Virginia | 1-08940 | 13-3260245 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) |
6601 West Broad Street, Richmond, Virginia | 23230 |
(Address of principal executive offices) | (Zip Code) |
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
o | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Emerging growth company | o |
ALTRIA GROUP, INC. | ||
By: | /s/ W. HILDEBRANDT SURGNER, JR. | |
Name: | W. Hildebrandt Surgner, Jr. | |
Title: | Vice President, Corporate Secretary and | |
Associate General Counsel |
Altria Headline Financials1 |
($ in millions, except per share data) | Q1 2019 | Change vs. Q1 2018 |
Net revenues | $5,628 | (7.9)% |
Revenues net of excise taxes | $4,389 | (6.0)% |
Reported tax rate | 26.1% | 2.9 pp |
Adjusted tax rate | 24.0% | 0.8 pp |
Reported diluted EPS | $0.60 | (40.0)% |
Adjusted diluted EPS | $0.90 | (5.3)% |
Cash Returns to Shareholders |
• | Altria’s current annualized dividend rate is $3.20 per share, representing an annualized dividend yield of 5.9% as of April 22, 2019. |
• | Altria paid $1.5 billion in dividends in the first quarter. |
• | Altria expects to maintain a dividend payout ratio target of approximately 80% of adjusted diluted EPS. Future dividend payments remain subject to the discretion of Altria’s Board of Directors (Board). |
• | Altria repurchased 2.7 million shares in the first quarter at an average price of $56.34 per share, for a cost of $151 million. |
• | As of March 31, 2019, Altria had $195 million remaining in the current $2 billion share repurchase program, which Altria expects to complete by the end of the second quarter of 2019. The timing of share repurchases depends upon marketplace conditions and other factors, and this program remains subject to the discretion of the Board. |
Transactions & Financing Matters |
• | Altria completed its investment of $1.8 billion (CAD $2.4 billion) in Cronos. Altria’s investment represents a 45% economic and voting interest in Cronos with a warrant, if exercised in full, to acquire an additional 10% equity stake. Altria also received certain anti-dilution protections to purchase Cronos shares to maintain its ownership percentage upon the occurrence of specified events. |
◦ | Altria will record Cronos-related financial instruments at fair value each quarter. As such, there may be significant reported earnings volatility, primarily driven by quarterly adjustments related to movement in Cronos’ stock price. Any fair-value adjustment is non-cash and will be reported as a special item.* |
• | Altria filed its Hart-Scott-Rodino (HSR) notification with the U.S. Federal Trade Commission (FTC) in the first quarter related to the proposed conversion of its interest in JUUL to voting securities pursuant to the terms of its investment. In April, Altria received a request for additional information and documents from the FTC relating to its HSR filing. |
• | Altria issued $16.3 billion of debt in the form of senior unsecured notes in the European and U.S. markets. Altria used the net proceeds to repay the term loan that it used to fund the JUUL investment, to fund the Cronos investment and for other general corporate purposes. The weighted-average coupon of the notes is approximately 4.1%. |
Cost Reduction Program |
• | In December 2018, Altria announced a cost reduction program that it expects to deliver approximately $575 million in annualized cost savings by the end of 2019 (Cost Reduction Program). The program includes, among other things, third-party spending reductions across Altria’s businesses and workforce reductions. |
