☒
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QUARTERLY 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,
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Richmond,
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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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Title of each class
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Trading Symbols
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Name of each exchange on which registered
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Common Stock, $0.33 1/3 par value
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MO
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New York Stock Exchange
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1.000% Notes due 2023
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MO23A
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New York Stock Exchange
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1.700% Notes due 2025
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MO25
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New York Stock Exchange
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2.200% Notes due 2027
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MO27
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New York Stock Exchange
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3.125% Notes due 2031
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MO31
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New York Stock Exchange
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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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☐
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Smaller reporting company
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☐
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Emerging growth 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 6.
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Signature
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June 30, 2020
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December 31, 2019
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Assets
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||||
Cash and cash equivalents
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$
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4,826
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$
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2,117
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Receivables
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140
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152
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Inventories:
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Leaf tobacco
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768
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874
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Other raw materials
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194
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192
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Work in process
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433
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696
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Finished product
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519
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531
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1,914
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2,293
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Other current assets
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124
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262
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Total current assets
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7,004
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4,824
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Property, plant and equipment, at cost
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5,137
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5,074
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Less accumulated depreciation
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3,135
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3,075
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2,002
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1,999
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Goodwill
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5,177
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5,177
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Other intangible assets, net
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12,650
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12,687
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Investments in equity securities
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22,319
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23,581
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Other assets
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1,048
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1,003
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Total Assets
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$
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50,200
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$
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49,271
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June 30, 2020
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December 31, 2019
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Liabilities
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Current portion of long-term debt
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$
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1,500
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$
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1,000
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Accounts payable
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273
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325
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Accrued liabilities:
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Marketing
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488
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393
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Taxes, except income taxes
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1,325
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13
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Settlement charges
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2,071
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3,346
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Other
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1,112
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1,520
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Income taxes
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1,066
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12
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Dividends payable
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1,565
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1,565
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Total current liabilities
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9,400
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8,174
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Long-term debt
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27,542
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27,042
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Deferred income taxes
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4,847
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5,083
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Accrued pension costs
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377
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473
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Accrued postretirement health care costs
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1,800
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1,797
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Other liabilities
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410
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345
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Total liabilities
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44,376
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42,914
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Contingencies (Note 12)
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Redeemable noncontrolling interest
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38
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38
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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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5,964
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5,970
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Earnings reinvested in the business
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36,908
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36,539
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Accumulated other comprehensive losses
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(3,774
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)
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(2,864
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)
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Cost of repurchased stock
(947,573,795 shares at June 30, 2020 and
947,979,763 shares at December 31, 2019)
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(34,345
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)
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(34,358
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)
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Total stockholders’ equity attributable to Altria
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5,688
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6,222
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Noncontrolling interests
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98
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97
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Total stockholders’ equity
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5,786
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6,319
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Total Liabilities and Stockholders’ Equity
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$
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50,200
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$
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49,271
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For the Six Months Ended June 30,
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For the Three Months Ended June 30,
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2020
