Again, I want to recognize the hard work and dedication of our talented employees that make these results possible. Let's now move to the advisory vote to approve the compensation of our NEOs. While this vote is nonbinding, the compensation committee will consider its outcome when making future decisions for these executives. We believe our executive compensation programs contribute to our excellent business results and strong shareholder returns. And as the proxy statement fully describes, we designed these programs to align the interests of our executives with those of our shareholders by appropriately compensating executives for achieving performance goals and advancing our mission and strategies.
At the 2016 Annual Meeting, more than 93% of the votes cast approved the compensation of our NEOs. The Board recommends that shareholders cast their votes in favor of this advisory matter should please do so now. The next item on our agenda is the advisory vote on the frequency of future shareholder votes on NEO compensation. The Board's recommendation is every year. While this vote is non binding, the Board will consider the outcome when determining the frequency of future advisory votes.
Those in the room wishing to vote on this matter should please do so now. Okay, let's now transition to the question and answer session. We very much welcome your questions and we know that you'll observe our meeting rules. If you would please identify yourself and address your question to me, and we have some lights upfront that will help us manage our time. If we run short today, I hope you'll complete and return a comment card so that we can respond to you.
Why don't we please now move to the first question? I'll begin over here on the left.
Good morning, Mr. Barrington.
Good morning, Mr. Sweta.
Edward Sweta, shareholder from Massachusetts. You and other executives of Altria and also executives of other tobacco companies have often referred to tobacco litigation as an issue that is manageable, and therefore should not be troubling to investors. Yet just within the past 2 months, the following developments have occurred. On April 6, in the Marotta case, the Florida Supreme Court ruled that federal law does not preempt plaintiffs from bringing strict liability and negligence claims against tobacco companies. On April 12th, a Florida appeals court affirmed a jury award in the Boatwright case.
That was an award of $35,000,000 to a smoker against Philip Morris USA and reversed the reduction of the award because the smoker was also at fault for his illnesses. So the appeals court ruled that Florida's comparative fault law does not apply to intentional torts and thereby increasing our company's exposure. On April 6, a Florida state jury awarded $1,000,000 to the widow of a lawyer and real estate developer after finding that Philip Morris was responsible for his coronary disease and fatal lung cancer. That was the Summers versus Philip Morris case. So my question to you, sir, today is, do you understand why there are shareholders who do believe that the tobacco litigation problem is not simply manageable.
Thank you for your question, Mr. Sweet. It's a pleasure to have you back at our meeting. You're always welcome. Listen, you point out that litigation presents a risk, and it does.
We try to do a thorough discussion of the risks in the 10 ks to try to lay out for shareholders to dimensionalize that risk. Second thing I would say is, I do continue to believe that the litigation has been well managed. It is a risk, but we devote substantial resources to it. And I think you'll agree because I know you followed this for many years. If you look at the slope of tobacco litigation from its height, whether it was at the attorney's general litigation or the class actions or the like, I think we could all agree that the slope has been coming, which is a good thing for shareholders as we work through that docket.
Mentioned several of the Engel cases. I would agree with you that Engel continues to present a complex set of cases down there. I think shareholders know the history of a large case that was tried as a class action. It was decertified as we argued it should be, but it has left a complex set of individual cases. We think that the terms actually on which those cases are being tried are not particularly fair to the defendants and we continue to argue for that.
But we're working our way through that. I saw some numbers the other day on Engel. For example, we had I think 1300 dismissals in the Engel cases. We tried about 90. So you can understand the relationship between the number of cases that are filed and the cases that actually get tried.
The ones that get tried, the plaintiffs win some and we win some and then we win some more on appeal. So it's a complex matter, but it's a finite matter and I think that we're working our way through it. In any event, welcome back to the meeting. Thanks very much for your question.
Good morning, Marty. It's Ann Gerken with Davenport.
Hi, Ms. Gerken. Welcome back.
Thank you. Congratulations on a solid start to your year and I appreciate your comments this morning about your work on innovative products. Marty, I was wondering if you would discuss how you are looking at allocating resources among the core tobacco portfolio versus spending to support your innovation, potentially launching products by year end, maybe under the IQOS label, how you're allocating those resources between those 2 sectors?
