Altria Announces Q2 Results, Expands Distribution of Marlboro NXT

In July 2013, PM USA expanded distribution of Marlboro NXT to an additional 23 states, primarily in the eastern U.S.

Altria Group Inc. has announced its 2013 second-quarter and first-half business results, and revised its guidance for 2013 full-year reported and adjusted diluted EPS based on its performance for the first half of 2013 and expectations for the second half of the year.

“Altria delivered solid financial results for the second quarter and first six months of 2013,” said Marty Barrington, chairman and CEO of Altria. “The company’s diverse business model delivered adjusted diluted earnings per share growth of 5.1% for the second quarter and 7.4% for the first half of the year.”

“All three of our reportable segments delivered adjusted operating companies income and margin growth in the second quarter and first half, ” said Barrington. “Altria’s companies also continue to innovate with new products for adult tobacco consumers. Nu Mark’s plans for introducing MarkTen e-cigarettes into a lead market in August of this year are on-track.”

Cost Management
Altria’s current cost reduction program for its tobacco and service company subsidiaries remains on-track and is expected to deliver $400 million in annualized savings versus previously planned spending by the end of 2013.

Cash Returns to Shareholders – Dividends
In May 2013, Altria’s Board of Directors declared a regular quarterly dividend of $0.44 per common share. The current annualized dividend rate is $1.76 per common share. As of July 17, 2013, Altria’s annualized dividend yield was 4.8%.

Altria expects to continue to return a large amount of cash to shareholders in the form of dividends by maintaining a dividend payout ratio target of approximately 80% of its adjusted diluted EPS. Future dividend payments remain subject to the discretion of the Board.

During the second quarter of 2013, Altria repurchased 3.7 million shares of its common stock at an average price of $36.27 for a total cost of approximately $135 million, as part of its previously announced $300 million share repurchase program. As of the end of the second quarter of 2013, Altria had approximately $165 million remaining in this program, which it intends to complete by the end of the year. The timing of share repurchases depends upon marketplace conditions and other factors, and the program remains subject to the discretion of the Board.

Previously Announced Capital Markets Activities
In May 2013, Altria issued $1 billion of new senior unsecured notes, comprised of $350 million of 2.95% notes that mature in 2023 and $650 million of 4.5% notes that mature in 2043.

Revised 2013 Full-Year Guidance
Altria revises its 2013 full-year guidance for reported diluted EPS from a range of $2.50 to $2.56 to a range of $2.51 to $2.56.

Altria also revises its 2013 full-year guidance for adjusted diluted EPS, which excludes the special items shown in Table 1, from a range of $2.35 to $2.41 to a range of $2.36 to $2.41, representing a growth rate of 7% to 9% from an adjusted diluted EPS base of $2.21 per share in 2012.

Highlights
Marlboro’s retail share for the second quarter of 2013 was unchanged versus the prior year period and grew 0.1 share point for the first half of 2013.

In July 2013, PM USA expanded distribution of Marlboro NXT to an additional 23 states, primarily in the eastern U.S.

PM USA’s retail share for the second quarter of 2013 increased 0.3 share points due to retail share gains by L&M in Discount, partially offset by share losses on other portfolio brands. For the first half of 2013, PM USA’s retail share grew 0.4 share points driven by share gains by L&M in Discount and Marlboro, partially offset by share losses on other portfolio brands.

In the machine-made large cigars category, Black & Mild’s retail share for the second quarter and first half of 2013 decreased 0.5 and 1.8 share points, respectively, driven primarily by competitive activity, including high levels of low-priced, imported machine-made large cigars. On a sequential basis, Black & Mild’s 2013 second-quarter retail share increased 1.4 share points versus the first quarter of 2013.

The smokeless products segment grew its adjusted OCI and adjusted OCI margin for the second quarter and first half of 2013 primarily through higher volume and higher pricing. USSTC grew Copenhagen and Skoal’s combined volume and retail share in both periods.

The smokeless products segment’s 2013 second-quarter and first-half net revenues increased 7.5% and 5.2%, respectively, primarily due to higher volume and higher pricing, partially offset by higher promotional investments and unfavorable mix due to growth in products introduced in recent years at a lower, popular price. For the second quarter and first half of 2013, the smokeless product segment’s revenues net of excise taxes increased 6.5% and 4.9%, respectively.

The smokeless products segment’s reported and adjusted OCI for the second quarter of 2013 increased 12.5% primarily due to higher volume, higher pricing and lower selling, general and administrative costs, partially offset by higher promotional investments and unfavorable mix due to growth in products introduced in recent years at a lower, popular price.

Reported OCI for the first half of 2013 increased 13.9% primarily due to the factors discussed above and the impact of restructuring charges in the first quarter of 2012 related to the cost reduction program. Adjusted OCI margin for the smokeless products segment grew 3.3 percentage points to 63.5% for the second quarter of 2013 and 2.4 percentage points to 62.4% for the first half of 2013.

 

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