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2019
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2020
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2019
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Net revenues
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$
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12,726
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$
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12,247
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$
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6,367
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$
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6,619
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Cost of sales
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3,948
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3,452
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1,775
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1,874
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Excise taxes on products
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2,618
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2,665
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1,305
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1,426
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Gross profit
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6,160
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6,130
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3,287
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3,319
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Marketing, administration and research costs
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1,028
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1,102
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491
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569
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Asset impairment and exit costs
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—
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73
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—
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33
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Operating income
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5,132
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4,955
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2,796
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2,717
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Interest and other debt expense, net
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583
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696
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308
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312
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Net periodic benefit income, excluding service cost
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(55
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)
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(16
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)
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(28
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)
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(15
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)
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Earnings from equity investments
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(166
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)
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(533
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)
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(9
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)
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(447
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)
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(Gain) loss on Cronos-related financial instruments
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97
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691
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(40
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)
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266
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Earnings before income taxes
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4,673
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4,117
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2,565
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2,601
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Provision for income taxes
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1,185
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|
999
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627
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|
604
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Net earnings
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3,488
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3,118
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1,938
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1,997
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Net (earnings) losses attributable to noncontrolling interests
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7
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(2
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)
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5
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(1
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)
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Net earnings attributable to Altria
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$
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3,495
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$
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3,116
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$
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1,943
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$
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1,996
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Per share data:
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Basic and diluted earnings per share attributable to Altria
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$
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1.88
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$
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1.66
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$
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1.04
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$
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1.07
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For the Six Months Ended June 30,
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For the Three Months Ended June 30,
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||||||||||||
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2020
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2019
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2020
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|
2019
|
||||||||
Net earnings
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$
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3,488
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$
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3,118
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$
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1,938
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$
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1,997
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Other comprehensive earnings (losses), net of deferred income taxes:
|
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||||||||
Benefit plans
|
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42
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|
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58
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|
|
21
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|
|
29
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||||
ABI
|
|
(913
|
)
|
|
(168
|
)
|
|
(1,211
|
)
|
|
31
|
|
||||
Currency translation adjustments and other
|
|
(39
|
)
|
|
11
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|
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(51
|
)
|
|
11
|
|
||||
Other comprehensive earnings (losses), net of deferred
income taxes
|
|
(910
|
)
|
|
(99
|
)
|
|
(1,241
|
)
|
|
71
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Comprehensive earnings
|
|
2,578
|
|
|
3,019
|
|
|
697
|
|
|
2,068
|
|
||||
Comprehensive (earnings) losses attributable to noncontrolling interests
|
|
7
|
|
|
(2
|
)
|
|
5
|
|
|
(1
|
)
|
||||
Comprehensive earnings attributable to Altria
|
|
$
|
2,585
|
|
|
$
|
3,017
|
|
|
$
|
702
|
|
|
$
|
2,067
|
|
|
|
Attributable to Altria
|
|
|
|
|
||||||||||||||||||||||
|
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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, 2019
|
|
$
|
935
|
|
|
$
|
5,970
|
|
|
$
|
36,539
|
|
|
$
|
(2,864
|
)
|
|
$
|
(34,358
|
)
|
|
$
|
97
|
|
|
$
|
6,319
|
|
Net earnings (losses) (1)
|
|
—
|
|
|
—
|
|
|
3,495
|
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
3,487
|
|
|||||||
Other comprehensive earnings (losses), net of deferred income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(910
|
)
|
|
—
|
|
|
—
|
|
|
(910
|
)
|
|||||||
Stock award activity
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
7
|
|
|||||||
Cash dividends declared ($1.68 per share)
|
|
—
|
|
|
—
|
|
|
(3,126
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,126
|
)
|
|||||||
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
|||||||
Balances, June 30, 2020
|
|
$
|
935
|
|
|
$
|
5,964
|
|
|
$
|
36,908
|
|
|
$
|
(3,774
|
)
|
|
$
|
(34,345
|
)
|
|
$
|
98
|
|
|
$
|
5,786
|
|
|
|
Attributable to Altria
|
|
|
|
|
||||||||||||||||||||||
|
|
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, 2018
|
|
$
|
935
|
|
|
$
|
5,961
|
|
|
$
|
43,962
|
|
|
$
|
(2,547
|
)
|
|
$
|
(33,524
|
)
|
|
$
|
2
|
|
|
$
|
14,789
|
|
Net earnings (losses) (1)
|
|
—
|
|
|
—
|
|
|
3,116
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,116
|
|
|||||||
Other comprehensive earnings (losses), net of deferred income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(99
|
)
|
|
—
|
|
|
—
|
|
|
(99
|
)
|
|||||||
Stock award activity
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
3
|
|
|||||||
Cash dividends declared ($1.60 per share)
|
|
—
|
|
|
—
|
|
|
(2,997
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,997
|
)
|
|||||||
Repurchases of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(346
|
)
|
|
—
|
|
|
(346
|
)
|
|||||||
Balances, June 30, 2019
|
|
$
|
935
|
|
|
$
|
5,953
|
|
|
$
|
44,081
|
|
|
$
|
(2,646
|
)
|
|
$
|
(33,859
|
)
|
|
$
|
2
|
|
|
$
|
14,466
|
|
(1)
|
Amounts attributable to noncontrolling interests for the six months ended June 30, 2020 and 2019 exclude net earnings of $1 million and $2 million, respectively, due to the redeemable noncontrolling interest related to Stag’s Leap Wine Cellars, which is reported in the mezzanine equity section on the condensed consolidated balance sheets.
