Altria Group Inc
Reported Diluted Earnings Per Share Down 1.4% to $1.36 vs. $1.38 in Year-Ago
Quarter
Excluding Items Detailed in Table Below, Diluted Earnings Per Share Up 1.5% to
$1.39 vs. $1.37 in Year-Ago Quarter
Company Projects 2006 Full-Year Diluted Earnings Per Share From Continuing
Operations in a Range of $5.48 to $5.53
Altria Group, Inc. (NYSE: MO) today announced third-quarter 2006 reported
diluted earnings per share of $1.36, including items detailed on the attached
Schedule 7, versus $1.38 in the year-ago period. Comparison of results for the
third quarter of 2006 versus the same period a year ago was impacted by a number
of items in both years. Absent those items, diluted earnings per share were up
1.5% to $1.39, as detailed in the table below.
"Our third-quarter results were in line with our internal expectations and we
remain on track to meet our earnings target for the full year," said Louis C.
Camilleri, chairman and chief executive officer of Altria Group, Inc. "Our
income performance during the third quarter was adversely affected by Philip
Morris International's continued challenges in Spain and the anticipated
inventory depletion in Japan following the July 2006 price increase."
"In our domestic tobacco business, Marlboro continued to gain share of both the
total cigarette market and the growing premium segment," Mr. Camilleri said.
"Kraft posted solid earnings gains. However, achieving its goals for stronger
top-line growth and sustainable earnings momentum will require continued
investment in innovation and brand-building initiatives," Mr. Camilleri said.
The 1.5% increase in diluted earnings per share to $1.39, after excluding the
items shown in the table below, was due primarily to favorable operating results
at Philip Morris USA (PM USA) and Kraft, as well as favorable net interest
expense and better results from Philip Morris Capital Corporation (PMCC). These
were partially offset by lower operating results at Philip Morris International
(PMI) and a higher tax rate.
Q3 2006 Q3 2005 Change
------- ------- ------
Reported diluted EPS from continuing operations $ 1.36 $ 1.38 (1.4)%
(Gain) on redemption of United Biscuits
investment, net of minority interest impact (0.06) --
Loss on sales of businesses,
net of minority interest impact (0.02) --
Asset impairment and exit costs,
net of minority interest impact 0.06 0.02
Net charges for loss on U.S. tobacco
pool and tobacco quota buy-out -- 0.01
Provision for airline industry exposure -- 0.06
Tax items, net of minority interest impact 0.01 (0.10)
------ ------
Diluted EPS, excluding above items $ 1.39 $ 1.37 1.5%
As shown on Schedule 7, the 1.4% decline in reported diluted earnings per share
was due primarily to lower results from international tobacco operations and
higher Kraft restructuring charges for the third quarter of 2006 versus 2005,
which were partially offset by Kraft's gain on the redemption of its interest in
United Biscuits (UB) described below. The year-ago period included $204 million
in tax benefits, primarily related to the American Jobs Creation Act (AJCA),
offset by an increase of $200 million ($129 million after tax) in the provision
for airline industry exposure at PMCC and $23 million in net charges ($15
million after tax) at PM USA related to tobacco quota buy-out legislation.
Acquisitions and Divestitures
In July 2006, Kraft announced an agreement with United Biscuits to acquire the
Spanish and Portuguese operations of UB, and rights to all Nabisco trademarks in
the European Union, Eastern Europe, the Middle East and Africa for a total cost
of $1.07 billion. The acquisition was financed by Kraft's assumption of $541
million of debt issued by the acquired business immediately prior to the
acquisition, as well as $530 million of value for the redemption of Kraft's
outstanding investment in UB. The redemption of Kraft's interest in UB resulted
in a $251 million pre-tax gain on closing, benefiting Altria Group, Inc. by
$0.06 per diluted share.
Kraft also completed the sale of its Milk Bone pet snacks brand and assets in
July 2006 for $580 million and recorded additional taxes of $59 million related
to the sale. This sale and the additional taxes were recorded in the third
quarter of 2006.
In addition, on July 27, Kraft announced that it had agreed to sell its Minute
Rice brand and related assets for approximately $280 million. The transaction,
which is expected to close in the fourth quarter, will result in a gain to
Altria Group, Inc. of approximately $140 million or $0.07 per diluted share,
after taxes and minority interest.
2006 Full-Year Forecast
Altria projects 2006 full-year diluted earnings per share from continuing
operations in a range of $5.48 to $5.53, versus a previously disclosed range of
$5.40 to $5.50. The company's revised forecast includes Kraft's gain on the
Minute Rice sale (positively impacting Altria by approximately $0.07 per share).
It also reflects revisions for Kraft's gain on the redemption of its interest in
UB (positively impacting Altria by approximately $0.06 per share versus $0.09
per share in previous guidance). It does not include the impact of any potential
future acquisitions or divestitures. The factors described in the
Forward-Looking and Cautionary Statements section of this release represent
continuing risks to this projection.
Debt Rating Upgrade
On October 24, 2006, Moody's Investors Service upgraded the long-term senior
unsecured debt rating of Altria Group, Inc. and subsidiaries to Baa1 from Baa2
and affirmed the company's short-term commercial paper rating of Prime-2.
Conference Call
A conference call with members of the investment community and news media will
be Webcast at 2:00 p.m. Eastern Time on October 25, 2006. Access is available at
www.altria.com.
