ý
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Virginia
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13-3260245
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification No.)
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6601 West Broad Street, Richmond, Virginia
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23230
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
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þ
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Accelerated filer
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¨
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Non-accelerated filer
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¨
(Do not check if a smaller reporting company)
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Smaller reporting company
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¨
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Page No.
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PART I -
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FINANCIAL INFORMATION
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Item 1.
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Financial Statements (Unaudited)
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Item 2.
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Item 3.
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Item 4.
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PART II -
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OTHER INFORMATION
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Item 1.
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Item 1A.
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Item 2.
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Item 6.
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Signature
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March 31, 2016
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December 31, 2015
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||||
Assets
|
|
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||||
Cash and cash equivalents
|
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$
|
3,815
|
|
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$
|
2,369
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Receivables
|
|
104
|
|
|
124
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||
Inventories:
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|
|
|
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||||
Leaf tobacco
|
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994
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957
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||
Other raw materials
|
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178
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|
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181
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Work in process
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436
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444
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Finished product
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500
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449
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2,108
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2,031
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Deferred income taxes
|
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1,175
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1,175
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Other current assets
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296
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387
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||
Total current assets
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7,498
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6,086
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Property, plant and equipment, at cost
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4,849
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4,877
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||
Less accumulated depreciation
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2,894
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|
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2,895
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||
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1,955
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1,982
|
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||
Goodwill
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5,285
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5,285
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Other intangible assets, net
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12,023
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|
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12,028
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Investment in SABMiller
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5,743
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5,483
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Finance assets, net
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1,165
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|
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1,239
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Other assets
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394
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|
|
360
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|
||
Total Assets
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$
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34,063
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$
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32,463
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March 31, 2016
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December 31, 2015
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||||
Liabilities
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||||
Current portion of long-term debt
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$
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4
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$
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4
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Accounts payable
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208
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|
|
400
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Accrued liabilities:
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|
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||||
Marketing
|
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687
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695
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||
Employment costs
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137
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198
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||
Settlement charges
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4,760
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3,590
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Other
|
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1,121
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1,081
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||
Income taxes
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590
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|
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—
|
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||
Dividends payable
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1,109
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1,110
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Total current liabilities
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8,616
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7,078
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Long-term debt
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12,846
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12,843
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Deferred income taxes
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5,606
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5,663
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Accrued pension costs
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1,479
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1,277
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Accrued postretirement health care costs
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2,314
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2,245
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Other liabilities
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417
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447
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Total liabilities
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31,278
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29,553
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Contingencies (Note 10)
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||||
Redeemable noncontrolling interest
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37
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37
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Stockholders’ Equity
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||||
Common stock, par value $0.33 1/3 per share
(2,805,961,317 shares issued)
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935
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935
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Additional paid-in capital
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5,818
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5,813
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Earnings reinvested in the business
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27,367
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27,257
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Accumulated other comprehensive losses
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(3,327
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)
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(3,280
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)
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Cost of repurchased stock
(849,251,121 shares at March 31, 2016 and
845,901,836 shares at December 31, 2015)
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(28,048
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)
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(27,845
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)
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Total stockholders’ equity attributable to Altria Group, Inc.
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2,745
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2,880
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Noncontrolling interests
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3
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(7
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)
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Total stockholders’ equity
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2,748
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2,873
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Total Liabilities and Stockholders’ Equity
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$
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34,063
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$
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32,463
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For the Three Months Ended March 31,
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||||||
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2016
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2015
|
||||
Net revenues
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$
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6,066
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$
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5,804
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Cost of sales
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1,874
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1,797
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Excise taxes on products
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1,536
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1,532
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Gross profit
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2,656
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2,475
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Marketing, administration and research costs
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559
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610
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Asset impairment and exit costs
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120
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—
|
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Operating income
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1,977
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1,865
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Interest and other debt expense, net
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200
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209
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Loss on early extinguishment of debt
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—
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228
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|
||
Earnings from equity investment in SABMiller
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(66
|
)
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(134
|
)
|
||
Gain on derivative financial instrument
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(40
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)
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—
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Earnings before income taxes
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1,883
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1,562
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Provision for income taxes
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665
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|
|
544
|
|
||
Net earnings
|
|
1,218
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|
1,018
|
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||
Net earnings attributable to noncontrolling interests
|
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(1
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)
|
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—
|
|
||
Net earnings attributable to Altria Group, Inc.
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$
|
1,217
|
|
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$
|
1,018
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Per share data:
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|
||||
Basic and diluted earnings per share attributable to Altria Group, Inc.
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$
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0.62
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$
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0.52
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Dividends declared
|
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$
|
0.565
|
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$
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0.52
|
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For the Three Months Ended March 31,
|
||||||
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2016
|
|
2015
|
||||
Net earnings
|
|
$
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1,218
|
|
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$
|
1,018
|
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Other comprehensive earnings (losses), net of deferred income taxes:
|
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|
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|
||||
Currency translation adjustments
|
|
1
|
|
|
(1
|
)
|
||
Benefit plans
|
|
(174
|
)
|
|
42
|
|
||
SABMiller
|
|
126
|
|
|
(304
|
)
|
||
Other comprehensive losses, net of deferred income taxes
|
|
(47
|
)
|
|
(263
|
)
|
||
|
|
|
|
|
||||
Comprehensive earnings
|
|
1,171
|
|
|
755
|
|
||
Comprehensive earnings attributable to noncontrolling interests
|
|
(1
|
)
|
|
—
|
|
||
Comprehensive earnings attributable to Altria Group, Inc.
|
|
$
|
1,170
|
|
|
$
|
755
|
|
|
|
Attributable to Altria Group, Inc.
|
|
|
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|
||||||||||||||||||||||
|
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Common
Stock
|
|
Additional
Paid-in
Capital
|
|
Earnings
Reinvested
in the
Business
|
|
Accumulated
Other
Comprehensive
Losses
|
|
Cost of
Repurchased
Stock
|
|
Non-controlling
Interests
|
|
Total
Stockholders’
Equity
|
||||||||||||||
Balances, December 31, 2014
|
|
$
|
935
|
|
|
$
|
5,735
|
|
|
$
|
26,277
|
|
|
$
|
(2,682
|
)
|
|
$
|
(27,251
|
)
|
|
$
|
(4
|
)
|
|
$
|
3,010
|
|
Net earnings (losses)
(1)
|
|
—
|
|
|
—
|
|
|
5,241
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
5,238
|
|
|||||||
Other comprehensive losses, net of deferred income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(598
|
)
|
|
—
|
|
|
—
|
|
|
(598
|
)
|
|||||||
Stock award activity
|
|
—
|
|
|
78
|
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|
—
|
|
|
38
|
|
|||||||
Cash dividends declared ($2.17 per share)
|
|
—
|
|
|
—
|
|
|
(4,261
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,261
|
)
|
|||||||
Repurchases of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(554
|
)
|
|
—
|
|
|
(554
|
)
|
|||||||
Balances, December 31, 2015
|
|
935
|
|
|
5,813
|
|
|
27,257
|
|
|
(3,280
|
)
|
|
(27,845
|
)
|
|
(7
|
)
|
|
2,873
|
|
|||||||
Net earnings
(1)
|
|
—
|
|
|
—
|
|
|
1,217
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,217
|
|
|||||||
Other comprehensive losses, net of deferred income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
|
—
|
|
|
—
|
|
|
(47
|
)
|
|||||||
Stock award activity
|
|
—
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
(35
|
)
|
|
—
|
|
|
(20
|
)
|
|||||||
Cash dividends declared ($0.565 per share)
|
|
—
|
|
|
—
|
|
|
(1,107
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,107
|
)
|
|||||||
Repurchases of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(168
|
)
|
|
—
|
|
|
(168
|
)
|
|||||||
Other
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|||||||
Balances, March 31, 2016
|
|
$
|
935
|
|
|
$
|
5,818
|
|
|
$
|
27,367
|
|
|
$
|
(3,327
|
)
|
|
$
|
(28,048
|
)
|
|
$
|
3
|
|
|
$
|
2,748
|
|
(1)
|
Amounts attributable to noncontrolling interests
for the three months ended March 31, 2016
and for the year ended
December 31, 2015
exclude net earnings of
$1 million
and
$5 million
, respectively, due to the redeemable noncontrolling interest related to Stag’s Leap Wine Cellars
,
which is reported in the mezzanine equity section in the condensed consolidated balance sheets at
March 31, 2016
and
December 31, 2015
.