Yes, it's a very thoughtful question. Thank you. What we try to do is to maximize the core business that we have while innovating for our future, which involves allocating appropriate investments to those innovative products. Fortunately, the business is of the size and scale where we can do both. It's not a binary choice between those.
So you see the results, for example, in 2016 at the core businesses, which were quite strong, and you also see significant progress on the innovative side. You see that our Newmark business has really done a good job, I think, of growing in 2016. You saw the ePaper shares I mentioned, I think, at the CAGNY presentation. We are placing appropriate investments in IQOS. It's a very promising technology for heat not burn.
So when innovative products come to the market, you invest behind them because they may very well be our future. At the same time, we're trying to continue our long term aspiration to grow our earnings between 7% and 9%, return 80% of the EPS to the shareholders the dividend. And if you look back over the last several years, we've been able to do that pretty successfully. We have an outstanding team of people at Haltree Haltree who are able to balance both of those objectives. But that's the balance that we're trying to strike every year, you're right.
Thank you again for your question. Good morning, sir.
Good morning. My name is Hampton Hinton. I'm a tobacco grower in Woodford County, Kentucky. I represent the Council for Burley Tobacco, my own farm and until recently I was on the FDA tip stack committee. So I have some background in part of the tobacco issue.
It's interesting today as you talk about the progress of the company. We as growers are in the supply chain, but sometimes we feel like we're at the bottom of the supply chain or maybe even your food chain. We're suffering from prices that are exactly the same as they were 16 years ago at the farm level. As an example, the products that we sell C2, which many of you won't know the difference, In 1901, 2001, it was $1.94 today it's $1.92 B2 in 2001 was $1.97 a pound, that's $1.98 We need some incentives to be our sustainability. Sustainability
as we
move into new products is especially vulnerable for us as we are part of the system. So I continually ask you all to think about ways to deal with the supply chain at our level, so we can be sustainable also and we can sort of be a product moving in the right direction, especially on modified risk issues without any providence and it was awfully hard for us to move our product at the farm level to reduce risk level. We can do some of this without any profitability we can capitalize, we can grow. We're dealing with the GAAP concerns, additional cost of labor and environmental, and we're happy to do that. We're happy to do that.
But you have left us completely out of the supply chain profitability aspect. In that regard, I don't think it's possible, but if it's possible for growers to address your Board at sometime or maybe even have an advisory position on your Board, the growers are still an important part in the Carolinas in Kentucky, Tennessee, and we appreciate you all inviting us to this meeting. I'm a stockholder also.
Thank you for sharing those very thoughtful and eloquent comments. I appreciate coming and raising today. We regard our growers as partners in our business, as you know. It's not appropriate for me to comment on pricing or profitability, as you can expect. But I can assure you that we're very much interested in the sustainability of the growers, and we have folks I know who work very hard at that.
But if you believe that there should be some further dialogue between your group, for example, and others at the company, I would welcome that dialogue because our success depends on your success. I couldn't agree with you more. And I very much appreciate you coming today to share those comments. Thank you.
Hi, my name is Jonathan Chaffee. I'm a shareholder from New York. Currently there are 10 counties and New York City that have made the minimum age to purchase tobacco and vape products to 21. Over 60% of New York's population is now covered by Tobacco 21. What is Altria's plan to counter these local laws from expanding in popularity and cutting down our current market?
Jeffrey, welcome back. I remember our conversation very well last year about this issue about 2021. And so I won't want to repeat what I explained to you last year. I will tell you our view is as follows. And it's not a question of trying to stop anything.
It's a question of exchanging views on an important topic. And our view is this, we are all in favor of minimum wage loss. In fact, you may remember that Altria and companies were among the leaders. It's hard to imagine these days, but there were actually a time when there were not minimum age laws in place for many tobacco products, and we were at the forefront of asking legislatures to do that. You may know, for example, that we did it more recently on e vapor.
