ALTRIA GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2013

Summary

Altria Group, Inc. reported a solid first quarter for 2013, with net earnings attributable to the company increasing by 15.9% to $1,385 million, or $0.69 per diluted share, compared to the prior year's quarter. This growth was driven by higher operating income from its smokeable and smokeless product segments, improved pricing across its portfolio, and a significant benefit from a favorable Non-Participating Manufacturer (NPM) Adjustment related to the Master Settlement Agreement, which positively impacted cost of sales. The company also benefited from lower interest expenses due to debt refinancing and fewer shares outstanding resulting from its ongoing share repurchase program. The investment in SABMiller contributed positively, although earnings from this equity investment decreased year-over-year due to special items in the prior year. Altria continued its commitment to returning capital to shareholders, completing its $1.5 billion share repurchase program and announcing a new $300 million program. The company also raised its full-year 2013 EPS forecast, reflecting the positive impact of the NPM Adjustment. Despite ongoing regulatory and litigation challenges inherent in the tobacco industry, Altria demonstrated strong operational execution and financial performance in the first quarter.

Key Highlights

• 1Net earnings attributable to Altria Group, Inc. increased by 15.9% to $1,385 million ($0.69 per diluted share) for Q1 2013, up from $1,195 million ($0.59 per diluted share) in Q1 2012.
• 2A $483 million reduction to cost of sales was recorded due to the Non-Participating Manufacturer (NPM) Adjustment, significantly boosting operating income.
• 3Smokeable products segment operating companies income increased significantly due to the NPM Adjustment, higher pricing, and cost reduction initiatives, despite a 5.3% decrease in shipment volume.
• 4Smokeless products segment saw a growth in operating companies income, driven by higher volume for Copenhagen and favorable pricing, with combined segment shipment volume up 3.4%.
• 5Altria completed its $1.5 billion share repurchase program and announced a new $300 million program, demonstrating a continued commitment to capital return.
• 6The company revised its full-year 2013 EPS forecast upwards to a range of $2.49 to $2.55.
• 7The investment in SABMiller provided equity earnings, though they decreased year-over-year due to prior-year special items.

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