01—Abstract
Summary
Summary of the 10-Q filed July 24, 2013. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc.'s second-quarter 2013 report shows a solid performance driven by its core tobacco segments.
For the six months ended June 30, 2013, net earnings attributable to Altria Group, Inc. increased by 9.5% to $2,651 milliona, and diluted EPS grew by 10.9% to $1.32, driven by higher operating income from smokeable and smokeless products, partially offset by lower earnings from its SABMiller investment. The company also benefited from a significant NPM Adjustment Settlement, contributing $519 million to cost of sales reduction. Operating income was further supported by higher pricing across its product categories and a reduction in marketing, administration, and research costs.
The company continued its commitment to shareholder returns through dividends and share repurchases, with $1.769 billionb paid in dividends and $192 million used for share repurchases during the first half of the year. The company also announced a new $300 million share repurchase program in April 2013. Despite ongoing industry challenges such as regulatory scrutiny and declining cigarette volumes, Altria demonstrated resilience through strategic pricing and operational efficiencies, positioning it to meet its full-year EPS guidance.
02—Key points
Key Highlights
- Net earnings attributable to Altria Group, Inc. increased by 9.5% to $2,651 million for the six months ended June 30, 2013, compared to the same period in 2012.
- Diluted EPS attributable to Altria Group, Inc. rose by 10.9% to $1.32 for the six months ended June 30, 2013.
- The company received a significant benefit of $519 million from the NPM Adjustment Settlement, which reduced cost of sales and boosted operating companies income in the smokeable products segment.
- Operating income increased by 18.0% for the six months ended June 30, 2013, driven by strong performance in the smokeable and smokeless products segments, as well as lower interest expenses.
- Altria continued to return capital to shareholders, paying $1.769 billion in dividends and repurchasing $192 million worth of shares during the first six months of 2013.
- The smokeable products segment saw a 0.4 percentage point increase in cigarette retail share for the first half of 2013, with Marlboro maintaining a strong presence.
- The smokeless products segment experienced growth in both shipment volume and retail share for Copenhagen and Skoal combined, contributing to a 5.4% increase in shipment volume for the first half of 2013.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2013, Altria Group, Inc. kept $0.20.
- Revenue$6.30B100.0%
- Cost of revenue−$3.75B59.5%
- Gross profit$2.55B40.5%
- Operating costs−$553.0M8.8%
- Operating income$2.00B31.7%
- Interest, other & tax−$735.0M11.7%
- Net income$1.27B20.1%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2013filed July 24, 2013Financial Statements
Q2 FY2013 against Q2 FY2012
| Line item | Q2 FY2013Q2 FY2012 | Change |
|---|---|---|
| Revenue | $6.30B$6.49B | −2.8% |
| Cost of Revenue | $1.97B$2.09B | −5.5% |
| Gross Profit | $2.55B$2.49B | +2.4% |
| Operating Income | $2.00B$1.88B | +6.6% |
| Net Income | $1.27B$1.23B | +3.3% |
| EPS (Basic) | $0.63$0.60 | +5.0% |
| Shares Outstanding (Basic) | 2.00B2.03B | −1.2% |
05—Questions
Frequently Asked Questions
What was the primary driver of the increase in Altria's net earnings for the first half of 2013?
The increase in net earnings for the first half of 2013 was primarily driven by higher operating income from the smokeable and smokeless products segments, lower interest and other debt expense, and the significant benefit from the NPM Adjustment Settlement, which reduced cost of sales.
How did Altria manage its cigarette shipment volumes in the first half of 2013?
Despite an industry-wide decline, Altria's reported domestic cigarette shipment volume decreased by 6.0% for the six months ended June 30, 2013. After adjusting for industry trends and trade inventory changes, the company estimates its volume was down approximately 4%, which was in line with the estimated category decline rate.
What is the significance of the NPM Adjustment Settlement?
The NPM Adjustment Settlement provided Altria's subsidiary, PM USA, with a reduction in its Master Settlement Agreement payment obligation. For the six months ended June 30, 2013, this resulted in a $519 million reduction to cost of sales, significantly boosting operating companies income in the smokeable products segment.
How is Altria returning capital to shareholders?
Altria demonstrated its commitment to shareholder returns by paying $1.769 billion in dividends and repurchasing $192 million of its common stock during the first six months of 2013. The company also has an ongoing share repurchase program authorized.
06—Continue