When e vapor products came into the marketplace, they were not covered by many minimum age laws, and it was the Altria family of companies with others who persuaded the legislatures to raise the minimum age law to 18. It's a line drawing exercise of where really are. There are some, and I know that you've been active in this, having Western New York, who would like to raise the age to 21. I think the greater weight of the evidence is at 18, but we acknowledge that the debate is underway. So if you look at the master settlement agreement, if you look at the majority of state legislatures, if you look at the Tobacco Control Act of 2,000 and 9, the demarcation point has generally been weighted to 18.
There are some exceptions, but the greater weight is there. Here's the other issue that I think we have to be thoughtful about. And I saw that, for example, out in Cattaraugus County, I think that the legislature did pass 2021. The problem is, is that it's surrounded by Erie and Allegheny and Chautauqua and Pennsylvania. And so a 20 year old who was giving business to one of your hardworking retailers in Cattaraugus probably took that business across the county line.
And so it has a tendency to kind of shift the volume around without really accomplishing what the purpose would be for those who propose it. So we don't think that's fair, frankly, to retailers to do that. There should be a debate if there's one to be had at the national level. There's a report that's been sent over to Congress. And if there's going to be regulation in this regard, it ought to be based on science and evidence and we can have it in one place so that we have one rule and not a patchwork of rules, which tends kind of to pick winners and losers.
That's our view on it. I acknowledge that there are others, and I appreciate you coming back to the meeting this morning. Is there a question on this side? I see none, so we'll stay here. Is there a question over here?
Welcome, sir.
Thank you. Hello. My name is Lee. I'm from Elmira, New York. My question, what steps are Altria taking to ensure that specific populations with higher smoking rates based on ethnicity, income, education and mental health are not being profiled by Altria Tobacco Advertising?
Well, thank you very much for your question. Welcome to the meeting. That's not how we run our marketing. We market our products to adult tobacco consumers, and we try to be thoughtful about the reach of those marketing materials, and I can explain more about that if you're interested. But we are selling to adults.
I know that the FDA has some studies underway. I think they're calling them vulnerable populations among adults and you may want to direct that question to FDA, which is I think looking at the issue that you're raising. In any event, welcome to the meeting. Glad you're here. Thank you.
Thank you. You're welcome. Good morning, sir.
Good morning, Mr. Barrington. My name is Justin Flores, Vice President of the Farm Labor Organizing Committee, Farm Workers Union based out in North Carolina.
Welcome back.
Thanks for having us here again. We wanted to bring a similar message as in previous years. As usual, we do appreciate the work that Altria has done on issues of farm labor, human rights, wages conditions and the work that's going on at the SLPG. Unfortunately, I'm here again to bring a report from Eastern North Carolina that while I think these are all very good first steps, we just had another tobacco growing season where we're not seeing very real changes, improvements in wages, work conditions out in the field. And so my question today is, in conversations with the company, there's been a lot of discussion around compliance with the law.
As I'm sure you're familiar with farm workers are excluded from a number of labor laws, employment laws, workers' compensation, the right to collect bargain, you name it. Some other companies such as Philip Morris International, Alliance 1, Universal Leaf have taken a view of following ILO standards, international standards rather than simply complying with the law on the ground. And so the question today is, is that something that the company is interested in looking at? And then I'd also would like to take the opportunity to follow-up on the man's comment from the growers' point of view, which is that when we talk about improving these things, we feel the grower paying $11.27 with really good housing and workers' compensation insurance is being paid the same amount for his or her tobacco as the grower paying $7.25 per hour and with no workers' compensation insurance using FLCs. And so I'd like to ask that question in mind that we have a common cause I think with a lot of the growers and that these issues are really we do need to set standards and we need to work together on these issues, but at the end of the day, these are economic issues.
And so sort of aligned with that question, is there any financial benefit that always glad to see you at our meeting. I think you're
very passionate about the questions. I'm always glad to see at our meeting. I think you're very passionate spokesperson for the folks that you're helping. I appreciate that. And we share that.