|
|
|
For the Three Months Ended March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
Cash Provided by (Used in) Operating Activities
|
|
|
|
|
||||
Net earnings
|
|
$
|
1,218
|
|
|
$
|
1,018
|
|
Adjustments to reconcile net earnings to operating cash flows:
|
|
|
|
|
||||
Depreciation and amortization
|
|
49
|
|
|
49
|
|
||
Deferred income tax benefit
|
|
(32
|
)
|
|
(40
|
)
|
||
Earnings from equity investment in SABMiller
|
|
(66
|
)
|
|
(134
|
)
|
||
Asset impairment and exit costs, net of cash paid
|
|
118
|
|
|
(1
|
)
|
||
Loss on early extinguishment of debt
|
|
—
|
|
|
228
|
|
||
Cash effects of changes:
|
|
|
|
|
||||
Receivables
|
|
20
|
|
|
25
|
|
||
Inventories
|
|
(79
|
)
|
|
(62
|
)
|
||
Accounts payable
|
|
(217
|
)
|
|
(166
|
)
|
||
Income taxes
|
|
645
|
|
|
541
|
|
||
Accrued liabilities and other current assets
|
|
(115
|
)
|
|
(117
|
)
|
||
Accrued settlement charges
|
|
1,170
|
|
|
1,051
|
|
||
Pension plan contributions
|
|
(3
|
)
|
|
(4
|
)
|
||
Pension provisions and postretirement, net
|
|
(18
|
)
|
|
25
|
|
||
Other
|
|
(1
|
)
|
|
85
|
|
||
Net cash provided by operating activities
|
|
2,689
|
|
|
2,498
|
|
||
Cash Provided by (Used in) Investing Activities
|
|
|
|
|
||||
Capital expenditures
|
|
$
|
(26
|
)
|
|
$
|
(48
|
)
|
Proceeds from finance assets
|
|
56
|
|
|
147
|
|
||
Other
|
|
4
|
|
|
—
|
|
||
Net cash provided by investing activities
|
|
34
|
|
|
99
|
|
||
Cash Used in Financing Activities
|
|
|
|
|
||||
Long-term debt repaid
|
|
—
|
|
|
(793
|
)
|
||
Repurchases of common stock
|
|
(168
|
)
|
|
(192
|
)
|
||
Dividends paid on common stock
|
|
(1,108
|
)
|
|
(1,026
|
)
|
||
Premiums and fees related to early extinguishment of debt
|
|
—
|
|
|
(226
|
)
|
||
Other
|
|
(1
|
)
|
|
(7
|
)
|
||
Cash used in financing activities
|
|
(1,277
|
)
|
|
(2,244
|
)
|
||
Cash and cash equivalents:
|
|
|
|
|
||||
Increase
|
|
1,446
|
|
|
353
|
|
||
Balance at beginning of period
|
|
2,369
|
|
|
3,321
|
|
||
Balance at end of period
|
|
$
|
3,815
|
|
|
$
|
3,674
|
|
|
|
For the Three Months Ended March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in millions, except per share data)
|
||||||
Total number of shares repurchased
|
|
2.8
|
|
|
3.6
|
|
||
Aggregate cost of shares repurchased
|
|
$
|
168
|
|
|
$
|
192
|
|
Average price per share of shares repurchased
|
|
$
|
59.81
|
|
|
$
|
53.03
|
|
|
For the Three Months Ended March 31, 2016
|
||||||||||
|
Asset Impairment and Exit Costs
(1)
|
|
Implementation Costs
|
|
Total
|
||||||
|
(in millions)
|
||||||||||
Smokeable products
|
$
|
97
|
|
|
$
|
2
|
|
|
$
|
99
|
|
Smokeless products
|
13
|
|
|
—
|
|
|
13
|
|
|||
All other
|
5
|
|
|
—
|
|
|
5
|
|
|||
General corporate
|
5
|
|
|
—
|
|
|
5
|
|
|||
Total
|
$
|
120
|
|
|
$
|
2
|
|
|
$
|
122
|
|
|
For the Three Months Ended March 31, 2016
|
||
|
(in millions)
|
||
Charges
|
$
|
100
|
|
Cash spent
|
(2
|
)
|
|
Balances at March 31, 2016
|
$
|
98
|
|
|
|
For the Three Months Ended March 31,
|
||||||||||||||
|
|
Pension
|
|
Postretirement
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
(in millions)
|
|||||||||||||||
Service cost
|
|
$
|
18
|
|
|
$
|
21
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Interest cost
|
|
71
|
|
|
84
|
|
|
21
|
|
|
26
|
|
||||
Expected return on plan assets
|
|
(138
|
)
|
|
(135
|
)
|
|
—
|
|
|
—
|
|
||||
Amortization:
|
|
|
|
|
|
|
|
|
||||||||
Net loss
|
|
44
|
|
|
59
|
|
|
7
|
|
|
12
|
|
||||
Prior service cost (credit)
|
|
1
|
|
|
2
|
|
|
(10
|
)
|
|
(10
|
)
|
||||
Termination and curtailment
|
|
20
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Net periodic benefit cost
|
|
$
|
16
|
|
|
$
|
31
|
|
|
$
|
22
|
|
|
$
|
32
|
|
|
For the Three Months Ended March 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in millions)
|
||||||
Net earnings attributable to Altria Group, Inc.
|
$
|
1,217
|
|
|
$
|
1,018
|
|
Less: Distributed and undistributed earnings attributable to unvested restricted shares and restricted stock units
|
(2
|
)
|
|
(2
|
)
|
||
Earnings for basic and diluted EPS
|
$
|
1,215
|
|
|
$
|
1,016
|
|
|
|
|
|
||||
Weighted-average shares for basic and diluted EPS
|
1,956
|
|
|
1,966
|
|
|
|
For the Three Months Ended March 31, 2016
|
||||||||||||||
|
|
Currency
Translation
Adjustments
|
|
Benefit Plans
|
|
SABMiller
|
|
Accumulated
Other
Comprehensive
Losses
|
||||||||
|
|
(in millions)
|
||||||||||||||
Balances, December 31, 2015
|
|
$
|
(5
|
)
|
|
$
|
(2,010
|
)
|
|
$
|
(1,265
|
)
|
|
$
|
(3,280
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive earnings (losses) before reclassifications
|
|
1
|
|
|
(318
|
)
|
|
182
|
|
|
(135
|
)
|
||||
Deferred income taxes
|
|
—
|
|
|
122
|
|
|
(64
|
)
|
|
58
|
|
||||
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes
|
|
1
|
|
|
(196
|
)
|
|
118
|
|
|
(77
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Amounts reclassified to net earnings
|
|
—
|
|
|
36
|
|
|
12
|
|
|
48
|
|
||||
Deferred income taxes
|
|
—
|
|
|
(14
|
)
|
|
(4
|
)
|
|
(18
|
)
|
||||
Amounts reclassified to net earnings, net of deferred income taxes
|
|
—
|
|
|
22
|
|
|
8
|
|
|
30
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive earnings (losses), net of deferred income taxes
|
|
1
|
|
|
(174
|
)
|
|
126
|
|
(1)
|
(47
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Balances, March 31, 2016
|
|
$
|
(4
|
)
|
|
$
|
(2,184
|
)
|
|
$
|
(1,139
|
)
|
|
$
|
(3,327
|
)
|
|
|
For the Three Months Ended March 31, 2015
|
||||||||||||||
|
|
Currency
Translation
Adjustments
|
|
Benefit Plans
|
|
SABMiller
|
|
Accumulated
Other
Comprehensive
Losses
|
||||||||
|
|
(in millions)
|
||||||||||||||
Balances, December 31, 2014
|
|
$
|
(2
|
)
|
|
$
|
(2,040
|
)
|
|
$
|
(640
|
)
|
|
$
|
(2,682
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive losses before reclassifications
|
|
(1
|
)
|
|
—
|
|
|
(471
|
)
|
|
(472
|
)
|
||||
Deferred income taxes
|
|
—
|
|
|
—
|
|
|
164
|
|
|
164
|
|
||||
Other comprehensive losses before reclassifications, net of deferred income taxes
|
|
(1
|
)
|
|
—
|
|
|
(307
|
)
|
|
(308
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Amounts reclassified to net earnings
|
|
—
|
|
|
68
|
|
|
4
|
|
|
72
|
|
||||
Deferred income taxes
|
|
—
|
|
|
(26
|
)
|
|
(1
|
)
|
|
(27
|
)
|
||||
Amounts reclassified to net earnings, net of deferred income taxes
|
|
—
|
|
|
42
|
|
|
3
|
|
|
45
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive (losses) earnings, net of deferred income taxes
|
|
(1
|
)
|
|
42
|
|
|
(304
|
)
|
(1)
|
(263
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Balances, March 31, 2015
|
|
$
|
(3
|
)
|
|
$
|
(1,998
|
)
|
|
$
|
(944
|
)
|
|
$
|
(2,945
|
)
|
|
For the Three Months Ended March 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in millions)
|
||||||
Benefit Plans:
(1)
|
|
|
|
||||
Net loss
|
$
|
55
|
|
|
$
|
76
|
|
Prior service cost/credit
|
(19
|
)
|
|
(8
|
)
|
||
|
36
|
|
|
68
|
|
||
|
|
|
|
||||
SABMiller
(2)
|
12
|
|
|
4
|
|
||
|
|
|
|
||||
Pre-tax amounts reclassified from accumulated other comprehensive
losses to net earnings
|
$
|
48
|
|
|
$
|
72
|
|
|
|
For the Three Months Ended March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in millions)
|
||||||
Net revenues:
|
|
|
|
|
||||
Smokeable products
|
|
$
|
5,422
|
|
|
$
|
5,221
|
|
Smokeless products
|
|
479
|
|
|
430
|
|
||
Wine
|
|
145
|
|
|
134
|
|
||
All other
|
|
20
|
|
|
19
|
|
||
Net revenues
|
|
$
|
6,066
|
|
|
$
|
5,804
|
|
Earnings before income taxes:
|
|
|
|
|
||||
Operating companies income (loss):
|
|
|
|
|
||||
Smokeable products
|
|
$
|
1,751
|
|
|
$
|
1,686
|
|
Smokeless products
|
|
280
|
|
|
251
|
|
||
Wine
|
|
28
|
|
|
27
|
|
||
All other
|
|
(21
|
)
|
|
(41
|
)
|
||
Amortization of intangibles
|
|
(5
|
)
|
|
(5
|
)
|
||
General corporate expenses
|
|
(51
|
)
|
|
(53
|
)
|
||
Corporate asset impairment and exit costs
|
|
(5
|
)
|
|
—
|
|
||
Operating income
|
|
1,977
|
|
|
1,865
|
|
||
Interest and other debt expense, net
|
|
(200
|
)
|
|
(209
|
)
|
||
Loss on early extinguishment of debt
|
|
—
|
|
|
(228
|
)
|
||
Earnings from equity investment in SABMiller
|
|
66
|
|
|
134
|
|
||
Gain on derivative financial instrument
|
|
40
|
|
|
—
|
|
||
Earnings before income taxes
|
|
$
|
1,883
|
|
|
$
|
1,562
|
|
|
For the Three Months Ended March 31, 2016
|
||
|
(in millions)
|
||
Smokeable products segment
|
$
|
12
|
|
Interest and other debt expense, net
|
6
|
|
|
Total
|
$
|
18
|
|
|
|
For the Three Months Ended March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in millions)
|
||||||
Smokeable products segment
|
|
$
|
26
|
|
|
$
|
43
|
|
Interest and other debt expense, net
|
|
12
|
|
|
—
|
|
||
Total
|
|
$
|
38
|
|
|
$
|
43
|
|
|
|
For the Three Months Ended March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in millions)
|
||||||
Balance at beginning of the year
|
|
$
|
42
|
|
|
$
|
42
|
|
Decrease to allowance
|
|
(2
|
)
|
|
—
|
|
||
Balance at March 31
|
|
$
|
40
|
|
|
$
|
42
|
|
|
|
March 31, 2016
|
|
December 31, 2015
|
||||
|
|
(in millions)
|
||||||
Credit Rating by Standard & Poor’s/Moody’s:
|
|
|
|
|
||||
“AAA/Aaa” to “A-/A3”
|
|
$
|
213
|
|
|
$
|
212
|
|
“BBB+/Baa1” to “BBB-/Baa3”
|
|
603
|
|
|
702
|
|
||
“BB+/Ba1” and Lower
|
|
389
|
|
|
367
|
|
||
