UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2004
OR
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 1-8940
Altria Group, Inc.
(Exact name of registrant as specified in its charter)
| Virginia | 13-3260245 | |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| 120 Park Avenue, New York, New York | 10017 | |
| (Address of principal executive offices) | (Zip Code) | |
Registrant’s telephone number, including area code (917) 663-4000
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes x No ¨
At July 30, 2004, there were 2,051,782,430 shares outstanding of the registrant’s common stock, par value $0.33 1/3 per share.
TABLE OF CONTENTS
| Page No. | ||||
| PART I - |
FINANCIAL INFORMATION | |||
| Item 1. |
||||
| Condensed Consolidated Balance Sheets at June 30, 2004 and December 31, 2003 |
3 – 4 | |||
| 5 | ||||
| 6 | ||||
| 7 | ||||
| Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003 |
8 – 9 | |||
| 10 – 33 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
34 – 62 | ||
| Item 4. |
63 | |||
| PART II - |
||||
| Item 1. |
64 | |||
| Item 2. |
Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities |
64 | ||
| Item 6. |
65 | |||
| 66 | ||||
-2-
PART I – FINANCIAL INFORMATION
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions of dollars)
(Unaudited)
| June 30, 2004 |
December 31, 2003 | |||||
| ASSETS |
||||||
| Consumer products |
||||||
| Cash and cash equivalents |
$ | 5,031 | $ | 3,777 | ||
| Receivables (less allowances of $128 and $135) |
5,672 | 5,256 | ||||
| Inventories: |
||||||
| Leaf tobacco |
3,228 | 3,591 | ||||
| Other raw materials |
2,179 | 2,009 | ||||
| Finished product |
3,809 | 3,940 | ||||
| 9,216 | 9,540 | |||||
| Other current assets |
2,228 | 2,809 | ||||
| Total current assets |
22,147 | 21,382 | ||||
| Property, plant and equipment, at cost |
27,551 | 27,233 | ||||
| Less accumulated depreciation |
11,778 | 11,166 | ||||
| 15,773 | 16,067 | |||||
| Goodwill |
28,316 | 27,742 | ||||
| Other intangible assets, net |
11,442 | 11,803 | ||||
| Other assets |
12,047 | 10,641 | ||||
| Total consumer products assets |
89,725 | 87,635 | ||||
| Financial services |
||||||
| Finance assets, net |
8,055 | 8,393 | ||||
| Other assets |
141 | 147 | ||||
| Total financial services assets |
8,196 | 8,540 | ||||
| TOTAL ASSETS |
$ | 97,921 | $ | 96,175 | ||
See notes to condensed consolidated financial statements.
Continued
-3-
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Continued)
(in millions of dollars, except share and per share data)
(Unaudited)
| June 30, 2004 |
December 31, 2003 |
|||||||
| LIABILITIES |
||||||||
| Consumer products |
||||||||
| Short-term borrowings |
$ | 2,576 | $ | 1,715 | ||||
| Current portion of long-term debt |
1,749 | 1,661 | ||||||
| Accounts payable |
2,877 | 3,198 | ||||||
| Accrued liabilities: |
||||||||
| Marketing |
2,471 | 2,443 | ||||||
| Taxes, except income taxes |
2,751 | 2,325 | ||||||
| Employment costs |
970 | 1,363 | ||||||
| Settlement charges |
2,338 | 3,530 | ||||||
| Other |
2,642 | 2,455 | ||||||
| Income taxes |
1,282 | 1,316 | ||||||
| Dividends payable |
1,398 | 1,387 | ||||||
| Total current liabilities |
21,054 | 21,393 | ||||||
| Long-term debt |
18,488 | 18,953 | ||||||
| Deferred income taxes |
7,479 | 7,295 | ||||||
| Accrued postretirement health care costs |
3,287 | 3,216 | ||||||
| Minority interest |
4,685 | 4,760 | ||||||
| Other liabilities |
6,858 | 7,161 | ||||||
| Total consumer products liabilities |
61,851 | 62,778 | ||||||
| Financial services |
||||||||
| Long-term debt |
2,071 | 2,210 | ||||||
| Deferred income taxes |
5,816 | 5,815 | ||||||
| Other liabilities |
408 | 295 | ||||||
| Total financial services liabilities |
8,295 | 8,320 | ||||||
| Total liabilities |
70,146 | 71,098 | ||||||
| Contingencies (Note 9) |
||||||||
| STOCKHOLDERS’ EQUITY |
||||||||
| Common stock, par value $0.33 1/3 per share (2,805,961,317 shares issued) |
935 | 935 | ||||||
| Additional paid-in capital |
5,112 | 4,813 | ||||||
| Earnings reinvested in the business |
48,950 | 47,008 | ||||||
| Accumulated other comprehensive losses (including currency translation of $1,641 and $1,578) |
(2,125 | ) | (2,125 | ) | ||||
| 52,872 | 50,631 | |||||||
| Less cost of repurchased stock (754,317,308 and 768,697,895 shares) |
(25,097 | ) | (25,554 | ) | ||||
| Total stockholders’ equity |
27,775 | 25,077 | ||||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
$ | 97,921 | $ | 96,175 | ||||
See notes to condensed consolidated financial statements.
