10-QPeriod: Q1 FY2014

ALTRIA GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2014

Filed April 24, 2014For Securities:MO

Summary

Altria Group, Inc. reported a decrease in net earnings attributable to Altria Group, Inc. for the first quarter of 2014 to $1,175 million, or $0.59 per diluted share, compared to $1,385 million, or $0.69 per diluted share, in the same period of 2013. This decline was primarily driven by a significant one-time benefit in the prior year related to the Non-Participating Manufacturer (NPM) Adjustment Settlement, which boosted 2013 results. Excluding these special items, the company's core operations showed an increase in earnings, primarily due to improved performance in the smokeable and smokeless products segments, alongside lower interest expenses. Altria reaffirmed its full-year 2014 adjusted diluted EPS forecast, indicating continued focus on operational efficiency and profitable growth. The company also continued its share repurchase program, returning capital to shareholders, and maintained its commitment to its dividend payout ratio target, signaling confidence in its financial health despite the year-over-year reported earnings decline. Investors should note the impact of the NPM adjustment settlement in the prior year on the reported figures and focus on the underlying operational trends.

Financial Highlights

46 data points
Beta

Revenue

$5.52B

40.9% Gross Margin

Net Income

$1.18B

21.3% Net Margin

EPS (Diluted)

$0.59

Total Assets

$35.41B

Cash & Equivalents

$3.62B

Free Cash Flow

$2.10B

Financial Statements
Beta
Revenue$5.52B
Cost of Revenue$1.75B
Gross Profit$2.26B
Operating Income$1.73B
Net Income$1.18B
EPS (Basic)$0.59
Shares Outstanding (Basic)1.99B

Key Highlights

  • 1Net earnings attributable to Altria Group, Inc. decreased by 15.2% to $1,175 million ($0.59 per diluted share) for Q1 2014, compared to $1,385 million ($0.69 per diluted share) in Q1 2013.
  • 2The year-over-year decline in net earnings was largely due to the absence of a significant NPM Adjustment Settlement benefit recorded in Q1 2013.
  • 3Excluding special items, operational performance showed improvement, driven by higher income from the smokeable and smokeless products segments and lower interest expenses.
  • 4Altria Group, Inc. continued its share repurchase program, spending $272 million in Q1 2014, and had $185 million remaining under its repurchase authorization as of March 31, 2014.
  • 5The company reaffirmed its full-year 2014 adjusted diluted EPS forecast, expecting growth of 6% to 9% over 2013.
  • 6Total smokeable products shipment volume decreased by 2.5%, while smokeless products shipment volume increased by 5.9% in Q1 2014 compared to Q1 2013.
  • 7The company continues to navigate significant legal and regulatory challenges inherent in the tobacco industry.

Frequently Asked Questions

The decrease in net earnings for Q1 2014 compared to Q1 2013 was primarily due to the absence of a significant Non-Participating Manufacturer (NPM) Adjustment Settlement benefit that was recorded in the prior year. This settlement significantly boosted the reported earnings in Q1 2013.

Excluding special items, Altria's core operations showed improvement. The smokeable products segment's operating companies income decreased year-over-year due to the NPM adjustment settlement benefit in the prior year, but the underlying operational performance was supported by gains in Marlboro's retail share. The smokeless products segment showed strong performance with increased shipment volume and operating companies income, driven by growth in Copenhagen.

Altria reaffirmed its full-year 2014 adjusted diluted EPS forecast, projecting a growth rate of 6% to 9% over 2013. This outlook reflects a focus on underlying operational performance and efficiency, with expected stronger growth in the second half of the year.

Altria continued to repurchase shares in Q1 2014, spending $272 million. It also maintained its commitment to a dividend payout ratio target of approximately 80% of its adjusted diluted EPS, with the annualized dividend rate at $1.92 per share. These actions demonstrate a continued focus on capital allocation and shareholder returns.