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Altria Group Inc. (MO) | Analysis of Inventory

Inventory Accounting Policy

Inventories are stated at the lower of cost or market. The last-in, first-out (“LIFO”) method is used to cost substantially all tobacco inventories. The cost of the remaining inventories is determined using the first-in, first-out (“FIFO”) and average cost methods. It is a generally recognized industry practice to classify leaf tobacco and wine inventories as current assets although part of such inventory, because of the duration of the curing and aging process, ordinarily would not be utilized within one year.

Source: Altria Group Inc., Annual Report

Inventory Disclosure

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Altria Group Inc., Statement of Financial Position, Inventory

USD $ in millions

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
Leaf tobacco
Other raw materials
Work in process
Finished product
Inventories

Source: Based on data from Altria Group Inc. Annual Reports

Item Description The company
Leaf tobacco Carrying amount as of the balance sheet date of unprocessed items to be consumed in the manufacturing or production process. Also includes purchased parts that will be used as components of a finished product. Altria Group Inc.'s leaf tobacco increased from 2008 to 2009 but then slightly declined from 2009 to 2010.
Work in process Carrying amount as of the balance sheet date of merchandise or goods which are partially completed, are generally comprised of raw materials, labor and factory overhead costs, and which require further materials, labor and overhead to be converted into finished goods, and which generally require the use of estimates to determine percentage complete and pricing. Altria Group Inc.'s work in process increased from 2008 to 2009 and from 2009 to 2010.
Finished product Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale. Altria Group Inc.'s finished product increased from 2008 to 2009 and from 2009 to 2010.
Inventories Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer). Altria Group Inc.'s inventories increased from 2008 to 2009 but then slightly declined from 2009 to 2010.

Adjustment to Inventory: from LIFO to FIFO

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Adjusting LIFO Inventory to FIFO (Current) Cost

USD $ in millions

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Adjustment to Inventories
Inventories at LIFO (as reported)
Add: LIFO reserve, ending balance
Inventories at FIFO (adjusted)
  Adjustment to Current Assets
Current assets (as reported)
Add: LIFO reserve, ending balance
Current assets (adjusted)
  Adjustment to Total Assets
Total assets (as reported)
Add: LIFO reserve, ending balance
Total assets (adjusted)
  Adjustment to Stockholders’ Equity Attributable To Altria Group, Inc.
Stockholders’ equity attributable to Altria Group, Inc. (as reported)
Add: LIFO reserve, ending balance
Stockholders’ equity attributable to Altria Group, Inc. (adjusted)
  Adjustment to Net Earnings Attributable To Altria Group, Inc.
Net earnings attributable to Altria Group, Inc. (as reported)
Add: Increase (decrease) in LIFO reserve, ending balance
Net earnings attributable to Altria Group, Inc. (adjusted)

Altria Group Inc.'s inventory value on Dec 31, 2010 would be $2,503  (in millions) if the FIFO inventory method was used instead of LIFO. Altria Group Inc.'s inventories, valued on a LIFO basis, on Dec 31, 2010 were $1,803 . Altria Group Inc.'s inventories would have been $700  higher than reported on Dec 31, 2010 if the FIFO method had been used instead.

Adjusted Ratios: LIFO vs. FIFO (Summary)

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Altria Group Inc., adjusted ratios

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  Current Ratio
Reported current ratio (LIFO)
Adjusted current ratio (FIFO)
  Net Profit Margin
Reported net profit margin (LIFO) % % % % %
Adjusted net profit margin (FIFO) % % % % %
  Total Asset Turnover
Reported total asset turnover (LIFO)
Adjusted total asset turnover (FIFO)
  Financial Leverage
Reported financial leverage (LIFO)
Adjusted financial leverage (FIFO)
  Return on Equity (ROE)
Reported ROE (LIFO) % % % % %
Adjusted ROE (FIFO) % % % % %
  Return on Assets (ROA)
Reported ROA (LIFO) % % % % %
Adjusted ROA (FIFO) % % % % %
Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Altria Group Inc.'s adjusted current ratio deteriorated from 2008 to 2009 but then slightly improved from 2009 to 2010.
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Altria Group Inc.'s adjusted net profit margin deteriorated from 2008 to 2009 but then slightly improved from 2009 to 2010.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Altria Group Inc.'s adjusted total asset turnover deteriorated from 2008 to 2009 but then slightly improved from 2009 to 2010.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Altria Group Inc.'s adjusted financial leverage declined from 2008 to 2009 and from 2009 to 2010.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Altria Group Inc.'s adjusted ROE deteriorated from 2008 to 2009 and from 2009 to 2010.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Altria Group Inc.'s adjusted ROA deteriorated from 2008 to 2009 but then slightly improved from 2009 to 2010.