ALTRIA GROUP, INC.
As described in "Note 15. Segment Reporting" of Altria Group, Inc.'s 2005 Annual
Report, management reviews operating companies income, which is defined as
operating income before corporate expenses and amortization of intangibles, to
evaluate segment performance and allocate resources. Management believes it is
appropriate to disclose this measure to help investors analyze business
performance and trends. For a reconciliation of operating companies income to
operating income, see the Condensed Statements of Earnings contained in this
release.
All references in this news release are to continuing operations, unless
otherwise noted.
References to international tobacco market share are PMI estimates based on a
number of industry sources.
2006 Third-Quarter Results
Net revenues for the third quarter of 2006 increased 3.7% versus 2005 to $25.9
billion, including favorable currency of $281 million.
Operating income increased 9.2% to $4.7 billion, reflecting the items described
in the attached reconciliation on Schedule 3, including Kraft's $251 million
gain on the redemption of its interest in UB, favorable currency of $25 million
and higher results from operations of $73 million, partially offset by charges
for asset impairment, exit and implementation costs, which were $139 million
higher in the third quarter of 2006 versus the year-earlier period, primarily at
Kraft. The operating income comparison also benefited from charges recorded in
the year-ago period for airline industry exposure at PMCC and net charges at PM
USA related to tobacco quota buy-out legislation.
Net earnings decreased 0.3% to $2.9 billion, reflecting the factors mentioned
above and favorable tax items in the third quarter of 2005 of $204 million, or
$0.10 per share, due primarily to the repatriation of earnings under provisions
of the AJCA. The company's effective tax rate was 35.4% in the third quarter of
2006, compared to 27.4% for the same period in 2005.
Diluted earnings per share, as detailed on Schedule 1, decreased 1.4% to $1.36,
driven by the factors mentioned above.
During the third quarter of 2006, Altria Group, Inc. increased its regular
quarterly dividend by 7.5% to $0.86 per common share, which represents an
annualized rate of $3.44 per common share.
DOMESTIC TOBACCO
2006 Third-Quarter Results
For the third quarter of 2006, Philip Morris USA (PM USA), Altria Group, Inc.'s
domestic tobacco business, delivered strong share performance, driven by
Marlboro.
Operating companies income increased 5.7% to $1.3 billion, primarily driven by
lower wholesale promotional allowance rates and a favorable comparison with
items in the third quarter of 2005, partially offset by lower volume and
spending for various excise tax ballot initiatives. Results for the third
quarter of 2005 included the previously mentioned net charges at PM USA related
to tobacco quota buy-out legislation and a pre-tax provision of $56 million for
the Boeken individual smoking case.
Shipment volume of 47.6 billion units was down 0.6% from the previous year,
reflecting changes in wholesale and retail trade inventory levels, the timing of
4th of July trade purchases and one less shipping day versus the year-ago
period. Adjusting for those factors, PM USA estimates that shipment volume
declined approximately 2% in the third quarter of 2006 versus the year-ago
period, and was down approximately 1.5% for the first nine months of 2006 versus
the same period in 2005. Premium mix for PM USA increased by 0.3 percentage
points to 92.0% in the third quarter of 2006.
As shown in the following table, PM USA's total retail share increased to 50.4%
in the third quarter of 2006, driven by Marlboro.
Philip Morris USA Quarterly Retail Share*
----------------------------------------------------------------------
Q3 2006 Q3 2005 Change
------- ------- --------
Marlboro 40.6% 40.1% 0.5 pp
Parliament 1.8% 1.8% 0.0 pp
Virginia Slims 2.3% 2.3% 0.0 pp
Basic 4.2% 4.2% 0.0 pp
------- ------- --------
Focus Brands 48.9% 48.4% 0.5 pp
Other PM USA 1.5% 1.7% -0.2 pp
------- ------- --------
Total PM USA 50.4% 50.1% 0.3 pp
* IRI/Capstone Total Retail Panel was developed to measure market
share in retail stores selling cigarettes. It is not designed to
capture Internet or direct mail sales.
PM USA's share of the premium category was down 0.1 share point versus the
year-earlier period to 62.1%, as the gain by Marlboro was more than offset by
segment share losses incurred by other PM USA non-focus premium brands. PM USA's
share of the discount category grew 0.1 share point to 16.3%. The total
industry's premium category share increased 0.7 points to 74.3% in the third
quarter of 2006, while the discount category share correspondingly declined to
25.7%. Within the discount category, share of the deep discount segment (which
includes both major manufacturers' private label brands and all other
manufacturers' discount brands) declined 0.2 points to 11.7% versus the year-ago
period.
INTERNATIONAL TOBACCO
2006 Third-Quarter Results
At Philip Morris International (PMI), Altria Group, Inc.'s international tobacco
business, results in the third quarter of 2006 were adversely impacted by
performance in Japan and Spain. However, PMI projects that it will achieve
strong growth in the fourth quarter of 2006.
In the third quarter of 2006, cigarette shipment volume for PMI declined 0.5% to
215.9 billion units. Continuing challenges in Spain, lower volume in Turkey,
Portugal and Romania and trade inventory depletion in Japan after the July 2006
price increase were largely offset by gains in Indonesia, Italy, Poland, Russia,
Ukraine, Mexico and Argentina. PMI's total tobacco volume, which included 2.3
billion cigarette equivalent units of other tobacco products (OTPs), declined
0.4% to 218.2 billion units.