I think I like very much your phrase about common cause. I think that the growing community and the farm worker community and the manufacturers who buy the tobacco have a common cause, which is to make sure that we have good standards in the field. And I'd hope you'd agree with me that the work that you and we and others have been doing over the last several years have helped to improve, whether it's been the progress that we've made on child labor, whether it's been the progress we've made on personal protection equipment in the field. And so we have made a lot of progress, but there's always more to do, of course. I do know that many of the growers in North Carolina did sign up for the collective bargaining agreement that the Growers Association offered.
And I looked at the numbers the other day, I think of the growers that we used in Carolina, I think actually are covered by the collective bargaining agreement. I acknowledge that there are others who don't, but our position on that is we can encourage it, but we can't compel it. So, of course, we want to continue to work with you and we actually do things that are above the law as you well know, whether it's the child labor law or the like. So we're not constrained by what the law is. We want to do the right thing in partnership with others.
Thanks again for coming. I think we do now have a question over here.
Yes, Mr. Chairman, my name is Michael Shpock, and I represent the AFL CIO Reserve Fund. The AFL CIO withdrew its proposal to this year's meeting in the OECD mediation process and then having a meeting with the AFL CIO to discuss their findings. This follow-up meeting is now being scheduled. Mr.
Chairman Flock and President, Baldomar Velasquez, are part of a global call to implement the human rights of those working in tobacco production. It has joined with the IUF, International Union Federation, based in Geneva, which represents union tobacco production workers and Tobacco Farm Worker Unions around the world to call on the tobacco industry with global procurement systems to take immediate steps to guarantee the right to freedom of association and collective bargaining by creating a mechanism that is within their supply chain that guarantees the following. A representatives are recognized, neutrality from employers that includes access to estates, ability for workers to speak with trade union representatives and an end to retaliation for workers' union activities. Sources outside of the U. S.
And what leaf supplier or suppliers are used by Altria to obtain non U. S. Grown tobacco leaf?
So thank you very much for being back. Glad to see you and I appreciate your comments. You're thoughtful as always. Let me try to take a couple of these things in turn. We buy actually a very small portion of our leaf offshore.
Most of the leaf that we use in our products is bought in America. We do use some products offshore for the blends because it's necessary, but it's small proportion of that. We use the suppliers that everybody else uses around the world. As you know, there are large companies that provide leaf from international markets and we work with them. We take the same approach to them as we take in the United States, which is we tell them what our expectations are about sourcing tobacco to us.
We give them a supplier code of conduct. They have to comply with good agricultural practice guidelines, and we try to make progress with them on conditions in the field. We've made a lot of progress. As I said, I just mentioned to Mr. Flores, the amount of or the number of growers rather that we use who have collective bargaining agreements.
The difference between us is the one we've discussed in the years past, which is while we encourage freedom of association, you can see that in our own business where we have labor unions at several of our locations and we have excellent relationships with them. What we can't do is compel independent third parties to associate, which is after all what signing a collective bargaining agreement is, to associate in the name of freedom of association for others. We think that's not the way forward, but we do think the way forward is to continue to work on the underlying conditions that require attention. That's making sure that, for example, wages get paid. While there are laws in place and our contracts require that our growers pay the wages that are required by law, and we audit against that.
And if there's remediation required, and I know you know the case where we have found some remediation that was required, we've done that. So I know that we differ on this question of collective bargaining, but we just can't compel people to sign agreements they don't want to sell. But that's not to say we can't make progress on the underlying issues. That's our approach. I just need to go here and I'll be back if we have time, if you'll indulge me, please.
Thank you. Good morning.
Good morning. My name is Emma Stewart and I'm from Plattsburgh, New York. With the passage of the smoke free public housing and multifamily properties in November by the U. S. Department of Housing and Urban Development, what is Altria determined to do, if anything, to protect their customers' right to smoke in their own homes?
Yes. Thank you very much for being here. Glad you're at our meeting. And I'll tell you what our our position on our website, which is secondhand smoke causes disease in nonsmokers, and so you have to be mindful of that. That's why we have regulation of tobacco products in their own home, but I think you have to take them of tobacco products in their own home.
