01—Abstract
Summary
Summary of the 10-Q filed July 31, 2009. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc.'s Q2 2009 report shows a significant increase in assets, largely driven by the acquisition of UST LLC for $11.7 billiona.
This strategic move expanded Altria's presence in the smokeless tobacco and wine markets. Despite the acquisition-related debt, the company reported growth in earnings from continuing operations, primarily due to higher pricing in its cigarette segment and contributions from the newly acquired UST business. However, the company also incurred substantial acquisition-related costs, including integration expenses and higher interest expenses due to new debt issuance.
The report highlights the company's focus on cost reduction initiatives and its commitment to returning capital to shareholders through dividends, though the share repurchase program was suspended to preserve financial flexibility. The company raised its full-year 2009 EPS guidance, reflecting confidence in its operational performance and integration of UST, despite ongoing challenges in the tobacco industry related to excise taxes, regulation, and litigation.
02—Key points
Key Highlights
- Acquisition of UST LLC for approximately $11.7 billion completed in January 2009, significantly expanding the company's smokeless tobacco and wine portfolio.
- Earnings from continuing operations increased to $1.6 billion for the six months ended June 30, 2009, up from $1.54 billion in the prior year period.
- Diluted EPS from continuing operations rose to $0.77 for the six months ended June 30, 2009, compared to $0.73 in the prior year period.
- Net revenues increased by 18.8% for the six months ended June 30, 2009, driven by the UST acquisition and higher pricing in the cigarette segment.
- Total debt increased significantly to $12.9 billion from $7.5 billion at year-end 2008, primarily due to financing the UST acquisition.
- The company suspended its share repurchase program in January 2009 to maintain financial flexibility.
- Altria raised its full-year 2009 EPS guidance for continuing operations, indicating positive outlook despite industry challenges.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2009, Altria Group, Inc. kept $0.15.
- Revenue$6.72B100.0%
- Cost of revenue−$4.26B63.4%
- Gross profit$2.46B36.6%
- Operating costs−$779.0M11.6%
- Operating income$1.68B25.0%
- Interest, other & tax−$667.0M9.9%
- Net income$1.01B15.0%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2009filed July 31, 2009Financial Statements
Q2 FY2009 against Q2 FY2008
| Line item | Q2 FY2009Q2 FY2008 | Change |
|---|---|---|
| Revenue | $6.72B$5.05B | +32.9% |
| Cost of Revenue | $2.14B$2.17B | −1.4% |
| Gross Profit | $2.46B$2.01B | +22.1% |
| Operating Income | $1.68B$1.34B | +25.0% |
| Net Income | $1.01B$930.00M | +8.6% |
| EPS (Basic) | $0.49$0.45 | +8.9% |
| EPS (Diluted) | $0.49$0.45 | +8.9% |
| Shares Outstanding (Basic) | 2K— | — |
| Shares Outstanding (Diluted) | 2K— | — |
05—Questions
Frequently Asked Questions
What was the impact of the UST acquisition on Altria's financial position?
The acquisition of UST for approximately $11.7 billion significantly increased Altria's assets and liabilities. It expanded the company's footprint in the smokeless tobacco and wine sectors, contributing to higher net revenues and operating income from continuing operations, despite increased interest expenses and acquisition-related costs.
How did Altria's earnings change in the first half of 2009 compared to the same period in 2008?
Altria's earnings from continuing operations grew slightly to $1.6 billion for the first six months of 2009, up from $1.54 billion in the prior year. Diluted EPS from continuing operations also saw an increase, from $0.73 to $0.77. This growth was driven by higher cigarette pricing, the inclusion of UST's results, and gains from SABMiller, partially offset by higher interest expenses and acquisition-related charges.
What is Altria's outlook for the remainder of 2009, and what factors are influencing it?
Altria raised its full-year 2009 EPS guidance for continuing operations, reflecting the successful integration of UST, strong cigarette pricing, and cost-reduction initiatives. Key factors influencing the outlook include ongoing excise tax increases, regulatory changes from the FDA, and competitive pressures in the tobacco market. The company also noted that its share repurchase program remains suspended to preserve financial flexibility.
06—Continue