Operating companies income was down 3.8% to $2.1 billion, and down 2.3%
excluding asset impairment and exit costs. The decline was due primarily to
unfavorable volume/mix in Japan and lower pricing in Spain, partially offset by
higher pricing elsewhere in PMI. Spain and Japan together contributed
approximately eight percentage points to the decline in third-quarter 2006
operating companies income.
PMI's market share in the third quarter of 2006 advanced in many countries, with
gains in Argentina, Austria, Belgium, Egypt, Finland, France, Hungary,
Indonesia, Italy, Japan, Korea, Lithuania, Mexico, Netherlands, the Philippines,
Poland, Serbia and Ukraine.
Total Marlboro cigarette shipments of 80.5 billion units were down 2.1%, due
mainly to Germany, Argentina and Japan. However, Marlboro market shares were up
in Belgium, France, Italy, Japan, Korea, Mexico, Netherlands, the Philippines,
Poland, Romania, Russia, Saudi Arabia, Serbia and Ukraine.
In the European Union (EU) region, PMI's cigarette shipments were down 0.9%, as
declines in Spain, Germany and Portugal were partially offset by gains in Italy,
Poland and Hungary. PMI's cigarette market share in the EU region was flat at
39.6%. Importantly, PMI's share of total tobacco consumption (cigarettes and
OTPs) in the EU was up 0.4 points to 35.9%.
In Germany, total tobacco consumption declined 9.5%. However, adjusted for one
less selling day in the quarter this year, consumption was down 8.1%, mainly
attributable to a significant decline in tobacco portions, with inventories of
these products now essentially exhausted. PMI's total tobacco shipments were
down 0.6%, but its share of total tobacco consumption increased 2.8 points to
31.5%. The total cigarette market declined 1.8%, while PMI's cigarette volume
and market share declined by 2.2% and 0.1 points to 36.5%, respectively.
In Italy, the total cigarette market rose 0.7%. PMI's shipment volume was up
4.2% and market share rose 1.2 points to 54.1%. Marlboro share increased 0.5
points to 23.0%, while share for Diana was also higher, up 0.5 points to 13.6%.
In France, the total market was essentially unchanged versus the prior-year
quarter. PMI's shipments were down 2.0% due to timing of trade purchases. Market
share continued to grow, rising 0.8 points to 42.5% on the strength of Marlboro
and the Philip Morris brand.
In Spain, the total cigarette market declined 7.9%, due mainly to an unfavorable
comparison with the third quarter of 2005, which benefited from trade purchases
as a result of an anticipated industry price increase that did not occur, as
well as the tobacco legislation in force since January 1, 2006. PMI's cigarette
shipments were down 12.4% in the third quarter of 2006 versus the year-ago
period, and market share declined 3.1 points to 32.2%, primarily due to L&M and
Chesterfield. Sequentially, PMI's market share was up 0.6 points versus the
second quarter of 2006 and share for Marlboro was up 0.7 points to 17.4% in the
third quarter of 2006 versus the previous quarter, demonstrating its continued
resilience.
In Eastern Europe, the Middle East and Africa, PMI's shipments declined 0.7% due
to Turkey and Romania, largely offset by strong gains in Russia, Ukraine, Israel
and Egypt. In Turkey, shipments were down 12.2%, due mainly to the decline of
low-price Bond Street, partially offset by gains of higher-margin brands
Parliament and Muratti. Market share in Turkey declined 0.7 points to 41.9%.
However, overall mix continued to improve, driven by gains of Parliament. In
Romania, shipments were down 31.4% and share declined 2.5 points to 31.0%,
mainly due to L&M. However, Marlboro share was up 2.0 points to 12.2%. In
Russia, shipments rose 3.3%, driven by Marlboro, Muratti and Parliament.
Although share was down 0.5 points, this primarily reflected declines of PMI's
low-price brands and L&M. Combined market share in Russia for PMI's
higher-margin brands, including Marlboro and Parliament, was up 0.4 points
versus the prior-year period. In Ukraine, shipments grew 8.8% and share advanced
1.2 points to 33.4% as consumers continued to trade up to higher priced
Marlboro, Parliament and Chesterfield.
In Asia, volume was down 1.5%, due primarily to a difficult comparison with the
prior-year quarter in Japan, partially offset by gains in Indonesia, Korea and
Thailand.
In Japan, PMI's shipments were down 1.8 billion units or 10.4%, due mainly to a
22.7% total market decline, partially offset by the favorable timing of
shipments. The industry contraction in the third quarter reflects trade
inventory depletion after the tax-driven price increase on July 1, 2006. PMI's
in-market sales were down 22.5% and market share was up 0.1 points to 25.0%.
Marlboro's share rose 0.3 points to 10.2%.
In Indonesia, PMI's shipment volume rose 9.1% and market share increased 1.5
points to 28.2%, demonstrating the continued strength of its brand portfolio,
led by A Hijau, A Mild and Dji Sam Soe.
PMI's volume in Latin America increased 4.4%, due mainly to gains in Argentina
and Mexico, partially offset by Colombia, which was negatively impacted by the
timing of shipments. The total market in Argentina was up 7.8%, while PMI's
shipments grew 18.2% and share was up 5.9 points to 66.9%, due primarily to the
continued growth of the Philip Morris brand. In Mexico, PMI shipments advanced
5.8% and market share rose 1.9 points to 63.8%, reflecting the continued
momentum of Marlboro, which rose 2.2 share points to 48.1%.
