01—Abstract
Summary
Summary of the 10-K filed February 16, 2012. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc.'s 2011 Form 10-K highlights a company focused on its core tobacco products, primarily cigarettes (Philip Morris USA) and smokeless products (U.S. Smokeless Tobacco Company), while also maintaining interests in wine (Ste.
Michelle Wine Estates) and financial services (Philip Morris Capital Corporation). The company reported a decrease in cigarette shipment volume but maintained market leadership with its Marlboro brand. The smokeless products segment saw a slight increase in volume.
Altria's financial services segment, PMCC, continued to manage its existing portfolio of finance leases. A significant portion of the filing details ongoing legal proceedings, particularly tobacco-related litigation, including smoking and health cases, health care cost recovery actions, and "Lights/Ultra Lights" cases. The company has achieved substantial success in managing litigation but acknowledges the inherent uncertainties and the potential for material impact on financial results.
Regulatory environments, including FDA oversight under the Family Smoking Prevention and Tobacco Control Act, and excise taxes continue to be key factors influencing the tobacco industry. Altria also addressed a significant charge related to PMCC's leveraged lease transactions and ongoing tax matters with the IRS.
02—Key points
Key Highlights
- Altria Group, Inc. operates through key segments including cigarettes (Philip Morris USA), smokeless products (U.S. Smokeless Tobacco Company), cigars (John Middleton Co.), wine (Ste. Michelle Wine Estates), and financial services (Philip Morris Capital Corporation).
- Philip Morris USA remains the largest cigarette company in the U.S., with Marlboro as its flagship brand, despite a 4.0% decrease in cigarette shipment volume for 2011.
- The smokeless products segment, led by Copenhagen and Skoal, experienced a 1.4% increase in shipment volume for 2011.
- The company incurred a $627 million charge related to the tax treatment of certain leveraged lease transactions by its financial services subsidiary, PMCC.
- Significant ongoing litigation, particularly tobacco-related, remains a material factor, with numerous cases concerning smoking and health, health care costs, and product labeling.
- Altria continues to manage its share repurchase program, authorizing a new $1.0 billion program in October 2011.
- The company is subject to increasing regulation from the FDA and faces ongoing excise tax pressures on its tobacco products.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2011, Altria Group, Inc. kept $0.14.
- Revenue$23.80B100.0%
- Cost of revenue−$14.86B62.4%
- Gross profit$8.94B37.6%
- Operating costs−$2.87B12.1%
- Operating income$6.07B25.5%
- Interest, other & tax−$2.67B11.2%
- Net income$3.39B14.3%
Where FY2011 revenue went
$23.80B- Other operating costs: $9.92B, 42% of revenue
- Cost of revenue: $7.68B, 32% of revenue
- Net income: $3.39B, 14% of revenue
- R&D: $128.0M, 0.5% of revenue
- Interest, other & tax: $2.67B, 11% of revenue
Kept 14% as net incomeR&D $128.0M · 0.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2011filed February 16, 2012Financial Statements
FY2011 against FY2010
| Line item | FY2011FY2010 | Change |
|---|---|---|
| Revenue | $23.80B$24.36B | −2.3% |
| Cost of Revenue | $7.68B$7.70B | −0.3% |
| Gross Profit | $8.94B$9.19B | −2.7% |
| R&D Expenses | $128.00M$144.00M | −11.1% |
| Operating Income | $6.07B$6.23B | −2.6% |
| Interest Expense | $1.22B$1.14B | +7.4% |
| Net Income | $3.39B$3.90B | −13.1% |
| EPS (Basic) | $1.64$1.87 | −12.3% |
| EPS (Diluted) | $1.64$1.87 | −12.3% |
| Shares Outstanding (Basic) | 2.06B2.08B | −0.6% |
| Shares Outstanding (Diluted) | 2.06B2.08B | −0.7% |
05—Questions
Frequently Asked Questions
What were the main business segments of Altria Group, Inc. in 2011?
In 2011, Altria's reportable segments included cigarettes, smokeless products, cigars, wine, and financial services. Effective January 1, 2012, the company planned to reorganize its segments into smokeable products, smokeless products, wine, and financial services.
What is the company's exposure to litigation, and how is it managed?
Altria faces significant litigation, primarily tobacco-related, including smoking and health cases, health care cost recovery actions, and "Lights/Ultra Lights" cases. The company states it has achieved substantial success in managing litigation but acknowledges the uncertainty and potential for material impact on its financial condition and results of operations. Provisions are recorded when an unfavorable outcome is probable and estimable.
Were there any significant financial events or charges reported in 2011?
Yes, Altria recorded a significant one-time charge of $627 million in the second quarter of 2011 related to the tax treatment of certain leveraged lease transactions entered into by its financial services subsidiary, PMCC. This charge was influenced by an adverse IRS decision and a related court ruling.
How did the tobacco product volumes perform in 2011?
For cigarettes, Philip Morris USA's total shipment volume decreased by approximately 4.0% in 2011 compared to 2010. For smokeless products, total shipment volume increased by 1.4% in 2011 compared to 2010. Cigar shipment volume remained unchanged from 2010 to 2011.
06—Continue