|
|
|
Attributable to Altria
|
|
|
|
|
||||||||||||||||||||||
|
|
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, March 30, 2020
|
|
$
|
935
|
|
|
$
|
5,959
|
|
|
$
|
36,528
|
|
|
$
|
(2,533
|
)
|
|
$
|
(34,346
|
)
|
|
$
|
94
|
|
|
$
|
6,637
|
|
Net earnings (losses) (1)
|
|
—
|
|
|
—
|
|
|
1,943
|
|
|
—
|
|
|
—
|
|
|
(5
|
)
|
|
1,938
|
|
|||||||
Other comprehensive earnings (losses), net of deferred income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,241
|
)
|
|
—
|
|
|
—
|
|
|
(1,241
|
)
|
|||||||
Stock award activity
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
6
|
|
|||||||
Cash dividends declared ($0.84 per share)
|
|
—
|
|
|
—
|
|
|
(1,563
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,563
|
)
|
|||||||
Other
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
9
|
|
|
9
|
|
|||||||
Balances, June 30, 2020
|
|
$
|
935
|
|
|
$
|
5,964
|
|
|
$
|
36,908
|
|
|
$
|
(3,774
|
)
|
|
$
|
(34,345
|
)
|
|
$
|
98
|
|
|
$
|
5,786
|
|
|
|
Attributable to Altria
|
|
|
|
|
||||||||||||||||||||||
|
|
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, March 31, 2019
|
|
$
|
935
|
|
|
$
|
5,943
|
|
|
$
|
43,582
|
|
|
$
|
(2,717
|
)
|
|
$
|
(33,664
|
)
|
|
$
|
2
|
|
|
$
|
14,081
|
|
Net earnings (losses) (1)
|
|
—
|
|
|
—
|
|
|
1,996
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,996
|
|
|||||||
Other comprehensive earnings (losses), net of deferred income taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
71
|
|
|
—
|
|
|
—
|
|
|
71
|
|
|||||||
Stock award activity
|
|
—
|
|
|
10
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10
|
|
|||||||
Cash dividends declared ($0.80 per share)
|
|
—
|
|
|
—
|
|
|
(1,497
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,497
|
)
|
|||||||
Repurchases of common stock
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(195
|
)
|
|
—
|
|
|
(195
|
)
|
|||||||
Balances, June 30, 2019
|
|
$
|
935
|
|
|
$
|
5,953
|
|
|
$
|
44,081
|
|
|
$
|
(2,646
|
)
|
|
$
|
(33,859
|
)
|
|
$
|
2
|
|
|
$
|
14,466
|
|
|
|
For the Six Months Ended
June 30, |
||||||
|
|
2020
|
|
2019
|
||||
Cash Provided by (Used in) Operating Activities
|
|
|
|
|
||||
Net earnings
|
|
$
|
3,488
|
|
|
$
|
3,118
|
|
Adjustments to reconcile net earnings to operating cash flows:
|
|
|
|
|
||||
Depreciation and amortization
|
|
130
|
|
|
106
|
|
||
Deferred income tax provision (benefit)
|
|
(4
|
)
|
|
(52
|
)
|
||
Earnings from equity investments
|
|
(166
|
)
|
|
(533
|
)
|
||
Dividends from ABI
|
|
108
|
|
|
221
|
|
||
Loss on Cronos-related financial instruments
|
|
97
|
|
|
691
|
|
||
Asset impairment and exit costs, net of cash paid
|
|
(41
|
)
|
|
(1
|
)
|
||
Cash effects of changes:
|
|
|
|
|
||||
Receivables
|
|
12
|
|
|
(21
|
)
|
||
Inventories
|
|
87
|
|
|
96
|
|
||
Accounts payable
|
|
(47
|
)
|
|
(175
|
)
|
||
Income taxes
|
|
1,049
|
|
|
94
|
|
||
Accrued liabilities and other current assets
|
|
1,028
|
|
|
80
|
|
||
Accrued settlement charges
|
|
(1,275
|
)
|
|
(1,435
|
)
|
||
Pension plan contributions
|
|
(11
|
)
|
|
(14
|
)
|
||
Pension provisions and postretirement, net
|
|
(38
|
)
|
|
(18
|
)
|
||
Other, net
|
|
529
|
|
|
235
|
|
||
Net cash provided by (used in) operating activities
|
|
4,946
|
|
|
2,392
|
|
||
Cash Provided by (Used in) Investing Activities
|
|
|
|
|
||||
Capital expenditures
|
|
(106
|
)
|
|
(79
|
)
|
||
Investment in Cronos
|
|
—
|
|
|
(1,832
|
)
|
||
Other, net
|
|
43
|
|
|
(65
|
)
|
||
Net cash provided by (used in) investing activities
|
|
$
|
(63
|
)
|
|
$
|
(1,976
|
)
|
(1)
|
Restricted cash consisted of cash deposits collateralizing appeal bonds posted by PM USA to obtain stays of judgments pending appeals. See Note 12. Contingencies.
