01—Abstract
Summary
Summary of the 10-Q filed October 29, 2015. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. (MO) reported solid financial results for the nine months ended September 30, 2015, demonstrating growth in net earnings and diluted earnings per share.
Net revenues increased primarily due to higher pricing and shipment volumes in the smokeable products segment, supported by gains in Marlboro's market share. The smokeless products segment also saw growth in operating income driven by pricing and increased retail share for Copenhagen and Skoal. The company highlighted a significant increase in net cash provided by operating activities compared to the prior year.
Altria also continued its commitment to shareholder returns through increased dividends and share repurchases, completing its $1 billiona July 2014 repurchase program and authorizing a new $1 billion program. Notably, the company repaid $1 billion in senior unsecured notes and completed a debt tender offer in the first quarter of 2015, reducing its overall debt. Investors should note the ongoing legal and regulatory challenges facing the tobacco industry, which Altria continues to manage.
While the company reaffirmed its full-year adjusted diluted EPS growth forecast, it also acknowledged factors like a higher effective tax rate and potential moderating trade inventories that could impact the fourth quarter. The potential acquisition of SABMiller by AB InBev was also a significant development during the period.
02—Key points
Key Highlights
- Net earnings attributable to Altria Group, Inc. increased by 4.2% to $3,994 million for the nine months ended September 30, 2015, compared to the same period in 2014.
- Diluted EPS increased by 5.2% to $2.03 for the nine months ended September 30, 2015.
- Net revenues increased by 4.7% to $19,116 million for the nine months ended September 30, 2015.
- The smokeable products segment showed strong performance with a 13.0% increase in operating companies income for the nine months, driven by higher pricing and shipment volume.
- The smokeless products segment's operating companies income grew by 3.2% for the nine months, aided by higher pricing and improved retail share for Copenhagen and Skoal.
- Altria repaid $1 billion in senior unsecured notes and completed a $793 million debt tender offer during the nine months, reducing overall debt.
- The company announced an 8.7% increase in its quarterly dividend rate to $0.565 per common share and continued its share repurchase program.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2015, Altria Group, Inc. kept $0.23.
- Revenue$6.70B100.0%
- Cost of revenue−$3.65B54.5%
- Gross profit$3.05B45.5%
- Operating costs−$739.0M11.0%
- Operating income$2.31B34.4%
- Interest, other & tax−$779.0M11.6%
- Net income$1.53B22.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2015filed October 29, 2015Financial Statements
Q3 FY2015 against Q3 FY2014
| Line item | Q3 FY2015Q3 FY2014 | Change |
|---|---|---|
| Revenue | $6.70B$6.49B | +3.2% |
| Cost of Revenue | $1.93B$2.08B | −7.1% |
| Gross Profit | $3.05B$2.67B | +13.9% |
| Operating Income | $2.31B$2.00B | +15.4% |
| Net Income | $1.53B$1.40B | +9.4% |
| EPS (Basic) | $0.78$0.71 | +9.9% |
| Shares Outstanding (Basic) | 1.96B1.98B | −0.9% |
05—Questions
Frequently Asked Questions
What was the primary driver for the increase in Altria's net earnings for the first nine months of 2015?
The primary drivers for the increase in net earnings were higher operating income from the smokeable and smokeless product segments, partially offset by a loss on early extinguishment of debt in 2015 and lower earnings from the equity investment in SABMiller.
How did Altria manage its debt during this period?
Altria repaid $1 billion in senior unsecured notes at maturity and completed a debt tender offer to repurchase $793 million of its senior unsecured notes. These actions reduced its overall long-term debt.
What is the status of the potential acquisition of SABMiller by Anheuser-Busch InBev (AB InBev)?
Altria supported an agreement in principle for AB InBev's possible acquisition of SABMiller. As of the filing date, an agreement on key terms was announced, and regulatory deadlines for a firm offer were extended, indicating ongoing discussions and potential significant events.
What impact did litigation and settlement costs have on Altria's results?
Litigation and health-related settlement costs, including NPM Adjustment Items and tobacco and health litigation charges, had a mixed impact. While some NPM Adjustment Items provided a pre-tax income benefit, tobacco and health litigation items resulted in pre-tax charges, impacting operating income. The company continues to actively manage these legal and regulatory challenges.
06—Continue