Total
|
|
$
|
1,205
|
|
|
$
|
1,281
|
|
|
April 25, 2016
|
|
April 20, 2015
|
|
April 21, 2014
|
Individual Smoking and Health Cases
(1)
|
62
|
|
64
|
|
70
|
Smoking and Health Class Actions and Aggregated Claims Litigation
(2)
|
5
|
|
5
|
|
6
|
Health Care Cost Recovery Actions
(3)
|
1
|
|
1
|
|
1
|
“Lights/Ultra Lights” Class Actions
|
11
|
|
12
|
|
15
|
|
For the Three Months Ended March 31,
|
||||||
|
2016
|
|
2015
|
||||
|
(in millions)
|
||||||
Accrued liability for tobacco and health litigation items at beginning of period
|
$
|
132
|
|
|
$
|
39
|
|
Pre-tax charges for:
|
|
|
|
||||
Tobacco and health judgments
|
4
|
|
|
—
|
|
||
Related interest costs
|
2
|
|
|
—
|
|
||
Agreement to resolve federal
Engle
progeny cases
|
—
|
|
|
43
|
|
||
Agreement to resolve
Aspinall
including interest costs
|
32
|
|
|
—
|
|
||
Payments
|
(17
|
)
|
|
(5
|
)
|
||
Accrued liability for tobacco and health litigation items at end of period
|
$
|
153
|
|
|
$
|
77
|
|
▪
|
2003 NPM Adjustment
. With one exception (Montana), the courts have ruled that the states’ claims of diligent enforcement are to be submitted to arbitration. PM USA and other PMs entered into an agreement with most of the MSA states and territories concerning the 2003 NPM Adjustment, under which such states and territories would receive a partial liability reduction of
20%
for the 2003 NPM Adjustment in the event the arbitration panel determined that they did not diligently enforce during 2003. The Montana state courts ruled that Montana may litigate its diligent enforcement claims in state court, rather than in arbitration. In June 2012, the PMs and Montana entered a consent decree pursuant to which Montana would not be subject to the 2003 NPM Adjustment.
|
▪
|
2004 and Subsequent NPM Adjustments
. PM USA believes that the MSA requires the states’ diligent enforcement claims for 2004 and thereafter to be determined in multi-state arbitrations, although a number of non-signatory states filed motions in their state courts contending that the claims are to be determined in separate arbitrations for individual states or that there is no arbitrable dispute for 2004. In September 2015, a Missouri intermediate appellate court ruled that Missouri was entitled to a single-state arbitration to determine whether Missouri diligently enforced for 2004. PM USA appealed this ruling, and the Supreme Court of Missouri granted review. No assurance can be given that the outcome of such appeal will be favorable to PM USA. As discussed above, PM USA has reached a contingent settlement of the NPM Adjustment disputes with Missouri, but no assurance can be given that the settlement will become final. In December 2015, a Wisconsin trial court ruled that Wisconsin must arbitrate its claim of diligent enforcement for 2004, and Wisconsin has since agreed to join the 2004 diligent enforcement arbitration.
|
▪
|
defendants falsely denied, distorted and minimized the significant adverse health consequences of smoking;
|
▪
|
defendants hid from the public that cigarette smoking and nicotine are addictive;
|
▪
|
defendants falsely denied that they control the level of nicotine delivered to create and sustain addiction;
|
▪
|
defendants falsely marketed and promoted “low tar/light” cigarettes as less harmful than full-flavor cigarettes;
|
▪
|
defendants falsely denied that they intentionally marketed to youth;
|
▪
|
defendants publicly and falsely denied that ETS is hazardous to non-smokers; and
|
▪
|
defendants suppressed scientific research.
|
▪
|
its application to defendants’ subsidiaries;
|
▪
|
the prohibition on the use of express or implied health messages or health descriptors, but only to the extent of extraterritorial application;
|
▪
|
its point-of-sale display provisions; and
|
▪
|
its application to Brown & Williamson Holdings.
|
▪
|
Aspinall
: In August 2004, the Massachusetts Supreme Judicial Court affirmed the class certification order. In August 2006, the trial court denied PM USA’s motion for summary judgment and granted plaintiffs’ cross-motion for summary judgment on the defenses of federal preemption and a state law exemption to Massachusetts’ consumer protection statute. On motion of the parties, the trial court subsequently reported its decision to deny summary judgment to the appeals court for review and stayed further proceedings pending completion of the appellate review. In March 2009, the Massachusetts Supreme Judicial Court affirmed the order denying summary judgment to PM USA and granting the plaintiffs’ cross-motion. In January 2010, plaintiffs moved for partial summary judgment as to liability claiming collateral estoppel from the findings in the case brought by the Department of Justice (see
Health Care Cost Recovery Litigation - Federal Government’s Lawsuit
described above). In March 2012, the trial court denied plaintiffs’ motion. In February 2013, the trial court, upon agreement of the parties, dismissed without prejudice plaintiffs’ claims against Altria Group, Inc. PM USA is now the sole defendant in the case. In September 2013, the case was transferred to the Business Litigation Session of the Massachusetts Superior Court. Also in September 2013, plaintiffs filed a motion for partial summary judgment on the scope of remedies available in the case, which the Massachusetts Superior Court denied in February 2014, concluding that plaintiffs cannot obtain disgorgement of profits as an equitable remedy and that their recovery is limited to actual damages or
$25
per class member if they cannot prove actual damages greater than
$25
. Plaintiffs filed a motion asking the trial court to report its February 2014 ruling to the Massachusetts Appeals Court for review, which the trial court denied. In March 2014, plaintiffs petitioned the Massachusetts Appeals Court for review of the ruling, which the appellate court denied. In August
|
▪
|
Larsen
: In August 2005, a Missouri Court of Appeals affirmed the class certification order. In December 2009, the trial court denied plaintiffs’ motion for reconsideration of the period during which potential class members can qualify to become part of the class. The class period remains 1995-2003. In June 2010, PM USA’s motion for partial summary judgment regarding plaintiffs’ request for punitive damages was denied. In April 2010, plaintiffs moved for partial summary judgment as to an element of liability in the case, claiming collateral estoppel from the findings in the case brought by the Department of Justice (see
Health Care Cost Recovery Litigation - Federal Government’s Lawsuit
described above). The plaintiffs’ motion was denied in December 2010. In June 2011, PM USA filed various summary judgment motions challenging the plaintiffs’ claims. In August 2011, the trial court granted PM USA’s motion for partial summary judgment, ruling that plaintiffs could not present a damages claim based on allegations that
Marlboro
Lights are more dangerous than
Marlboro
Reds. The trial court denied PM USA’s remaining summary judgment motions. Trial in the case began in September 2011 and, in October 2011, the court declared a mistrial after the jury failed to reach a verdict. In January 2014, the trial court reversed its prior ruling granting partial summary judgment against plaintiffs’ “more dangerous” claim and allowed plaintiffs to pursue that claim. In October 2014, PM USA filed motions to decertify the class and for partial summary judgment on plaintiffs’ “more dangerous” claim, which the court denied in June 2015. Upon retrial, in April 2016, the jury returned a verdict in favor of PM USA.
|
▪
|
Miner
:
In June 2007, the United States Supreme Court reversed the lower court rulings in
Miner
(formerly known as
Watson
) that denied plaintiffs’ motion to have the case heard in a state, as opposed to federal, trial court. The Supreme Court rejected defendants’ contention that the case must be tried in federal court under the “federal officer” statute. Following remand, the case was removed again to federal court in Arkansas and transferred to the MDL proceeding discussed above. In November 2010, the district court in the MDL proceeding remanded the case to Arkansas state court. In December 2011, plaintiffs voluntarily dismissed their claims against Altria Group, Inc. without prejudice. In March 2013, plaintiffs filed a class certification motion. In November 2013, the trial court granted class certification. The certified class includes those individuals who, from November 1, 1971 through June 22, 2010, purchased
Marlbor
o Lights and
Marlboro
Ultra Lights for personal consumption in Arkansas. PM USA filed a notice of appeal of the class certification ruling to the Arkansas Supreme Court in December 2013. In February 2015, the Arkansas Supreme Court affirmed the trial court’s class certification order. In May 2015, PM USA filed a motion for partial summary judgment seeking to foreclose any recovery for cigarette purchases prior to 1999, when a private right of action was added to the consumer protection statute under which plaintiffs are suing. The trial court denied the motion in July 2015. Trial is currently scheduled to begin on August 2, 2016.