• | Altria recorded pre-tax charges of $61 million in the first quarter of 2019 related to the program. |
2019 Full-Year Guidance |
Financial Performance |
• | Net revenues decreased 7.9% to $5.6 billion primarily due to lower net revenues in the smokeable products segment. Revenues net of excise taxes decreased 6.0% to $4.4 billion. |
• | Reported diluted EPS decreased 40.0% to $0.60, primarily driven by the 2019 unrealized loss on Cronos-related financial instruments (substantially all of which was non-cash), lower reported equity earnings from AB InBev (which included AB InBev special items), higher asset impairment, exit, implementation and acquisition-related costs, higher ongoing interest expense and 2018 NPM Adjustment Items, partially offset by higher reported operating companies income (OCI) in the smokeless products segment. |
• | Adjusted diluted EPS decreased 5.3% to $0.90, primarily driven by higher ongoing interest expense and lower adjusted equity earnings from AB InBev, partially offset by higher adjusted OCI in the smokeless products segment. |
Table 1 - Altria’s Adjusted Results | ||||||||
First Quarter | ||||||||
2019 | 2018 | Change | ||||||
Reported diluted EPS | $ | 0.60 | $ | 1.00 | (40.0 | )% | ||
Asset impairment, exit, implementation and acquisition-related costs | 0.06 | — | ||||||
Tobacco and health litigation items | 0.01 | 0.01 | ||||||
AB InBev special items | 0.05 | (0.04 | ) | |||||
Loss on Cronos-related financial instruments | 0.17 | — | ||||||
NPM Adjustment Items | — | (0.03 | ) | |||||
Loss on AB InBev/SABMiller business combination | — | 0.01 | ||||||
Tax items | 0.01 | — | ||||||
Adjusted diluted EPS | $ | 0.90 | $ | 0.95 | (5.3 | )% |
Special Items |
• | In the first quarter of 2019, Altria recorded pre-tax charges of $159 million (or $0.06 per share) for acquisition-related costs associated with the Cronos and JUUL transactions and the Cost Reduction Program. |
• | In the first quarter of 2019, equity earnings from AB InBev included pre-tax charges of $114 million (or $0.05 per share), consisting primarily of Altria’s share of AB InBev’s mark-to-market losses on AB InBev’s derivative financial instruments used to hedge certain share commitments. |
• | In the first quarter of 2018, equity earnings from AB InBev included net pre-tax income of $117 million (or $0.04 per share), consisting primarily of Altria’s share of AB InBev’s estimated effect of the Tax Reform Act, partially offset by Altria’s share of AB InBev’s mark-to-market losses on AB InBev’s derivative financial instruments used to hedge certain share commitments. |
• | In the first quarter of 2019, Altria recorded a pre-tax unrealized loss of $425 million (or $0.17 per share) primarily resulting from the non-cash change in the fair value of Cronos-related financial instruments to acquire additional shares in Cronos. |
• | In the first quarter of 2018, Altria recorded pre-tax income of $68 million (or $0.03 per share) for an NPM adjustment settlement with nine states. |
Revenues and OCI |
• | Net revenues decreased 8.8%, as lower shipment volume was partially offset by higher pricing and lower promotional investments. Revenues net of excise taxes decreased 7.0%. |
• | Reported OCI decreased 5.2%, as lower shipment volume, 2018 NPM Adjustment Items and higher asset impairment, exit and implementation costs were partially offset by higher pricing, lower promotional investments and lower costs. |
