01—Abstract
Summary
Summary of the 10-Q filed October 30, 2020. Cited figures are marked; the original filing is the authoritative source.
Altria Group, Inc. (MO) reported its third-quarter 2020 financial results, indicating a notable increase in net revenues driven by pricing actions in its smokeable products segment.
Despite a decline in cigarette shipment volumes, the company maintained its market share in the premium cigarette category, supported by strong performance from Marlboro. The oral tobacco products segment also showed revenue growth, benefiting from pricing and volume increases, though overall segment retail share saw a slight decrease due to the growth of oral nicotine pouches. The company experienced a significant negative impact from its investment in JUUL, recording a $2.6 billiona impairment charge, reflecting continued challenges in the e-vapor market.
This impairment, coupled with other special items, led to a net loss for the quarter, but adjusted earnings per share remained positive, demonstrating resilience in core operations. Altria also highlighted its continued commitment to returning capital to shareholders through dividends, announcing an increase in its quarterly dividend rate. The company's financial health remains supported by strong operating cash flows, although its balance sheet reflects substantial long-term debt.
Altria's significant investments in ABI and Cronos are being closely monitored for potential impairment, with current assessments indicating temporary declines in value. The company is navigating a complex regulatory environment for tobacco and nicotine products, which presents ongoing risks and uncertainties. Management is focused on adapting to evolving consumer preferences and regulatory landscapes while maintaining operational efficiency and financial flexibility.
02—Key points
Key Highlights
- Net revenues increased by 3.9% to $19.8 billion for the first nine months of 2020, driven by higher pricing in the smokeable products segment and growth in oral tobacco products.
- The company recorded a significant $2.6 billion impairment charge related to its JUUL equity investment, reflecting continued deterioration in JUUL's business prospects.
- Diluted EPS for the nine months ended September 30, 2020, was $1.36, a substantial increase from $0.27 in the prior year, primarily due to the JUUL impairment charge in the prior year not recurring at the same level.
- Adjusted diluted EPS for the nine months of 2020 was $3.37, an increase of 5.6% compared to $3.19 in the prior year, demonstrating underlying operational strength.
- Altria announced a 2.4% increase in its quarterly dividend rate to $0.86 per share, with an annualized rate of $3.44, reaffirming its commitment to shareholder returns.
- Cash provided by operating activities increased to $5.84 billion for the first nine months of 2020, up from $5.27 billion in the same period of 2019, indicating robust cash generation.
- The company's balance sheet shows total assets of $46.65 billion and total liabilities of $43.38 billion as of September 30, 2020.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q3 FY2020, Altria Group, Inc. lost $0.13.
- Revenue$7.12B100.0%
- Cost of revenue−$3.41B47.8%
- Gross profit$3.72B52.2%
- Operating costs−$557.0M7.8%
- Operating income$3.16B44.4%
- Interest, other & tax−$4.11B57.7%
- Net income−$952.0M13.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2020filed October 30, 2020Financial Statements
Q3 FY2020 against Q3 FY2019
| Line item | Q3 FY2020Q3 FY2019 | Change |
|---|---|---|
| Revenue | $7.12B$6.86B | +3.9% |
| Cost of Revenue | $1.96B$1.92B | +2.4% |
| Gross Profit | $3.72B$3.50B | +6.3% |
| Operating Income | $3.16B$2.94B | +7.3% |
| Net Income | -$952.00M-$2.60B | +63.4% |
| EPS (Basic) | $-0.51$-1.39 | +63.3% |
| EPS (Diluted) | $-0.51$-1.39 | +63.3% |
| Shares Outstanding (Basic) | 1.86B1.87B | −0.5% |
| Shares Outstanding (Diluted) | 1.86B1.87B | −0.5% |
05—Questions
Frequently Asked Questions
What was Altria's net revenue performance in the third quarter of 2020?
Altria reported net revenues of $7.123 billion for the three months ended September 30, 2020, an increase of 3.9% compared to $6.856 billion in the same period of 2019. This growth was primarily driven by higher pricing in the smokeable products segment.
What is the impact of the JUUL investment on Altria's financials?
Altria recorded a significant non-cash pre-tax impairment charge of $2.6 billion for its JUUL equity securities during the nine months ended September 30, 2020. This charge reflects the deterioration in JUUL's business prospects due to its strategic update, revised international expansion plans, and evolving US e-vapor category dynamics.
How did Altria's dividend policy evolve in this period?
Altria's Board of Directors declared a 2.4% increase in the quarterly dividend rate to $0.86 per share (annualized rate of $3.44) in July 2020, demonstrating a continued commitment to returning capital to shareholders.
What is Altria's outlook for the full year 2020?
Altria narrowed its 2020 full-year adjusted diluted EPS guidance to a range of $4.30 to $4.38, representing growth of 2% to 4% over its 2019 adjusted diluted EPS base. This outlook excludes certain forecasted income and expense items.
06—Continue