01—Abstract
Summary
Summary of the 10-Q filed July 30, 2020. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. reported solid financial performance for the six months ended June 30, 2020, with net revenues increasing to $12.73 billiona and net earnings attributable to Altria rising to $3.50 billion, representing a 12.2% increase year-over-year.
Diluted earnings per share also saw a significant increase of 13.3%. The company's cash provided by operating activities more than doubled to $4.95 billionb, primarily driven by improved segment performance and timing of tax payments. Despite the positive financial results, Altria noted the ongoing uncertainty and potential impacts of the COVID-19 pandemic on its operations, supply chains, and consumer behavior.
The company took precautionary measures by borrowing and then repaying under its credit facility and issuing new long-term debt to bolster liquidity. The significant charges related to the wine business's strategic reset and inventory write-offs impacted the overall reported earnings, but the core tobacco segments demonstrated resilience and delivered growth. Altria also declared a quarterly dividend of $0.86c per share, reflecting continued commitment to returning capital to shareholders.
02—Key points
Key Highlights
- Net revenues increased by 3.9% to $12.73 billion for the first six months of 2020, driven by higher pricing across segments.
- Net earnings attributable to Altria increased by 12.2% to $3.50 billion for the first six months of 2020.
- Diluted EPS grew by 13.3% to $1.88 for the first six months of 2020.
- Operating cash flow significantly increased to $4.95 billion for the first six months of 2020, more than double the previous year's figure.
- The company experienced a substantial pre-tax charge of $394 million related to the wine business's strategic reset and inventory write-offs.
- Altria's investment in ABI showed a significant fair value decline, approximately 42% below its carrying value, though management deemed the decline temporary.
- The company declared a quarterly dividend of $0.86 per share, an increase from the previous quarter, demonstrating a commitment to shareholder returns.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2020, Altria Group, Inc. kept $0.31.
- Revenue$6.37B100.0%
- Cost of revenue−$3.08B48.4%
- Gross profit$3.29B51.6%
- Operating costs−$491.0M7.7%
- Operating income$2.80B43.9%
- Interest, other & tax−$853.0M13.4%
- Net income$1.94B30.5%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2020filed July 30, 2020Financial Statements
Q2 FY2020 against Q2 FY2019
| Line item | Q2 FY2020Q2 FY2019 | Change |
|---|---|---|
| Revenue | $6.37B$6.62B | −3.8% |
| Cost of Revenue | $1.77B$1.87B | −5.3% |
| Gross Profit | $3.29B$3.32B | −1.0% |
| Operating Income | $2.80B$2.72B | +2.9% |
| Net Income | $1.94B$2.00B | −2.7% |
| EPS (Basic) | $1.04$1.07 | −2.8% |
| EPS (Diluted) | $1.04$1.07 | −2.8% |
| Shares Outstanding (Basic) | 1.86B1.87B | −0.6% |
| Shares Outstanding (Diluted) | 1.86B1.87B | −0.6% |
05—Questions
Frequently Asked Questions
What was the impact of COVID-19 on Altria's financial performance?
Altria reported that while its core tobacco businesses were not materially impacted by COVID-19 to date, the pandemic created economic uncertainty. The company took precautionary measures to enhance liquidity, including borrowing and repaying under its credit facility and issuing new debt. The wine business experienced negative impacts, and Altria noted its investments in ABI and Cronos were affected by market volatility due to the pandemic. Altria incurred $50 million in net pre-tax charges related to COVID-19 for safety measures and employee support.
How did Altria's major investments (ABI, JUUL, Cronos) perform during the quarter?
Altria's investment in ABI saw a significant decline in fair value (approx. 42% below carrying value), attributed to market volatility and COVID-19 impacts, though management considered it temporary. The investment in JUUL ($4.2 billion carrying value) did not result in impairment charges for the quarter. Altria's investment in Cronos also experienced a fair value decline (approx. 7% below carrying value), deemed temporary by management. Earnings from equity investments decreased significantly, largely due to impacts on ABI and Cronos.
What is the outlook for Altria's dividend payments?
Altria's Board of Directors declared a quarterly dividend of $0.86 per share, representing a 2.4% increase. The company reaffirmed its long-term objective of a dividend payout ratio target of approximately 80% of its adjusted diluted EPS, indicating a continued commitment to returning capital to shareholders.
Were there any significant charges or write-offs impacting profitability?
Yes, Altria recorded pre-tax charges of $394 million in the first six months of 2020 related to its wine business (Ste. Michelle Wine Estates). These charges included a $292 million inventory write-off and an estimated $100 million loss on future non-cancelable grape purchase commitments, driven by slowing wine category growth, increased inventory levels, and the impact of COVID-19 on sales.
06—Continue