• | Adjusted OCI was essentially unchanged, as lower shipment volume was offset by higher pricing, lower promotional investments and lower costs. Adjusted OCI margins increased 3.6 percentage points to 53.3%. |
Table 2 - Smokeable Products: Revenues and OCI ($ in millions) | ||||||||
First Quarter | ||||||||
2019 | 2018 | Change | ||||||
Net revenues | $ | 4,935 | $ | 5,414 | (8.8 | )% | ||
Excise taxes | (1,203 | ) | (1,401 | ) | ||||
Revenues net of excise taxes | $ | 3,732 | $ | 4,013 | (7.0 | )% | ||
Reported OCI | $ | 1,932 | $ | 2,038 | (5.2 | )% | ||
NPM Adjustment Items | — | (68 | ) | |||||
Asset impairment, exit and implementation costs | 44 | 1 | ||||||
Tobacco and health litigation items | 15 | 24 | ||||||
Adjusted OCI | $ | 1,991 | $ | 1,995 | (0.2 | )% | ||
Adjusted OCI margins 1 | 53.3 | % | 49.7 | % | 3.6 pp |
Shipment Volume |
• | Smokeable products segment reported domestic cigarette shipment volume declined 14.3%, primarily driven by trade inventory movements, the industry’s rate of decline, retail share losses and one fewer shipping day. |
• | When adjusted for trade inventory movements and one fewer shipping day, smokeable products segment domestic cigarette shipment volume decreased by an estimated 7%. |
• | When adjusted for trade inventory movements and one fewer shipping day, total domestic cigarette industry volumes declined by an estimated 5%. |
• | Reported cigar shipment volume increased 1.1%. |
Table 3 - Smokeable Products: Shipment Volume (sticks in millions) | ||||||
First Quarter | ||||||
2019 | 2018 | Change | ||||
Cigarettes: | ||||||
Marlboro | 20,467 | 23,653 | (13.5 | )% | ||
Other premium | 1,165 | 1,409 | (17.3 | )% | ||
Discount | 1,962 | 2,460 | (20.2 | )% | ||
Total cigarettes | 23,594 | 27,522 | (14.3 | )% | ||
Cigars: | ||||||
Black & Mild | 380 | 375 | 1.3 | % | ||
Other | 2 | 3 | (33.3 | )% | ||
Total cigars | 382 | 378 | 1.1 | % | ||
Total smokeable products | 23,976 | 27,900 | (14.1 | )% |
Brand Activity and Retail Share |
• | PM USA launched Marlboro Rewards nationally in January 2019. |
• | PM USA announced the national expansion of Marlboro Smooth Ice, a menthol offering, with innovative reseal pack technology starting in April. |
• | Nat Sherman announced plans to expand Nat’s nationally starting in April. |
• | Marlboro retail share declined 0.2 share points to 43.1% from the year ago period and is unchanged sequentially from the fourth quarter of 2018. |
• | Nat’s first-quarter 2019 share was 0.3 share points in states selling the product. |
Table 4 - Smokeable Products: Cigarettes Retail Share (percent) | |||||
First Quarter | |||||
2019 | 2018 | Percentage point change | |||
Cigarettes: | |||||
Marlboro | 43.1 | % | 43.3 | % | (0.2) |
Other premium | 2.5 | 2.6 | (0.1) | ||
Discount | 4.2 | 4.6 | (0.4) | ||
Total cigarettes | 49.8 | % | 50.5 | % | (0.7) |
Revenues and OCI |
• | Net revenues increased 2.9%, primarily driven by higher pricing and lower promotional investments, partially offset by lower shipment volume. Revenues net of excise taxes increased 3.2%. |
• | Reported OCI increased 5.9%, primarily driven by higher pricing, lower promotional investments and lower costs, partially offset by lower shipment volume and higher asset impairment, exit and implementation costs. |
• | Adjusted OCI increased 7.9%, primarily driven by higher pricing, lower promotional investments and lower costs, partially offset by lower shipment volume. Adjusted OCI margins increased 3.1 percentage points to 72.1%. |