|
▪
|
Brown
: In June 1997, plaintiffs filed suit in California state court alleging that domestic cigarette manufacturers, including PM USA and others, violated California law regarding unfair, unlawful and fraudulent business practices. In September 2013, the court issued a final Statement of Decision, in which the court found that PM USA violated California law, but that plaintiffs had not established a basis for relief. On this basis, the court granted judgment for PM USA. In October 2013, the court entered final judgment in favor of PM USA. In December 2013, plaintiffs filed a notice of appeal and PM USA filed a conditional cross-appeal. In February 2014, the trial court awarded PM USA
$764,553
in costs and plaintiffs appealed the costs award. The Court of Appeal affirmed the trial court judgment and dismissed PM USA’s conditional cross-appeal as moot. The court also affirmed the costs award in favor of PM USA. In November 2015, plaintiffs filed a petition for review with the California Supreme Court, which the court denied in December 2015. In March 2016, plaintiffs’ counsel paid PM USA
$600,000
in exchange for a release of the costs award. This litigation has concluded.
|
▪
|
the date, if any, on which PM USA consolidates with or merges into Altria Group, Inc. or any successor;
|
▪
|
the date, if any, on which Altria Group, Inc. or any successor consolidates with or merges into PM USA;
|
▪
|
the payment in full of the Obligations pertaining to such Guarantees; and
|
▪
|
the rating of Altria Group, Inc.’s long-term senior unsecured debt by Standard & Poor’s of A or higher.
|
|
|
Altria
Group, Inc.
|
|
|
PM USA
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Total
Consolidating
Adjustments
|
|
|
Consolidated
|
|
|||||
Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
3,749
|
|
|
$
|
—
|
|
|
$
|
66
|
|
|
$
|
—
|
|
|
$
|
3,815
|
|
Receivables
|
|
—
|
|
|
6
|
|
|
98
|
|
|
—
|
|
|
104
|
|
|||||
Inventories:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Leaf tobacco
|
|
—
|
|
|
594
|
|
|
400
|
|
|
—
|
|
|
994
|
|
|||||
Other raw materials
|
|
—
|
|
|
118
|
|
|
60
|
|
|
—
|
|
|
178
|
|
|||||
Work in process
|
|
—
|
|
|
8
|
|
|
428
|
|
|
—
|
|
|
436
|
|
|||||
Finished product
|
|
—
|
|
|
157
|
|
|
343
|
|
|
—
|
|
|
500
|
|
|||||
|
|
—
|
|
|
877
|
|
|
1,231
|
|
|
—
|
|
|
2,108
|
|
|||||
Due from Altria Group, Inc. and subsidiaries
|
|
16
|
|
|
5,129
|
|
|
1,820
|
|
|
(6,965
|
)
|
|
—
|
|
|||||
Deferred income taxes
|
|
—
|
|
|
1,268
|
|
|
7
|
|
|
(100
|
)
|
|
1,175
|
|
|||||
Other current assets
|
|
301
|
|
|
21
|
|
|
80
|
|
|
(106
|
)
|
|
296
|
|
|||||
Total current assets
|
|
4,066
|
|
|
7,301
|
|
|
3,302
|
|
|
(7,171
|
)
|
|
7,498
|
|
|||||
Property, plant and equipment, at cost
|
|
—
|
|
|
3,069
|
|
|
1,780
|
|
|
—
|
|
|
4,849
|
|
|||||
Less accumulated depreciation
|
|
—
|
|
|
2,141
|
|
|
753
|
|
|
—
|
|
|
2,894
|
|
|||||
|
|
—
|
|
|
928
|
|
|
1,027
|
|
|
—
|
|
|
1,955
|
|
|||||
Goodwill
|
|
—
|
|
|
—
|
|
|
5,285
|
|
|
—
|
|
|
5,285
|
|
|||||
Other intangible assets, net
|
|
—
|
|
|
2
|
|
|
12,021
|
|
|
—
|
|
|
12,023
|
|
|||||
Investment in SABMiller
|
|
5,743
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,743
|
|
|||||
Investment in consolidated subsidiaries
|
|
11,131
|
|
|
2,709
|
|
|
—
|
|
|
(13,840
|
)
|
|
—
|
|
|||||
Finance assets, net
|
|
—
|
|
|
—
|
|
|
1,165
|
|
|
—
|
|
|
1,165
|
|
|||||
Due from Altria Group, Inc. and subsidiaries
|
|
4,790
|
|
|
—
|
|
|
—
|
|
|
(4,790
|
)
|
|
—
|
|
|||||
Other assets
|
|
19
|
|
|
571
|
|
|
141
|
|
|
(337
|
)
|
|
394
|
|
|||||
Total Assets
|
|
$
|
25,749
|
|
|
$
|
11,511
|
|
|
$
|
22,941
|
|
|
$
|
(26,138
|
)
|
|
$
|
34,063
|
|
|
|
Altria
Group, Inc.
|
|
|
PM USA
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Total
Consolidating
Adjustments
|
|
|
Consolidated
|
|
|||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current portion of long-term debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Accounts payable
|
|
—
|
|
|
107
|
|
|
101
|
|
|
—
|
|
|
208
|
|
|||||
Accrued liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Marketing
|
|
—
|
|
|
578
|
|
|
109
|
|
|
—
|
|
|
687
|
|
|||||
Employment costs
|
|
66
|
|
|
5
|
|
|
66
|
|
|
—
|
|
|
137
|
|
|||||
Settlement charges
|
|
—
|
|
|
4,753
|
|
|
7
|
|
|
—
|
|
|
4,760
|
|
|||||
Other
|
|
323
|
|
|
569
|
|
|
329
|
|
|
(100
|
)
|
|
1,121
|
|
|||||
Income taxes
|
|
—
|
|
|
522
|
|
|
174
|
|
|
(106
|
)
|
|
590
|
|
|||||
Dividends payable
|
|
1,109
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,109
|
|
|||||
Due to Altria Group, Inc. and subsidiaries
|
|
6,720
|
|
|
220
|
|
|
25
|
|
|
(6,965
|
)
|
|
—
|
|
|||||
Total current liabilities
|
|
8,218
|
|
|
6,754
|
|
|
815
|
|
|
(7,171
|
)
|
|
8,616
|
|
|||||
Long-term debt
|
|
12,834
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
12,846
|
|
|||||
Deferred income taxes
|
|
1,638
|
|
|
—
|
|
|
4,305
|
|
|
(337
|
)
|
|
5,606
|
|
|||||
Accrued pension costs
|
|
204
|
|
|
—
|
|
|
1,275
|
|
|
—
|
|
|
1,479
|
|
|||||
Accrued postretirement health care costs
|
|
—
|
|
|
1,483
|
|
|
831
|
|
|
—
|
|
|
2,314
|
|
|||||
Due to Altria Group, Inc. and subsidiaries
|
|
—
|
|
|
—
|
|
|
4,790
|
|
|
(4,790
|
)
|
|
—
|
|
|||||
Other liabilities
|
|
110
|
|
|
130
|
|
|
177
|
|
|
—
|
|
|
417
|
|
|||||
Total liabilities
|
|
23,004
|
|
|
8,367
|
|
|
12,205
|
|
|
(12,298
|
)
|
|
31,278
|
|
|||||
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
37
|
|
|||||
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Common stock
|
|
935
|
|
|
—
|
|
|
9
|
|
|
(9
|
)
|
|
935
|
|
|||||
Additional paid-in capital
|
|
5,818
|
|
|
3,310
|
|
|
11,446
|
|
|
(14,756
|
)
|
|
5,818
|
|
|||||
Earnings reinvested in the business
|
|
27,367
|
|
|
106
|
|
|
1,089
|
|
|
(1,195
|
)
|
|
27,367
|
|
|||||
Accumulated other comprehensive losses
|
|
(3,327
|
)
|
|
(272
|
)
|
|
(1,848
|
)
|
|
2,120
|
|
|
(3,327
|
)
|
|||||
Cost of repurchased stock
|
|
(28,048
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(28,048
|
)
|
|||||
Total stockholders’ equity attributable to Altria Group, Inc.
