Good morning, everyone, and welcome to Altria Group, Inc.'s 2011 Annual Meeting of Shareholders. I now call the meeting to order. I'm Mike Szymanczyk, Chairman of the Board and Chief Executive Officer of Altria Group. We welcome all shareholders, employees, and retirees who are here today, as well as those who are joining us on the audio webcast. Let me introduce the other executives who have joined me on the stage this morning. Denise Keane is Altria's Executive Vice President and General Counsel, and Brandt Surgner is our Corporate Secretary. My remarks today contain certain forward-looking statements and reference non-GAAP financial measures. I direct your attention to the forward-looking and cautionary statements and reconciliations of non-GAAP to GAAP measures on altria.com. There are cards on your seats with the agenda and rules for today's meeting.
We will start with the presentation of certain formal documents by the Corporate Secretary, proceed to the election of the Board of Directors, and then move to the ratification of PricewaterhouseCoopers as Altria's independent auditors. I then will share with you a business update focusing on Altria's continuing progress against its corporate mission, which enables the company to deliver superior returns to our shareholders. We then will have advisory votes on the compensation of Altria's named executive officers and on the frequency of such future advisory votes. A question and answer session will follow, and then we will vote on one shareholder proposal. The Corporate Secretary will report on the preliminary voting results, and then we will close our meeting. Brandt will now present certain formal documents.
Thank you, Mike. I present to the meeting, together with affidavits of mailing, a copy of the notice of meeting, form of proxy, proxy statement, and annual report, which includes financial statements for the fiscal year ending December 31, 2010. The holders of record of common stock at the close of business on March 28, 2011, are entitled to vote at this meeting. 83% of Altria 's common stock is represented here today, so a quorum is present for the transaction of business.
Brandt, please file the documents with the records of the meeting. I appoint representatives from Computershare, the transfer agent for Altria's common stock, as inspectors of election. Inspectors are instructed to execute the oath and to take custody of all proxies in the certified list of holders of common stock as of the close of business on March 28, 2011. This list, which is available for inspection throughout the meeting, contains the names and addresses of all common shareholders and the shares held by each. The inspector's responsibility is to certify the vote of all matters presented at the meeting. All proxies and ballots are confidential unless shareholders have written comments on them. We will now distribute proxy cards to any shareholders in the room who have not yet returned them.
Shareholders who have already returned their proxy cards or voted by the internet, mail, or the telephone do not need to submit a new card. If you need a proxy card, please raise your hand. Upon conclusion of the voting, please return the proxy card to an usher who will deliver it to the inspectors. I want to welcome our Board of Directors. The diversity of their skills and experience provides Altria with strong leadership and oversight. Robert Huntley has decided to retire from Altria's Board of Directors after nearly 35 years of service. We thank him for his service and the countless contributions he has made to the Altria family of companies over the years. We will miss his wisdom and guidance and wish him well in retirement. As a result of his retirement, Altria's bylaws have been amended so that the board will consist of nine members.
The election of the 2011-2012 Board of Directors is the first matter as set forth in the notice of meeting. Denise, please announce those nominees' names appearing in the proxy.
The nominees are Elizabeth E. Bailey, Gerald L. Baliles, John P. Casteen III, Dinyar S. Devitre, Thomas F. Farrell II, Thomas W. Jones, George Muñoz, Nabil Y. Sakkab, and Michael E. Szymanczyk, each to hold office until the next annual meeting of shareholders or until his or her successor shall have been duly chosen.
Thank you, Denise. Under our bylaws, it is too late to make additional nominations. Those in the room wishing to vote on the nomination of directors should do so at this time. I would like to introduce Bill Brennan of PricewaterhouseCoopers. The next item on the agenda is the ratification of PricewaterhouseCoopers LLP as Altria's independent registered public accounting firm. Denise, 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 31st, 2011, be ratified.
Thank you. Those in the room wishing to vote on the ratification of independent auditors should do so at this time. 2010 was a successful year for Altria as our diverse business platform delivered strong results in a challenging environment. In addition, Altria continued enhancing its regulatory affairs capabilities to adapt to FDA regulation, improved its compliance and societal alignment initiatives, and achieved substantial success in managing litigation. The work of our employees across all these areas led to strong financial results for our shareholders. In 2010, Altria grew adjusted diluted earnings per share by 8.6%, increased its dividend twice for a total increase of 11.8%, and delivered total shareholder returns of 32.9%. Altria achieved these solid results by following its mission and values framework. Our mission is to own and develop financially disciplined businesses that are leaders in responsibly providing adult tobacco and wine consumers with superior branded products.
Our work supporting this mission is guided by four strategies: invest in leadership, align with society, satisfy adult consumers, and create substantial value for shareholders. Guiding our work in support of this mission and strategies are five core values: integrity, trust, and respect; passion to succeed; executing with quality; driving creativity into everything we do; and sharing with others. Altria's mission and values framework have for many years guided our employees on how to conduct business in a responsible manner. Because expectations for companies are constantly changing, last year we commissioned an outside study of the work our family of companies has done in support of this framework. We learned that our mission and values-driven approach leads to best practices in many areas, and we are using the study's results to help guide future work that supports our mission.