Table 5 - Smokeless Products: Revenues and OCI ($ in millions) | ||||||||
First Quarter | ||||||||
2019 | 2018 | Change | ||||||
Net revenues | $ | 540 | $ | 525 | 2.9 | % | ||
Excise taxes | (31 | ) | (32 | ) | ||||
Revenues net of excise taxes | $ | 509 | $ | 493 | 3.2 | % | ||
Reported OCI | $ | 358 | $ | 338 | 5.9 | % | ||
Asset impairment, exit and implementation costs | 9 | 2 | ||||||
Adjusted OCI | $ | 367 | $ | 340 | 7.9 | % | ||
Adjusted OCI margins 1 | 72.1 | % | 69.0 | % | 3.1 pp |
Shipment Volume |
• | Smokeless products segment reported domestic shipment volume declined 2.2%, primarily driven by the industry’s rate of decline and one fewer shipping Monday. When adjusted for trade inventory movements and calendar differences, smokeless products segment shipment volume declined an estimated 1%. |
• | Total smokeless industry volume declined by an estimated 1.5% over the past six months. |
Table 6 - Smokeless Products: Shipment Volume (cans and packs in millions) | ||||||
First Quarter | ||||||
2019 | 2018 | Change | ||||
Copenhagen | 125.2 | 124.4 | 0.6 | % | ||
Skoal | 50.3 | 55.0 | (8.5 | )% | ||
Copenhagen and Skoal | 175.5 | 179.4 | (2.2 | )% | ||
Other | 15.9 | 16.3 | (2.5 | )% | ||
Total smokeless products | 191.4 | 195.7 | (2.2 | )% |
Brand Activity and Retail Share |
• | USSTC presented at the Tobacco Products Scientific Advisory Committee meeting in February 2019, related to its modified risk tobacco product application for Copenhagen Snuff. The committee overwhelmingly voted that USSTC’s proposed modified risk claim is fully supported by scientific evidence. |
• | USSTC announced plans to open a dedicated store in Nashville. The store is designed to reinforce Copenhagen’s leading equity position among adult dippers and its 100% American craftsmanship positioning. |
• | Copenhagen retail share grew 0.7 share points to 35.0%. |
• | Skoal retail share declined 0.8 share points to 15.4%. |
Table 7 - Smokeless Products: Retail Share (percent) | |||||
First Quarter | |||||
2019 | 2018 | Percentage point change | |||
Copenhagen | 35.0 | % | 34.3 | % | 0.7 |
Skoal | 15.4 | 16.2 | (0.8) | ||
Copenhagen and Skoal | 50.4 | 50.5 | (0.1) | ||
Other | 3.5 | 3.3 | 0.2 | ||
Total smokeless products | 53.9 | % | 53.8 | % | 0.1 |
Revenues, OCI and Shipment Volume |
• | Net revenues increased 6.3%, primarily driven by higher shipment volume, partially offset by higher promotional investments. |
• | Reported and adjusted OCI decreased $2 million, primarily driven by higher costs and higher promotional investments, partially offset by higher shipment volume. |
• | Reported wine shipment volume increased 8.0% to approximately 1.9 million cases. |
Table 8 - Wine: Revenues and Operating Companies (Loss) Income ($ in millions) | ||||||||
First Quarter | ||||||||
2019 | 2018 | Change | ||||||
Net revenues | $ | 151 | $ | 142 | 6.3 | % | ||
Excise taxes | (5 | ) | (5 | ) | ||||
Revenues net of excise taxes | $ | 146 | $ | 137 | 6.6 | % | ||
Reported and Adjusted OCI | $ | 15 | $ | 17 | (11.8 | )% | ||
OCI margins 1 | 10.3 | % | 12.4 | % | (2.1) pp |
Altria's Profile |
Basis of Presentation |
Forward-Looking and Cautionary Statements |
Schedule 1 | ||
ALTRIA GROUP, INC. | ||
and Subsidiaries | ||
Consolidated Statements of Earnings | ||
For the Quarters Ended March 31, | ||
(dollars in millions, except per share data) | ||
(Unaudited) |
2019 | 2018 | % Change | ||||||||
