01—Abstract
Summary
Summary of the 10-K filed February 24, 2010. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc.'s 2009 Form 10-K highlights a year marked by significant strategic acquisitions and ongoing challenges within the tobacco industry.
The company completed the acquisition of UST LLC for approximately $11.7 billiona, integrating its smokeless tobacco and wine businesses, which significantly diversified Altria's revenue streams and contributed to the newly formed smokeless products and wine segments. Despite a decline in cigarette shipment volumes, the core Marlboro brand maintained its leading market share in the U.S. premium cigarette segment. Altria also experienced a shift in its business segments' profitability contribution, with cigarettes decreasing and smokeless products and wine gaining importance.
The company continued its commitment to shareholder returns by increasing its quarterly dividend. However, Altria faces persistent risks from ongoing tobacco-related litigation, increasing excise taxes, and evolving regulatory landscapes, including the new Family Smoking Prevention and Tobacco Control Act granting the FDA broad regulatory authority over tobacco products.
02—Key points
Key Highlights
- Acquisition of UST LLC for $11.7 billion significantly expanded Altria's portfolio into smokeless products and wine.
- Cigarette shipment volumes declined by 12.2% in 2009, with the Marlboro brand volume decreasing by 10.6%.
- The cigarette segment's share of operating companies income decreased from 95.4% in 2008 to 85.3% in 2009, reflecting diversification.
- Smokeless products and wine segments, bolstered by the UST acquisition, became more significant contributors to operating income.
- Altria increased its quarterly dividend by 6.3% in Q3 2009 and announced a target to increase its dividend payout ratio to approximately 80% of adjusted diluted EPS.
- The company suspended its $4.0 billion share repurchase program in September 2009 to preserve financial flexibility.
- Altria faces ongoing risks related to tobacco litigation, increasing excise taxes, and new FDA regulations under the Family Smoking Prevention and Tobacco Control Act.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2009, Altria Group, Inc. kept $0.14.
- Revenue$23.56B100.0%
- Cost of revenue−$14.72B62.5%
- Gross profit$8.83B37.5%
- Operating costs−$3.37B14.3%
- Operating income$5.46B23.2%
- Interest, other & tax−$2.26B9.6%
- Net income$3.21B13.6%
Where FY2009 revenue went
$23.56B- Other operating costs: $9.93B, 42% of revenue
- Cost of revenue: $7.99B, 34% of revenue
- Net income: $3.21B, 14% of revenue
- R&D: $177.0M, 0.8% of revenue
- Interest, other & tax: $2.26B, 9.6% of revenue
Kept 14% as net incomeR&D $177.0M · 0.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2009filed February 24, 2010Financial Statements
FY2009 against FY2008
| Line item | FY2009FY2008 | Change |
|---|---|---|
| Revenue | $23.56B$19.36B | +21.7% |
| Cost of Revenue | $7.99B$8.27B | −3.4% |
| Gross Profit | $8.83B$7.69B | +14.9% |
| R&D Expenses | $177.00M$232.00M | −23.7% |
| Operating Income | $5.46B$4.88B | +11.9% |
| Interest Expense | $1.19B$237.00M | +401.7% |
| Net Income | $3.21B$4.93B | −35.0% |
| EPS (Basic) | $1.55$2.37 | −34.6% |
| EPS (Diluted) | $1.54$2.36 | −34.7% |
| Shares Outstanding (Basic) | 2.07B2.08B | −0.4% |
| Shares Outstanding (Diluted) | 2.07B2.08B | −0.6% |
05—Questions
Frequently Asked Questions
What were the major strategic moves Altria made in 2009?
The most significant strategic move was the acquisition of UST LLC for approximately $11.7 billion in January 2009. This acquisition integrated UST's smokeless tobacco (U.S. Smokeless Tobacco Company) and wine (Ste. Michelle Wine Estates) businesses into Altria's operations, diversifying its product portfolio beyond cigarettes.
How did Altria's business segments perform in terms of profitability contribution?
The contribution of the cigarette segment to operating companies income decreased significantly, from 95.4% in 2008 to 85.3% in 2009. Conversely, the smokeless products segment, new to Altria's reporting due to the UST acquisition, accounted for 6.4% of operating companies income in 2009, and the wine segment contributed 0.7%. The financial services segment's contribution also decreased.
What is Altria's stance on returning capital to shareholders?
Altria demonstrated a commitment to shareholder returns by increasing its quarterly dividend in the third quarter of 2009 and subsequently announcing an increase in its target dividend payout ratio to approximately 80% of adjusted diluted EPS. However, it suspended its share repurchase program in September 2009 to maintain financial flexibility.
What are the key risks and regulatory challenges facing Altria?
Altria faces significant risks including ongoing tobacco-related litigation, which has led to substantial jury awards and settlements. Additionally, the company is subject to increasing excise taxes on tobacco products and new regulatory oversight from the FDA under the Family Smoking Prevention and Tobacco Control Act, which grants broad authority to regulate tobacco product design, manufacturing, marketing, and sales.
06—Continue