ALTRIA GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2012

Summary

Altria Group, Inc. reported a net earnings increase of 20.5% for the first nine months of 2012 compared to the same period in 2011, reaching $3,077 million, or $1.51 per diluted share, up from $1.23 per diluted share. This growth was driven by higher operating income from its smokeable products, financial services, and smokeless products segments, alongside increased equity earnings from its SABMiller investment. However, the company experienced a significant $874 million pre-tax loss on early debt extinguishment in the third quarter of 2012, impacting quarterly earnings. Despite this, the company reaffirmed its full-year adjusted diluted EPS forecast, projecting 7% to 9% growth over 2011. Altria also announced a 7.3% increase in its quarterly dividend to $0.44 per share and expanded its share repurchase program by $500 million, demonstrating a commitment to returning capital to shareholders. The company's financial services segment saw improved performance due to a beneficial settlement with the IRS regarding leveraged lease transactions, while its tobacco segments navigated ongoing regulatory pressures and evolving consumer preferences, with the smokeable products segment showing strength in Marlboro's retail share and the smokeless products segment benefiting from Copenhagen's performance.

Key Highlights

• 1Net earnings attributable to Altria Group, Inc. increased by 20.5% to $3,077 million for the first nine months of 2012, translating to diluted EPS of $1.51, up from $1.23 in the prior year.
• 2The company recorded a significant pre-tax loss of $874 million on early extinguishment of debt in the third quarter of 2012.
• 3Altria declared a quarterly dividend of $0.44 per common share, a 7.3% increase, and reaffirmed its full-year adjusted diluted EPS growth forecast of 7-9%.
• 4Share repurchases continued, with $622 million spent in the first nine months of 2012 under an expanded $1.5 billion program.
• 5Equity earnings from the investment in SABMiller plc increased significantly, contributing to overall net income growth.
• 6The financial services segment benefited from a $68 million net earnings benefit related to a favorable IRS closing agreement on leveraged lease transactions.
• 7Smokeable products segment showed resilience with higher pricing and cost management, while Marlboro's retail share improved. Smokeless products segment also saw growth driven by Copenhagen.

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