Recently, we published our first formal corporate responsibility report, which is available on altria.com, to help inform those outside the company about our business practices. We also evolved this framework to reflect the changing nature of our businesses while retaining the elements that are essential to our long-term success. We updated several of our mission goals to incorporate the wine business and guide its work in support of the mission and reflect how we expect our tobacco businesses to operate in an FDA-regulated environment. Our first strategy is investing in leadership by developing our people, business partners, brands, and communities. Altria's long-term success depends on hiring and developing talented people. Last year, despite the economic challenges that caused many companies to scale back their recruiting, we continued to hire highly qualified individuals through our Can't Beat the Experience program.
We continued our work to promote diversity in hiring by supporting the Thurgood Marshall College Fund and the Hispanic Scholarship Fund. Recently, Diversity Inc. recognized Altria on its list of noteworthy companies for our commitment to diversity. Altria supports its employees as we work to improve our communities with a variety of involvement programs. For instance, we expanded the employee-funded and managed Altria Companies Employee Community Fund to include our USSTC in Middleton communities in Nashville, Tennessee, Hopkinsville, Kentucky, Franklin Park, Illinois, and King of Prussia, Pennsylvania in 2010. This fund supported 90 organizations in Central Virginia with grants totaling $2.3 million. Last year, the company also matched over $1.3 million in employee contributions to nonprofit organizations, and employees from across our companies completed nearly 30,000 hours of volunteer service in their communities. That included our senior executives, 40 of whom served on nonprofit boards.
Altria continued enhancing its culture of employee volunteerism with a variety of company-sponsored events. A large number of employees, from our newest to our most senior executives, helped the Central Virginia Food Bank provide nourishing food to families and children in need. Last fall, we expanded our season of service to include 13 volunteer events in six states and the District of Columbia. Over 350 employees participated in Keep America Beautiful's Great American Cleanup program through company-sponsored events in Illinois, Kentucky, Montana, Pennsylvania, and Virginia. In addition, Altria made nearly $50 million in cash and in-kind corporate contributions to nonprofit organizations last year. This giving concentrated on our focus areas of education, positive youth development, arts and culture, and the environment. Altria's companies continued their support of academic institutions serving our communities, such as J.
Sargeant Reynolds Community College, the University of Virginia, Virginia Commonwealth University, Virginia State University, and the University of Washington, to help prepare future workforces. Altria helped organizations such as the Virginia Museum of Fine Arts, the Kennedy Center, and the National Gallery of Art deliver cultural programming to enhance the quality of life in our communities. In 2010, Altria provided grants to the National Fish and Wildlife Foundation to promote sustainable agricultural practices and water conservation, particularly within the Chesapeake Bay watershed. Altria was proud to help establish a USO Center at the Richmond Airport to support about 2,500 troops per month who unselfishly serve our country. Last November, Altria also established and published a supplier code of conduct which applies to all suppliers who provide goods and services to our family of companies.
The code demonstrates our continuing commitment to building relationships with suppliers who operate in a responsible manner while providing more transparency to external stakeholders about what we expect. For example, the supplier code emphasizes Altria's commitment to developing a diverse supplier base, including minority-owned and women-owned businesses. Altria's companies have long used inclusive practices to build supplier relationships, and we encourage our suppliers to do the same. Last year, the Virginia Minority Supplier Development Council presented Altria with the Raising the Bar Award for our leadership in establishing the Minority Business Enterprise Executive Management Program at the University of Richmond, which helps develop management expertise among minority business executives. Earlier this year, diversitybusiness.com ranked Altria ninth on its list of America's top organizations for multicultural business opportunities. Our supplier code also emphasizes the importance of the environment, social, and economic sustainability of our agricultural supply chain.
Our operating companies work with the agricultural community to improve practices that contribute to sustainability. For example, our tobacco businesses provide farmers with guidance on good agricultural practices, or GAP, covering topics such as crop management, environmental stewardship, and labor management. In 2010, we modified our GAP programs to promote improvements in farmers' tobacco-growing practices. These changes included requiring growers and leaf merchants to certify that tobacco was grown in compliance with GAP contractual requirements. An independent third party, as well as company representatives, performed GAP assessments, and we published results on altria.com. Ste. Michelle Wine Estates has long incorporated sustainable practices into its vineyards and operations. Most recently, Ste. Michelle's Vineyards at Coal Creek, Canoe Ridge, and North Star achieved certification for the use of environmentally responsible agricultural methods. In addition, Stag's Leap Wine Cellars became a Napa Green Certified winery last year.
For context, less than 10% of the 500 wineries in the Napa Valley are certified under this program, which promotes environmentally sound agricultural practices. We believe our efforts are making a difference, so do others. Virginia State University recognized Altria as its Donor of the Year and Keep America Beautiful acknowledged us with a Corporate Leadership Award. We're grateful for that kind of recognition and congratulate our terrific employees who make it happen. Our second strategy is aligning with society by helping to resolve the societal issues relevant to our businesses. Pursuing that strategy requires that we have a leadership focus on compliance and maintain constructive relationships with external stakeholders. Earlier this year, we launched a refreshed code of conduct, which is the cornerstone of our compliance program.
The code provides guidance to our company's employees on how to approach our work and operate with integrity and reinforces everyone's duty to speak up if they see something that doesn't meet that standard. We refreshed the code to better reflect our mission and values framework and the principles that support our compliance program. A leading compliance and ethics organization assessed our refreshed code, placing it in the top 1% of the over 1,600 codes they have reviewed. Strong compliance programs also include training that builds a culture of compliance at all levels. Last year, employees from across our companies completed 24,000 hours of compliance training. For example, 250 directors and managers participated in compliance leadership training. These leaders then reinforced the culture of compliance by facilitating programs with their organizations on compliance-related topics.
