10-QPeriod: Q3 FY2014

ALTRIA GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2014

Filed October 30, 2014For Securities:MO

Summary

Altria Group, Inc.'s 10-Q filing for the period ending September 30, 2014, shows a mixed financial performance. For the first nine months of 2014, the company reported net earnings attributable to Altria Group, Inc. of $3.83 billion, a decrease from $4.05 billion in the same period of 2013. Diluted EPS also saw a slight decrease to $1.93 from $2.02 year-over-year. This was primarily driven by lower operating income, partly offset by reduced interest expenses and a lower effective tax rate. The company highlighted increased investment spending in innovative tobacco products and higher integration/acquisition costs related to Green Smoke as contributing factors. Despite the decrease in net earnings, Altria continued its commitment to shareholder returns by increasing its quarterly dividend by 8.3% to $0.52 per share. The company also actively repurchased shares, completing its April 2013 program and initiating a new $1.0 billion repurchase program in July 2014. The company reaffirmed its full-year 2014 adjusted diluted EPS forecast, indicating an expected growth of 7% to 9%.

Financial Highlights

48 data points
Beta

Revenue

$6.49B

41.2% Gross Margin

Net Income

$1.40B

21.5% Net Margin

EPS (Diluted)

$0.71

Total Assets

$34.08B

Cash & Equivalents

$2.24B

Free Cash Flow

$2.25B

Financial Statements
Beta
Revenue$6.49B
Cost of Revenue$2.08B
Gross Profit$2.67B
Operating Income$2.00B
Net Income$1.40B
EPS (Basic)$0.71
Shares Outstanding (Basic)1.98B

Key Highlights

  • 1Net earnings attributable to Altria Group, Inc. for the nine months ended September 30, 2014, were $3.83 billion, a decrease from $4.05 billion in the prior year.
  • 2Diluted EPS for the nine months ended September 30, 2014, decreased to $1.93 from $2.02 in the prior year.
  • 3The company increased its quarterly dividend by 8.3% to $0.52 per share, with an annualized rate of $2.08.
  • 4Altria completed its April 2013 share repurchase program and initiated a new $1.0 billion program in July 2014, repurchasing $679 million of stock in the first nine months of 2014.
  • 5Net revenues for the nine months ended September 30, 2014, decreased slightly by 0.7% to $18.26 billion, primarily due to lower excise taxes and gains on asset sales in the financial services business.
  • 6The smokeable products segment's operating companies income decreased by 5.7% for the nine months, impacted by higher NPM Adjustment Items in 2013 and lower shipment volume.
  • 7The smokeless products segment showed growth in operating companies income by 4.6% for the nine months, driven by higher pricing and promotional investments.

Frequently Asked Questions

For the nine months ended September 30, 2014, Altria reported net earnings attributable to Altria Group, Inc. of $3.83 billion, a decrease from $4.05 billion in the same period of 2013. Diluted EPS also decreased to $1.93 from $2.02 year-over-year. This decline was primarily attributed to lower operating income, partially offset by reduced interest expenses and a lower effective tax rate.

Altria demonstrated its commitment to returning capital to shareholders by increasing its quarterly dividend by 8.3% to $0.52 per share, bringing the annualized rate to $2.08. Additionally, the company actively engaged in share repurchases, completing its April 2013 program and initiating a new $1.0 billion program in July 2014. In the first nine months of 2014, Altria repurchased $679 million of its common stock.

The smokeable products segment experienced a 5.7% decrease in operating companies income for the nine months ended September 30, 2014, compared to the prior year. This was primarily due to higher Non-Participating Manufacturer (NPM) Adjustment Items in the prior year ($621 million) and a decrease in shipment volume ($313 million), partially offset by higher pricing.

Altria's Nu Mark subsidiary acquired Green Smoke in April 2014. For the nine months ended September 30, 2014, integration and acquisition-related costs of $23 million were recorded, primarily impacting marketing, administration, and research expenses. The acquisition is intended to complement Nu Mark's capabilities in the e-vapor market.