ALTRIA GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2011

Summary

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 million 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 million 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 million 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.

Key Highlights

• 1Net 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.
• 2A 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.
• 3Despite 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.
• 4The 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.
• 5The smokeless products segment saw an increase in net revenues driven by higher pricing and shipment volume growth in key brands like Copenhagen.
• 6Altria repurchased approximately $616 million of its common stock in the first six months of 2011 under its $1.0 billion share repurchase program.
• 7The company's equity investment in SABMiller contributed positively, with earnings increasing by 37.1% for the six-month period.

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