Net revenues | $ | 5,628 | $ | 6,108 | (7.9 | )% | ||||
Cost of sales 1 | 1,578 | 1,734 | ||||||||
Excise taxes on products 1 | 1,239 | 1,438 | ||||||||
Gross profit | 2,811 | 2,936 | (4.3 | )% | ||||||
Marketing, administration and research costs | 479 | 567 | ||||||||
Asset impairment and exit costs | 39 | 2 | ||||||||
Operating companies income | 2,293 | 2,367 | (3.1 | )% | ||||||
Amortization of intangibles | 8 | 5 | ||||||||
General corporate expenses | 46 | 46 | ||||||||
Corporate asset impairment and exit costs | 1 | — | ||||||||
Operating income | 2,238 | 2,316 | (3.4 | )% | ||||||
Interest and other debt expense, net | 384 | 166 | ||||||||
Net periodic benefit income, excluding service cost | (1 | ) | (7 | ) | ||||||
Earnings from equity investment in AB InBev | (86 | ) | (342 | ) | ||||||
Loss on Cronos-related financial instruments | 425 | — | ||||||||
Loss on AB InBev/SABMiller business combination | — | 33 | ||||||||
Earnings before income taxes | 1,516 | 2,466 | (38.5 | )% | ||||||
Provision for income taxes | 395 | 571 | ||||||||
Net earnings | 1,121 | 1,895 | (40.8 | )% | ||||||
Net earnings attributable to noncontrolling interests | (1 | ) | (1 | ) | ||||||
Net earnings attributable to Altria | $ | 1,120 | $ | 1,894 | (40.9 | )% | ||||
Per share data: | ||||||||||
Basic and diluted earnings per share attributable to Altria | $ | 0.60 | $ | 1.00 | (40.0 | )% | ||||
Weighted-average diluted shares outstanding | 1,874 | 1,899 | (1.3 | )% | ||||||
1 Cost of sales includes charges for resolution expenses related to state settlement agreements and FDA user fees. Supplemental information concerning those items and excise taxes on products sold is shown in Schedule 3. | ||||||||||
Schedule 2 | |||||||||||||||
ALTRIA GROUP, INC. | |||||||||||||||
and Subsidiaries | |||||||||||||||
Selected Financial Data | |||||||||||||||
For the Quarters Ended March 31, | |||||||||||||||
(dollars in millions) | |||||||||||||||
(Unaudited) | |||||||||||||||
Net Revenues | |||||||||||||||
Smokeable Products | Smokeless Products | Wine | All Other | Total | |||||||||||
2019 | $ | 4,935 | $ | 540 | $ | 151 | $ | 2 | $ | 5,628 | |||||
2018 | 5,414 | 525 | 142 | 27 | 6,108 | ||||||||||
% Change | (8.8 | )% | 2.9 | % | 6.3 | % | (92.6 | )% | (7.9 | )% | |||||
Reconciliation: | |||||||||||||||
For the quarter ended March 31, 2018 | $ | 5,414 | $ | 525 | $ | 142 | $ | 27 | $ | 6,108 | |||||
Operations | (479 | ) | 15 | 9 | (25 | ) | (480 | ) | |||||||
For the quarter ended March 31, 2019 | $ | 4,935 | $ | 540 | $ | 151 | $ | 2 | $ | 5,628 | |||||
Operating Companies Income (Loss) | |||||||||||||||
Smokeable Products | Smokeless Products | Wine | All Other | Total | |||||||||||
2019 | $ | 1,932 | $ | 358 | $ | 15 | $ | (12 | ) | $ | 2,293 | ||||
2018 | 2,038 | 338 | 17 | (26 | ) | 2,367 | |||||||||
% Change | (5.2 | )% | 5.9 | % | (11.8 | )% | 53.8 | % | (3.1 | )% | |||||
Reconciliation: | |||||||||||||||
For the quarter ended March 31, 2018 | $ | 2,038 | $ | 338 | $ | 17 | $ | (26 | ) | $ | 2,367 | ||||
NPM Adjustment Items - 2018 | (68 | ) | — | — | — | (68 | ) | ||||||||
Asset impairment, exit and implementation costs - 2018 | 1 | 2 | — | — | 3 | ||||||||||
Tobacco and health litigation items - 2018 | 24 | — | — | — | 24 | ||||||||||
(43 | ) | 2 | — | — | (41 | ) | |||||||||
Asset impairment, exit and implementation costs - 2019 | (44 | ) | (9 | ) | — | 5 | (48 | ) | |||||||
Tobacco and health litigation items - 2019 | (15 | ) | — | — | — | (15 | ) | ||||||||