Adjusted Current Ratio

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Current assets (USD $ in millions)
Current liabilities (USD $ in millions)
   
Current ratio1
  Adjusted: from LIFO to FIFO
Adjusted current assets (USD $ in millions)
Current liabilities (USD $ in millions)
   
Adjusted current ratio2

2010 Calculations

1 Current ratio = Current assets ÷ Current liabilities
= ÷ =

2 Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= ÷ =

Ratio Description The company
Adjusted current ratio A liquidity ratio calculated as adjusted current assets divided by current liabilities. Altria Group Inc.'s adjusted current ratio deteriorated from 2008 to 2009 but then slightly improved from 2009 to 2010.

Adjusted Net Profit Margin

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Net earnings attributable to Altria Group, Inc. (USD $ in millions)
Net revenues (USD $ in millions)
   
Net profit margin1 % % % % %
  Adjusted: from LIFO to FIFO
Adjusted net earnings attributable to Altria Group, Inc. (USD $ in millions)
Net revenues (USD $ in millions)
   
Adjusted net profit margin2 % % % % %

2010 Calculations

1 Net profit margin = 100 × Net earnings attributable to Altria Group, Inc. ÷ Net revenues
= 100 × ÷ = %

2 Adjusted net profit margin = 100 × Adjusted net earnings attributable to Altria Group, Inc. ÷ Net revenues
= 100 × ÷ = %

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Altria Group Inc.'s adjusted net profit margin deteriorated from 2008 to 2009 but then slightly improved from 2009 to 2010.

Adjusted Total Asset Turnover

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Net revenues (USD $ in millions)
Total assets (USD $ in millions)
   
Total asset turnover1
  Adjusted: from LIFO to FIFO
Net revenues (USD $ in millions)
Adjusted total assets (USD $ in millions)
   
Adjusted total asset turnover2

2010 Calculations

1 Total asset turnover = Net revenues ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Net revenues ÷ Adjusted total assets
= ÷ =

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Altria Group Inc.'s adjusted total asset turnover deteriorated from 2008 to 2009 but then slightly improved from 2009 to 2010.

Adjusted Financial Leverage

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Total assets (USD $ in millions)
Stockholders’ equity attributable to Altria Group, Inc. (USD $ in millions)
   
Financial leverage1
  Adjusted: from LIFO to FIFO
Adjusted total assets (USD $ in millions)
Adjusted stockholders’ equity attributable to Altria Group, Inc. (USD $ in millions)
   
Adjusted financial leverage2

2010 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity attributable to Altria Group, Inc.
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity attributable to Altria Group, Inc.
= ÷ =

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.		 Altria Group Inc.'s adjusted financial leverage declined from 2008 to 2009 and from 2009 to 2010.

Adjusted Return On Equity (ROE)

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Net earnings attributable to Altria Group, Inc. (USD $ in millions)
Stockholders’ equity attributable to Altria Group, Inc. (USD $ in millions)
   
ROE1 % % % % %
  Adjusted: from LIFO to FIFO
Adjusted net earnings attributable to Altria Group, Inc. (USD $ in millions)
Adjusted stockholders’ equity attributable to Altria Group, Inc. (USD $ in millions)
   
Adjusted ROE2 % % % % %

2010 Calculations

1 ROE = 100 × Net earnings attributable to Altria Group, Inc. ÷ Stockholders’ equity attributable to Altria Group, Inc.
= 100 × ÷ = %

2 Adjusted ROE = 100 × Adjusted net earnings attributable to Altria Group, Inc. ÷ Adjusted stockholders’ equity attributable to Altria Group, Inc.
= 100 × ÷ = %

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. Altria Group Inc.'s adjusted ROE deteriorated from 2008 to 2009 and from 2009 to 2010.

Adjusted Return On Assets (ROA)

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    Dec 31, 2010 Dec 31, 2009 Dec 31, 2008 Dec 31, 2007 Dec 31, 2006
  As Reported
Net earnings attributable to Altria Group, Inc. (USD $ in millions)
Total assets (USD $ in millions)
   
ROA1 % % % % %
  Adjusted: from LIFO to FIFO
Adjusted net earnings attributable to Altria Group, Inc. (USD $ in millions)
Adjusted total assets (USD $ in millions)
   
Adjusted ROA2 % % % % %

2010 Calculations

1 ROA = 100 × Net earnings attributable to Altria Group, Inc. ÷ Total assets
= 100 × ÷ = %

2 Adjusted ROA = 100 × Adjusted net earnings attributable to Altria Group, Inc. ÷ Adjusted total assets
= 100 × ÷ = %

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Altria Group Inc.'s adjusted ROA deteriorated from 2008 to 2009 but then slightly improved from 2009 to 2010.

February 7, 2012

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