|
|
2,745
|
|
|
3,144
|
|
|
10,696
|
|
|
(13,840
|
)
|
|
2,745
|
|
|||||
Noncontrolling interests
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
3
|
|
|||||
Total stockholders’ equity
|
|
2,745
|
|
|
3,144
|
|
|
10,699
|
|
|
(13,840
|
)
|
|
2,748
|
|
|||||
Total Liabilities and Stockholders’ Equity
|
|
$
|
25,749
|
|
|
$
|
11,511
|
|
|
$
|
22,941
|
|
|
$
|
(26,138
|
)
|
|
$
|
34,063
|
|
|
|
Altria
Group, Inc. |
|
|
PM USA
|
|
|
Non-
Guarantor Subsidiaries |
|
|
Total
Consolidating Adjustments |
|
|
Consolidated
|
|
|||||
Assets
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
|
$
|
2,313
|
|
|
$
|
—
|
|
|
$
|
56
|
|
|
$
|
—
|
|
|
$
|
2,369
|
|
Receivables
|
|
—
|
|
|
7
|
|
|
117
|
|
|
—
|
|
|
124
|
|
|||||
Inventories:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Leaf tobacco
|
|
—
|
|
|
562
|
|
|
395
|
|
|
—
|
|
|
957
|
|
|||||
Other raw materials
|
|
—
|
|
|
123
|
|
|
58
|
|
|
—
|
|
|
181
|
|
|||||
Work in process
|
|
—
|
|
|
5
|
|
|
439
|
|
|
—
|
|
|
444
|
|
|||||
Finished product
|
|
—
|
|
|
121
|
|
|
328
|
|
|
—
|
|
|
449
|
|
|||||
|
|
—
|
|
|
811
|
|
|
1,220
|
|
|
—
|
|
|
2,031
|
|
|||||
Due from Altria Group, Inc. and subsidiaries
|
|
—
|
|
|
3,821
|
|
|
1,807
|
|
|
(5,628
|
)
|
|
—
|
|
|||||
Deferred income taxes
|
|
—
|
|
|
1,268
|
|
|
7
|
|
|
(100
|
)
|
|
1,175
|
|
|||||
Other current assets
|
|
284
|
|
|
65
|
|
|
112
|
|
|
(74
|
)
|
|
387
|
|
|||||
Total current assets
|
|
2,597
|
|
|
5,972
|
|
|
3,319
|
|
|
(5,802
|
)
|
|
6,086
|
|
|||||
Property, plant and equipment, at cost
|
|
—
|
|
|
3,102
|
|
|
1,775
|
|
|
—
|
|
|
4,877
|
|
|||||
Less accumulated depreciation
|
|
—
|
|
|
2,157
|
|
|
738
|
|
|
—
|
|
|
2,895
|
|
|||||
|
|
—
|
|
|
945
|
|
|
1,037
|
|
|
—
|
|
|
1,982
|
|
|||||
Goodwill
|
|
—
|
|
|
—
|
|
|
5,285
|
|
|
—
|
|
|
5,285
|
|
|||||
Other intangible assets, net
|
|
—
|
|
|
2
|
|
|
12,026
|
|
|
—
|
|
|
12,028
|
|
|||||
Investment in SABMiller
|
|
5,483
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5,483
|
|
|||||
Investment in consolidated subsidiaries
|
|
11,648
|
|
|
2,715
|
|
|
—
|
|
|
(14,363
|
)
|
|
—
|
|
|||||
Finance assets, net
|
|
—
|
|
|
—
|
|
|
1,239
|
|
|
—
|
|
|
1,239
|
|
|||||
Due from Altria Group, Inc. and subsidiaries
|
|
4,790
|
|
|
—
|
|
|
—
|
|
|
(4,790
|
)
|
|
—
|
|
|||||
Other assets
|
|
20
|
|
|
536
|
|
|
131
|
|
|
(327
|
)
|
|
360
|
|
|||||
Total Assets
|
|
$
|
24,538
|
|
|
$
|
10,170
|
|
|
$
|
23,037
|
|
|
$
|
(25,282
|
)
|
|
$
|
32,463
|
|
|
|
Altria
Group, Inc. |
|
|
PM USA
|
|
|
Non-
Guarantor Subsidiaries |
|
|
Total
Consolidating Adjustments |
|
|
Consolidated
|
|
|||||
Liabilities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Current portion of long-term debt
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
4
|
|
Accounts payable
|
|
3
|
|
|
104
|
|
|
293
|
|
|
—
|
|
|
400
|
|
|||||
Accrued liabilities:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Marketing
|
|
—
|
|
|
586
|
|
|
109
|
|
|
—
|
|
|
695
|
|
|||||
Employment costs
|
|
18
|
|
|
11
|
|
|
169
|
|
|
—
|
|
|
198
|
|
|||||
Settlement charges
|
|
—
|
|
|
3,585
|
|
|
5
|
|
|
—
|
|
|
3,590
|
|
|||||
Other
|
|
354
|
|
|
616
|
|
|
285
|
|
|
(174
|
)
|
|
1,081
|
|
|||||
Dividends payable
|
|
1,110
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,110
|
|
|||||
Due to Altria Group, Inc. and subsidiaries
|
|
5,427
|
|
|
191
|
|
|
10
|
|
|
(5,628
|
)
|
|
—
|
|
|||||
Total current liabilities
|
|
6,912
|
|
|
5,093
|
|
|
875
|
|
|
(5,802
|
)
|
|
7,078
|
|
|||||
Long-term debt
|
|
12,831
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
12,843
|
|
|||||
Deferred income taxes
|
|
1,547
|
|
|
—
|
|
|
4,443
|
|
|
(327
|
)
|
|
5,663
|
|
|||||
Accrued pension costs
|
|
215
|
|
|
—
|
|
|
1,062
|
|
|
—
|
|
|
1,277
|
|
|||||
Accrued postretirement health care costs
|
|
—
|
|
|
1,460
|
|
|
785
|
|
|
—
|
|
|
2,245
|
|
|||||
Due to Altria Group, Inc. and subsidiaries
|
|
—
|
|
|
—
|
|
|
4,790
|
|
|
(4,790
|
)
|
|
—
|
|
|||||
Other liabilities
|
|
153
|
|
|
126
|
|
|
168
|
|
|
—
|
|
|
447
|
|
|||||
Total liabilities
|
|
21,658
|
|
|
6,679
|
|
|
12,135
|
|
|
(10,919
|
)
|
|
29,553
|
|
|||||
Contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Redeemable noncontrolling interest
|
|
—
|
|
|
—
|
|
|
37
|
|
|
—
|
|
|
37
|
|
|||||
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Common stock
|
|
935
|
|
|
—
|
|
|
9
|
|
|
(9
|
)
|
|
935
|
|
|||||
Additional paid-in capital
|
|
5,813
|
|
|
3,310
|
|
|
11,456
|
|
|
(14,766
|
)
|
|
5,813
|
|
|||||
Earnings reinvested in the business
|
|
27,257
|
|
|
436
|
|
|
1,099
|
|
|
(1,535
|
)
|
|
27,257
|
|
|||||
Accumulated other comprehensive losses
|
|
(3,280
|
)
|
|
(255
|
)
|
|
(1,692
|
)
|
|
1,947
|
|
|
(3,280
|
)
|
|||||
Cost of repurchased stock
|
|
(27,845
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(27,845
|
)
|
|||||
Total stockholders’ equity attributable to Altria Group, Inc.
|
|
2,880
|
|
|
3,491
|
|
|
10,872
|
|
|
(14,363
|
)
|
|
2,880
|
|
|||||
Noncontrolling interests
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|||||
Total stockholders’ equity
|
|
2,880
|
|
|
3,491
|
|
|
10,865
|
|
|
(14,363
|
)
|
|
2,873
|
|
|||||
Total Liabilities and Stockholders’ Equity
|
|
$
|
24,538
|
|
|
$
|
10,170
|
|
|
$
|
23,037
|
|
|
$
|
(25,282
|
)
|
|
$
|
32,463
|
|
|
|
Altria
Group, Inc. |
|
|
PM USA
|
|
|
Non-
Guarantor Subsidiaries |
|
|
Total
Consolidating Adjustments |
|
|
Consolidated
|
|
|||||
Net revenues
|
|
$
|
—
|
|
|
$
|
5,265
|
|
|
$
|
810
|
|
|
$
|
(9
|
)
|
|
$
|
6,066
|
|
Cost of sales
|
|
—
|
|
|
1,642
|
|
|
241
|
|
|
(9
|
)
|
|
1,874
|
|
|||||
Excise taxes on products
|
|
—
|
|
|
1,487
|
|
|
49
|
|
|
—
|
|
|
1,536
|
|
|||||
Gross profit
|
|
—
|
|
|
2,136
|
|
|
520
|
|
|
—
|
|
|
2,656
|
|
|||||
Marketing, administration and research costs
|
|
36
|
|
|
415
|
|
|
108
|
|
|
—
|
|
|
559
|
|
|||||
Asset impairment and exit costs
|
|
5
|
|
|
94
|
|
|
21
|
|
|
—
|
|
|
120
|
|
|||||
Operating (expense) income
|
|
(41
|
)
|
|
1,627
|
|
|
391
|
|
|
—
|
|
|
1,977
|
|
|||||
Interest and other debt expense, net
|
|
129
|
|
|
15
|
|
|
56
|
|
|
—
|
|
|
200
|
|
|||||
Earnings from equity investment in SABMiller
|
|
(66
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(66
|
)
|
|||||
Gain on derivative financial instrument
|
|
(40
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(40
|
)
|
|||||
(Loss) earnings before income taxes and equity earnings of subsidiaries
|
|
(64
|
)
|
|
1,612
|
|
|
335
|
|
|
—
|
|
|
1,883
|
|
|||||
(Benefit) provision for income taxes
|
|
(49
|
)
|
|
603
|
|
|
111
|
|
|
—
|
|
|
665
|
|
|||||
Equity earnings of subsidiaries
|
|
1,232
|
|
|
60
|
|
|
—
|
|
|
(1,292
|
)
|
|
—
|
|
|||||
Net earnings
|
|
1,217
|
|
|
1,069
|
|
|
224
|
|
|
(1,292
|
)
|
|
1,218
|
|
|||||
Net earnings attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||||
Net earnings attributable to Altria Group, Inc.