But I think you have to take them each on their own facts and circumstances. So the one that you've raised with respect to the HUD rule is complicated, isn't it? Because you have the government, which is in some cases the homeowner, in other cases is providing subsidies. So, we have not weighed in on that. We think that the process that's been chosen, which is as that rule is being implemented, the building operators are talking to their residents about what's the best way to implement the rule, and that's fine with Altria.
Thank you. Welcome again. Yes, sir. Thank you for being patient. I can come back this way.
I want to make sure your other person gets to speak. But again, my question was, what percentage would you say of tobacco that you purchase is coming from outside of the U. S? Small. Small, 2%, 3%?
We buy leaf competitively with other manufacturers. So I don't know that that's the number. If that's the number that's I can't remember as I stand here whether that's the number that we've publicly given out. If we have, I'll have Mr. Sykes follow-up and give it to you.
If not, it's probably because we regard it as competitive and I won't give it to you.
So Right. And in terms of supply, leaf suppliers who use?
The same answer I gave you a moment ago, which is we use the same suppliers that we use.
Alliance 1. Don't have
a list here, but it's no secret who we use. And if that's of interest to you, I'm sure we can get it for you. Okay. Thank you. Okay.
Thank you very much. Is there a question over here?
Hi. I'm Taylor Sheer from New York.
Welcome.
So, when I go into my local stores, there why are there Marlboro brand advertisement placed in your products that youth are interested in such as candy, food items and toys?
We don't do that. Our trade programs, don't do that and we encourage retailers not to do that. The reason that tobacco products are available, in stores is because adults have a right to buy them. But our trade programs have worked for over 20 years to address that issue. We incented people to take cigarette products off of the counter.
You may not remember this, they actually used to be on the counter. They now have to be behind the counter. We limit the amount of signage. We train clerks on not to them to underage people. We do a whole host of things.
There's a big description of this on our website. And I'm sorry, it's just not accurate to suggest that we put products near products that that you're making references. It's just not accurate at all. In any event, welcome to the meeting and thank you for your question.
Good morning, Mr. Barrington. My name is Eric Pearson, a shareholder from Wisconsin. My question relates to station of new reduced risk products. Are discussions already ongoing with federal and state authorities?
And do you have any information that you could share in a public forum about whether or not there are opportunities to differentiate between the taxation for reduced risk products and traditional smokeable products?
Yes, it's a thoughtful question. Thank you for being here and I appreciate it. We're in support of differential taxation as well as differential regulation of other tobacco marketing. It would make sense that if you're trying to migrate adult tobacco consumers down the continuum harm that we discussed this morning that you would have tax policy which supported that. So you want to try to get people to be aware of the product, to try it, to see if it's for them.
And certainly, overtaxing them at the outset would be bad policy. And the answer to your questions, we are having those discussions now, particularly in the States. Thank you. Okay. It looks like we have exhausted our questions.
I thank everybody for asking your questions. I appreciate very much you're coming to ask them here. So we'll now hear a presentation and then vote on 1 shareholder proposal included in the proxy statement. The Board recommends a vote against the proposal for the reasons explained in the proxy statement, but we encourage everyone to read the full proposal and our response. Proponents and any speakers commenting on the proposal should please first identify themselves.
Again, thank you very much in advance for your cooperation with our meeting rules. So will the representative from the Sisters of St. Francis of Philadelphia please present the proposal? Good morning.
Good morning, Mr. Chairman, and thank you for your beautiful responses to people and your respect for people in this audience. It's been a while since I've been here and I haven't heard that in the past. You're very welcome. So good morning again, members of the Board, fellow shareholders.
I am Nora Nash. I represent the Sisters of St. Francis of Philadelphia and 5 other co filers. All members of the Interfaith Center on Corporate Responsibility. I hereby move shareholder proposal number 5.
As faith based investors, we believe that our company has a moral duty to produce and market its products in a responsible manner. Altria is doing that and is doing its part to meet its stated policies, but it is not doing enough to prevent the blatant marketing that is taking place in low income city neighborhoods across the country. Your Board of Directors suggest, Congress did not ban retail advertising, recognizing that tobacco companies have the right to communicate about their products to their adult consumers at the point of purchase. How does that speak to economic justice and human rights when you know that families from lower income communities are more likely to be less educated and have little awareness of the high risks associated with smoking. In 2,009, we shared the risks associated with food insecurity, where families spend less on food and more on cigarettes.
