Summary
Altria Group, Inc. (MO) filed an 8-K on November 12, 2020, to report on its investment in JUUL Labs, Inc. The company elected to convert its non-voting JUUL shares to voting shares on November 11, 2020. This action was taken despite ongoing administrative challenges from the U.S. Federal Trade Commission (FTC) that began in April 2020. While Altria now possesses additional governance rights, including director election capabilities, it has stated its intention to act as a passive investor and not exercise these enhanced rights pending the outcome of the FTC litigation. Furthermore, Altria reiterated its accounting treatment for the JUUL investment. The investment will be accounted for under the fair value option, meaning that cash dividends received and quarterly changes in the fair value of the investment will be recognized in Altria's consolidated statement of earnings. Importantly, Altria plans to exclude these quarterly fair value adjustments from its adjusted diluted earnings per share (EPS), treating them as a special item. The company also indicated that it will file JUUL's financial statements and pro forma financial information in a future amendment to this 8-K.
Key Highlights
- 1Altria converted its non-voting JUUL shares to voting shares on November 11, 2020.
- 2The conversion occurred despite an ongoing FTC challenge to Altria's investment in JUUL.
- 3Altria intends to maintain a passive investor stance and not exercise new governance rights (e.g., director appointments) pending FTC litigation.
- 4The JUUL investment will be accounted for under the fair value option.
- 5Quarterly fair value changes in the JUUL investment will be recognized in earnings but excluded from adjusted diluted EPS.
- 6Altria plans to file JUUL's financial statements and pro forma information via an amendment to this 8-K.
- 7A press release dated November 12, 2020, related to this event is attached as an exhibit.