01—Abstract
Summary
Summary of the 10-K filed February 27, 2018. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. reported total net revenues of $25.576 billiona for the year ended December 31, 2017.
The company's primary segments are smokeable products, smokeless products, and wine. The smokeable products segment, driven by Marlboro, continues to be the largest contributor to operating companies income, despite a slight decline in cigarette shipment volume. The smokeless products segment, featuring Copenhagen and Skoal, demonstrated growth in net revenues and operating companies income, partly due to price increases.
The wine segment, primarily Ste. Michelle Wine Estates, experienced a decline in net revenues and operating companies income, attributed to competitive pressures and inventory adjustments. Financially, Altria demonstrated strong operating cash flow and maintained a solid credit rating.
The company completed a $4.0 billionb share repurchase program in early 2018 and authorized a new $1.0 billion program. Dividends paid to shareholders increased by 6.5% in 2017, reflecting the company's commitment to returning capital to investors.
A significant event impacting net earnings was the enactment of the Tax Cuts and Jobs Act, which resulted in a substantial tax benefit in 2017. The company faces ongoing regulatory scrutiny and litigation risks inherent in the tobacco industry, but continues to navigate these challenges while focusing on innovation and strategic brand management.
02—Key points
Key Highlights
- Altria's core smokeable products segment remained the largest contributor to operating income, despite a 5.1% decrease in cigarette shipment volume.
- Smokeless products segment saw net revenue and operating income growth, primarily driven by pricing actions, partially offset by unfavorable mix and lower shipment volume.
- The company's wine segment experienced a decline in net revenues and operating income due to competitive pressures and trade inventory reductions.
- Altria repurchased $2.9 billion of its common stock in 2017, completing a $4.0 billion program and initiating a new $1.0 billion repurchase program.
- Dividends paid to shareholders increased by 6.5% in 2017, with a quarterly dividend rate of $0.66 per share.
- The Tax Cuts and Jobs Act of 2017 significantly impacted the company's tax provision, resulting in a substantial net tax benefit for the year.
- Altria's investment in AB InBev represented a significant asset, with a carrying value of $17.952 billion at year-end 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Altria Group, Inc. kept $0.40.
- Revenue$25.58B100.0%
- Cost of revenue−$13.61B53.2%
- Gross profit$11.96B46.8%
- Operating costs−$2.37B9.3%
- Operating income$9.59B37.5%
- Interest, other & tax$629.0M2.5%
- Net income$10.22B40.0%
Where FY2017 revenue went
$25.58B- Operating income: $9.59B, 38% of revenue
- Other operating costs: $8.20B, 32% of revenue
- Cost of revenue: $7.54B, 29% of revenue
- R&D: $241.0M, 0.9% of revenue
Kept 38% as operating income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 27, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $25.58B$25.74B | −0.7% |
| Cost of Revenue | $7.54B$7.75B | −2.6% |
| Gross Profit | $11.96B$11.57B | +3.4% |
| R&D Expenses | $241.00M$203.00M | +18.7% |
| Operating Income | $9.59B$8.76B | +9.5% |
| Interest Expense | $736.00M$754.00M | −2.4% |
| Net Income | $10.22B$14.24B | −28.2% |
| EPS (Basic) | $5.31$7.28 | −27.1% |
| EPS (Diluted) | $5.31$7.28 | −27.1% |
| Shares Outstanding (Basic) | 1.92B1.95B | −1.6% |
| Shares Outstanding (Diluted) | 1.92B1.95B | −1.6% |
05—Questions
Frequently Asked Questions
What was Altria's overall financial performance in 2017?
In 2017, Altria reported net revenues of $25.576 billion and net earnings attributable to Altria Group, Inc. of $10.222 billion. Diluted EPS was $5.31. The company generated strong operating cash flow and continued to return capital to shareholders through dividends and share repurchases.
How did the different business segments perform?
The smokeable products segment remained the largest contributor, with operating companies income increasing due to higher pricing, partially offset by lower shipment volume. The smokeless products segment grew net revenues and operating income, primarily through higher pricing. The wine segment experienced a decline in net revenues and operating income due to competitive activity and trade inventory reductions.
What are the key risks and challenges facing Altria?
Altria faces significant risks inherent in the tobacco industry, including ongoing litigation and bonding requirements, regulatory actions from the FDA, potential excise tax increases, declining smoking prevalence, and evolving consumer preferences. The company also faces competition across all its product categories.
How is Altria managing its capital and returning value to shareholders?
Altria actively manages its capital through share repurchases and dividends. In 2017, the company repurchased approximately $2.9 billion of its stock and increased its quarterly dividend by 8.2%. The company has a stated target dividend payout ratio of approximately 80% of its adjusted diluted EPS and expects to continue its capital return strategy.
06—Continue