|
|
$
|
1,217
|
|
|
$
|
1,069
|
|
|
$
|
223
|
|
|
$
|
(1,292
|
)
|
|
$
|
1,217
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net earnings
|
|
$
|
1,217
|
|
|
$
|
1,069
|
|
|
$
|
224
|
|
|
$
|
(1,292
|
)
|
|
$
|
1,218
|
|
Other comprehensive losses, net of deferred income taxes
|
|
(47
|
)
|
|
(17
|
)
|
|
(156
|
)
|
|
173
|
|
|
(47
|
)
|
|||||
Comprehensive earnings
|
|
1,170
|
|
|
1,052
|
|
|
68
|
|
|
(1,119
|
)
|
|
1,171
|
|
|||||
Comprehensive earnings attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||||
Comprehensive earnings attributable to
Altria Group, Inc. |
|
$
|
1,170
|
|
|
$
|
1,052
|
|
|
$
|
67
|
|
|
$
|
(1,119
|
)
|
|
$
|
1,170
|
|
|
|
Altria
Group, Inc. |
|
|
PM USA
|
|
|
Non-
Guarantor Subsidiaries |
|
|
Total
Consolidating Adjustments |
|
|
Consolidated
|
|
|||||
Net revenues
|
|
$
|
—
|
|
|
$
|
5,068
|
|
|
$
|
745
|
|
|
$
|
(9
|
)
|
|
$
|
5,804
|
|
Cost of sales
|
|
—
|
|
|
1,566
|
|
|
240
|
|
|
(9
|
)
|
|
1,797
|
|
|||||
Excise taxes on products
|
|
—
|
|
|
1,480
|
|
|
52
|
|
|
—
|
|
|
1,532
|
|
|||||
Gross profit
|
|
—
|
|
|
2,022
|
|
|
453
|
|
|
—
|
|
|
2,475
|
|
|||||
Marketing, administration and research costs
|
|
42
|
|
|
465
|
|
|
103
|
|
|
—
|
|
|
610
|
|
|||||
Operating (expense) income
|
|
(42
|
)
|
|
1,557
|
|
|
350
|
|
|
—
|
|
|
1,865
|
|
|||||
Interest and other debt expense (income), net
|
|
154
|
|
|
(1
|
)
|
|
56
|
|
|
—
|
|
|
209
|
|
|||||
Loss on early extinguishment of debt
|
|
228
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
228
|
|
|||||
Earnings from equity investment in SABMiller
|
|
(134
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(134
|
)
|
|||||
(Loss) earnings before income taxes and equity earnings of subsidiaries
|
|
(290
|
)
|
|
1,558
|
|
|
294
|
|
|
—
|
|
|
1,562
|
|
|||||
(Benefit) provision for income taxes
|
|
(143
|
)
|
|
584
|
|
|
103
|
|
|
—
|
|
|
544
|
|
|||||
Equity earnings of subsidiaries
|
|
1,165
|
|
|
61
|
|
|
—
|
|
|
(1,226
|
)
|
|
—
|
|
|||||
Net earnings
|
|
1,018
|
|
|
1,035
|
|
|
191
|
|
|
(1,226
|
)
|
|
1,018
|
|
|||||
Net earnings attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net earnings attributable to Altria Group, Inc.
|
|
$
|
1,018
|
|
|
$
|
1,035
|
|
|
$
|
191
|
|
|
$
|
(1,226
|
)
|
|
$
|
1,018
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net earnings
|
|
$
|
1,018
|
|
|
$
|
1,035
|
|
|
$
|
191
|
|
|
$
|
(1,226
|
)
|
|
$
|
1,018
|
|
Other comprehensive (losses) earnings, net of deferred income taxes
|
|
(263
|
)
|
|
4
|
|
|
35
|
|
|
(39
|
)
|
|
(263
|
)
|
|||||
Comprehensive earnings
|
|
755
|
|
|
1,039
|
|
|
226
|
|
|
(1,265
|
)
|
|
755
|
|
|||||
Comprehensive earnings attributable to noncontrolling interests
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Comprehensive earnings attributable to
Altria Group, Inc. |
|
$
|
755
|
|
|
$
|
1,039
|
|
|
$
|
226
|
|
|
$
|
(1,265
|
)
|
|
$
|
755
|
|
|
|
Altria
Group, Inc.
|
|
|
PM USA
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Total
Consolidating
Adjustments
|
|
|
Consolidated
|
|
|||||
Cash Provided by Operating Activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by operating activities
|
|
$
|
1,433
|
|
|
$
|
2,780
|
|
|
$
|
108
|
|
|
$
|
(1,632
|
)
|
|
$
|
2,689
|
|
Cash Provided by (Used in) Investing Activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures
|
|
—
|
|
|
(7
|
)
|
|
(19
|
)
|
|
—
|
|
|
(26
|
)
|
|||||
Proceeds from finance assets
|
|
—
|
|
|
—
|
|
|
56
|
|
|
—
|
|
|
56
|
|
|||||
Other
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
4
|
|
|||||
Net cash (used in) provided by investing activities
|
|
—
|
|
|
(7
|
)
|
|
41
|
|
|
—
|
|
|
34
|
|
|||||
Cash Provided by (Used in) Financing Activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Repurchases of common stock
|
|
(168
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(168
|
)
|
|||||
Dividends paid on common stock
|
|
(1,108
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,108
|
)
|
|||||
Changes in amounts due to/from Altria Group, Inc. and subsidiaries
|
|
1,279
|
|
|
(1,374
|
)
|
|
95
|
|
|
—
|
|
|
—
|
|
|||||
Cash dividends paid to parent
|
|
—
|
|
|
(1,399
|
)
|
|
(233
|
)
|
|
1,632
|
|
|
—
|
|
|||||
Other
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|||||
Net cash provided by (used in) financing activities
|
|
3
|
|
|
(2,773
|
)
|
|
(139
|
)
|
|
1,632
|
|
|
(1,277
|
)
|
|||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Increase
|
|
1,436
|
|
|
—
|
|
|
10
|
|
|
—
|
|
|
1,446
|
|
|||||
Balance at beginning of period
|
|
2,313
|
|
|
—
|
|
|
56
|
|
|
—
|
|
|
2,369
|
|
|||||
Balance at end of period
|
|
$
|
3,749
|
|
|
$
|
—
|
|
|
$
|
66
|
|
|
$
|
—
|
|
|
$
|
3,815
|
|
|
|
Altria
Group, Inc.
|
|
|
PM USA
|
|
|
Non-
Guarantor
Subsidiaries
|
|
|
Total
Consolidating
Adjustments
|
|
|
Consolidated
|
|
|||||
Cash Provided by Operating Activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net cash provided by operating activities
|
|
$
|
845
|
|
|
$
|
2,696
|
|
|
$
|
136
|
|
|
$
|
(1,179
|
)
|
|
$
|
2,498
|
|
Cash Provided by (Used in) Investing Activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures
|
|
—
|
|
|
(15
|
)
|
|
(33
|
)
|
|
—
|
|
|
(48
|
)
|
|||||
Proceeds from finance assets
|
|
—
|
|
|
—
|
|
|
147
|
|
|
—
|
|
|
147
|
|
|||||
Other
|
|
—
|
|
|
10
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|||||
Net cash (used in) provided by investing activities
|
|
—
|
|
|
(5
|
)
|
|
104
|
|
|
—
|
|
|
99
|
|
|||||
Cash Provided by (Used in) Financing Activities
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Long-term debt repaid
|
|
(793
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(793
|
)
|
|||||
Repurchases of common stock
|
|
(192
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(192
|
)
|
|||||
Dividends paid on common stock
|
|
(1,026
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,026
|
)
|
|||||
Changes in amounts due to/from Altria Group, Inc. and subsidiaries
|
|
1,750
|
|
|
(1,634
|
)
|
|
(116
|
)
|
|
—
|
|
|
—
|
|
|||||
Premiums and fees related to early extinguishment of debt
|
|
(226
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(226
|
)
|
|||||
Cash dividends paid to parent
|
|
—
|
|
|
(1,060
|
)
|
|
(119
|
)
|
|
1,179
|
|
|
—
|
|
|||||
Other
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
—
|
|
|
(7
|
)
|
|||||
Net cash used in financing activities
|
|
(487
|
)
|
|
(2,694
|
)
|
|
(242
|
)
|
|
1,179
|
|
|
(2,244
|
)
|
|||||
Cash and cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Increase (decrease)
|
|
358
|
|
|
(3
|
)
|
|
(2
|
)
|
|
—
|
|
|
353
|
|
|||||
Balance at beginning of period
|
|
3,281
|
|
|
3
|
|
|
37
|
|
|
—
|
|
|
3,321
|
|
|||||
Balance at end of period
|
|
$
|
3,639
|
|
|
$
|
—
|
|
|
$
|
35
|
|
|
$
|
—
|
|
|
$
|
3,674
|
|
|
Net Earnings
|
|
Diluted EPS
|
||||
|
(in millions, except per share data)
|
||||||
For the three months ended March 31, 2015
|
$
|
1,018
|
|
|
$
|
0.52
|
|
|
|
|
|
||||
2015 Tobacco and health litigation items
|
27
|
|
|
0.01
|
|
||
2015 SABMiller special items
|
56
|
|
|
0.03
|
|
||
2015 Loss on early extinguishment of debt
|
143
|
|
|
0.07
|
|
||
2015 Tax items
|
2
|
|
|
—
|
|
||
Subtotal 2015 special items
|
228
|
|
|
0.11
|
|
||
|
|
|
|
||||
2016 NPM Adjustment Items
|
(11
|
)
|
|
(0.01
|
)
|
||
2016 Asset impairment, exit and implementation costs
|
(78
|
)
|
|
(0.04
|
)
|
||
2016 Tobacco and health litigation items
|
(24
|
)
|
|
(0.01
|
)
|
||
2016 SABMiller special items
|
(108
|
)
|
|
(0.05
|
)
|
||
2016 Gain on derivative financial instrument
|
26
|
|
|
0.01
|
|
||
2016 Tax items
|
(1
|
)
|
|
—
|
|
||
Subtotal 2016 special items
|
(196
|
)
|
|
(0.10
|
)
|
||
|
|
|
|
||||
Operations
|
167
|
|
|
0.09
|
|
||
For the three months ended March 31, 2016
|
$
|
1,217
|
|
|
$
|
0.62
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in millions)
|
||||||
Net revenues:
|
|
|
|
|
||||
Smokeable products
|
|
$
|
5,422
|
|
|
$
|
5,221
|
|
Smokeless products
|
|
479
|
|
|
430
|
|
||
Wine
|
|
145
|
|
|
134
|
|
||
All other
|
|
20
|
|
|
19
|
|
||
Net revenues
|
|
$
|
6,066
|
|
|
$
|
5,804
|
|
|
|
|
|
|
||||
Excise taxes on products:
|
|
|
|
|
||||
Smokeable products
|
|
$
|
1,499
|
|
|
$
|
1,495
|
|
Smokeless products
|
|
32
|
|
|
32
|
|
||
Wine
|
|
5
|
|
|
5
|
|
||
Excise taxes on products
|
|
$
|
1,536
|
|
|
$
|
1,532
|
|
|
|
|
|
|
||||
Operating income:
|
|
|
|
|
||||
Operating companies income (loss):
|
|
|
|
|
||||
Smokeable products
|
|
$
|
1,751
|
|
|
$
|
1,686
|
|
Smokeless products
|
|
280
|
|
|
251
|
|
||
Wine
|
|
28
|
|
|
27
|
|
||
All other
|
|
(21
|
)
|
|
(41
|
)
|
||
Amortization of intangibles
|
|
(5
|
)
|
|
(5
|
)
|
||
General corporate expenses
|
|
(51
|
)
|
|
(53
|
)
|
||
Corporate asset impairment and exit costs
|
|
(5
|
)
|
|
—
|
|
||
Operating income
|
|
$
|
1,977
|
|
|
$
|
1,865
|
|
▪
|
NPM Adjustment Items:
P
re-tax expense for NPM Adjustment Items was recorded in Altria Group, Inc.’s condensed consolidated statement of earnings as follows:
|
|
|
For the Three Months Ended March 31, 2016
|
||
|
|
(in millions)
|
||
Smokeable products segment
|
|
$
|
12
|
|
Interest and other debt expense, net
|
|
6
|
|
|
Total
|
|
$
|
18
|
|
|
|
For the Three Months Ended March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in millions)
|
||||||
Smokeable products segment
|
|
$
|
26
|
|
|
$
|
43
|
|
Interest and other debt expense, net
|
|
12
|
|
|
—
|
|
||
Total
|
|
$
|
38
|
|
|
$
|
43
|
|
▪
|
Asset Impairment, Exit and Implementation Costs:
In January 2016, Altria Group, Inc. announced a productivity initiative designed to maintain its operating companies’ leadership and cost competitiveness. The initiative, which reduces spending on certain selling, general and administrative infrastructure and implements a leaner organizational structure, is expected to deliver approximately $300 million in annualized productivity savings by the end of 2017. As a result of this initiative, Altria Group, Inc. expects to incur total pre-tax restructuring charges of approximately
$140 million
, substantially all of which are expected to be recorded in 2016 and result in cash expenditures.