|
(in millions, except per share data)
|
|
For the Six Months Ended June 30, 2019
|
|
For the Three Months Ended June 30, 2019
|
||||
Total number of shares repurchased
|
|
6.4
|
|
|
3.7
|
|
||
Aggregate cost of shares repurchased
|
|
$
|
346
|
|
|
$
|
195
|
|
Average price per share of shares repurchased
|
|
$
|
54.36
|
|
|
$
|
52.93
|
|
|
|
For the Six Months Ended June 30,
|
||||||||||||||||||
|
|
2020
|
|
2019
|
||||||||||||||||
|
|
Implementation Costs (1)
|
|
Total
|
|
Asset Impairment and Exit Costs
|
|
Implementation Costs (2)
|
|
Total
|
||||||||||
|
(in millions)
|
|||||||||||||||||||
Smokeable products
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
50
|
|
|
$
|
25
|
|
|
$
|
75
|
|
Oral tobacco products
|
|
—
|
|
|
—
|
|
|
8
|
|
|
3
|
|
|
11
|
|
|||||
Wine
|
|
394
|
|
|
394
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
All other
|
|
—
|
|
|
—
|
|
|
14
|
|
|
(7
|
)
|
|
7
|
|
|||||
General corporate
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
|||||
Total
|
|
394
|
|
|
394
|
|
|
73
|
|
|
21
|
|
|
94
|
|
|||||
Plus amounts included in net periodic benefit income, excluding
service cost (3)
|
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
12
|
|
|||||
Total
|
|
$
|
394
|
|
|
$
|
394
|
|
|
$
|
85
|
|
|
$
|
21
|
|
|
$
|
106
|
|
|
|
For the Three Months Ended June 30,
|
||||||||||||||||||
|
2020
|
|
2019
|
|||||||||||||||||
|
|
Implementation Costs (1)
|
|
Total
|
|
Asset Impairment and Exit Costs
|
|
Implementation Costs (2)
|
|
Total
|
||||||||||
|
(in millions)
|
|||||||||||||||||||
Smokeable products
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
14
|
|
|
$
|
17
|
|
|
$
|
31
|
|
Oral tobacco products
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
|||||
Wine
|
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
All other
|
|
—
|
|
|
—
|
|
|
19
|
|
|
(7
|
)
|
|
12
|
|
|||||
Total
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
33
|
|
|
$
|
12
|
|
|
$
|
45
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions)
|
||
Balances at December 31, 2019
|
$
|
67
|
|
Charges
|
—
|
|
|
Cash spent
|
(41
|
)
|
|
Balances at June 30, 2020
|
$
|
26
|
|
|
|
Carrying Amount
|
||||||
|
|
June 30, 2020
|
|
December 31, 2019
|
||||
|
|
(in millions)
|
||||||
ABI (1)
|
|
$
|
16,891
|
|
|
$
|
18,071
|
|
JUUL
|
|
4,205
|
|
|
4,205
|
|
||
Cronos (2)
|
|
1,223
|
|
|
1,305
|
|
||
Total
|
|
$
|
22,319
|
|
|
$
|
23,581
|
|
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
|
(in millions)
|
||||||||||||||
ABI
|
|
$
|
112
|
|
|
$
|
388
|
|
|
$
|
(22
|
)
|
|
$
|
302
|
|
Cronos
|
|
54
|
|
|
145
|
|
|
31
|
|
|
145
|
|
||||
Total
|
|
$
|
166
|
|
|
$
|
533
|
|
|
$
|
9
|
|
|
$
|
447
|
|
▪
|
Altria will continue to provide regulatory affairs support for JUUL’s pursuit of its pre-market tobacco applications (PMTA) and/or its modified risk tobacco products authorization (MRTP) and discontinued all other services as of March 31, 2020;
|
▪
|
Altria will have the option to be released from its non-compete obligation (i) in the event JUUL is prohibited by federal law from selling e-vapor products in the U.S. for a continuous period of at least 12 months (subject to tolling of this period in certain circumstances) or (ii) if the carrying value of Altria’s investment in JUUL is not more than 10% of its initial carrying value of $12.8 billion;
|
▪
|
Altria and JUUL agreed that for a period of one year they will not pursue any litigation against each other in connection with any conduct that occurred prior to the date of such cooperation agreement, with statutes of limitation being tolled during the one-year period;
|
▪
|
with respect to certain litigation in which Altria and JUUL are both defendants against third-party plaintiffs, Altria will not pursue any claims against JUUL for indemnification or reimbursement except for any non-contractual claims for contribution or indemnity where a judgment has been entered against Altria and JUUL; and
|
▪
|
upon Share Conversion, JUUL will:
|
▪
|
restructure JUUL’s current seven-member board of directors to a nine-member board that will include independent board members. The new structure will include: (i) three independent directors (one of whom will be designated by Altria and two of whom will be designated by JUUL stockholders other than Altria) unanimously certified as independent by a nominating committee, which will include at least one Altria designee, (ii) two directors designated by Altria, (iii) three directors designated by JUUL stockholders other than Altria, and (iv) the JUUL Chief Executive Officer; and
|
▪
|
create a Litigation Oversight Committee, which will include two Altria designated directors (one of whom will chair the Litigation Oversight Committee) that will have oversight authority and review of litigation management for matters in which JUUL and Altria are co-defendants and have or reasonably could have a written joint defense agreement in effect between them. Subject to certain limitations, the Litigation Oversight Committee will recommend to JUUL changes to outside counsel and litigation strategy by majority vote, with disagreements by JUUL’s management being resolved by majority vote of JUUL’s board of directors.