These are still the same communities. Can't you hear their cry? Our proposal is actually screaming through the voice of Philadelphia City Analysis of License, telling us that the lower income codes had 2 thirds more within more tobacco retailers per capita than higher income ZIP codes and 3 quarters more within 1 1,000 feet of a school. Did you actually read the Philadelphia Health Commissioner's statement about tobacco companies. They are not just selling them, they are marketing them and marketing them to our children.
He added, I think that people should be quite unhappy and even outraged about the amount of marketing of this killer product in low income neighborhoods by companies who want nothing more than to make a profit of getting people sick. That's a very, very strong statement. And I don't want to think that this is true of Altria. So please listen to us. You have strategies for advertising to adults.
Please employ those same strategies for education in City Junior High School and High Schools. Try it right here in Richmond. Look at the zip codes. Look at the data. Think of it as your contribution to economic justice and the human rights of communities.
It is the better way. Now not as part of my official statement, I stand before you today and another person has stood here for many, many years and you know him as Reverend Michael Crosby. Reverend Michael Crosby is quite ill at this point in time. And I think it is my privilege to stand before you today and pay some tribute to Mike Crosby, who has fought in this room, as you well know, for many years to do something about tobacco and its illnesses. He has worked extremely hard with Philip Morris on farm labor and we all have worked in the movie industry and all sorts of areas and Mike has been our leader and he has been your leader.
So a tribute to Mike would be to do something here in Richmond on those zip codes or in the farm labor field that could be named the Cosby something, Cosby Altria something. Now that's my heartfelt thought. And again, I appreciate the work that you are doing, but a lot more needs to be done.
Thank you very much. And I hope that you'll extend our best wishes to Father Crosby. Many of us reached out to him upon hearing about his illness, and we're keeping him in our thoughts every day. We miss him. So I hope you'll tell him that.
Thank you very much. Are there comments on the proposal? Okay. Okay. Those in the room wishing to vote on this proposal should please do so now.
All matters to be voted on have now been presented. If you haven't already voted, please complete your proxy card, raise your hand and an usher will collect your card. Okay, thank you. Since all shareholders have had the opportunity to vote, the polls are now closed. The ushers should have collected all the proxies and delivered them to the inspectors.
As the report is being delivered, I'd like to take a moment to note that this will be Denise Keene's final shareholder meeting in the capacity as General Counsel. Denise recently announced her decision to retire from Altria after 40 years of extraordinary service. During her career, Denise has held several leadership roles, including General Counsel of Altria Group since 2008 and before that, General Counsel of Philip Morris USA. She has been a key member of our leadership team and invaluable resource to our Board of Directors and a tireless advocate for diversity and inclusion, both at Altria and in the legal profession. And on a personal note, Denise has been my friend, my colleague and my sounding board for nearly 25 years through thick and thin.
While we will benefit from her talents through the end of next month, I wanted to take this moment to ask you to join me in thanking Denise for her dedication and her many contributions to Alberts. Thank you very much for that. So, Brent, can you please summarize the inspectors report?
The inspectors have 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 88% 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, 2007 has been ratified with more than 98% of the shares voting in favor. Shareholders have approved on an advisory basis the compensation the compensation of the company's NEOs with more than 92% of the shares voting in favor.
Shareholders have voted on an advisory basis that future advisory votes on the compensation of the company's NEOs should be considered annually. Of the shares voting, 89% voted for an annual frequency, 1% voted for a 2 year frequency, and
10
percent of the shares voting on the proposal voting against and 2.6%
voting in favor. That concludes the report. Okay. Thanks, Brandt. Please file the report, the inspector certificate and the proxies with our meeting records.
We'll post the voting results on the website with the press release following our meeting, and we'll file the final voting results with the SEC on a Form 8 ks. Thank you all very much for coming today or for listening on the webcast, and especially thank you for your continued confidence in Altria. And our meeting is adjourned.