Altria periodically assesses the effectiveness of our compliance and integrity program, and in 2010, we engaged a third-party firm to do this. This assessment did not identify any gaps regarding the design or implementation of our program, noting that it contains many key elements of a model compliance program. Of course, no compliance program is perfect, and we continue to work on strengthening ours and gaining all employees' commitment to our culture of compliance. We have continued enhancing our regulatory affairs capabilities to assist our tobacco operating companies' compliance with FDA regulation and succeed in the new regulatory environment. For example, we have actively communicated and engaged with the FDA on numerous issues as we believe that regulation is best achieved through an approach that draws upon the expertise and experience of all stakeholders, including the regulated industry.
We have made nearly 50 submissions, and our executives presented at eight meetings. Copies of our public submissions and presentations are available on altria.com. Over the last year, the FDA's Tobacco Product Scientific Advisory Committee, or TPSAC, examined the use of menthol in cigarettes.
TPSAC produced a report to the FDA stating that removal of menthol cigarettes from the marketplace would benefit public health in the United States, but it did not propose a specific policy or set of actions that the FDA should take. PM USA engaged in the TPSAC process by making several detailed scientific submissions and presentations. PM USA believes the collective science and evidence-based information do not support moving menthol cigarettes or imposing additional restrictions that would deprive adult smokers of menthol cigarettes. PM USA also believes that banning menthol cigarettes could trigger a series of unintended consequences, such as an increase in counterfeit and contraband cigarette activity.
The FDA has stated that it intends to consider the TPSAC report, information submitted by industry, and other science and evidence in determining what, if any, actions it may propose to take related to menthol. PM USA plans to continue working with the FDA on this issue. Kids should not smoke or use any tobacco products. Helping prevent the underage use of tobacco products is an important societal and business issue, which is why our tobacco operating companies work like many others to reduce it. Underage tobacco prevention begins by helping kids make good choices. Altria's companies are leading supporters of positive youth organizations like Boys & Girls Clubs of America, Ready by 21, and the National 4-H Council. Programs supported by our tobacco companies in 2010 are projected to reach 1.3 million middle school kids, an increase of over 90% from 2007.
These grants are also expected to reach over 830,000 adult influencers who work with kids to help them make good decisions. We funded life skills training for 100,000 students in nearly 300 schools. This program has been found to reduce tobacco and alcohol and drug use among middle school kids by 50% to 75%. Our tobacco companies help provide parents with the resources they need to help their kids make good choices by supporting the Search Institute's website called Parent Further, which launched in May of last year. By the end of 2010, there were over 450,000 visits to the website, exceeding its goal by over 80%. Efforts to reduce underage tobacco access and use are having an impact. The U.S. government reported that nearly 90% of retailers in 2009 complied with laws prohibiting underage tobacco sales versus 60% in 1997.
In December last year, the University of Michigan's Monitoring the Future study reported that smoking rates were down by nearly two-thirds from their peak in the late 1990s among eighth graders and by almost half among 12th graders. While national surveys indicate that underage use of smokeless tobacco and cigars is also down from its peak rate, underage use of both products increased in the last year surveyed. As we integrated the acquired Middleton and USSTC businesses into Altria's mission framework over the past two years, we made a number of changes to their business practices intended to limit underage reach.
These include limiting participation in adult one-to-one consumer engagement events to age-verified adults 21 years of age or older, offering trade programs that encourage retailers to adopt responsible merchandising practices such as non-self-service for our tobacco products, supporting The We Card Program, which includes age verification signage and training store employees on how to prevent underage tobacco sales, and encouraging the Search Institute to include information on smokeless tobacco and cigars on its Parent Further website. While we are pleased with the progress that has been made in reducing underage tobacco use over time, we recognize that more work must be done. We will continue to work along with others to make progress on this important issue. Altria's third strategy is to satisfy adult consumers better than competitors by developing products and responsibly marketing our company's brands.
Our operating companies do this by focusing on the growth and development of premium brands to build their businesses. Marlboro is the nation's largest cigarette brand and has consistently built its share over 50 years. Marlboro's foundation is its strong brand equity. The brand reinforces this equity and remains relevant to adult smokers with innovative and responsible brand-building equity programs, as well as new products that expand into segments historically underserved. Last year, the brand executed brand-building programs such as Flavor Break, Marlboro Country Rewards, and Out wit the West 4 to build equity among adult smokers. Since the beginning of 2010, the brand has introduced four Special Blend products and Marlboro Skyline Menthol. These programs and new products helped Marlboro achieve a record retail share in 2010. About 25% of adult smokers are interested in smokeless tobacco alternatives to cigarettes.
Last year, PM USA nationally expanded Marlboro Snus as a smokeless tobacco alternative for these adult smokers, and earlier this year, introduced two new variants of Marlboro Snus in a bigger and bolder format. Copenhagen is the smokeless tobacco brand that men find most satisfying. Its heritage dates back to 1822, and it has evolved its equity-building programs and product offerings to remain relevant to today's adult dipper. Last year, USSTC introduced a new equity-building campaign inviting adult dippers to choose Copenhagen. The brand also expanded its offerings by introducing Copenhagen Long Cut Straight and Extra Long Cut Natural, which built upon the successful launch of Long Cut Wintergreen. These new products and equity-building programs helped Copenhagen return to retail share growth in 2010 after many years of retail share declines. Skoal is perceived by its adult dippers as a modern and innovative brand with great tasting products.
