01—Abstract
Summary
Summary of the 10-Q filed October 27, 2016. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. reported mixed financial results for the nine months ended September 30, 2016, with net earnings attributable to Altria Group, Inc. of $3,963 milliona, a slight decrease of 0.8% compared to the prior year's period, translating to diluted EPS of $2.02, down 0.5%.
This decrease was primarily driven by a significant loss on early extinguishment of debt and higher restructuring charges, partially offset by improved operating income from its smokeable and smokeless products segments, and a notable gain on derivative financial instruments related to the SABMiller transaction. The company announced an 8.0% increase in its quarterly dividend to $0.61b per share, reinforcing its commitment to shareholder returns, and continued its share repurchase program, with approximately $453 million remaining under its $1 billion authorization at the quarter's end. The company also provided an update on its significant investment in SABMiller, which completed its business combination with Anheuser-Busch InBev SA/NV on October 10, 2016.
Altria now holds a 10.2% ownership in the combined entity, AB InBev. This transaction is expected to result in a substantial pre-tax gain of approximately $13.7 billionc, largely to be recognized in the fourth quarter of 2016. Despite ongoing legal and regulatory challenges inherent to the tobacco industry, Altria's core operations, particularly smokeless products, demonstrated growth, and the company remains focused on its productivity initiatives and long-term shareholder value.
02—Key points
Key Highlights
- Net earnings attributable to Altria Group, Inc. were $3,963 million for the nine months ended September 30, 2016, a decrease of 0.8% year-over-year.
- Diluted EPS attributable to Altria Group, Inc. was $2.02 for the nine months ended September 30, 2016, a decrease of 0.5% year-over-year.
- The company announced an 8.0% increase in its quarterly dividend rate to $0.61 per common share, with an annualized rate of $2.44.
- Altria invested $1.6 billion to increase its ownership in the newly formed AB InBev (following the SABMiller combination) to approximately 10.2%.
- A pre-tax gain of approximately $13.7 billion is expected from the SABMiller transaction, to be recorded primarily in the fourth quarter of 2016.
- Altria completed debt tender offers totaling $933 million during the third quarter of 2016, resulting in pre-tax losses on early extinguishment of debt of $823 million.
- The company incurred $130 million in pre-tax charges related to a productivity initiative in the first nine months of 2016.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2016, Altria Group, Inc. kept $0.16.
- Revenue$6.91B100.0%
- Cost of revenue−$3.75B54.4%
- Gross profit$3.15B45.6%
- Operating costs−$768.0M11.1%
- Operating income$2.38B34.5%
- Interest, other & tax−$1.29B18.7%
- Net income$1.09B15.8%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2016filed October 27, 2016Financial Statements
Q3 FY2016 against Q3 FY2015
| Line item | Q3 FY2016Q3 FY2015 | Change |
|---|---|---|
| Revenue | $6.91B$6.70B | +3.1% |
| Cost of Revenue | $2.04B$1.93B | +5.7% |
| Gross Profit | $3.15B$3.05B | +3.4% |
| Operating Income | $2.38B$2.31B | +3.3% |
| Net Income | $1.09B$1.53B | −28.5% |
| EPS (Basic) | $0.56$0.78 | −28.2% |
| Shares Outstanding (Basic) | 1.95B1.96B | −0.3% |
05—Questions
Frequently Asked Questions
What was Altria's net earnings and EPS for the nine months ended September 30, 2016?
For the nine months ended September 30, 2016, Altria Group, Inc. reported net earnings attributable to Altria Group, Inc. of $3,963 million, or $2.02 per diluted share. This represents a slight decrease compared to the same period in the prior year.
How did Altria's dividend and share repurchase programs fare during this period?
Altria's Board of Directors approved an 8.0% increase in the quarterly dividend rate to $0.61 per common share. The company also continued its share repurchase program, with approximately $453 million remaining under its $1 billion authorization at September 30, 2016.
What is the impact of the SABMiller acquisition on Altria's financial results?
Following the completion of Anheuser-Busch InBev's (AB InBev) acquisition of SABMiller, Altria now holds approximately a 10.2% ownership in AB InBev. The company expects to record a significant pre-tax gain of approximately $13.7 billion from this transaction, primarily in the fourth quarter of 2016. The investment in AB InBev will be accounted for using the equity method.
What significant charges or gains impacted Altria's earnings during this period?
Altria experienced a substantial pre-tax loss on early extinguishment of debt totaling $823 million due to debt tender offers. The company also recorded $130 million in pre-tax charges related to a productivity initiative. Offsetting these were pre-tax gains of $205 million on derivative financial instruments associated with the SABMiller transaction.
06—Continue