FOOD
2006 Third-Quarter Results
Kraft Foods Inc. (Kraft) reported 2006 third-quarter results on October 23,
2006. Kraft's net revenues were up 2.3% to $8.2 billion, driven by North
American convenient meals, cheese, snacks, cereals and powdered beverages, as
well as Latin America and Eastern Europe and favorable currency of $125 million,
partially offset by the impact of divestitures.
Ongoing volume declined 1.9%, due primarily to the impact of product item
pruning and the discontinuation of select product lines, primarily in the North
American Foodservice and Canadian ready-to-drink beverage businesses, as well as
weakness in several beverage and grocery franchises. Partially offsetting those
factors were strong gains achieved across numerous products, including Oscar
Mayer meats, Post cereals, Kraft natural cheese, DiGiorno pizza and Wheat Thins
snack crackers.
Operating income increased 18.2% to $1.4 billion for the third quarter,
benefiting from the gain on the redemption of Kraft's interest in UB and also
from lower dairy costs, improved product mix and ongoing manufacturing
efficiencies and cost savings, partially offset by higher marketing spending to
support brand equity, higher asset impairment, exit and implementation costs,
and higher energy and packaging costs. Excluding the asset impairment, exit and
implementation costs and gains/losses on the sale of businesses, operating
income increased 5.6% and the resulting operating income margin increased to
15.2% from 14.8% recorded in the corresponding prior-year period.
NORTH AMERICAN FOOD
2006 Third-Quarter Results
For the third quarter 2006, Kraft North America Commercial (KNAC) net revenues
were up 0.7% to $5.6 billion versus the prior-year quarter, reflecting increases
in Beverages, Convenient Meals and Snacks & Cereals and favorable currency of
$52 million, partially offset by declines in Cheese & Foodservice and Grocery.
Ongoing volume decreased 2.1% due to decreases in Beverages, Cheese &
Foodservice and Grocery, partially offset by increases in Convenient Meals and
Snacks & Cereals. Operating companies income decreased 1.9% to $930 million,
with higher asset impairment, exit and implementation costs only partially
offset by productivity and restructuring savings, positive mix, and favorable
currency of $12 million.
INTERNATIONAL FOOD
2006 Third-Quarter Results
For the third quarter 2006, net revenues for Kraft International Commercial
(KIC) increased 5.8% to $2.7 billion versus the prior-year quarter, reflecting
increases in the European Union and Developing Markets, Oceania & North Asia,
and favorable currency of $73 million. Ongoing volume was down 1.4%, due
primarily to declines in grocery and cheese. Operating companies income
increased 86.1% to $469 million, due primarily to a $251 million gain on
redemption of Kraft's interest in UB, as well as positive mix, price increases
and favorable currency of $8 million, partially offset by lower volume and
higher asset impairment, exit and implementation costs.
FINANCIAL SERVICES
2006 Third-Quarter Results
Philip Morris Capital Corporation (PMCC) reported operating companies income of
$101 million for the third quarter of 2006, versus an operating companies loss
of $121 million for the third quarter of 2005. Results for the third quarter of
2006 were significantly above the comparable period in 2005 due to gains from
asset sales and a $200 million loss provision taken in the third quarter of 2005
related to the airline industry.
Consistent with its strategic shift in 2003, PMCC is focused on managing its
existing portfolio of finance assets in order to maximize gains and generate
cash flow from asset sales and related activities. PMCC is no longer making new
investments and expects that its operating companies income will fluctuate over
time as investments mature or are sold.
Altria Group, Inc. Profile
As of September 30, 2006, Altria Group, Inc. owned approximately 88.6% of the
outstanding common shares of Kraft Foods Inc. and 100% of the outstanding common
shares of Philip Morris International Inc., Philip Morris USA Inc. and Philip
Morris Capital Corporation. In addition, Altria Group, Inc. owned approximately
28.7% of SABMiller plc. The brand portfolio of Altria Group, Inc.'s consumer
packaged goods companies includes such well-known names as Kraft, Jacobs, L&M,
Marlboro, Maxwell House, Nabisco, Oreo, Oscar Mayer, Parliament, Philadelphia,
Post and Virginia Slims. Altria Group, Inc. recorded 2005 net revenues of $97.9
billion.
Trademarks and service marks mentioned in this release are the registered
property of, or licensed by, the subsidiaries of Altria Group, Inc.
Forward-Looking and Cautionary Statements
This press release contains projections of future results and other
forward-looking statements that involve a number of risks and uncertainties and
are made pursuant to the Safe Harbor Provisions of the Private Securities
Litigation Reform Act of 1995. The following important factors could cause
actual results and outcomes to differ materially from those contained in such
forward-looking statements.
Altria Group, Inc.'s consumer products subsidiaries are subject to changing
prices for raw materials; intense price competition; changes in consumer
preferences and demand for their products; fluctuations in levels of customer
inventories; the effects of foreign economies and local economic and market
conditions; unfavorable currency movements and changes to income tax laws. Their
results are dependent upon their continued ability to promote brand equity
successfully; to anticipate and respond to new consumer trends; to develop new
products and markets and to broaden brand portfolios in order to compete
effectively with lower-priced products; to improve productivity; and to respond
effectively to changing prices for raw materials.
