10-QPeriod: Q2 FY2016

ALTRIA GROUP, INC. Quarterly Report for Q2 Ended Jun 30, 2016

Filed July 27, 2016For Securities:MO

Summary

Altria Group, Inc. reported solid financial results for the six months ended June 30, 2016, with net earnings attributable to Altria Group, Inc. increasing by 16.4% to $2.87 billion, translating to diluted EPS of $1.47, a 17.6% increase year-over-year. This performance was driven by higher operating income across its smokeable and smokeless products segments, lower interest expenses, and a significant gain from a derivative financial instrument related to the proposed AB InBev and SABMiller business combination. The company also raised its full-year adjusted diluted EPS growth forecast, signaling confidence in its ongoing operations. The company continued its strong capital return to shareholders through dividends and share repurchases. Dividends paid increased by 8.0% to $2.215 billion, and the company had approximately $624 million remaining under its July 2015 share repurchase program, expected to be completed by the end of 2016. Despite ongoing challenges in the tobacco industry, including regulatory scrutiny and litigation, Altria demonstrated resilience through effective pricing strategies and market share management, particularly in its premium cigarette and smokeless tobacco brands.

Financial Highlights

46 data points
Beta

Revenue

$6.52B

45.3% Gross Margin

Net Income

$1.65B

25.3% Net Margin

EPS (Diluted)

$0.84

Total Assets

$31.32B

Cash & Equivalents

$819.00M

Free Cash Flow

-$1.68B

Financial Statements
Beta
Revenue$6.52B
Cost of Revenue$1.92B
Gross Profit$2.96B
Operating Income$2.41B
Net Income$1.65B
EPS (Basic)$0.84
Shares Outstanding (Basic)1.95B

Key Highlights

  • 1Net earnings attributable to Altria Group, Inc. increased 16.4% to $2.87 billion for the first six months of 2016.
  • 2Diluted EPS increased 17.6% to $1.47 for the first six months of 2016.
  • 3Smokeable products segment operating companies income increased 4.3% for the first six months of 2016, driven by higher pricing and lower costs.
  • 4Smokeless products segment net revenues increased 10.0% and operating companies income increased 13.6% for the first six months of 2016, benefiting from higher pricing, promotional investments, and shipment volume.
  • 5Altria received a significant pre-tax gain of $157 million from a derivative financial instrument related to the AB InBev/SABMiller transaction.
  • 6The company raised its full-year 2016 adjusted diluted EPS growth forecast to 7.5%-9.5%.
  • 7Dividends paid increased by 8.0% to $2.215 billion for the first six months of 2016.

Frequently Asked Questions

For the six months ended June 30, 2016, Altria Group, Inc. reported a significant increase in net earnings attributable to Altria Group, Inc. by 16.4% to $2.87 billion, and diluted EPS increased by 17.6% to $1.47, compared to the same period in 2015. This growth was primarily driven by improved operating income from its key business segments, favorable impacts from a derivative financial instrument related to the SABMiller transaction, and lower debt-related expenses.

The smokeable products segment saw a 4.3% increase in operating companies income, primarily due to higher pricing and promotional investments, which offset a decline in shipment volume. The smokeless products segment experienced robust growth, with net revenues up 10.0% and operating companies income up 13.6%, driven by increases in pricing, promotional investments, and shipment volume, with Copenhagen and Skoal brands showing strong performance.

Altria recognized a pre-tax gain of $157 million in the first six months of 2016 from a derivative financial instrument related to the proposed business combination between AB InBev and SABMiller. The company expects the transaction, once completed, to result in a substantial pre-tax accounting gain and anticipates accounting for its interest in the combined entity under the equity method.

Altria continued its commitment to returning capital to shareholders. Dividends paid increased by 8.0% to $2.215 billion for the first six months of 2016. The company also actively repurchased shares under its repurchase programs, with approximately $624 million remaining under its July 2015 program, which it expected to complete by the end of 2016.