01—Abstract
Summary
Summary of the 10-K filed February 25, 2016. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc.'s 2015 10-K filing indicates a solid financial performance with growth driven by its core smokeable and smokeless product segments.
The company reported an increase in net revenues and operating income compared to the previous year. Key drivers included pricing strategies and market share gains in its premium cigarette brands, particularly Marlboro, and continued strength in its smokeless tobacco portfolio with brands like Copenhagen and Skoal. While the company continues to navigate a challenging regulatory environment and litigation landscape, it demonstrates a commitment to shareholder returns through consistent dividend payments and share repurchases.
The company also highlights its strategic investments in innovative tobacco products, signaling a forward-looking approach to adapting to evolving consumer preferences. The significant equity investment in SABMiller remains a notable asset, though its earnings contribution saw a decrease in 2015.
Investors should note the ongoing litigation risks, particularly concerning tobacco-related lawsuits, and the impact of federal regulations on the tobacco industry. However, the company's diversified product portfolio and strong brand equity in its core segments provide a foundation for continued financial stability.
02—Key points
Key Highlights
- Net revenues increased by 3.7% to $25.43 billion in 2015.
- Operating income grew by 9.7% to $8.36 billion in 2015.
- Diluted EPS increased by 4.3% to $2.67 in 2015.
- Smokeable products segment net revenues increased by 3.9%, driven by pricing and shipment volume.
- Smokeless products segment net revenues increased by 3.9%, primarily due to higher pricing.
- The company returned $6.7 billion to shareholders through dividends and share repurchases in 2015.
- Altria holds a significant ~27% equity investment in SABMiller, contributing $757 million in earnings in 2015.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2015, Altria Group, Inc. kept $0.21.
- Revenue$25.43B100.0%
- Cost of revenue−$14.32B56.3%
- Gross profit$11.11B43.7%
- Operating costs−$2.75B10.8%
- Operating income$8.36B32.9%
- Interest, other & tax−$3.12B12.3%
- Net income$5.24B20.6%
Where FY2015 revenue went
$25.43B- Other operating costs: $9.15B, 36% of revenue
- Cost of revenue: $7.74B, 30% of revenue
- Net income: $5.24B, 21% of revenue
- Interest, other & tax: $3.12B, 12% of revenue
- R&D: $186.0M, 0.7% of revenue
Kept 21% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2015filed February 25, 2016Financial Statements
FY2015 against FY2014
| Line item | FY2015FY2014 | Change |
|---|---|---|
| Revenue | $25.43B$24.52B | +3.7% |
| Cost of Revenue | $7.74B$7.79B | −0.6% |
| Gross Profit | $11.11B$10.16B | +9.4% |
| R&D Expenses | $186.00M$167.00M | +11.4% |
| Operating Income | $8.36B$7.62B | +9.7% |
| Interest Expense | $808.00M$857.00M | −5.7% |
| Net Income | $5.24B$5.07B | +3.4% |
| EPS (Basic) | $2.67$2.56 | +4.3% |
| Shares Outstanding (Basic) | 1.96B1.98B | −0.9% |
05—Questions
Frequently Asked Questions
What were the main drivers of Altria's revenue growth in 2015?
Altria's revenue growth in 2015 was primarily driven by price increases across its smokeable and smokeless product segments. The smokeable products segment also benefited from a slight increase in shipment volume, while the smokeless products segment saw volume growth in Copenhagen offsetting declines in Skoal.
How is Altria managing the ongoing litigation risks?
Altria acknowledges significant ongoing litigation risks, particularly related to smoking and health cases. The company states that it has achieved substantial success in managing litigation and believes it has valid defenses. Litigation defense costs are expensed as incurred, and the company does not accrue for unfavorable outcomes unless they are probable and estimable, which has not been the case for most pending tobacco-related litigation.
What is the company's outlook for 2016?
For the full year 2016, Altria forecasted adjusted diluted EPS growth in the range of 7% to 9% over 2015 adjusted diluted EPS. This forecast excludes certain special items and anticipates an effective tax rate on operations of 35.3%. The forecast does not include any impact from the anticipated AB InBev and SABMiller business combination.
How is Altria addressing the evolving tobacco landscape, including innovative products?
Altria is investing in innovative tobacco products through its subsidiary Nu Mark, which participates in the e-vapor category. The company also has a strategic framework with Philip Morris International for joint research, development, and technology sharing in e-vapor products. This demonstrates an effort to adapt to changing consumer preferences and explore new revenue streams beyond traditional combustible cigarettes.
06—Continue