01—Abstract
Summary
Summary of the 10-K filed February 27, 2013. Cited figures are marked; the original filing is the authoritative source.
In the fiscal year ending December 31, 2012, Altria Group, Inc. (MO) demonstrated resilience and growth, with net earnings attributable to Altria Group, Inc. increasing by 23.3% to $4.18 billiona compared to the prior year.
This growth was driven by strong performance across its key segments, particularly smokeable and smokeless products, supported by effective pricing strategies and cost management. The company also benefited from higher equity earnings from its significant investment in SABMiller plc. Despite facing ongoing regulatory and litigation challenges inherent in the tobacco industry, Altria managed its operations effectively, reflected in a 25.6% increase in diluted Earnings Per Share (EPS) to $2.06b.
Altria continued to return value to shareholders through a 7.3% increase in its quarterly dividend to $0.44c per share and substantial share repurchases totaling $1.1 billion under its $1.5 billion repurchase program. The company maintained a stable credit rating, with a positive outlook from major credit rating agencies, underscoring its financial stability. Looking ahead, Altria provided a cautious but optimistic forecast for 2013, expecting reported diluted EPS growth of 6% to 9%, reflecting confidence in its ongoing business strategies and ability to navigate the evolving market landscape.
02—Key points
Key Highlights
- Net earnings attributable to Altria Group, Inc. increased by 23.3% to $4.18 billion in 2012, up from $3.39 billion in 2011.
- Diluted EPS grew by 25.6% to $2.06 in 2012, compared to $1.64 in 2011.
- The Smokeable Products segment reported higher operating companies income, driven by effective pricing and cost management, with Marlboro's retail share increasing.
- The Smokeless Products segment showed growth in operating companies income, attributed to higher pricing and combined volume and retail share performance of Copenhagen and Skoal.
- Altria's equity investment in SABMiller plc contributed significantly, with earnings increasing by 67.7% to $1.22 billion.
- The company repurchased approximately $1.1 billion of its common stock under its share repurchase program.
- Altria increased its quarterly dividend by 7.3% to $0.44 per common share, maintaining a target payout ratio of approximately 80% of adjusted diluted EPS.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2012, Altria Group, Inc. kept $0.17.
- Revenue$24.62B100.0%
- Cost of revenue−$15.05B61.2%
- Gross profit$9.56B38.8%
- Operating costs−$2.31B9.4%
- Operating income$7.25B29.5%
- Interest, other & tax−$3.07B12.5%
- Net income$4.18B17.0%
Where FY2012 revenue went
$24.62B- Other operating costs: $9.29B, 38% of revenue
- Cost of revenue: $7.94B, 32% of revenue
- Net income: $4.18B, 17% of revenue
- Interest, other & tax: $3.07B, 12% of revenue
- R&D: $136.0M, 0.6% of revenue
Kept 17% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2012filed February 27, 2013Financial Statements
FY2012 against FY2011
| Line item | FY2012FY2011 | Change |
|---|---|---|
| Revenue | $24.62B$23.80B | +3.4% |
| Cost of Revenue | $7.94B$7.68B | +3.3% |
| Gross Profit | $9.56B$8.94B | +7.0% |
| R&D Expenses | $136.00M$128.00M | +6.3% |
| Operating Income | $7.25B$6.07B | +19.5% |
| Interest Expense | $1.13B$1.22B | −7.5% |
| Net Income | $4.18B$3.39B | +23.3% |
| EPS (Basic) | $2.06$1.64 | +25.6% |
| EPS (Diluted) | $2.06$1.64 | +25.6% |
| Shares Outstanding (Basic) | 2.02B2.06B | −1.9% |
| Shares Outstanding (Diluted) | 2.02B2.06B | −1.9% |
05—Questions
Frequently Asked Questions
What were the main drivers of Altria's earnings growth in 2012?
Altria's earnings growth in 2012 was primarily driven by higher operating income from all reportable segments (smokeable products, smokeless products, and wine), increased equity earnings from its investment in SABMiller plc, and lower interest and other debt expense, net. These factors were partially offset by a significant loss on the early extinguishment of debt related to a tender offer.
How did Altria's major product categories perform in terms of volume and retail share?
In the smokeable products segment, cigarette shipment volume decreased slightly by 0.2%, while retail share for cigarettes increased to 49.8%. For smokeless products, shipment volume increased by 3.9%, and combined retail share for Copenhagen and Skoal reached 50.6%. The wine segment saw a 3.7% increase in shipment volume.
What are the significant "special items" mentioned in the financial results and how did they impact earnings?
The company reported several special items that impacted comparability. Key items in 2012 included a $0.28 per share loss on early extinguishment of debt and a $0.08 per share benefit from SABMiller special items. In 2011, notable items were a $0.30 per share charge related to PMCC leveraged lease transactions and $0.05 per share for tobacco and health judgments. Management excludes these items to assess underlying business trends and results.
What is Altria's strategy regarding shareholder returns?
Altria remains committed to returning value to shareholders through dividends and share repurchases. In 2012, the company increased its quarterly dividend by 7.3% and continued its share repurchase program, buying back approximately $1.1 billion of its stock. The company aims to maintain a dividend payout ratio of around 80% of its adjusted diluted EPS.
06—Continue