10-QPeriod: Q1 FY2011

ALTRIA GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2011

Filed April 28, 2011For Securities:MO

Summary

Altria Group, Inc. (MO) reported a solid first quarter for 2011, with net earnings attributable to Altria Group, Inc. increasing by 15.3% to $937 million, and diluted earnings per share (EPS) rising by 15.4% to $0.45 compared to the same period in 2010. This growth was driven by higher operating income across its segments, particularly in cigarettes and smokeless products, lower interest expenses, and a significant increase in earnings from its equity investment in SABMiller. The company reaffirmed its full-year 2011 EPS guidance, anticipating 6% to 9% growth over 2010 adjusted diluted EPS, though it cautioned about potential lumpiness in quarterly results due to trade inventory dynamics and ongoing economic pressures on consumers. Financially, Altria maintained a strong liquidity position with approximately $3.4 billion in cash and cash equivalents. The company's debt levels remained substantial at $12.2 billion, but its credit metrics, such as the debt-to-EBITDA ratio, were within covenant requirements. Altria's Board of Directors authorized a new $1.0 billion share repurchase program in January 2011, though no shares were repurchased under this program in the first quarter. The company also continued its dividend payments, with a 12.5% increase in total dividend payments compared to the prior year, reflecting its commitment to returning capital to shareholders.

Financial Highlights

46 data points
Beta

Revenue

$5.64B

38.1% Gross Margin

Net Income

$938.00M

16.6% Net Margin

EPS (Diluted)

$0.45

Total Assets

$38.58B

Cash & Equivalents

$3.43B

Free Cash Flow

$2.05B

Financial Statements
Beta
Revenue$5.64B
Cost of Revenue$1.79B
Gross Profit$2.15B
Operating Income$1.54B
Net Income$938.00M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)2.08B
Shares Outstanding (Diluted)2.08B

Key Highlights

  • 1Net earnings attributable to Altria Group, Inc. increased 15.3% to $937 million ($0.45 per diluted share) for the first quarter of 2011, up from $813 million ($0.39 per diluted share) in the prior year.
  • 2Operating income for the consolidated company increased by $109 million (7.6%) year-over-year, driven primarily by strong performance in the cigarettes and smokeless products segments.
  • 3Earnings from the equity investment in SABMiller increased significantly, contributing $189 million pre-tax for the quarter, up from $138 million in the prior year.
  • 4The company reaffirmed its full-year 2011 diluted EPS forecast to be in the range of $2.00 to $2.06, representing 6% to 9% growth over 2010 adjusted diluted EPS.
  • 5Altria maintained robust liquidity with $3.432 billion in cash and cash equivalents at the end of the first quarter.
  • 6The company's cigarettes segment saw a decline in shipment volume (down 6.4%) and retail share (down 1.2 share points), impacted by trade inventory movements and new product launch timing.
  • 7A new $1.0 billion share repurchase program was authorized in January 2011, though no shares were repurchased under this program during the first quarter.

Frequently Asked Questions

Altria reported a strong first quarter in 2011, with net earnings attributable to Altria Group, Inc. increasing by 15.3% to $937 million, or $0.45 per diluted share. This growth was driven by higher operating income from its core businesses, particularly cigarettes and smokeless products, and a notable increase in earnings from its SABMiller investment. The company also reaffirmed its full-year earnings guidance.

The cigarettes segment's operating companies income increased due to higher pricing and lower costs, but shipment volume and retail share declined year-over-year. The smokeless products segment saw improved operating income driven by pricing, although volume and share saw a slight decrease compared to a strong prior year with new product activity. The cigars segment experienced a decline in operating income due to increased promotional investments. The wine segment showed modest growth in both revenue and operating income, and the financial services segment's operating income remained flat.

Altria reaffirmed its full-year 2011 reported diluted EPS guidance to be between $2.00 and $2.06. This guidance reflects an expected 6% to 9% growth in adjusted diluted EPS compared to 2010. However, the company anticipates some quarterly unevenness in growth due to trade inventory dynamics and ongoing economic pressures on consumers, with stronger growth expected in the latter half of the year.

Altria's Board of Directors authorized a new $1.0 billion share repurchase program in January 2011. However, no shares were repurchased under this program during the first quarter of 2011. The company continued to return capital to shareholders through dividends, paying $794 million in the first quarter of 2011, an increase of 12.5% over the prior year, reflecting a higher dividend rate.