01—Abstract
Summary
Summary of the 10-Q filed July 27, 2017. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. reported strong financial performance for the six months ended June 30, 2017, with net earnings attributable to Altria Group, Inc. increasing by 18.1% to $3,390 milliona, and diluted EPS rising by 19.0% to $1.75.
This growth was driven by higher operating income, a significant gain from the AB InBev/SABMiller business combination, and a lower effective tax rate, partially offset by reduced earnings from the AB InBev equity investment. The company also saw a notable increase in net cash provided by operating activities, largely due to dividends received from AB InBev and a decrease in litigation-related payments. The smokeable products segment experienced growth in net revenues and operating income, primarily due to higher pricing, despite a slight decrease in shipment volume.
The smokeless products segment's performance was impacted by a product recall in Q1 2017, though pricing and volume recovered in the second quarter. The wine segment saw a decline in net revenues and operating income due to lower shipment volumes and increased competition. Altria continued its commitment to shareholder returns, increasing dividends paid and repurchasing shares under its authorized program.
02—Key points
Key Highlights
- Net earnings attributable to Altria Group, Inc. increased by 18.1% to $3,390 million for the first six months of 2017 compared to the same period in 2016.
- Diluted EPS grew by 19.0% to $1.75 for the first six months of 2017.
- The company recorded a pre-tax gain of $408 million from AB InBev divestitures in the first six months of 2017.
- Net cash provided by operating activities increased significantly to $1,948 million for the first six months of 2017.
- The smokeable products segment saw net revenue and operating income growth driven by higher pricing, despite lower shipment volumes.
- Altria repurchased $1.6 billion of its common stock during the first six months of 2017 and increased its share repurchase program authorization.
- Dividends paid increased by 7.0% to $2,369 million for the first six months of 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2017, Altria Group, Inc. kept $0.30.
- Revenue$6.66B100.0%
- Cost of revenue−$3.55B53.3%
- Gross profit$3.11B46.7%
- Operating costs−$586.0M8.8%
- Operating income$2.53B37.9%
- Interest, other & tax−$539.0M8.1%
- Net income$1.99B29.9%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2017filed July 27, 2017Financial Statements
Q2 FY2017 against Q2 FY2016
| Line item | Q2 FY2017Q2 FY2016 | Change |
|---|---|---|
| Revenue | $6.66B$6.52B | +2.2% |
| Cost of Revenue | $1.95B$1.92B | +1.3% |
| Gross Profit | $3.11B$2.96B | +5.3% |
| Operating Income | $2.53B$2.41B | +4.9% |
| Net Income | $1.99B$1.65B | +20.3% |
| EPS (Basic) | $1.03$0.84 | +22.6% |
| Shares Outstanding (Basic) | 1.93B1.95B | −1.3% |
05—Questions
Frequently Asked Questions
What was the main driver for the increase in Altria's net earnings in the first half of 2017?
The primary drivers for the increase in net earnings were higher operating income, a significant gain from the AB InBev/SABMiller business combination ($408 million pre-tax gain from AB InBev divestitures), and a lower effective tax rate, partially offset by lower earnings from the AB InBev equity investment.
How did the AB InBev/SABMiller business combination impact Altria's results?
The business combination resulted in a significant pre-tax gain of $408 million in the first six months of 2017 due to AB InBev divestitures. Altria also recognized pre-tax gains in the prior year related to a derivative financial instrument associated with the transaction. Altria holds a 10.2% ownership in the combined AB InBev entity and accounts for it using the equity method.
What is the status of Altria's share repurchase program?
Altria has a $1.0 billion share repurchase program authorized in July 2015, expanded to $3.0 billion in October 2016, and further expanded to $4.0 billion in July 2017. The company expects to complete this program by the end of the second quarter of 2018. During the first six months of 2017, Altria repurchased $1.6 billion of its common stock.
How did the product recall in the smokeless products segment affect performance?
The voluntary product recall initiated in the first quarter of 2017 negatively impacted the smokeless products segment's net revenues, shipment volume, and operating companies income for the first half of 2017. However, performance showed recovery in the second quarter with higher pricing and increased shipment volume.
What is Altria's outlook for full-year 2017 adjusted diluted EPS growth?
Altria reaffirmed its expectation for a 2017 full-year adjusted diluted EPS growth rate to be in the range of 7.5% to 9.5% over 2016 full-year adjusted diluted EPS, excluding certain income and expense items. The company anticipates stronger growth in the second half of the year, partly due to the full-year inclusion of AB InBev equity income and the resolution of the smokeless product recall's financial impact.
06—Continue