Altria Group, Inc.'s tobacco subsidiaries (Philip Morris USA and Philip Morris
International) continue to be subject to litigation, including risks associated
with adverse jury and judicial determinations, and courts reaching conclusions
at variance with the company's understanding of applicable law and bonding
requirements in the limited number of jurisdictions that do not limit the dollar
amount of appeal bonds; legislation, including actual and potential excise tax
increases; discriminatory excise tax structures; increasing marketing and
regulatory restrictions; the effects of price increases related to excise tax
increases and concluded tobacco litigation settlements on consumption rates and
consumer preferences within price segments; health concerns relating to the use
of tobacco products and exposure to environmental tobacco smoke; governmental
regulation; privately imposed smoking restrictions; and governmental and grand
jury investigations.
Altria Group, Inc. and its subsidiaries are subject to other risks detailed from
time to time in its publicly filed documents, including its Quarterly Report on
Form 10-Q for the period ended June 30, 2006. Altria Group, Inc. cautions that
the foregoing list of important factors is not complete and does not undertake
to update any forward-looking statements that it may make.
ALTRIA GROUP, INC. Schedule 1
and Subsidiaries
Condensed Statements of Earnings
For the Quarters Ended September 30,
(in millions, except per share data)
(Unaudited)
2006 2005 % Change
--------------------------
Net revenues $25,885 $24,962 3.7%
Cost of sales 9,265 9,082 2.0%
Excise taxes on products (*) 8,229 7,656 7.5%
-----------------
Gross profit 8,391 8,224 2.0%
Marketing, administration and research
costs 3,560 3,459
Domestic tobacco loss on U.S. tobacco pool - 138
Domestic tobacco quota buy-out - (115)
Asset impairment and exit costs 190 59
Gain on redemption of United Biscuits
investment (251) -
(Gains) losses on sales of businesses, net 3 -
Provision for airline industry exposure - 200
-----------------
Operating companies income 4,889 4,483 9.1%
Amortization of intangibles 7 6
General corporate expenses 166 160
Asset impairment and exit costs 3 2
-----------------
Operating income 4,713 4,315 9.2%
Interest and other debt expense, net 193 306
-----------------
Earnings before income taxes, minority
interest, and equity
earnings, net 4,520 4,009 12.7%
Provision for income taxes 1,598 1,098 45.5%
-----------------
Earnings before minority interest, and
equity earnings, net 2,922 2,911 0.4%
Minority interest in earnings, and equity
earnings, net 47 28
-----------------
Net earnings $ 2,875 $ 2,883 (0.3)%
=================
Per share data(**):
Basic earnings per share $ 1.38 $ 1.39 (0.7)%
=================
Diluted earnings per share $ 1.36 $ 1.38 (1.4)%
=================
Weighted average number of
shares outstanding - Basic 2,090 2,072 0.9%
- Diluted 2,107 2,092 0.7%
(*) The detail of excise taxes on products sold is as follows:
2006 2005
-----------------
Domestic tobacco $ 938 $ 945
International tobacco 7,291 6,711
-----------------
Total excise taxes $ 8,229 $ 7,656
=================
(**) Basic and diluted earnings per share are computed for each of the
periods presented. Accordingly, the sum of the quarterly earnings per
share amounts may not agree to the year-to-date amounts.
ALTRIA GROUP, INC. Schedule 2
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended September 30,
(in millions)
(Unaudited)
North
Domestic International American International
tobacco tobacco food food
-----------------------------------------------
2006 Net Revenues $ 4,830 $ 12,703 $ 5,591 $ 2,652
2005 Net Revenues 4,731 12,075 5,551 2,506
% Change 2.1% 5.2% 0.7% 5.8%
Reconciliation:
2005 Net Revenues $ 4,731 $ 12,075 $ 5,551 $ 2,506
Divested businesses -
2005 - - (106) (5)
Divested businesses -
2006 - - - -
Implementation - 2006 - - - -
Acquired businesses - - - -
Currency - 156 52 73
Operations 99 472 94 78
-----------------------------------------------
2006 Net Revenues $ 4,830 $ 12,703 $ 5,591 $ 2,652
===============================================
Financial
services Total
-----------------------
2006 Net Revenues $ 109 $ 25,885
2005 Net Revenues 99 24,962
% Change 10.1% 3.7%
Reconciliation:
2005 Net Revenues $ 99 $ 24,962
Divested businesses -
2005 - (111)
Divested businesses -
2006 - -
Implementation - 2006 - -
Acquired businesses - -
Currency - 281
Operations 10 753
-----------------------
2006 Net Revenues $ 109 $ 25,885
=======================
Note: The detail of excise taxes on products sold is as follows:
2006 2005
-----------------------
Domestic tobacco $ 938 $ 945
International tobacco 7,291 6,711
-----------------------
Total excise taxes $ 8,229 $ 7,656
=======================
Currency increased international tobacco excise taxes by $96 million.