(59 | ) | (9 | ) | — | 5 | (63 | ) | ||||||||
Operations | (4 | ) | 27 | (2 | ) | 9 | 30 | ||||||||
For the quarter ended March 31, 2019 | $ | 1,932 | $ | 358 | $ | 15 | $ | (12 | ) | $ | 2,293 | ||||
Schedule 3 | |||||||
ALTRIA GROUP, INC. | |||||||
and Subsidiaries | |||||||
Supplemental Financial Data | |||||||
(dollars in millions) | |||||||
(Unaudited) | |||||||
For the Quarters Ended March 31, | |||||||
2019 | 2018 | ||||||
The segment detail of excise taxes on products sold is as follows: | |||||||
Smokeable products | $ | 1,203 | $ | 1,401 | |||
Smokeless products | 31 | 32 | |||||
Wine | 5 | 5 | |||||
$ | 1,239 | $ | 1,438 | ||||
The segment detail of charges for resolution expenses related to state settlement agreements included in cost of sales is as follows: | |||||||
Smokeable products | $ | 911 | $ | 1,017 | |||
Smokeless products | 2 | 2 | |||||
$ | 913 | $ | 1,019 | ||||
The segment detail of FDA user fees included in cost of sales is as follows: | |||||||
Smokeable products | $ | 72 | $ | 69 | |||
Smokeless products | 1 | 1 | |||||
$ | 73 | $ | 70 | ||||
Schedule 4 | |||||||
ALTRIA GROUP, INC. | |||||||
and Subsidiaries | |||||||
Net Earnings and Diluted Earnings Per Share - Attributable to Altria Group, Inc. | |||||||
For the Quarters Ended March 31, | |||||||
(dollars in millions, except per share data) | |||||||
(Unaudited) | |||||||
Net Earnings | Diluted EPS | ||||||
2019 Net Earnings | $ | 1,120 | $ | 0.60 | |||
2018 Net Earnings | $ | 1,894 | $ | 1.00 | |||
% Change | (40.9 | )% | (40.0 | )% | |||
Reconciliation: | |||||||
2018 Net Earnings | $ | 1,894 | $ | 1.00 | |||
2018 NPM Adjustment Items | (51 | ) | (0.03 | ) | |||
2018 AB InBev special items | (92 | ) | (0.04 | ) | |||
2018 Asset impairment, exit and implementation costs | 2 | — | |||||
2018 Tobacco and health litigation items | 20 | 0.01 | |||||
2018 Loss on AB InBev/SABMiller business combination | 26 | 0.01 | |||||
2018 Tax items | 1 | — | |||||
Subtotal 2018 special items | (94 | ) | (0.05 | ) | |||
2019 AB InBev special items | (90 | ) | (0.05 | ) | |||
2019 Asset impairment, exit, implementation and acquisition-related costs | (125 | ) | (0.06 | ) | |||
2019 Tobacco and health litigation items | (13 | ) | (0.01 | ) | |||
2019 Loss on Cronos-related financial instruments | (328 | ) | (0.17 | ) | |||
2019 Tax items | (19 | ) | (0.01 | ) | |||
Subtotal 2019 special items | (575 | ) | (0.30 | ) | |||
Fewer shares outstanding | — | 0.01 | |||||
Change in tax rate | (17 | ) | (0.01 | ) | |||
Operations | (88 | ) | (0.05 | ) | |||
2019 Net Earnings | $ | 1,120 | $ | 0.60 |
Schedule 5 | |||||||||||||||
ALTRIA GROUP, INC. | |||||||||||||||
and Subsidiaries | |||||||||||||||
Reconciliation of GAAP and non-GAAP Measures | |||||||||||||||
For the Quarters Ended March 31, | |||||||||||||||
(dollars in millions, except per share data) | |||||||||||||||
(Unaudited) | |||||||||||||||
Earnings before Income Taxes | Provision for Income Taxes | Net Earnings | Net Earnings Attributable to Altria | Diluted EPS | |||||||||||
2019 Reported | $ | 1,516 | $ | 395 | $ | 1,121 | $ | 1,120 | $ | 0.60 | |||||
AB InBev special items | 114 | 24 | 90 | 90 | 0.05 | ||||||||||
Asset impairment, exit, implementation and acquisition-related costs | 159 | 34 | 125 | 125 | 0.06 | ||||||||||
Tobacco and health litigation items | 17 | 4 | 13 | 13 | 0.01 | ||||||||||
Loss on Cronos-related financial instruments | 425 | 97 | 328 | 328 | 0.17 | ||||||||||
Tax items | — | (19 | ) | 19 | 19 | 0.01 | |||||||||