|
|
For the Three Months Ended March 31, 2016
|
||||||||||
|
Asset Impairment and Exit Costs
|
|
Implementation Costs
|
|
Total
|
||||||
|
(in millions)
|
||||||||||
Smokeable products
|
$
|
97
|
|
|
$
|
2
|
|
|
$
|
99
|
|
Smokeless products
|
13
|
|
|
—
|
|
|
13
|
|
|||
All other
|
5
|
|
|
—
|
|
|
5
|
|
|||
General corporate
|
5
|
|
|
—
|
|
|
5
|
|
|||
Total
|
$
|
120
|
|
|
$
|
2
|
|
|
$
|
122
|
|
▪
|
Loss on Early Extinguishment of Debt:
During the first quarter of 2015, Altria Group, Inc. completed a debt tender offer to purchase for cash $793 million aggregate principal amount of its senior unsecured 9.700% notes due 2018. As a result of the debt tender offer, during the first quarter of 2015, Altria Group, Inc. recorded a pre-tax loss on early extinguishment of debt of $228 million, which included premiums and fees of $226 million and the write-off of the related unamortized debt discount and debt issuance costs of $2 million.
|
▪
|
Gain on Derivative Financial Instrument:
For the
three months ended March 31, 2016
, Altria Group, Inc. recorded a pre-tax gain of
$40 million
for the change in the fair value of its derivative financial instrument entered into in connection with the AB InBev and SABMiller business combination. For further discussion, see
Note 4
.
Investment in SABMiller
to the condensed consolidated financial statements in Item 1 (“
Note 4
”).
|
▪
|
SABMiller Special Items:
Altria Group, Inc.’s earnings from its equity investment in SABMiller for the three months ended March 31, 2016 and 2015 included net pre-tax charges of $166 million and $86 million, respectively, consisting primarily of Altria Group, Inc.’s share of SABMiller’s asset impairment charges.
|
▪
|
pending and threatened litigation and bonding requirements;
|
▪
|
the requirement to issue “corrective statements” in various media in connection with the federal government’s lawsuit;
|
▪
|
restrictions and requirements imposed by the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”), and restrictions and requirements that have been, and in the future will be, imposed by the U.S. Food and Drug Administration (“FDA”);
|
▪
|
actual and proposed excise tax increases, as well as changes in tax structures and tax stamping requirements;
|
▪
|
bans and restrictions on tobacco use imposed by governmental entities and private establishments and employers;
|
▪
|
other federal, state and local government actions, including:
|
▪
|
increases in the minimum age to purchase tobacco products above the current federal minimum age of 18;
|
▪
|
restrictions on the sale of tobacco products by certain retail establishments, the sale of certain tobacco products with certain characterizing flavors and the sale of tobacco products in certain package sizes;
|
▪
|
additional restrictions on the advertising and promotion of tobacco products;
|
▪
|
other actual and proposed tobacco product legislation and regulation; and
|
▪
|
governmental investigations;
|
▪
|
the diminishing prevalence of cigarette smoking and increased efforts by tobacco control advocates and others (including employers and retail establishments) to further restrict tobacco use;
|
▪
|
changes in adult tobacco consumer purchase behavior, which is influenced by various factors such as economic conditions, excise taxes and price gap relationships, may result in adult tobacco consumers switching to discount products or other lower priced tobacco products;
|
▪
|
the highly competitive nature of the tobacco categories in which our tobacco subsidiaries operate, including competitive disadvantages related to cigarette price increases attributable to the settlement of certain litigation;
|
▪
|
illicit trade in tobacco products; and
|
▪
|
potential adverse changes in tobacco leaf price, availability and quality.
|
▪
|
FSPTCA and FDA Regulation;
|
▪
|
Excise Taxes;
|
▪
|
International Treaty on Tobacco Control;
|
▪
|
State Settlement Agreements;
|
▪
|
Other Federal, State and Local Regulation and Activity;
|
▪
|
Illicit Trade in Tobacco Products;
|
▪
|
Price, Availability and Quality of Agricultural Products; and
|
▪
|
Timing of Sales.
|
▪
|
imposes restrictions on the advertising, promotion, sale and distribution of tobacco products, including at retail;
|
▪
|
bans descriptors such as “light,” “mild” or “low” or similar descriptors when used as descriptors of modified risk unless expressly authorized by the FDA;
|
▪
|
requires extensive product disclosures to the FDA and may require public disclosures;
|
▪
|
prohibits any express or implied claims that a tobacco product is or may be less harmful than other tobacco products without FDA authorization;
|
▪
|
imposes reporting obligations relating to contraband activity and grants the FDA authority to impose recordkeeping and other obligations to address illicit trade in tobacco products;
|
▪
|
changes the language of the cigarette and smokeless tobacco product health warnings, enlarges their size and requires the development by the FDA of graphic warnings for cigarettes, and gives the FDA the authority to require new warnings;
|
▪
|
authorizes the FDA to adopt product regulations and related actions, including imposing tobacco product standards that are appropriate for the protection of the public health (
e.g.
, related to the use of menthol in cigarettes, nicotine yields and other constituents or ingredients) and imposing manufacturing standards for tobacco products;
|
▪
|
establishes pre-market review pathways for new and modified tobacco products, including:
|
▪
|
authorizing the FDA to subject tobacco products that would be modified or first introduced into the market after March 22, 2011 to application and pre-market review and authorization requirements (the “New Product Application Process”) if the FDA does not find them, as a manufacturer may contend, to be “substantially equivalent” to products commercially marketed as of February 15, 2007, and possibly to deny any such new product application, thereby preventing the distribution and sale of any product affected by such denial; and
|
▪
|
authorizing the FDA to determine that certain existing tobacco products modified or introduced into the market for the first time between February 15, 2007 and March 22, 2011 are not “substantially equivalent” to products commercially marketed as of February 15, 2007, in which case the FDA could require the removal of such products from the marketplace or subject them to the New Product Application Process and, if any such applications are denied, prevent the continued distribution and sale of such products (see
FDA Regulatory Actions
-
Substantial Equivalence and Other New Product Processes/Pathways
below); and
|
▪
|
equips the FDA with a variety of investigatory and enforcement tools, including the authority to inspect tobacco product manufacturing and other facilities.
|
▪
|
impact the consumer acceptability of tobacco products;
|
▪
|
delay, discontinue or prevent the sale or distribution of existing, new or modified tobacco products;
|
▪
|
limit adult tobacco consumer choices;
|
▪
|
impose restrictions on communications with adult tobacco consumers;
|
▪
|
create a competitive advantage or disadvantage for certain tobacco companies;
|
▪
|
impose additional manufacturing, labeling or packaging requirements;
|
▪
|
impose additional restrictions at retail;
|
▪
|
result in increased illicit trade in tobacco products; or
|
▪
|
otherwise significantly increase the cost of doing business.
