01—Abstract
Summary
Summary of the 10-Q filed April 25, 2013. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. reported a solid first quarter for 2013, with net earnings attributable to the company increasing by 15.9% to $1,385 milliona, 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 billionb 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.
02—Key points
Key Highlights
- Net 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.
- A $483 million reduction to cost of sales was recorded due to the Non-Participating Manufacturer (NPM) Adjustment, significantly boosting operating income.
- Smokeable 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.
- Smokeless 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%.
- Altria completed its $1.5 billion share repurchase program and announced a new $300 million program, demonstrating a continued commitment to capital return.
- The company revised its full-year 2013 EPS forecast upwards to a range of $2.49 to $2.55.
- The investment in SABMiller provided equity earnings, though they decreased year-over-year due to prior-year special items.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2013, Altria Group, Inc. kept $0.25.
- Revenue$5.53B100.0%
- Cost of revenue−$2.85B51.6%
- Gross profit$2.67B48.4%
- Operating costs−$522.0M9.4%
- Operating income$2.15B38.9%
- Interest, other & tax−$767.0M13.9%
- Net income$1.39B25.1%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2013filed April 25, 2013Financial Statements
Q1 FY2013 against Q1 FY2012
| Line item | Q1 FY2013Q1 FY2012 | Change |
|---|---|---|
| Revenue | $5.53B$5.65B | −2.1% |
| Cost of Revenue | $1.30B$1.79B | −27.5% |
| Gross Profit | $2.67B$2.20B | +21.4% |
| Operating Income | $2.15B$1.64B | +31.1% |
| Net Income | $1.39B$1.20B | +15.9% |
| EPS (Basic) | $0.69$0.59 | +16.9% |
| Shares Outstanding (Basic) | 2.00B2.03B | −1.5% |
05—Questions
Frequently Asked Questions
What was the primary driver of the increase in net earnings for the first quarter of 2013?
The primary driver for the increase in net earnings was higher operating income, driven by strong performance in the smokeable and smokeless product segments. This was significantly boosted by a favorable Non-Participating Manufacturer (NPM) Adjustment, higher pricing, and cost reduction initiatives. Additionally, lower interest expenses and fewer outstanding shares due to share repurchases contributed to the improved earnings per share.
How did the NPM Adjustment impact Altria's financial results?
The Non-Participating Manufacturer (NPM) Adjustment resulted in a $483 million reduction to Altria's cost of sales in the first quarter of 2013. This adjustment, related to the Master Settlement Agreement, significantly increased operating income and consequently boosted net earnings and EPS.
What is Altria's strategy regarding capital return to shareholders?
Altria demonstrated its commitment to capital return by completing its $1.5 billion share repurchase program during the quarter and announcing a new $300 million repurchase program. The company also aims to maintain a dividend payout ratio of approximately 80% of its adjusted diluted EPS, with the annualized dividend rate at $1.76 per share.
How did the company's investment in SABMiller perform during the quarter?
Altria's equity investment in SABMiller contributed positively to earnings, although earnings from this investment decreased compared to the prior year's first quarter. This decrease was primarily due to special items recorded by SABMiller in the previous year, which were not present in the current quarter.
06—Continue