01—Abstract
Summary
Summary of the 10-Q filed July 28, 2011. Cited figures are marked; the original filing is the authoritative source.
For the six months ended June 30, 2011, Altria Group, Inc. (MO) reported a decrease in net earnings attributable to Altria Group, Inc. to $1,381 milliona from $1,855 million in the prior year, resulting in diluted earnings per share (EPS) of $0.66, down from $0.89.
This decline was primarily driven by a significant $627 millionb one-time charge related to the PMCC Leveraged Lease Charge, which impacted both net revenues and income tax provision, and lower operating income from the financial services and cigar segments. These factors were partially offset by higher earnings from the cigarettes and smokeless products segments, as well as an increase in equity earnings from SABMiller. Despite the overall decrease in reported earnings, the company's core operations showed resilience.
Excluding special items like the PMCC charge, asset impairments, and other adjustments, adjusted diluted EPS indicated underlying operational growth. The company also continued its capital return to shareholders, repurchasing approximately $616 millionc of its common stock under its share repurchase program and paying dividends. Altria reaffirmed its full-year adjusted diluted EPS forecast, signaling confidence in its underlying business performance despite a challenging economic environment.
02—Key points
Key Highlights
- Net earnings attributable to Altria Group, Inc. decreased by 25.6% to $1.38 billion for the first six months of 2011, with diluted EPS falling to $0.66 from $0.89 in the prior year.
- A significant one-time charge of $627 million related to the PMCC Leveraged Lease Charge heavily impacted the reported earnings for the second quarter and six-month period.
- Despite the reported earnings decline, core operations excluding special items showed growth, with adjusted diluted EPS growth expected to be between 6% and 9% for the full year.
- The cigarettes segment demonstrated stable net revenues, with higher list prices offsetting lower shipment volumes. Operating income for the segment increased due to pricing and cost savings.
- The smokeless products segment saw an increase in net revenues driven by higher pricing and shipment volume growth in key brands like Copenhagen.
- Altria repurchased approximately $616 million of its common stock in the first six months of 2011 under its $1.0 billion share repurchase program.
- The company's equity investment in SABMiller contributed positively, with earnings increasing by 37.1% for the six-month period.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2011, Altria Group, Inc. kept $0.07.
- Revenue$5.92B100.0%
- Cost of revenue−$3.95B66.7%
- Gross profit$1.97B33.3%
- Operating costs−$677.0M11.4%
- Operating income$1.29B21.9%
- Interest, other & tax−$851.0M14.4%
- Net income$444.0M7.5%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2011filed July 28, 2011Financial Statements
Q2 FY2011 against Q2 FY2010
| Line item | Q2 FY2011Q2 FY2010 | Change |
|---|---|---|
| Revenue | $5.92B$6.27B | −5.6% |
| Cost of Revenue | $2.03B$1.97B | +3.2% |
| Gross Profit | $1.97B$2.37B | −16.9% |
| Operating Income | $1.29B$1.53B | −15.3% |
| Net Income | $444.00M$1.04B | −57.4% |
| EPS (Basic) | $0.21$0.50 | −58.0% |
| EPS (Diluted) | $0.21$0.50 | −58.0% |
| Shares Outstanding (Basic) | 2.08B2.08B | 0.0% |
| Shares Outstanding (Diluted) | 2.08B2.08B | −0.1% |
05—Questions
Frequently Asked Questions
What was the primary driver of the decrease in net earnings for the six months ended June 30, 2011?
The primary driver of the decrease in net earnings was a significant one-time charge of $627 million related to the PMCC Leveraged Lease Charge, which impacted both net revenues and the income tax provision. This was compounded by lower operating income from the financial services and cigar segments.
How did Altria's core operations perform excluding the one-time charge?
Excluding special items such as the PMCC Leveraged Lease Charge, asset impairments, and other adjustments, Altria's adjusted diluted EPS was projected to grow between 6% and 9% for the full year 2011. This indicates that the underlying business operations, particularly in the cigarettes and smokeless products segments, were performing positively.
What is the status of Altria's share repurchase program?
Altria repurchased approximately $616 million of its common stock in the first six months of 2011 under its $1.0 billion share repurchase program authorized in January 2011. The company stated that the PMCC Leveraged Lease Charge is not expected to impact its dividend payments or share repurchase program.
How did the cigarette business perform in terms of volume and market share?
For the six months ended June 30, 2011, Altria's domestic cigarette shipment volume declined 3.5% versus the prior year, primarily due to changes in trade inventories. After adjusting for inventory changes, the volume decline was estimated at 5.0%. The premium segment continued to dominate, making up 94.3% of PM USA's total volume. Marlboro's retail share slightly decreased year-over-year, but showed sequential improvement.
06—Continue