For 2011, USSTC has a number of activities planned to enhance Skoal's marketplace position. New equity communications reinforce the brand's core product attributes with its smooth, it's Skoal, and the brand also introduced a line of smokeless tobacco products called Skoal X-TRA. Many adult dippers are seeking more convenient smokeless products that deliver great taste, and Skoal introduced new snus varieties designed to appeal to these adult tobacco consumers. Black & Mild is the best any-day cigar adult smokers enjoy because of its combination of smooth taste and pleasant aroma. Adult cigar consumers like to try different varieties and blends, so new products play an important role in building Black & Mild's equity and marketplace position. Last year, Middleton introduced Black & Mild Royale in both plastic and wood-tipped varieties, and this year is expanding nationally untipped cigarillo varieties in both classic and sweets blends.
Middleton historically has not had significant entries in the untipped cigarillo segment, which represented over 50% of the machine-made large cigar category's volume in 2010. Middleton expects these products to help build Black & Mild's marketplace position. A common thread that runs across all our tobacco businesses is that the majority of adult tobacco consumers make tobacco purchase decisions based in significant part on flavor preferences. Whether it is a complex tobacco flavor like Marlboro Red, a classic smokeless tobacco flavor like Copenhagen Wintergreen, or historical pipe tobacco flavors like those found in Middleton cigars, adult tobacco consumers want a wide variety of flavors in their tobacco products. Our tobacco companies have taken a number of actions, which I previously described, designed to responsibly offer adult tobacco consumers the products they want while also seeking to limit underage reach.
In addition, our tobacco companies also supported enactment of the bill granting FDA regulatory authority over tobacco products. They communicate about the health effects of their products, and because tobacco use is addictive and it can be very difficult to quit, our tobacco companies help connect adult tobacco consumers who have decided to quit with cessation information from public health authorities. Our objective has been and continues to be giving adult tobacco consumers the products they want while mitigating unintended consequences. Altria's fourth strategy is to create substantial value for shareholders. Each of our operating companies has business objectives designed to maximize long-term business performance. We couple this with conservative management of our balance sheet and the desire to maximize cash returns to our shareholders over time. PM USA's objective in the cigarette category is to grow income by expanding margins while maintaining momentum on Marlboro.
In 2010, Marlboro's retail share grew 0.8 of a share point versus 2009 to a record 42.6%. The cigarette segment's adjusted operating company's income grew by 4.5% from $5.3 billion in 2009 to $5.6 billion in 2010. The principal driver of this income growth was margin expansion, which grew from an adjusted 36.7% in 2009 to 38.3% in 2010. USSTC and PM USA's objective in the smokeless category is to increase income by growing retail share moderately over time in order to grow volume. Smokeless segment retail share grew 0.7 of a share point to 55.3% from 2009 to 2010. This retail share growth enabled adjusted smokeless segment volume for USSTC and PM USA to grow approximately 8% versus the smokeless category's estimated growth rate of 7%.
These retail share and volume results, combined with significant cost reductions, helped 2010 adjusted smokeless segment operating company's income decrease by 30.9% from 2009 to $827 million. Middleton's objective is to invest behind Black & Mild to build its position in the machine-made large cigar category in order to grow income over time. Middleton grew Black & Mild's retail share and adjusted operating company's income from 2008 to 2009, but increased competitive activity following the 2009 FET increase caused its retail share and adjusted operating company's income to decline from 2009 to 2010. Middleton continues to make adjustments in its approach and believes that Black & Mild's strong brand equity and growth opportunities position it for long-term success. Ste. Michelle's objective in the wine category is to grow income by executing its String of Pearls strategy to grow volume faster than the category. Ste.
Michelle's retail unit volume outperformed the wine category's volume last year, and this strong volume performance helped grow income. From 2009 to 2010, the company grew its adjusted operating company's income by 13.7%. Ongoing cost management remains important to creating shareholder value. Our companies have made excellent progress against our $1.5 billion cost reduction program off the 2006 cost base. Through the end of the first quarter of this year, we have delivered almost $1.4 billion in cost savings and plan to complete this program by the end of the year. Altria's balance sheet strength remains an important component of our ability to create shareholder value. Our balance sheet enables the company to maintain a strong liquidity position by preserving access to the capital markets for short and long-term debt and secures the cash flow generated by the operating companies.
Altria's economic interest in SABMiller strengthens the financial profile of the company and has grown in value and adds to our earnings and cash flows. Given our balance sheet strength and our expectations of relatively modest internal uses of cash, we expect to continue returning the major amount of cash generated from our operations to our shareholders. Our 80% dividend payout target is among the highest of all companies in the Food, Beverage, and Tobacco Index, and our yield of 5.7% at the end of April 2011 was also among the highest. Altria expects to raise its dividend in line with suggested earnings per share growth, although all future dividend payments remain subject to the discretion of Altria's Board of Directors. In addition to this strong dividend, from time to time, the company may also repurchase its stock as an additional way to add value to shareholders.