2019 Adjusted for Special Items | $ | 2,231 | $ | 535 | $ | 1,696 | $ | 1,695 | $ | 0.90 | |||||
2018 Reported | $ | 2,466 | $ | 571 | $ | 1,895 | $ | 1,894 | $ | 1.00 | |||||
NPM Adjustment Items | (68 | ) | (17 | ) | (51 | ) | (51 | ) | (0.03 | ) | |||||
AB InBev special items | (117 | ) | (25 | ) | (92 | ) | (92 | ) | (0.04 | ) | |||||
Asset impairment, exit and implementation costs | 3 | 1 | 2 | 2 | — | ||||||||||
Tobacco and health litigation items | 28 | 8 | 20 | 20 | 0.01 | ||||||||||
Loss on AB InBev/SABMiller business combination | 33 | 7 | 26 | 26 | 0.01 | ||||||||||
Tax items | — | (1 | ) | 1 | 1 | — | |||||||||
2018 Adjusted for Special Items | $ | 2,345 | $ | 544 | $ | 1,801 | $ | 1,800 | $ | 0.95 | |||||
2019 Reported Net Earnings | $ | 1,120 | $ | 0.60 | |||||||||||
2018 Reported Net Earnings | $ | 1,894 | $ | 1.00 | |||||||||||
% Change | (40.9 | )% | (40.0 | )% | |||||||||||
2019 Net Earnings Adjusted for Special Items | $ | 1,695 | $ | 0.90 | |||||||||||
2018 Net Earnings Adjusted for Special Items | $ | 1,800 | $ | 0.95 | |||||||||||
% Change | (5.8 | )% | (5.3 | )% |
Schedule 6 | |||||||||||||||
ALTRIA GROUP, INC. | |||||||||||||||
and Subsidiaries | |||||||||||||||
Reconciliation of GAAP and non-GAAP Measures | |||||||||||||||
For the Year Ended December 31, 2018 | |||||||||||||||
(dollars in millions, except per share data) | |||||||||||||||
(Unaudited) | |||||||||||||||
Earnings before Income Taxes | Provision for Income Taxes | Net Earnings | Net Earnings Attributable to Altria | Diluted EPS | |||||||||||
2018 Reported | $ | 9,341 | $ | 2,374 | $ | 6,967 | $ | 6,963 | $ | 3.68 | |||||
NPM Adjustment Items | (145 | ) | (36 | ) | (109 | ) | (109 | ) | (0.06 | ) | |||||
Tobacco and health litigation items | 131 | 33 | 98 | 98 | 0.05 | ||||||||||
AB InBev special items | (85 | ) | (17 | ) | (68 | ) | (68 | ) | (0.03 | ) | |||||
Asset impairment, exit, implementation and acquisition-related costs | 538 | 106 | 432 | 432 | 0.23 | ||||||||||
Loss on AB InBev/SABMiller business combination | 33 | 7 | 26 | 26 | 0.01 | ||||||||||
Tax items | — | (197 | ) | 197 | 197 | 0.11 | |||||||||
2018 Adjusted for Special Items | $ | 9,813 | $ | 2,270 | $ | 7,543 | $ | 7,539 | $ | 3.99 |
Schedule 7 | |||||||
ALTRIA GROUP, INC. | |||||||
and Subsidiaries | |||||||
Condensed Consolidated Balance Sheets | |||||||
(dollars in millions) | |||||||
(Unaudited) | |||||||
March 31, 2019 | December 31, 2018 | ||||||
Assets | |||||||
Cash and cash equivalents | $ | 3,352 | $ | 1,333 | |||
Inventories | 2,356 | 2,331 | |||||
Other current assets | 554 | 635 | |||||
Property, plant and equipment, net | 1,922 | 1,938 | |||||
Goodwill and other intangible assets, net | 17,523 | 17,475 | |||||
Investments in equity securities | 32,015 | 30,496 | |||||
Other long-term assets | 1,511 | 1,430 | |||||
Total assets | $ | 59,233 | $ | 55,638 | |||
Liabilities and Stockholders’ Equity | |||||||
Short-term borrowings | $ | — | $ | 12,704 | |||
Current portion of long-term debt | 2,144 | 1,144 | |||||
Accrued settlement charges | 4,367 | 3,454 | |||||
Other current liabilities | 3,608 | 3,891 | |||||
Long-term debt | 27,024 | 11,898 | |||||
Deferred income taxes | 5,353 | 5,172 | |||||
Accrued postretirement health care costs | 1,764 | 1,749 | |||||
Accrued pension costs | 497 | 544 | |||||
Other long-term liabilities | 357 | 254 | |||||
Total liabilities | 45,114 | 40,810 | |||||
Redeemable noncontrolling interest | 38 | 39 | |||||
