10-QPeriod: Q1 FY2021

ALTRIA GROUP, INC. Quarterly Report for Q1 Ended Mar 31, 2021

Filed April 29, 2021For Securities:MO

Summary

Altria Group, Inc.'s first quarter 2021 report shows a decrease in net revenues compared to the prior year, primarily driven by lower net revenues in the smokeable products segment. This was partially offset by an increase in net revenues from the oral tobacco products segment. Despite the revenue dip, operating income saw an increase due to a significant turnaround in the wine segment, which had substantial charges in the prior year. A notable event during the quarter was a significant loss on early extinguishment of debt, stemming from the repurchase and redemption of long-term debt, which impacted net earnings. Investments in equity securities, particularly JUUL, experienced a non-cash pre-tax unrealized loss, reflecting challenges in the e-vapor market. Management is guiding for full-year adjusted diluted EPS growth of 3% to 6% and continues to prioritize its strategy of transitioning adult smokers to a non-combustible future. Overall, the quarter was marked by strategic debt management, ongoing investments in new product categories, and continued challenges within the traditional tobacco market. Investors should monitor the company's progress in its non-combustible product transition and the performance of its significant equity investments, which continue to be volatile. The company's strong operational performance in core segments, coupled with prudent financial management, underpins its continued focus on returning value to shareholders through dividends and share repurchases.

Financial Highlights

49 data points
Beta

Revenue

$6.04B

54.2% Gross Margin

Net Income

$1.42B

23.6% Net Margin

EPS (Diluted)

$0.77

Total Assets

$48.78B

Cash & Equivalents

$5.84B

Free Cash Flow

$3.01B

Financial Statements
Beta
Revenue$6.04B
Cost of Revenue$1.61B
Gross Profit$3.27B
Operating Income$2.69B
Net Income$1.42B
EPS (Basic)$0.77
EPS (Diluted)$0.77
Shares Outstanding (Basic)1.86B
Shares Outstanding (Diluted)1.86B

Key Highlights

  • 1Net revenues decreased by 5.1% to $6.04 billion compared to the first quarter of 2020, primarily due to lower net revenues in the smokeable products segment.
  • 2Operating income increased by 15.2% to $2.69 billion, benefiting from a significant recovery in the wine segment's performance due to the absence of large inventory-related charges recorded in the prior year.
  • 3A substantial pre-tax loss of $649 million was recorded on the early extinguishment of debt, resulting from tender offers and redemption of long-term senior unsecured notes.
  • 4Net earnings attributable to Altria decreased by 8.2% to $1.42 billion, impacted by the debt extinguishment loss and a non-cash unrealized loss on the JUUL investment.
  • 5Diluted EPS attributable to Altria decreased to $0.77 from $0.83 in the prior year.
  • 6The company repurchased approximately 7.05 million shares of common stock for $325 million during the quarter, under a new $2.0 billion share repurchase program authorized in January 2021.
  • 7Altria reaffirmed its 2021 full-year adjusted diluted EPS guidance, projecting growth of 3% to 6% over 2020.

Frequently Asked Questions

The primary driver for the decrease in net revenues was lower net revenues in the smokeable products segment, which experienced a 6.4% decline. This was mainly due to a decrease in shipment volume, partially offset by higher pricing and promotional investments.

Altria actively managed its debt by issuing $5.5 billion in new long-term senior unsecured notes and simultaneously repurchasing and redeeming $4.04 billion in existing notes and redeeming $1.0 billion of another note. This resulted in a significant pre-tax loss of $649 million on early extinguishment of debt due to premiums and fees paid. This debt management strategy aimed to reduce near-term maturities and extend the weighted-average maturity of its debt.

Altria recorded a non-cash pre-tax unrealized loss of $200 million on its investment in JUUL due to a decrease in fair value, attributed to projections of lower JUUL revenues and increased discount rates. The investment in Anheuser-Busch InBev (ABI) continued to have a fair value below its carrying value, but Altria concluded this decline was temporary, influenced by factors including the COVID-19 pandemic's impact on ABI's business and market valuation. Altria continues to monitor both investments closely.

Altria expects its full-year 2021 adjusted diluted EPS to be in the range of $4.49 to $4.62, representing a growth rate of 3% to 6% over 2020. This guidance accounts for planned investments in its non-combustible product transition, including marketplace initiatives, building a consumer engagement platform, and increased R&D. The company anticipates stronger EPS growth in the latter three quarters of the year.