01—Abstract
Summary
Summary of the 10-Q filed October 29, 2009. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. reported net earnings attributable to Altria Group, Inc. of $2.48 billiona for the nine months ended September 30, 2009, a decrease from $4.25 billion in the same period of 2008.
This decline was significantly influenced by the spin-off of Philip Morris International Inc. (PMI) in 2008, which generated a substantial one-time gain in the prior year. Excluding discontinued operations, earnings from continuing operations increased slightly to $2.48 billionb from $2.41 billion, driven by improved performance in cigarettes, financial services, and cigars segments, as well as the impact of the recently acquired UST LLC. The company also successfully raised $4.2 billion in long-term debt to finance the UST acquisition and continued its restructuring efforts, including the closure of a manufacturing facility.
For the third quarter of 2009, net earnings attributable to Altria Group, Inc. were $882 millionc, a modest increase from $867 million in the prior year's third quarter. Diluted EPS from continuing operations remained stable at $0.42. The company continues to manage its debt profile, having issued significant long-term notes to fund the UST acquisition, and has suspended its share repurchase program to preserve financial flexibility.
Altria's diverse segments, including cigarettes, smokeless products, cigars, wine, and financial services, are navigating varied market conditions, with cigarettes facing volume declines offset by pricing strategies, while smokeless products and cigars show growth potential. Altria also provided updated full-year 2009 guidance, narrowing its reported diluted EPS from continuing operations range to $1.53d-$1.56 and emphasizing a 5%-7% growth in adjusted diluted EPS over 2008. This outlook accounts for higher tobacco excise taxes, investment in smokeless tobacco brands, cost reduction initiatives, and increased pension expenses.
02—Key points
Key Highlights
- Net earnings attributable to Altria Group, Inc. decreased to $2.48 billion for the nine months ended September 30, 2009, from $4.25 billion in the prior year, primarily due to the PMI spin-off in 2008.
- Earnings from continuing operations increased slightly to $2.48 billion for the nine months ended September 30, 2009, from $2.41 billion in the prior year.
- Diluted EPS from continuing operations increased to $1.19 for the nine months ended September 30, 2009, from $1.15 in the prior year.
- Altria successfully acquired UST LLC in January 2009 for approximately $11.7 billion, consolidating its smokeless products and wine businesses.
- The company issued $4.2 billion in senior unsecured long-term notes in February 2009 to finance the UST acquisition.
- Altria suspended its $4.0 billion share repurchase program in September 2009 to preserve financial flexibility.
- Total net revenues increased by 19.3% to $17.54 billion for the nine months ended September 30, 2009, largely driven by the UST acquisition and higher cigarette pricing.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2009, Altria Group, Inc. kept $0.14.
- Revenue$6.30B100.0%
- Cost of revenue−$4.01B63.7%
- Gross profit$2.29B36.3%
- Operating costs−$891.0M14.1%
- Operating income$1.39B22.1%
- Interest, other & tax−$512.0M8.1%
- Net income$882.0M14.0%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2009filed October 29, 2009Financial Statements
Q3 FY2009 against Q3 FY2008
| Line item | Q3 FY2009Q3 FY2008 | Change |
|---|---|---|
| Revenue | $6.30B$5.24B | +20.3% |
| Cost of Revenue | $2.03B$2.23B | −8.8% |
| Gross Profit | $2.29B$2.11B | +8.2% |
| Operating Income | $1.39B$1.33B | +4.9% |
| Net Income | $882.00M$867.00M | +1.7% |
| EPS (Basic) | $0.43$0.42 | +2.4% |
| EPS (Diluted) | $0.42$0.42 | 0.0% |
| Shares Outstanding (Basic) | 2.07B— | — |
| Shares Outstanding (Diluted) | 2.07B— | — |
05—Questions
Frequently Asked Questions
What was the impact of the UST acquisition on Altria's financial performance?
The acquisition of UST, completed in January 2009, significantly impacted Altria's financial performance. It led to an increase in net revenues and operating income from continuing operations, primarily due to the inclusion of UST's smokeless products and wine businesses. However, the acquisition also incurred substantial acquisition-related costs, including transaction and integration expenses, which weighed on profitability in the short term.
How did Altria's cigarette business perform in the nine months ended September 30, 2009?
Altria's cigarette segment experienced a 9.2% increase in net revenues to $15.55 billion, driven by higher pricing, largely attributable to the federal excise tax (FET) increase in April 2009. However, shipment volume declined by 12.5%. Operating companies income for the segment increased by 4.2% due to pricing strategies and cost management, partially offset by volume declines and increased costs.
What is Altria's current dividend policy and share repurchase program status?
Altria's Board of Directors approved a 6.3% increase in the quarterly dividend to $0.34 per common share, resulting in an annualized rate of $1.36 per share. In September 2009, Altria indefinitely suspended its $4.0 billion share repurchase program to preserve financial flexibility and focus on interest expense reduction.
How has Altria's debt position changed following the UST acquisition?
Altria's total consumer products debt increased to $12.0 billion at September 30, 2009, from $7.0 billion at December 31, 2008. This increase was primarily due to the issuance of $4.2 billion in long-term notes in February 2009 to finance the UST acquisition and the consolidation of UST's existing debt.
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