Altria's Board has approved a $1 billion stock repurchase program, which we expect to complete by the end of the year. This year's business environment is difficult with high unemployment, low consumer confidence, and intense competition. In addition, our tobacco businesses continue to adapt to FDA oversight and manage a challenging litigation environment. Despite these challenges, Altria's businesses are off to a good start, and results through the end of the first quarter give us confidence that we can achieve our adjusted diluted earnings per share growth objective for the year. In the cigarette segment, PM USA grew adjusted operating company's income by 7.1% in the first quarter versus the comparable year-ago period. Marlboro's retail share declined versus the first quarter of 2010, but this comparison was impacted by the timing of new product launches.
Marlboro showed strong retail share momentum through the first quarter and is well positioned for the balance of the year. In the smokeless product segment, USSTC and PM USA grew first quarter adjusted operating company's income by 3.2% despite a difficult comparison in the prior year period. Copenhagen and Skoal each grew sequential retail share versus the fourth quarter of 2010, and adjusted smokeless products' shipment volumes grew versus the first quarter of 2010. In the cigar segment, post-FET increased marketplace dynamics continued to impact Middleton's income results, requiring investments in promotional initiatives to defend Black & Mild. These investments helped Middleton's 2011 first quarter retail share and shipment volumes increase versus the comparable quarter in 2010. Middleton is working to improve its marketplace position but expects it will take some time and continue to impact the company's income results for the balance of the year.
In the wine segment, Ste. Michelle grew first quarter adjusted operating company's income by a strong 25% versus the prior year period, driven in part by a mix shift to higher margin products. These business results helped Altria grow its 2011 first quarter adjusted diluted earnings per share by 4.8% versus the first quarter of 2010 and give us confidence that we can grow 2011 adjusted diluted earnings per share by 6% to 9% to a range of $2.01 - $2.07 from a base of $1.90 in 2010. This adjusted earnings per share growth, when combined with Altria's dividend, should deliver solid returns to our shareholders this year. Through the end of April, Altria's total shareholder return of 10.6% exceeded that of the S&P 500. Over time, our business platform and strategies have delivered strong returns to our shareholders.
From 2007 to 2010, adjusted diluted earnings per share grew at a compounded annual growth rate of 8.2%, and the dividend increased by 31% from the time of the PMI spin-off through the end of last year. Altria's total shareholder return of 30.7% from the time of the PMI spin-off through the end of 2010 significantly outpaced the total returns of the Food, Beverage, and Tobacco Index, our peer group, and the S&P 500. The totality of our results against our mission received special recognition earlier this year. Corporate Responsibility Magazine ranked Altria 35th on its 100 Best Corporate Citizens list. This ranking compares the largest publicly traded companies in the United States on their performance in the areas of environment, climate change, employee relations, human rights, governance, philanthropy, and financial performance.
We are pleased with these results and believe that our executive compensation programs are an important contributor to strong shareholder returns. These programs are designed to align the interests of executives and shareholders to promote the company's mission and business strategies and reward fairly the execution of those strategies. The Compensation Committee of Altria's Board of Directors, which is composed entirely of independent directors, regularly reviews the company's executive compensation program objectives and designs and benchmarks them against other programs. These matters are fully discussed in the proxy. The next item on the agenda is an advisory vote on the compensation of named executive officers. While this vote is non-binding, the Compensation Committee intends to consider the outcome of this vote when making future compensation decisions for named executive officers.
The Board recommends that shareholders approve on an advisory basis the compensation for our named executive officers as described in the compensation discussion and analysis section of the proxy statement. If you choose to vote on this matter, please do so at this time. The next item on the agenda is a non-binding vote on the frequency of future advisory votes on the compensation of Altria's named executive officers. The Board has decided not to make a recommendation as to the frequency of future advisory votes on compensation of the company's named executive officers but intends to consider carefully the results of this shareholder vote when it determines the frequency of these future advisory votes. If you choose to vote on this matter, please do so at this time. We will now transition to our 30-minute question and answer session.
We have placed two microphones in the aisle for use in asking questions. We will alternate between the microphones until our time is up or we have run out of questions. The ushers will assist you in getting to the microphones. We ask that each speaker limit his or her question to two minutes so that all who wish to ask a question may have the opportunity to do so. Brandt, our Corporate Secretary, will help us watch our time with a lighting system. When a speaker has 30 seconds remaining, the light in front of the stage will turn from green to yellow. When a speaker's time has expired, the light will turn red, and the speaker should please conclude his or her question. Thank you for your cooperation. You may ask a follow-up question after all other shareholders have asked their question.
If there is not enough time for all the questions in today's meeting, please complete a comment card, which an usher can provide, and then return the card to him or her. We will respond to you promptly. Please identify yourself and address your question to me. Let's begin. Do you have a question here?
Yes, good morning.
Good morning.
I'm Anne Morrow Donley, D-O-N-L-E-Y, a shareholder from Virginia. You said this morning you believe Altria's work is making a difference. Two studies released in March of this year, 2011, revealed a trauma caused to the fetus by people smoking around non-smoking pregnant women. One study is in Environmental Research, the other in the International Journal of Obstetrics and Gynecology. They found that in secondhand smoke exposure, certain toxic chemicals are present at higher proportions in secondhand smoke than in mainstream smoke, and this can affect the developing fetal nervous system by reducing oxygen and nutrient flow to the fetus, resulting in significant decreases in cognitive function in six-month infants. Also, that adverse outcomes include lower birth weight, shorter birth lengths, smaller head circumference, and stillbirth. Some years ago, your CEO, Geoffrey Bible, stated twice during a shareholders' meeting that he would advise pregnant women not to smoke.