|
▪
|
149.8 million newly issued common shares of Cronos (“Acquired Common Shares”), which represented a 45% economic and voting interest;
|
▪
|
anti-dilution protections to purchase Cronos common shares, exercisable each quarter upon dilution, to maintain its ownership percentage. Certain of the anti-dilution protections provide Altria the ability to purchase additional Cronos common shares at a per share exercise price of Canadian dollar (“CAD”) $16.25 upon the occurrence of specified events (“Fixed-price Preemptive Rights”). Based on Altria’s assumptions as of June 30, 2020, Altria estimates the Fixed-price Preemptive Rights allows Altria to purchase up to an additional approximately 36 million common shares of Cronos; and
|
▪
|
a warrant providing Altria the ability to purchase up to an additional 10% of common shares of Cronos (approximately 78 million common shares at June 30, 2020) at a per share exercise price of CAD $19.00, which expires on March 8, 2023.
|
▪
|
$1.2 billion to the warrant;
|
▪
|
$0.5 billion to the Fixed-price Preemptive Rights;
|
▪
|
$0.4 billion to the Acquired Common Shares; and
|
▪
|
$0.3 billion to a deferred tax liability.
|
|
|
June 30, 2020
|
|
December 31, 2019
|
|
June 30, 2020
|
|
December 31, 2019
|
|
|
Fixed-price Preemptive Rights
|
|
Cronos Warrant
|
||||
Share price (1)
|
|
C$8.18
|
|
C$9.97
|
|
C$8.18
|
|
C$9.97
|
Expected life (2)
|
|
1.39 years
|
|
1.67 years
|
|
2.68 years
|
|
3.18 years
|
Expected volatility (3)
|
|
91.31%
|
|
81.61%
|
|
91.31%
|
|
81.61%
|
Risk-free interest rate (4)(5)
|
|
0.27%
|
|
1.71%
|
|
0.30%
|
|
1.69%
|
Expected dividend yield (6)
|
|
—%
|
|
—%
|
|
—%
|
|
—%
|
|
Fair Value of Assets
|
|
Fair Value of Liabilities
|
|||||||||||||||
|
Balance Sheet Classification
|
|
June 30, 2020
|
|
December 31, 2019
|
|
Balance Sheet Classification
|
June 30, 2020
|
|
December 31, 2019
|
||||||||
Derivatives designated as hedging instruments:
|
(in millions)
|
|||||||||||||||||
Foreign currency contracts
|
Other current assets
|
|
$
|
20
|
|
|
$
|
46
|
|
|
Other accrued liabilities
|
$
|
1
|
|
|
$
|
7
|
|
Foreign currency contracts
|
Other assets
|
|
—
|
|
|
—
|
|
|
Other liabilities
|
5
|
|
|
21
|
|
||||
Total
|
|
$
|
20
|
|
|
$
|
46
|
|
|
|
$
|
6
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
||||||||
Cronos warrant
|
Investments in equity securities
|
|
$
|
166
|
|
|
$
|
234
|
|
|
|
|
|
|
||||
Fixed-price
Preemptive Rights
|
Investments in equity securities
|
|
40
|
|
|
69
|
|
|
|
|
|
|
||||||
Total
|
|
|
$
|
206
|
|
|
$
|
303
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total derivatives
|
|
|
$
|
226
|
|
|
$
|
349
|
|
|
|
$
|
6
|
|
|
$
|
28
|
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Fixed-price Preemptive Rights
|
$
|
(29
|
)
|
|
$
|
(212
|
)
|
|
$
|
6
|
|
|
$
|
(80
|
)
|
Cronos warrant
|
(68
|
)
|
|
(448
|