-4-
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(in millions of dollars, except per share data)
(Unaudited)
| For the Six Months Ended June 30, | ||||||
| 2004 |
2003 | |||||
| Net revenues |
$ | 44,847 | $ | 40,202 | ||
| Cost of sales |
16,720 | 15,556 | ||||
| Excise taxes on products |
12,880 | 10,231 | ||||
| Gross profit |
15,247 | 14,415 | ||||
| Marketing, administration and research costs |
6,839 | 6,164 | ||||
| Domestic tobacco headquarters relocation charges |
20 | 9 | ||||
| Domestic tobacco legal settlement |
182 | |||||
| International tobacco E.C. agreement |
250 | |||||
| Asset impairment and exit costs |
485 | |||||
| Amortization of intangibles |
9 | 5 | ||||
| Operating income |
7,644 | 8,055 | ||||
| Interest and other debt expense, net |
597 | 546 | ||||
| Earnings before income taxes and minority interest |
7,047 | 7,509 | ||||
| Provision for income taxes |
2,149 | 2,643 | ||||
| Earnings before minority interest |
4,898 | 4,866 | ||||
| Minority interest in earnings and other, net |
77 | 243 | ||||
| Net earnings |
$ | 4,821 | $ | 4,623 | ||
| Per share data: |
||||||
| Basic earnings per share |
$ | 2.36 | $ | 2.28 | ||
| Diluted earnings per share |
$ | 2.34 | $ | 2.27 | ||
| Dividends declared |
$ | 1.36 | $ | 1.28 | ||
See notes to condensed consolidated financial statements.
-5-
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings
(in millions of dollars, except per share data)
(Unaudited)
| For the Three Months Ended June 30, | ||||||
| 2004 |
2003 | |||||
| Net revenues |
$ | 23,008 | $ | 20,831 | ||
| Cost of sales |
8,636 | 7,991 | ||||
| Excise taxes on products |
6,563 | 5,344 | ||||
| Gross profit |
7,809 | 7,496 | ||||
| Marketing, administration and research costs |
3,468 | 3,111 | ||||
| Domestic tobacco headquarters relocation charges |
10 | 9 | ||||
| Domestic tobacco legal settlement |
182 | |||||
| International tobacco E.C. agreement |
250 | |||||
| Asset impairment and exit costs |
160 | |||||
| Amortization of intangibles |
5 | 3 | ||||
| Operating income |
3,916 | 4,191 | ||||
| Interest and other debt expense, net |
297 | 263 | ||||
| Earnings before income taxes and minority interest |
3,619 | 3,928 | ||||
| Provision for income taxes |
963 | 1,382 | ||||
| Earnings before minority interest |
2,656 | 2,546 | ||||
| Minority interest in earnings and other, net |
29 | 109 | ||||
| Net earnings |
$ | 2,627 | $ | 2,437 | ||
| Per share data: |
||||||
| Basic earnings per share |
$ | 1.28 | $ | 1.20 | ||
| Diluted earnings per share |
$ | 1.27 | $ | 1.20 | ||
| Dividends declared |
$ | 0.68 | $ | 0.64 | ||
See notes to condensed consolidated financial statements.
-6-
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ Equity
for the Year Ended December 31, 2003 and
the Six Months Ended June 30, 2004
(in millions of dollars, except per share data)
(Unaudited)
| Accumulated Other Comprehensive Earnings |
||||||||||||||||||||||||||||||
| Common Stock |
Addi- tional Paid-in |
Earnings vested in the |
Currency Translation Adjustments |
Other |
Total |
Cost of chased |
Total Stock- holders’ Equity |
|||||||||||||||||||||||
| Balances, January 1, 2003 |
$ | 935 | $ | 4,642 | $ | 43,259 | $ | (2,951 | ) | $ | (1,005 | ) | $ | (3,956 | ) | $ | (25,402 | ) | $ | 19,478 | ||||||||||
| Comprehensive earnings: |
||||||||||||||||||||||||||||||
| Net earnings |
9,204 | 9,204 | ||||||||||||||||||||||||||||
| Other comprehensive earnings (losses), net of income taxes: |
||||||||||||||||||||||||||||||
| Currency translation adjustments |
1,373 | 1,373 | 1,373 | |||||||||||||||||||||||||||
| Additional minimum pension liability |
464 | 464 | 464 | |||||||||||||||||||||||||||
| Change in fair value of derivatives accounted for as hedges |
(6 | ) | (6 | ) | (6 | ) | ||||||||||||||||||||||||
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