Given this data that's come out this year, that secondhand smoke around a non-smoking pregnant woman can significantly harm and even kill the fetus, would you, as the current CEO, go further and advise people not to smoke around women of childbearing age?
Thank you very much for your question, Anne, and thanks for being here today. I think that we're pretty clear on this subject, and you can find some information about this on the web. For some time, our position has been that people should be guided by the public health authorities relative to issues of smoking and health, including secondhand smoke. I also think that our position has been clear that pregnant women shouldn't smoke and that children and pregnant women shouldn't be exposed to smokers' smoke and that people should be mindful of that when smoking. I don't think there's anything new here. I think that we believe that it's appropriate for pregnant women not to be exposed to smokers' smoke. Thank you very much for your question. We have a question over here.
Yes, Mr. Szymanczyk, my name is Michael Crosby, and I'm with the Midwest Capuchins and the Interfaith Center on Corporate Responsibility. Thank you. I noticed you saying something pretty quickly that is in contradiction to last week's meeting of PMI. At PMI, I wasn't there, but what I read all over in the press was that Louis Camilleri said that tobacco use is addictive, but it's not that difficult to quit. Here, I think I heard you say it is addictive, but, quote, "It can be very difficult to quit." I'm sure you're going to be asked, does this put you over against Louis Camilleri? Why does he say it's not that difficult to quit, and why do you say it can be very difficult to quit? Could you, would you elaborate on that a little bit, please?
I would simply say that what I said is on our website, so there's nothing new here. This is the Altria Group shareholders' meeting, and we discuss the business of Altria here. Thanks very much for your question. Over here, is there another question?
Yes, sir. Edward Sweda , S-W-E-D-A.
Hello.
Hello there. Shareholder from Massachusetts. I indeed also was intrigued by the statement from Mr. Camilleri, who, of course, was the CEO of this company previously. It's interesting also in the context that, as you know, down in Florida, we've had, in the past, since February of 2009, 43 of the Engle Progeny cases have gone to verdicts down there, and 30 out of the 43, so over 2/3, have come back plaintiff verdicts. One of the cases on appeal, the Merck, Inc. case against Reynolds, has been upheld by an intermediate court of appeal. I think it's fairly a long shot that that would be overturned by the Florida Supreme Court, given that they would have to essentially undo what they put forth in the 2006 Florida Supreme Court ruling. My question would be, in this context, actually perhaps two-part.
One, if you could just clarify what I got a sense that you said just a moment ago, correct me if I'm wrong, is that you disagree with Mr. Camilleri's statement from last week that quitting tobacco use, that it's not that hard to quit. Secondly, given the situation in Florida, will Altria, at some point in the near future, change its position of refusing to settle any of those Engle Progeny cases? Thank you.
Thank you very much for your question. I believe I answered the first question relative to Altria Group's position and statement on the subject of addiction, which has been on our website for some time. Again, there's nothing new here, I don't think. Relative to litigation, Engle in particular, you can understand that in great detail by looking at our 10-Q. It will give you the basis for why we believe that it's appropriate to do what we're doing relative to those cases. Thank you very much for your question and for being here today. Do we have a question over here?
Good morning, Mr. Szymanczyk. I'm Cathy Rowan.
Good morning.
Morning. Representing the shareholder Trinity Health, and I just have a short comment to make. For several years, Altria shareholders and members of the Interfaith Center on Corporate Responsibility filed a proposal asking the company to create procedures to implement the internationally agreed-upon core human rights conventions in the countries in which it operates and to find ways to ensure that suppliers are enforcing those as well. In 2009, that proposal received the support of 1/4 of shareholders. The company listened to its shareholders and began to address concerns around the protection of human rights of tobacco farmworkers. We've been pleased to participate in dialogue with Altria and see the company taking some first positive steps toward communicating its expectations in regards to suppliers, assessing suppliers' practices, and using third-party organizations to verify the results of those assessments.
Based on those actions, we've decided not to refile that proposal this year. I think everyone here knows that the product that this company makes can lead to death, and old-time shareholders will know that my colleagues have been addressing this issue for decades. However, in this case, we think it's good to balance our challenges with support for what the company is trying to do to ensure human rights compliance and monitoring within its supply chain. We thank you for that.
Thank you very much. Most of all, thank you for constructively engaging with us. I think that there are going to be places where there are disagreements between the company and various stakeholders, but I also think that we can make progress when we constructively engage and try and find things that we can do to make the situation better. Thank you very much for your comments and for your constructive engagement. Do I have another question over here?
Good morning, Mike.
Good morning.
It's Ann Gurkin with Davenport.
Hi, Ann.
Good morning. I'm listening to your comments this morning. Innovation certainly remains a key strategy for Altria. I was wondering if you'd comment on how Altria is approaching innovation given the increased FDA regulation on the industry.
That's a good question. You know, we continue to work on a number of development areas, and I think that importantly, as we've said all along, FDA represents a framework that can help guide the type of innovation development that the company does and, in particular, guide efforts to try to reduce harm. I think we intend on working closely within the regulatory framework. I think that the FDA will be focused on developing regulations and processes for how innovation should occur, and in particular, how innovation should occur relative to trying to improve the situation regarding tobacco and health. Good question. I think it's going to continue to evolve for a while, but we intend on being fully engaged and participating as we go forward in that process develops. Thanks very much. Do I have another question over here?
