01—Abstract
Summary
Summary of the 10-Q filed April 30, 2020. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. reported a strong first quarter of 2020, with net earnings attributable to Altria increasing by 38.6% to $1.55 billiona, and diluted EPS rising 38.3% to $0.83, compared to the same period in 2019.
This growth was driven by higher revenues across its smokeable and oral tobacco product segments, improved pricing, and lower interest expenses. The company also benefited from a significant reduction in losses related to its Cronos investment and favorable movements in its Anheuser-Busch InBev (ABI) investment. However, the company's wine business, Ste.
Michelle Wine Estates, recorded a substantial pre-tax charge of $392 millionb due to inventory write-offs and estimated losses on grape purchase commitments, exacerbated by economic uncertainty surrounding the COVID-19 pandemic. In response to the pandemic's broader economic implications, Altria drew down its entire $3.0 billion revolving credit facility as a precautionary measure and rescinded the remaining $500 million of its share repurchase program to bolster liquidity. Despite these challenges, Altria's core tobacco businesses demonstrated resilience, and the company withdrew its full-year 2020 adjusted diluted EPS guidance due to ongoing uncertainties.
02—Key points
Key Highlights
- Net earnings attributable to Altria increased by 38.6% to $1.55 billion, with diluted EPS up 38.3% to $0.83.
- Smokeable products segment saw a 13.6% increase in net revenues, driven by higher shipment volume and pricing.
- Oral tobacco products segment net revenues grew by 11.3%, also attributed to higher pricing and shipment volume.
- Ste. Michelle Wine Estates recorded a significant $392 million pre-tax charge due to inventory issues and grape purchase commitments, impacting the wine segment's profitability.
- Altria drew down its entire $3.0 billion revolving credit facility as a precautionary measure amid COVID-19 uncertainty.
- The company rescinded the remaining $500 million of its share repurchase program to preserve liquidity.
- Altria withdrew its full-year 2020 adjusted diluted EPS guidance due to COVID-19 related uncertainties.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2020, Altria Group, Inc. kept $0.24.
- Revenue$6.36B100.0%
- Cost of revenue−$3.49B54.8%
- Gross profit$2.87B45.2%
- Operating costs−$537.0M8.4%
- Operating income$2.34B36.7%
- Interest, other & tax−$784.0M12.3%
- Net income$1.55B24.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2020filed April 30, 2020Financial Statements
Q1 FY2020 against Q1 FY2019
| Line item | Q1 FY2020Q1 FY2019 | Change |
|---|---|---|
| Revenue | $6.36B$5.63B | +13.0% |
| Cost of Revenue | $2.17B$1.58B | +37.7% |
| Gross Profit | $2.87B$2.81B | +2.2% |
| Operating Income | $2.34B$2.24B | +4.4% |
| Net Income | $1.55B$1.12B | +38.6% |
| EPS (Basic) | $0.83$0.60 | +38.3% |
| EPS (Diluted) | $0.83$0.60 | +38.3% |
| Shares Outstanding (Basic) | 1.86B1.87B | −0.9% |
| Shares Outstanding (Diluted) | 1.86B— | — |
05—Questions
Frequently Asked Questions
How did Altria's financial performance fare in Q1 2020?
Altria reported a strong first quarter of 2020, with net earnings attributable to Altria increasing by 38.6% to $1.55 billion and diluted EPS growing by 38.3% to $0.83, compared to the first quarter of 2019. This was driven by improved performance in its smokeable and oral tobacco segments.
What significant charges did Altria incur during the quarter?
Altria's wine business, Ste. Michelle Wine Estates, incurred a substantial pre-tax charge of $392 million related to inventory write-offs and estimated losses on future grape purchase commitments, negatively impacting the wine segment's results.
How did COVID-19 impact Altria's liquidity and financial outlook?
In response to the economic uncertainty surrounding COVID-19, Altria drew the full $3.0 billion from its revolving credit facility and canceled the remaining $500 million of its share repurchase program to enhance its cash position and financial flexibility. Due to these uncertainties, Altria withdrew its previously issued full-year 2020 adjusted diluted EPS guidance.
What was the performance of Altria's key investments like ABI, JUUL, and Cronos?
Altria's investment in ABI experienced a significant fair value decline below its carrying value, attributed partly to COVID-19 impacts, though Altria deemed it temporary. The company's investment in JUUL and Cronos also faced ongoing scrutiny and valuation considerations, with no impairment recorded at the end of the quarter, but with continued monitoring of business and regulatory risks.
06—Continue