01—Abstract
Summary
Summary of the 10-K filed February 26, 2019. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. reported net revenues of $25.36 billiona for the year ended December 31, 2018, a slight decrease from the prior year, primarily driven by lower net revenues in the smokeable products segment, partially offset by higher net revenues in the smokeless products segment.
The company's net earnings attributable to Altria decreased significantly to $6.96 billionb from $10.22 billion in the prior year, largely due to a higher effective income tax rate resulting from the Tax Reform Act, lower operating income, and a large gain on the AB InBev transaction in the prior year. The company made significant strategic investments in 2018, notably a $12.8 billion investment in JUUL Labs, Inc., representing a 35% economic interest, and announced an agreement to acquire a 45% equity interest in Cronos Group Inc., a cannabinoid company. Despite the overall revenue dip, Altria demonstrated pricing power across its segments, with higher pricing helping to offset lower shipment volumes.
The company also announced a cost reduction program expected to yield $575 millionc in annualized savings by the end of 2019. The report highlights ongoing challenges, including declining cigarette volumes, regulatory scrutiny from the FDA, and litigation risks. However, strategic investments in newer product categories like e-vapor and cannabis signal a forward-looking approach to adapt to evolving consumer preferences and market trends.
02—Key points
Key Highlights
- Net revenues for the year ended December 31, 2018 were $25.36 billion, a decrease from $25.58 billion in 2017.
- Net earnings attributable to Altria decreased to $6.96 billion in 2018 from $10.22 billion in 2017.
- Diluted EPS attributable to Altria decreased to $3.68 in 2018 from $5.31 in 2017.
- Altria made a substantial $12.8 billion investment in JUUL Labs, Inc., acquiring a 35% economic interest.
- The company announced plans to acquire a 45% equity interest in Cronos Group Inc., a global cannabinoid company.
- Cigarette shipment volume decreased by 5.8% in 2018, continuing a long-term industry trend.
- Altria declared and paid dividends totaling $5.4 billion in 2018, a 12.6% increase from the prior year, reflecting a higher dividend rate.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2018, Altria Group, Inc. kept $0.27.
- Revenue$25.36B100.0%
- Cost of revenue−$13.11B51.7%
- Gross profit$12.25B48.3%
- Operating costs−$3.14B12.4%
- Operating income$9.12B35.9%
- Interest, other & tax−$2.15B8.5%
- Net income$6.96B27.5%
Where FY2018 revenue went
$25.36B- Other operating costs: $8.62B, 34% of revenue
- Cost of revenue: $7.37B, 29% of revenue
- Net income: $6.96B, 27% of revenue
- R&D: $252.0M, 1.0% of revenue
- Interest, other & tax: $2.15B, 8.5% of revenue
Kept 27% as net incomeR&D $252.0M · 1.0%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2018filed February 26, 2019Financial Statements
FY2018 against FY2017
| Line item | FY2018FY2017 | Change |
|---|---|---|
| Revenue | $25.36B$25.58B | −0.8% |
| Cost of Revenue | $7.37B$7.54B | −2.3% |
| Gross Profit | $12.25B$11.96B | +2.4% |
| R&D Expenses | $252.00M$241.00M | +4.6% |
| Operating Income | $9.12B$9.59B | −5.0% |
| Interest Expense | $697.00M$736.00M | −5.3% |
| Net Income | $6.96B$10.22B | −31.9% |
| EPS (Basic) | $3.69$5.31 | −30.5% |
| EPS (Diluted) | $3.68$5.31 | −30.7% |
| Shares Outstanding (Basic) | 1.89B1.92B | −1.8% |
| Shares Outstanding (Diluted) | 1.89B1.92B | −1.7% |
05—Questions
Frequently Asked Questions
What were Altria's key financial performance indicators for the year ended December 31, 2018?
For the year ended December 31, 2018, Altria reported net revenues of $25.36 billion, a slight decrease from the previous year. Net earnings attributable to Altria were $6.96 billion, a significant decrease from $10.22 billion in 2017. Diluted EPS attributable to Altria also decreased to $3.68 from $5.31 in the prior year. The company's significant investments in JUUL and Cronos Group impacted its financial structure and future outlook.
What are Altria's strategic initiatives and investments for future growth?
Altria has made substantial strategic investments to adapt to evolving market trends. Key initiatives include a $12.8 billion investment in JUUL Labs, Inc., a leading e-vapor company, and an agreement to acquire a significant stake in Cronos Group Inc., a global cannabinoid company. These investments signal Altria's focus on diversifying its portfolio beyond traditional tobacco products.
What are the primary challenges and risks highlighted in the filing for Altria?
Altria faces several significant challenges, including declining cigarette consumption volumes due to evolving consumer preferences and tobacco control measures. The company is also subject to extensive regulatory oversight from the FDA, potential increases in excise taxes, ongoing litigation risks related to tobacco and health, and the inherent competition within its operating segments. The investments in JUUL and Cronos also carry their own regulatory and operational risks.
How did the Tax Reform Act impact Altria's financial results?
The Tax Reform Act, which reduced the U.S. federal corporate income tax rate from 35% to 21%, significantly impacted Altria's financial results. While it led to a re-measurement of deferred tax liabilities, resulting in a substantial tax benefit in 2017, subsequent adjustments and the lower statutory rate also influenced the effective tax rate in 2018 and subsequent forecasts, as noted in the filing.
06—Continue