Good morning. This is Kristy Hartman from Davenport & Co.
Hello.
I was wondering if you'd comment or provide some more color on the state of the consumer, given the rising food and gas prices they're facing.
I said it in January. I think for consumers, it's still a tough time. Unemployment's still high. Confidence is low. As you mentioned, some prices are higher. It's a tough environment, I think, for consumers. We're mindful of that. We're trying to be thoughtful in that regard relative to the situation our consumers are in. Thanks very much for your question. Is there another question over here?
Good morning, Mike. `George Dumigan, stockholder from Connecticut.
Hi.
Hi. Jim Cramer constantly touts Altria on his show and has, since 2005, preferred your stock over PMI. He says the management team is one of the best-run management teams in the country. The question is this: money is cheap. Do you plan to use some of that money to acquire other companies? If so, can you elaborate on that?
I think I've been pretty clear about how we think about what the company's objectives are relative to shareholders. We acquired some companies here to really round out our tobacco portfolio, and we, in the process, wound up with another interest in the alcohol business. Those are nice businesses, and they offer a lot of potential for shareholders. Right now, our focus is really on developing those businesses, growing them, and taking the cash that we can develop out of them and returning it to shareholders. That's our focus. I think that that will give the shareholders a nice return for the foreseeable future. Thanks very much. Do I have another question over here?
Thank you, Mike. Anne Morrow Donley again.
Thank you.
I just wanted to clarify what I'd asked earlier, or your answer rather, because you referred to the statement on the website, and also you have a statement in the annual report about secondhand smoke, which never really says what you think or what Altria thinks beyond referring everything to public health people. I wondered if you would say whether you yourself, as CEO, would specifically address this about not smoking around women of childbearing age because of the damage secondhand smoke does to the fetus, including killing it, and whether you would then say that you've advised people not to smoke around women of childbearing age.
I think the answer to that question is, again, that people should be guided by what the public health authorities say on this subject. I think they're pretty clear about smoking and pregnancy, and I think that that's what's important and that that's what people should listen to. Thanks very much for your question. Is there another question over here?
Good morning, Mr. Chairman. Romanita Matta Barrera, representing SER Metro- Detroit Jobs for Progress, a national nonprofit in the workforce industry, wanted to say we are encouraged to hear about your initiatives around diversity and youth education programs. We are very much happy to see Mr. George Muñoz as a successful board member. I'd like to ask, what other leadership development opportunities are you providing within Altria for diverse leadership within your corporation?
Thank you. It's a good question, and we're happy to have George Muñoz on the board as well. I talked a bit about diversity in my remarks and the fact that we have a broad array of programs, scholarship programs, and, of course, we are a very active developer of people inside the company. Most of the people in this company come in in entry-level positions, and then we grow them up through the company with, I think, very strong training and development programs and very thoughtful experiences in the company. Those apply to all people, and in particular, we're interested in developing a diverse population and spreading that population so that we get diverse perspectives relative to the decisions that are made within the company. It's an important area for us. I think we're very well recognized for our work in this area, but it's something that never ends.
It's something that always has to continue going forward for a whole array of reasons related to making good decisions in this business over the long term. Thanks very much for your question. I think that completes our time period. Is that correct? Okay. Good. Thank you, everyone, for your questions. They're very good questions, and I'd ask, now that we, I think everybody's returned to their seats, okay, we can move on. If you have a question that wasn't answered, that you didn't ask, but you'd still like to get the answer to it, I remind you that there, again, is a comment card that is on your seat. You can return it to us. If you don't have a comment card, ask for one, and they'll give you one. Now hear a presentation on the shareholder proposal included in the proxy statement and vote on this proposal.
We believe shareholders should vote against this proposal for the reasons set forth fully in the proxy. In the interest of time, I will not elaborate on our views today, but we encourage all shareholders to read the proposal and our response. As it's been our practice, we ask that the proponent limit his or her presentation to four minutes or less, and each speaker commenting on the proposal to limit comments to two minutes or less. We will devote no more than eight minutes to the proposal. We will use the lighting system to help keep track of time. The light will turn yellow when a speaker has 30 seconds remaining, and the light will turn red when a speaker's time has expired. At this point, the speaker should please conclude his or her remarks and allow the next person to speak.
Thank you in advance for your cooperation with the proponent for the proposal. Please proceed to the microphone. Identify yourself and your proposal.
Mr. Szymanczyk, as I said before, my name is Michael Crosby from Milwaukee. I'm a Capuchin Franciscan brother. We and other members of the Interfaith Center on Corporate Responsibility moved the adoption of our proposal on page 75 that asked the board of directors to ensure that Altria stops the production of any of its tobacco products with characterizing flavor added, as well as their distribution and their marketing, unless it can be proven by independent and evidence-based research that this kind of characterizing flavors doesn't contribute to youth initiation. Way back, I think it was somewhere in a study that I read, as early as 1994, I think it was, 1992, Philip Morris, Altria then, vice versa, acknowledged in its documents that flavoring influences young people to smoke. We know the company has made very strong statements about it doesn't want young people to smoke.
We know that flavoring does make an incentive or offer an incentive to young people which otherwise wouldn't be there. By smoking, nicotine is addictive, and addiction, as you said, is very difficult to quit. I would still like you to state why you disagree with Mr. Camilleri because that part where your disagreement about how hard it is to quit isn't on the website. The fact that it is addictive is, but not why and why you disagree with Mr. Camilleri. When you look at what this company is doing in terms of its competitor, I compliment you. You aren't coming up with all these different types of flavoring.