|
▪
|
bans the use of color and graphics in tobacco product labeling and advertising;
|
▪
|
prohibits the sale of cigarettes and smokeless tobacco to underage persons;
|
▪
|
restricts the use of non-tobacco trade and brand names on cigarettes and smokeless tobacco products;
|
▪
|
requires the sale of cigarettes and smokeless tobacco in direct, face-to-face transactions;
|
▪
|
prohibits sampling of cigarettes and prohibits sampling of smokeless tobacco products except in qualified adult-only facilities;
|
▪
|
prohibits gifts or other items in exchange for buying cigarettes or smokeless tobacco products;
|
▪
|
prohibits the sale or distribution of items such as hats and tee shirts with tobacco brands or logos; and
|
▪
|
prohibits brand name sponsorship of any athletic, musical, artistic or other social or cultural event, or any entry or team in any event.
|
|
|
For the Three Months Ended March 31,
|
||||||||||||||
|
|
Net Revenues
|
|
Operating Companies Income
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
|
|
(in millions)
|
||||||||||||||
Smokeable products
|
|
$
|
5,422
|
|
|
$
|
5,221
|
|
|
$
|
1,751
|
|
|
$
|
1,686
|
|
Smokeless products
|
|
479
|
|
|
430
|
|
|
280
|
|
|
251
|
|
||||
Total smokeable and smokeless products
|
|
$
|
5,901
|
|
|
$
|
5,651
|
|
|
$
|
2,031
|
|
|
$
|
1,937
|
|
|
|
Shipment Volume
|
|||||||
|
For the Three Months Ended March 31,
|
|||||||
|
2016
|
|
2015
|
|
Change
|
|||
|
(sticks in millions)
|
|||||||
Cigarettes:
|
|
|
|
|
|
|||
Marlboro
|
25,361
|
|
|
25,117
|
|
|
1.0
|
%
|
Other premium
|
1,514
|
|
|
1,578
|
|
|
(4.1
|
)%
|
Discount
|
2,664
|
|
|
2,503
|
|
|
6.4
|
%
|
Total cigarettes
|
29,539
|
|
|
29,198
|
|
|
1.2
|
%
|
Cigars:
|
|
|
|
|
|
|||
Black & Mild
|
317
|
|
|
298
|
|
|
6.4
|
%
|
Other
|
10
|
|
|
4
|
|
|
100.0 %+
|
|
Total cigars
|
327
|
|
|
302
|
|
|
8.3
|
%
|
Total smokeable products
|
29,866
|
|
|
29,500
|
|
|
1.2
|
%
|
|
Retail Share
|
|||||||
|
For the Three Months Ended March 31,
|
|||||||
|
2016
|
|
2015
|
|
Percentage Point Change
|
|||
Cigarettes:
|
|
|
|
|
|
|||
Marlboro
|
44.0
|
%
|
|
44.0
|
%
|
|
—
|
|
Other premium
|
2.7
|
|
|
2.8
|
|
|
(0.1
|
)
|
Discount
|
4.7
|
|
|
4.3
|
|
|
0.4
|
|
Total cigarettes
|
51.4
|
%
|
|
51.1
|
%
|
|
0.3
|
|
Cigars:
|
|
|
|
|
|
|||
Black & Mild
|
25.9
|
%
|
|
26.6
|
%
|
|
(0.7
|
)
|
Other
|
0.5
|
|
|
0.3
|
|
|
0.2
|
|
Total cigars
|
26.4
|
%
|
|
26.9
|
%
|
|
(0.5
|
)
|
▪
|
Effective November 15, 2015, PM USA increased the list price on all of its cigarette brands by $0.07 per pack.
|
▪
|
Effective May 17, 2015, PM USA increased the list price on all of its cigarette brands by $0.07 per pack.
|
|
|
Shipment Volume
|
|||||||
|
|
For the Three Months Ended March 31,
|
|||||||
|
|
2016
|
|
2015
|
|
Change
|
|||
|
|
(cans and packs in millions)
|
|||||||
Copenhagen
|
|
124.8
|
|
|
110.1
|
|
|
13.4
|
%
|
Skoal
|
|
64.5
|
|
|
64.0
|
|
|
0.8
|
%
|
Copenhagen
and
Skoal
|
|
189.3
|
|
|
174.1
|
|
|
8.7
|
%
|
Other
|
|
16.8
|
|
|
17.0
|
|
|
(1.2
|
)%
|
Total smokeless products
|
|
206.1
|
|
|
191.1
|
|
|
7.8
|
%
|
|
|
Retail Share
|
|||||||
|
|
For the Three Months Ended March 31,
|
|||||||
|
|
2016
|
|
2015
|
|
Percentage Point Change
|
|||
Copenhagen
|
|
32.4
|
%
|
|
31.3
|
%
|
|
1.1
|
|
Skoal
|
|
19.2
|
|
|
19.8
|
|
|
(0.6
|
)
|
Copenhagen
and
Skoal
|
|
51.6
|
|
|
51.1
|
|
|
0.5
|
|
Other
|
|
3.5
|
|
|
3.8
|
|
|
(0.3
|
)
|
Total smokeless products
|
|
55.1
|
%
|
|
54.9
|
%
|
|
0.2
|
|
▪
|
Effective December 8, 2015, USSTC increased the list price on
Copenhagen
and
Skoal
popular price products by $0.12 per can. In addition, USSTC increased the list price on all its brands, except for
Copenhagen
and
Skoal
popular price products, by $0.07 per can.
|
▪
|
Effective May 5, 2015, USSTC increased the list price on all its brands by $0.07 per can.
|
|
|
For the Three Months Ended March 31,
|
||||||
|
|
2016
|
|
2015
|
||||
|
|
(in millions)
|
||||||
Net revenues
|
|
$
|
145
|
|
|
$
|
134
|
|
Operating companies income
|
|
$
|
28
|
|
|
$
|
27
|
|
▪
|
debt tender offer completed during the first quarter of 2015, which resulted in the repurchase of
$793 million
of senior unsecured long-term notes and a
$226 million
payment of premiums and fees, as more fully described in
Note 9
.
Debt
to the condensed consolidated financial statements in Item 1 (“Note 9”); and
|
▪
|
lower share repurchases during the first three months of 2016;
|
▪
|
higher dividends paid during the first three months of 2016.
|
|
Short-term Debt
|
|
Long-term Debt
|
|
Outlook
|
|
|
|
|
|
|
Moody’s
1
|
P-2
|
|
A3
|
|
Stable
|
Standard & Poor’s
2
|
A-1
|
|
A-
|
|
Stable
|
Fitch Ratings Ltd.
|
F2
|
|
BBB+
|
|
Stable
|
|
|
|
|
|
|
▪
|
promote brand equity successfully;
|
▪
|
anticipate and respond to new and evolving adult consumer preferences;
|
▪
|
develop, manufacture, market and distribute products that appeal to adult consumers (including, where appropriate, through arrangements with, or investments in, third parties);
|
▪
|
improve productivity; and
|
▪
|
protect or enhance margins through cost savings and price increases.
|
Period
|
|
Total Number of Shares Purchased
(1)
|
|
Average Price Paid Per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs
|
||||||
|
|
|
|
|
|
|
|
|
||||||
January 1 - 31, 2016
|
|
1,322,500
|
|
|
$
|
58.45
|
|
|
1,322,500
|
|
|
$
|
887,406,363
|
|
February 1 - 29, 2016
|
|
1,340,898
|
|
|
$
|
60.17
|
|
|
848,600
|
|
|
$
|
836,128,864
|
|
March 1 - 31, 2016
|
|
708,992
|
|
|
$
|
61.78
|
|
|
634,600
|
|
|
$
|
796,910,133
|
|
For the Quarter Ended March 31, 2016
|
|
3,372,390
|
|
|
$
|
59.84
|
|
|
2,805,700
|
|
|
|
(1)
|
The total number of shares purchased include (a) shares purchased under the July 2015 share repurchase program (which totaled 1,322,500 shares in January, 848,600 shares in February and 634,600 shares in March) and (b) shares withheld by Altria Group, Inc. in an amount equal to the statutory withholding taxes for holders who vested in restricted stock and restricted stock units, and forfeitures of restricted stock for which consideration was paid in connection with termination of employment of certain employees (which totaled 492,298 shares in February and 74,392 shares in March).
|
10.1
|
Form of Restricted Stock Unit Agreement, dated as of January 26, 2016. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on January 28, 2016 (File No. 1-08940).
|
10.2
|
Amendment to Benefit Equalization Plan, effective March 31, 2016.
|
12
|
Statements regarding computation of ratios of earnings to fixed charges.
|
31.1
|
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
31.2
|
Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
32.1
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
99.1
|
Certain Litigation Matters.
|
99.2
|
Trial Schedule for Certain Cases.
|
99.3
|
Definitions of Terms Related to Financial Covenants included in Altria Group, Inc.’s Amended and Restated 5-Year Revolving Credit Agreement, dated as of August 19, 2013. Incorporated by reference to Altria Group, Inc.’s Quarterly Report on Form 10-Q for the period ended September 30, 2013 (File No. 1-08940).
|
1.
|
ARTICLE IIA(1)(a)(ii) of the Plan is amended to read as follows:
|
|
/s/ RODGER W. ROLLAND
|
|
Rodger W. Rolland
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Administrator, Benefit Equalization Plan
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1.
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I have reviewed this quarterly report on Form 10-Q of Altria Group, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ MARTIN J. BARRINGTON
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Martin J. Barrington
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Chairman, Chief Executive Officer and President
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1.
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I have reviewed this quarterly report on Form 10-Q of Altria Group, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
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The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
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Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
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Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
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Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
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The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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(a)
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All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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(b)
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Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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/s/ WILLIAM F. GIFFORD, JR.
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William F. Gifford, Jr.
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Executive Vice President and Chief Financial Officer
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April
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0
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May
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3
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June
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3
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April
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0
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May
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0
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June
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0
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April
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0
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May
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0
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June
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0
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