ALTRIA GROUP, INC. Schedule 3
and Subsidiaries
Selected Financial Data by Business Segment
For the Quarters Ended September 30,
(in millions)
(Unaudited)
North
Domestic International American International
tobacco tobacco food food
-----------------------------------------------
2006 Operating
Companies Income $1,270 $2,119 $930 $469
2005 Operating
Companies Income 1,202 2,202 948 252
% Change 5.7% (3.8)% (1.9)% 86.1%
Reconciliation:
----------------------
2005 Operating
Companies Income $1,202 $2,202 $948 $252
Divested businesses -
2005 - - (25) -
Domestic tobacco loss
on U.S. tobacco pool
- 2005 138 - - -
Domestic tobacco quota
buy-out - 2005 (115) - - -
Asset impairment and
exit costs - 2005 - 33 2 24
Implementation costs -
2005 - - 11 5
Provision for airline
industry exposure -
2005 - - - -
-----------------------------------------------
23 33 (12) 29
-----------------------------------------------
Divested businesses -
2006 - - - -
Asset impairment and
exit costs - 2006 - (65) (62) (63)
Gain on redemption of
United Biscuits
investment - 2006 - - - 251
(Losses) gains on
sales of businesses -
2006 - - (3) -
Implementation costs -
2006 - - (21) (2)
-----------------------------------------------
- (65) (86) 186
-----------------------------------------------
Acquired businesses - - - -
Currency - 5 12 8
Operations 45 (56) 68 (6)
-----------------------------------------------
2006 Operating
Companies Income $1,270 $2,119 $930 $469
===============================================
Financial
services Total
-----------------------
2006 Operating
Companies Income $101 $4,889
2005 Operating
Companies Income (121) 4,483
% Change NA 9.1%
Reconciliation:
----------------------
2005 Operating
Companies Income $(121) $4,483
Divested businesses -
2005 - (25)
Domestic tobacco loss
on U.S. tobacco pool
- 2005 - 138
Domestic tobacco quota
buy-out - 2005 - (115)
Asset impairment and
exit costs - 2005 - 59
Implementation costs -
2005 - 16
Provision for airline
industry exposure -
2005 200 200
-----------------------
200 273
-----------------------
Divested businesses -
2006 - -
Asset impairment and
exit costs - 2006 - (190)
Gain on redemption of
United Biscuits
investment - 2006 - 251
(Losses) gains on
sales of businesses -
2006 - (3)
Implementation costs -
2006 - (23)
-----------------------
- 35
-----------------------
Acquired businesses - -
Currency - 25
Operations 22 73
-----------------------
2006 Operating
Companies Income $101 $4,889
=======================
ALTRIA GROUP, INC. Schedule 4
and Subsidiaries
Condensed Statements of Earnings
For the Nine Months Ended September 30,
(in millions, except per share data)
(Unaudited)
2006 2005 % Change
---------------------------
Net revenues $76,009 $73,364 3.6%
Cost of sales 27,573 26,887 2.6%
Excise taxes on products (*) 23,670 22,271 6.3%
-----------------
Gross profit 24,766 24,206 2.3%
Marketing, administration and research
costs 10,463 10,333
Domestic tobacco headquarters relocation
charges - 3
Domestic tobacco loss on U.S. tobacco pool - 138
Domestic tobacco quota buy-out - (115)
Italian antitrust charge 61 -
Asset impairment and exit costs 641 262
Gain on redemption of United Biscuits
investment (251) -
(Gains) losses on sales of businesses, net 14 (115)
Provision for airline industry exposure 103 200
-----------------
Operating companies income 13,735 13,500 1.7%
Amortization of intangibles 23 14
General corporate expenses 482 484
Asset impairment and exit costs 35 40
-----------------
Operating income 13,195 12,962 1.8%
Interest and other debt expense, net 702 907
-----------------
Earnings from continuing operations before
income taxes, minority interest, and
equity earnings, net 12,493 12,055 3.6%
Provision for income taxes 3,275 3,581 (8.5)%
-----------------
Earnings from continuing operations before
minority interest, and equity earnings,
net 9,218 8,474 8.8%
Minority interest in earnings from
continuing operations, and equity
earnings, net 155 95
-----------------
Earnings from continuing operations 9,063 8,379 8.2%
Loss from discontinued operations, net of
income taxes and minority interest(**) - (233)
-----------------
Net earnings $ 9,063 $ 8,146 11.3%
=================
Per share data (***):
Basic earnings per share from continuing
operations $ 4.34 $ 4.05 7.2%
Basic earnings per share from discontinued
operations $ - $ (0.11)
-----------------
Basic earnings per share $ 4.34 $ 3.94 10.2%
=================
Diluted earnings per share from continuing
operations $ 4.31 $ 4.01 7.5%
Diluted earnings per share from
discontinued operations $ - $ (0.11)
-----------------
Diluted earnings per share $ 4.31 $ 3.90 10.5%
=================
Weighted average number of
shares outstanding - Basic 2,086 2,067 0.9%
- Diluted 2,104 2,087 0.8%
(*) The detail of excise taxes on products sold is as follows:
2006 2005
-----------------
Domestic tobacco $ 2,724 $ 2,761
International tobacco 20,946 19,510
-----------------
Total excise taxes $23,670 $22,271
=================
(**) Discontinued operations in 2005 includes $(255) from loss on sale
and $22 of earnings, net of minority interest impact
(***) Basic and diluted earnings per share are computed for each of
the periods presented. Accordingly, the sum of the quarterly earnings
per share amounts may not agree to the year-to-date amounts.