Total stockholders’ equity | 14,081 | 14,789 | |||||
Total liabilities and stockholders’ equity | $ | 59,233 | $ | 55,638 | |||
Total debt | $ | 29,168 | $ | 25,746 | |||
Schedule 8 | ||||
ALTRIA GROUP, INC. | ||||
and Subsidiaries | ||||
Calculation of Total Debt to Adjusted EBITDA and Net Debt to Adjusted EBITDA Ratios | ||||
For the Twelve Months Ended March 31, 2019 | ||||
(dollars in millions) | ||||
(Unaudited) | ||||
Twelve Months Ended March 31, 2019 | ||||
Consolidated Net Earnings | $ | 6,193 | ||
Equity earnings and noncontrolling interests, net | (639 | ) | ||
Loss on Cronos-related financial instruments | 425 | |||
Dividends from less than 50% owned affiliates | 658 | |||
Provision for income taxes | 2,198 | |||
Depreciation and amortization | 227 | |||
Asset impairment and exit costs | 421 | |||
Interest and other debt expense, net | 883 | |||
Consolidated EBITDA 1 | $ | 10,366 | ||
Current portion of long-term debt | $ | 2,144 | ||
Long-term debt | 27,024 | |||
Total Debt 2 | 29,168 | |||
Cash and cash equivalents3 | 3,352 | |||
Net Debt 4 | $ | 25,816 | ||
Ratios: | ||||
Total Debt / Consolidated EBITDA | 2.8 | |||
Net Debt / Consolidated EBITDA | 2.5 | |||
1 Reflects the term “Consolidated EBITDA” as defined in Altria’s senior unsecured revolving credit agreement. | ||||
2 Reflects total debt as presented on Altria’s Condensed Consolidated Balance Sheet at March 31, 2019. See Schedule 7. | ||||
3Reflects cash and cash equivalents as presented on Altria’s Condensed Consolidated Balance Sheet at March 31, 2019. See Schedule 7. | ||||
4 Reflects total debt, less cash and cash equivalents at March 31, 2019. |
Schedule 9 | ||||||||||||||||||||||||||||||
ALTRIA GROUP, INC. | ||||||||||||||||||||||||||||||
and Subsidiaries | ||||||||||||||||||||||||||||||
Supplemental Financial Data for Special Items | ||||||||||||||||||||||||||||||
For the Quarters Ended March 31, | ||||||||||||||||||||||||||||||
(dollars in millions) | ||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||
Cost of Sales | Marketing, administration and research costs | Asset impairment and exit costs | General corporate expenses | Corporate asset impairment and exit costs | Interest and other debt expense, net | Net periodic benefit income, excluding service cost | Earnings from equity investment in AB InBev | Loss on Cronos-related financial instruments | Loss on AB InBev/SABMiller business combination | |||||||||||||||||||||
2019 Special Items - (Income) Expense | ||||||||||||||||||||||||||||||
AB InBev special items | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 114 | $ | — | $ | — | ||||||||||
Asset impairment, exit, implementation and acquisition-related costs | — | 9 | 39 | 2 | 1 | 96 | 12 | — | — | — | ||||||||||||||||||||
Tobacco and health litigation items | — | 15 | — | — | — | 2 | — | — | — | — | ||||||||||||||||||||
Loss on Cronos-related financial instruments | — | — | — | — | — | — | — | — | 425 | — | ||||||||||||||||||||
2018 Special Items - (Income) Expense | ||||||||||||||||||||||||||||||
NPM Adjustment Items | $ | (68 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||
AB InBev special items | — | — | — | — | — | — | — | (117 | ) | — | — | |||||||||||||||||||
Asset impairment, exit and implementation costs | 1 | — | 2 | — | — | — | — | — | — | — | ||||||||||||||||||||
Tobacco and health litigation items | — | 24 | — | — | — | 4 | — | — | — | — | ||||||||||||||||||||
Loss on AB InBev/SABMiller business combination | — | — | — | — | — | — | — | — | — | 33 |