10-QPeriod: Q3 FY2019

ALTRIA GROUP, INC. Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 31, 2019For Securities:MO

Summary

Altria Group, Inc. reported a net loss attributable to Altria of $2,600 million ($1.39 per diluted share) for the third quarter of 2019, a significant decrease compared to a net income of $1,943 million ($1.03 per diluted share) in the same period of 2018. This decline was primarily driven by a substantial non-cash pre-tax impairment charge of $4.5 billion ($2.41 per diluted share) related to Altria's investment in JUUL, along with increased interest expenses from recent debt financing and losses on Cronos-related financial instruments. Despite the reported net loss for the quarter, Altria's core smokeable products segment demonstrated resilience, with operating companies income increasing by 12.5% to $2,561 million, driven by higher pricing and lower promotional spending, which more than offset a slight decline in shipment volumes. The smokeless products segment also showed growth in operating companies income, up 12.7% to $417 million, benefiting from price increases. However, the wine segment experienced a decline in both net revenues and operating companies income. Altria reaffirmed its full-year 2019 adjusted diluted EPS growth forecast of 5% to 7%, excluding special items.

Financial Highlights

49 data points
Beta

Revenue

$6.86B

51.0% Gross Margin

Net Income

-$2.60B

-37.9% Net Margin

EPS (Diluted)

$-1.39

Total Assets

$52.91B

Cash & Equivalents

$1.60B

Free Cash Flow

$2.80B

Financial Statements
Beta
Revenue$6.86B
Cost of Revenue$1.92B
Gross Profit$3.50B
Operating Income$2.94B
Net Income-$2.60B
EPS (Basic)$-1.39
EPS (Diluted)$-1.39
Shares Outstanding (Basic)1.87B
Shares Outstanding (Diluted)1.87B

Key Highlights

  • 1Significant Q3 2019 net loss of $2.6 billion due to a $4.5 billion impairment charge on the JUUL investment.
  • 2Core smokeable products segment operating income increased by 12.5% to $2.56 billion, driven by higher pricing.
  • 3Smokeless products segment operating income grew by 12.7% to $417 million, also supported by pricing.
  • 4Altria reaffirmed its full-year 2019 adjusted diluted EPS growth forecast of 5% to 7%.
  • 5Total debt increased to $27.9 billion, primarily due to new long-term debt issuances to fund investments in JUUL and Cronos.
  • 6Quarterly dividend increased by 5% to $0.84 per share, with an annualized rate of $3.36 per share.
  • 7The company continues to face regulatory scrutiny and litigation risks inherent in the tobacco industry.

Frequently Asked Questions

The net loss of $2.6 billion in Q3 2019 was primarily due to a substantial non-cash pre-tax impairment charge of $4.5 billion related to Altria's investment in JUUL. This impairment was driven by revised volume and margin assumptions due to regulatory and market challenges facing the e-vapor industry. Higher interest expenses from recent debt financing and losses on Cronos-related financial instruments also contributed to the loss.

Altria's smokeable products segment showed strong operating performance, with operating companies income increasing by 12.5% to $2.56 billion, largely driven by higher pricing which offset lower shipment volumes. The smokeless products segment also saw an increase in operating companies income by 12.7% to $417 million, also benefiting from pricing actions.

Altria reaffirmed its full-year 2019 adjusted diluted Earnings Per Share (EPS) growth forecast to be in the range of 5% to 7% over its 2018 adjusted diluted EPS of $3.99. This guidance excludes certain significant items like the JUUL impairment charge.

Altria's investment in JUUL has been significantly impaired, leading to a $4.5 billion non-cash charge in Q3 2019 due to revised future performance expectations and regulatory concerns in the e-vapor market. The company's investment in Cronos also resulted in losses from financial instruments during the quarter. Altria's guidance assumes little to no earnings or cash contributions from these investments in the near term.