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TheStreet Open House

Altria Reports 2013 Third-Quarter And Nine-Month Results; Reaffirms 2013 Full-Year EPS Guidance

Stock quotes in this article: MO

The factors described in the Forward-Looking and Cautionary Statements section of this release represent continuing risks to this forecast. Reconciliations of full-year adjusted to reported diluted EPS are shown in Table 1.

 
Table 1 - Altria’s Full-Year Earnings Per Share Guidance
                  Full Year
2013 Guidance       2012       Change
Reported diluted EPS $     2.57   to   $     2.62       $     2.06       25 %   to   27 %
NPM Adjustment Items 1 (0.21 )

Asset impairment, exit and implementation costs

0.01
SABMiller special items 0.01 (0.08 )
PMCC leveraged lease benefit (0.03 )
Loss on early extinguishment of debt 0.28
Tax items 2       (0.01 )       (0.03 )
Adjusted diluted EPS $     2.36   to   $     2.41         $     2.21   7 % to 9 %
                                                                               

1 Reflects the impact of the NPM Adjustment Settlement ($0.16) and the NPM Arbitration Panel Decision ($0.05).

2 Excludes the tax impact of the Philip Morris Capital Corporation (PMCC) leveraged lease benefit.

ALTRIA GROUP, INC.

Altria reports its financial results, including diluted EPS, in accordance with U.S. generally accepted accounting principles (GAAP). Altria’s management reviews operating companies income (OCI), which is defined as operating income before corporate expenses and amortization of intangibles, to evaluate segment performance and allocate resources. Altria’s management also reviews OCI, operating margins and EPS on an adjusted basis, which excludes certain income and expense items that management believes are not part of underlying operations. These items may include, for example, loss on early extinguishment of debt, restructuring charges, SABMiller plc (SABMiller) special items, certain PMCC leveraged lease items, certain tax items, tobacco and health judgments, and settlements of, and determinations made in, certain NPM Adjustment disputes. Altria’s management does not view any of these special items to be part of Altria’s sustainable results as they may be highly variable and difficult to predict and can distort underlying business trends and results. Altria’s management also reviews income tax rates on an adjusted basis. Altria’s effective tax rate on operations may exclude certain tax items from its reported effective tax rate. Altria’s management believes that adjusted measures for OCI, operating margins and EPS, as well as the effective tax rate on operations, provide useful insight into underlying business trends and results and provide a more meaningful comparison of year-over-year results. Altria’s management uses adjusted measures internally for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets. These adjusted financial measures are not consistent with GAAP, and should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. Reconciliations of adjusted measures to corresponding GAAP measures are provided in the release. Comparisons are to the corresponding prior-year period unless otherwise stated.

Effective January 1, 2013, Altria’s reportable segments are smokeable products, manufactured and sold by PM USA and John Middleton Co. (Middleton); smokeless products, manufactured and sold by or on behalf of U.S. Smokeless Tobacco Company LLC (USSTC) and PM USA; and wine, produced and/or distributed by Ste. Michelle Wine Estates Ltd. (Ste. Michelle). Prior-period segment data have been recast to conform with the current-period segment presentation.

Altria’s net revenues increased 5.0% to $6.6 billion for the third quarter primarily due to higher net revenues from the smokeable and smokeless products segments, and higher gains on asset sales in the financial services business. For the first nine months, Altria’s net revenues were essentially unchanged at $18.4 billion, primarily due to higher net revenues from the smokeless products and wine segments, and higher gains on asset sales in the financial services business, offset by lower net revenues in the smokeable products segment. Altria’s revenues net of excise taxes increased 6.6% to $4.8 billion for the third quarter and 1.7% to $13.3 billion for the first nine months of 2013.

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