When you say in your statement in opposition, sir, that the company's tobacco subsidiaries do not manufacture or sell any cigarettes with characterizing flavors other than tobacco or menthol, if, and I haven't constituted it yet or deconstitute yet, when you say it's only regular tobacco or menthol, and then you look out in the display booths per score, you got all different degrees, like of mint and wintergreen or winter mint. I'm wondering, is this how you nuance the flavoring or what? I honestly don't know. It's an honest question. You don't have what Skoal used to have in terms of some of the flavoring, and I compliment you for that. At least I haven't found it. In the old Skoal, there are all these like blackberry and cinnamon and things like that that the competitor has.
I'd like you to comment on how you do then manipulate the menthol in terms of the flavor to get these different characterizing flavors around the word mint, wintergreen, and so on.
Your presumably.
With that, I move our resolution.
Okay. Great. Thank you. Are there any comments on this shareholder proposal?
Anne Morrow Donley in support of this.
I see.
Yes. I would be very much interested in hearing your comments in response to what Reverend Crosby has said. I'm also mentioning that there is a study that came out this year, the European Journal of Public Health, and that noted that in the past, the tobacco companies, including this one, have looked at adding not only flavorings, and some of them are flavorings and some of them are other chemicals that produce thirst and that are appetite suppressants. Menthol is wrapped around those as well. We know that young women and teenagers often are looking at trying to suppress their appetites and lose weight. I would hope that you would also look into that as well, and we certainly should support this resolution.
Okay. Thank you very much. Are there any further comments?
Yes, sir. Edward Sweda , again, shareholder from Massachusetts.
Yep.
I would just note, and certainly I would agree with Father Crosby that Reynolds American has been far more irresponsible in this regard than Altria, who, in terms of the use and abuse, I would say, of flavoring, even up to the present time. Let
me just say, nonetheless, that it really I think is a mistake for the company to oppose this particular resolution. We do have ongoing litigation, as you know, particularly the Department of Justice racketeering lawsuit against the company. The company has already been established as an adjudicated racketeer in that case from a few years ago. There are still issues involved, including corrective statements and other issues in that case. I think the unwillingness to support such a very mildly worded, reasonable resolution of this, as this one is, is something that can be looked at by the courts, the lawyers involved in that case, and put the company in an additional negative light. I would make that comment and really say that it is certainly, I believe, in the shareholders' interest to support this resolution. Thank you.
Thank you. Okay. Thank you. All the matters to be voted on have now been formally presented to the meeting. If you need to do so, please complete your proxy card. After you have done so, raise your hand, and the ushers will collect all cards and deliver them to the inspectors of election. Since all shareholders have had the opportunity to vote, I declare the polls closed. The ushers have now collected all the proxies, and they are directed to deliver them to the inspectors of election for counting. While the inspectors of election count the proxies, let me make a few concluding remarks. Altria historically has been a good investment for shareholders, and we believe the company will continue to be a quality investment for the foreseeable future.
We believe we have a diverse business platform with strong positions in the largest and most profitable tobacco categories, anchored by the best brands. We have a strong balance sheet, which enables us to return a large amount of cash to shareholders through dividends and periodic stock repurchases. We are well equipped to deal with the changing regulatory environment and challenging legal issues. Most importantly, we have a talented, mission, and values-driven organization. Altria's performance is a result of the hard work and dedication of the employees across all of our companies. They work every day to accomplish our mission, live by our values, and responsibly execute our business strategies to create value for shareholders. It is a privilege to lead such a talented group of people, and I thank them for their efforts.
I also want to thank the Richmond community and all of the communities where our employees live and work for their support. We will continue working hard to make them better places for all of us to live. Finally, I want to thank you, our shareholders, for your continuing trust and support. I speak for all employees when I say we will continue working hard on your behalf to deliver superior returns. I now ask that the inspectors of election deliver their report to the Corporate Secretary. Okay, Brandt, will you please read the report?
The inspectors of election have completed the preliminary count of the vote, which I have received. The preliminary voting results are as follows. Each of the nominees for director has been elected with more than 87% of the shares voting for their election. The selection of PricewaterhouseCoopers as Altria 's independent registered public accounting firm has been ratified with more than 98% of the shares voting in favor. Shareholders have approved on an advisory basis the compensation of the company's named executive officers with more than 93% of the shares voting in favor. Shareholders have voted on an advisory basis that future advisory votes on the compensation of our named executive officers should be considered annually. Of the shares voting, 69% voted for an annual frequency, 2% voted for a two-year frequency, and 27% voted for a three-year frequency. The shareholder proposal has been defeated.
97.5% of the shares voting on the proposal voted against the proposal, and 2.5% voted in favor. That concludes the report.
Thank you, Brandt. Please file the inspector's report, the oath of the inspectors of election, their certificate, and the proxies with the records of the meeting. We will post voting results on our website with a press release following the meeting, and final voting results will also be filed in a Form 8-K. After the board reviews and considers the results of the shareholder advisory votes, we will file a Form 8-K later this year reporting our decision on how frequently we will include a vote on the compensation of our named executive officers in future proxy materials. I want to thank everyone for coming today. Please travel safely on your way home. I declare the meeting adjourned.