ALTRIA GROUP, INC. Schedule 5
and Subsidiaries
Selected Financial Data by Business Segment
For the Nine Months Ended September 30,
(in millions)
(Unaudited)
North
Domestic International American International
tobacco tobacco food food
-----------------------------------------------
2006 Net Revenues $ 13,938 $ 36,814 $ 17,179 $ 7,806
2005 Net Revenues 13,667 34,985 16,855 7,595
% Change 2.0% 5.2% 1.9% 2.8%
Reconciliation:
----------------------
2005 Net Revenues $ 13,667 $ 34,985 $ 16,855 $ 7,595
Divested businesses -
2005 - - (402) (27)
Divested businesses -
2006 - - 105 -
Implementation - 2005 - - 1 -
Implementation - 2006 - - - -
Acquired businesses - 1,192 - -
Currency - (916) 124 (126)
Operations 271 1,553 496 364
-----------------------------------------------
2006 Net Revenues $ 13,938 $ 36,814 $ 17,179 $ 7,806
===============================================
Financial
services Total
-----------------------
2006 Net Revenues $ 272 $ 76,009
2005 Net Revenues 262 73,364
% Change 3.8% 3.6%
Reconciliation:
----------------------
2005 Net Revenues $ 262 $ 73,364
Divested businesses -
2005 - (429)
Divested businesses -
2006 - 105
Implementation - 2005 - 1
Implementation - 2006 - -
Acquired businesses - 1,192
Currency - (918)
Operations 10 2,694
-----------------------
2006 Net Revenues $ 272 $ 76,009
=======================
Note: The detail of excise taxes on products sold is as follows:
2006 2005
-----------------------
Domestic tobacco $ 2,724 $ 2,761
International tobacco 20,946 19,510
-----------------------
Total excise taxes $ 23,670 $ 22,271
=======================
Currency decreased international tobacco excise taxes by $493 million.
ALTRIA GROUP, INC. Schedule 6
and Subsidiaries
Selected Financial Data by Business Segment
For the Nine Months Ended September 30,
(in millions)
(Unaudited)
North
Domestic International American International
tobacco tobacco food food
-----------------------------------------------
2006 Operating
Companies Income $ 3,687 $ 6,225 $ 2,868 $ 817
2005 Operating
Companies Income 3,501 6,301 2,916 792
% Change 5.3% (1.2)% (1.6)% 3.2%
Reconciliation:
----------------------
2005 Operating
Companies Income $ 3,501 $ 6,301 $ 2,916 $ 792
Divested businesses -
2005 - - (63) (3)
Domestic tobacco
headquarters
relocation charges -
2005 3 - - -
Domestic tobacco loss
on U.S. tobacco pool
- 2005 138 - - -
Domestic tobacco quota
buy-out - 2005 (115) - - -
Asset impairment and
exit costs - 2005 - 57 124 81
Losses (gains) on
sales of businesses -
2005 - - 1 (116)
Implementation costs -
2005 - - 43 18
Provision for airline
industry exposure -
2005 - - - -
-----------------------------------------------
26 57 105 (20)
-----------------------------------------------
Divested businesses -
2006 - - 34 -
Italian antitrust
charge - 2006 - (61) - -
Asset impairment and
exit costs - 2006 - (88) (316) (237)
Gain on redemption of
United Biscuits
investment - 2006 - - - 251
(Losses) gains on
sales of businesses -
2006 - - (14) -
Implementation costs -
2006 - - (38) (15)
Provision for airline
industry exposure -
2006 - - - -
-----------------------------------------------
- (149) (334) (1)
-----------------------------------------------
Acquired businesses - 227 - -
Currency - (219) 25 (11)
Operations 160 8 156 57
-----------------------------------------------
2006 Operating
Companies Income $ 3,687 $ 6,225 $ 2,868 $ 817
===============================================
Financial
services Total
-----------------------
2006 Operating
Companies Income $ 138 $ 13,735
2005 Operating
Companies Income (10) 13,500
% Change NA 1.7%
Reconciliation:
----------------------
2005 Operating
Companies Income $ (10) $ 13,500
Divested businesses -
2005 - (66)
Domestic tobacco
headquarters
relocation charges -
2005 - 3
Domestic tobacco loss
on U.S. tobacco pool
- 2005 - 138
Domestic tobacco quota
buy-out - 2005 - (115)
Asset impairment and
exit costs - 2005 - 262
Losses (gains) on
sales of businesses -
2005 - (115)
Implementation costs -
2005 - 61
Provision for airline
industry exposure -
2005 200 200
-----------------------
200 368
-----------------------
Divested businesses -
2006 - 34
Italian antitrust
charge - 2006 - (61)
Asset impairment and
exit costs - 2006 - (641)
Gain on redemption of
United Biscuits
investment - 2006 - 251
(Losses) gains on
sales of businesses -
2006 - (14)
Implementation costs -
2006 - (53)
Provision for airline
industry exposure -
2006 (103) (103)
-----------------------
(103) (587)
-----------------------
Acquired businesses - 227
Currency - (205)
Operations 51 432
-----------------------
2006 Operating
Companies Income $ 138 $ 13,735
=======================
ALTRIA GROUP, INC. Schedule 7
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Quarters Ended September 30,
($ in millions, except per share data)
(Unaudited)
Diluted
Net Earnings E.P.S. (*)
------------- ------------
2006 Net Earnings $2,875 $1.36
2005 Net Earnings $2,883 $1.38
% Change (0.3)% (1.4)%
Reconciliation:
----------------------------------------
2005 Net Earnings $2,883 $1.38
2005 Domestic tobacco loss on U.S.
tobacco pool 87 0.04
2005 Domestic tobacco quota buy-out (72) (0.03)
2005 Asset impairment, exit and
implementation costs, net of minority
interest impact 51 0.02
2005 Corporate asset impairment and exit
costs 2 -
2005 Provision for airline industry
exposure 129 0.06
2005 Tax items, net of minority interest
impact (204) (0.10)
------------- ------------
(7) (0.01)
------------- ------------
2006 Asset impairment, exit and
implementation costs, net of minority
interest impact (125) (0.06)
2006 Gain on redemption of United
Biscuits investment, net of minority
interest impact 131 0.06
2006 Gains (losses) on sales of
businesses, net of minority interest
impact (53) (0.02)
2006 Corporate asset impairment and exit
costs (2) -
2006 Tax items, net of minority interest
impact (11) (0.01)
------------- ------------
(60) (0.03)
------------- ------------
Currency 17 0.01
Change in shares - (0.01)
Change in tax rate (40) (0.02)
Operations 82 0.04
------------- ------------
2006 Net Earnings $2,875 $1.36
============= ============
(*) Basic and diluted earnings per share are computed for each of the
periods presented. Accordingly, the sum of the quarterly earnings per
share amounts may not agree to the year-to-date amounts.
ALTRIA GROUP, INC. Schedule 8
and Subsidiaries
Net Earnings and Diluted Earnings Per Share
For the Nine Months Ended September 30,
($ in millions, except per share data)
(Unaudited)
Diluted
Net Earnings E.P.S. (*)
------------- ------------
2006 Continuing Earnings $ 9,063 $ 4.31
2005 Continuing Earnings $ 8,379 $ 4.01
% Change 8.2 % 7.5 %
Reconciliation:
----------------------------------------
2005 Continuing Earnings $ 8,379 $ 4.01
2005 Domestic tobacco headquarters
relocation charges 2 -
2005 Domestic tobacco loss on U.S.
tobacco pool 87 0.04
2005 Domestic tobacco quota buy-out (72) (0.03)
2005 Asset impairment, exit and
implementation costs, net of minority
interest impact 195 0.11
2005 Gains on sales of businesses, net
of minority interest impact (64) (0.03)
2005 Corporate asset impairment and exit
costs 27 0.01
2005 Provision for airline industry
exposure 129 0.06
2005 Tax items, net of minority interest
impact (470) (0.23)
------------- ------------
(166) (0.07)
------------- ------------
2006 Italian antitrust charge (61) (0.03)
2006 Asset impairment, exit and
implementation costs, net of minority
interest impact (409) (0.19)
2006 Gain on redemption of United
Biscuits investment, net of minority
interest impact 131 0.06
2006 Gains (losses) on sales of
businesses, net of minority interest
impact (59) (0.03)
2006 Corporate asset impairment and exit
costs (23) (0.01)
2006 Provision for airline industry
exposure (66) (0.03)
2006 Tax items, net of minority interest
impact 954 0.45
------------- ------------
467 0.22
------------- ------------
Currency (134) (0.07)
Change in shares - (0.03)
Change in tax rate 27 0.01
Operations 490 0.24
------------- ------------
2006 Continuing Earnings $ 9,063 $ 4.31
2006 Discontinued Earnings $ - $ -
------------- ------------
2006 Net Earnings $ 9,063 $ 4.31
============= ============
(*) Basic and diluted earnings per share are computed for each of the
periods presented. Accordingly, the sum of the quarterly earnings per
share amounts may not agree to the year-to-date amounts.
ALTRIA GROUP, INC. Schedule 9
and Subsidiaries
Condensed Balance Sheets
(in millions, except ratios)
(Unaudited)
September 30, December 31,
2006 2005
------------- ------------
Assets
-------------------------------------------
Cash and cash equivalents $ 5,695 $ 6,258
All other current assets 20,504 19,523
Property, plant and equipment, net 17,043 16,678
Goodwill 33,142 31,219
Other intangible assets, net 11,868 12,196
Other assets 12,768 14,667
------------- ------------
Total consumer products assets 101,020 100,541
Total financial services assets 6,759 7,408
------------- ------------
Total assets $ 107,779 $ 107,949
============= ============
Liabilities and Stockholders' Equity
-------------------------------------------
Short-term borrowings $ 3,172 $ 2,836
Current portion of long-term debt 3,243 3,430
Accrued settlement charges 3,351 3,503
All other current liabilities 17,555 16,389
Long-term debt 12,117 15,653
Deferred income taxes 7,618 8,492
Other long-term liabilities 12,717 13,813
------------- ------------
Total consumer products liabilities 59,773 64,116
Total financial services liabilities 6,816 8,126
------------- ------------
Total liabilities 66,589 72,242
Total stockholders' equity 41,190 35,707
------------- ------------
Total liabilities and
stockholders' equity $ 107,779 $ 107,949
============= ============
Total consumer products debt $ 18,532 $ 21,919
Debt/equity ratio - consumer products 0.45 0.61
Total debt $ 19,636 $ 23,933
Total debt/equity ratio 0.48 0.67
CONTACT: Altria Group, Inc.
Nicholas M. Rolli, 917-663-3460
or
Timothy R. Kellogg, 917-663-2759
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