)
|
|
34
|
|
|
(186
|
)
|
||||
|
$
|
(97
|
)
|
|
$
|
(660
|
)
|
|
$
|
40
|
|
|
$
|
(266
|
)
|
|
|
Gain (Loss) Recognized in Accumulated Other Comprehensive Losses
|
|
Gain (Loss) Recognized in Net Earnings (1)
|
|
Gain (Loss) Recognized in Accumulated Other Comprehensive Losses
|
|
Gain (Loss) Recognized in Net Earnings (1)
|
||||||||||||||||||||||||
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||||||||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||||||||||
|
|
(in millions)
|
||||||||||||||||||||||||||||||
Foreign currency contracts
|
|
$
|
38
|
|
|
$
|
13
|
|
|
$
|
25
|
|
|
$
|
16
|
|
|
$
|
(18
|
)
|
|
$
|
(10
|
)
|
|
$
|
11
|
|
|
$
|
7
|
|
Foreign currency denominated debt
|
|
(9
|
)
|
|
(32
|
)
|
|
—
|
|
|
—
|
|
|
(86
|
)
|
|
(65
|
)
|
|
—
|
|
|
—
|
|
||||||||
Total
|
|
$
|
29
|
|
|
$
|
(19
|
)
|
|
$
|
25
|
|
|
$
|
16
|
|
|
$
|
(104
|
)
|
|
$
|
(75
|
)
|
|
$
|
11
|
|
|
$
|
7
|
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||||||||||||||||||
|
Pension
|
|
Postretirement
|
|
Pension
|
|
Postretirement
|
||||||||||||||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||||||||||
|
(in millions)
|
||||||||||||||||||||||||||||||
Service cost
|
$
|
37
|
|
|
$
|
35
|
|
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
18
|
|
|
$
|
18
|
|
|
$
|
4
|
|
|
$
|
4
|
|
Interest cost
|
126
|
|
|
152
|
|
|
30
|
|
|
40
|
|
|
63
|
|
|
75
|
|
|
15
|
|
|
20
|
|
||||||||
Expected return on plan assets
|
(251
|
)
|
|
(288
|
)
|
|
(7
|
)
|
|
(7
|
)
|
|
(125
|
)
|
|
(143
|
)
|
|
(4
|
)
|
|
(3
|
)
|
||||||||
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Net loss
|
53
|
|
|
80
|
|
|
7
|
|
|
6
|
|
|
26
|
|
|
38
|
|
|
4
|
|
|
3
|
|
||||||||
Prior service cost (credit)
|
2
|
|
|
3
|
|
|
(15
|
)
|
|
(14
|
)
|
|
1
|
|
|
2
|
|
|
(8
|
)
|
|
(7
|
)
|
||||||||
Curtailment
|
—
|
|
|
7
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Net periodic benefit
(income) cost
|
$
|
(33
|
)
|
|
$
|
(11
|
)
|
|
$
|
23
|
|
|
$
|
38
|
|
|
$
|
(17
|
)
|
|
$
|
(10
|
)
|
|
$
|
11
|
|
|
$
|
17
|
|
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
|
(in millions)
|
||||||||||||||
Net earnings attributable to Altria
|
|
$
|
3,495
|
|
|
$
|
3,116
|
|
|
$
|
1,943
|
|
|
$
|
1,996
|
|
Less: Distributed and undistributed earnings attributable to share-based awards
|
|
(5
|
)
|
|
(4
|
)
|
|
(3
|
)
|
|
(2
|
)
|
||||
Earnings for basic and diluted EPS
|
|
$
|
3,490
|
|
|
$
|
3,112
|
|
|
$
|
1,940
|
|
|
$
|
1,994
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted-average shares for basic EPS
|
|
1,858
|
|
|
1,872
|
|
|
1,858
|
|
|
1,870
|
|
||||
Plus: contingently issuable performance stock units
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Weighted-average shares for diluted EPS
|
|
1,859
|
|
|
1,872
|
|
|
1,859
|
|
|
1,870
|
|
|
|
For the Six Months Ended June 30, 2020
|
||||||||||||||
|
|
Benefit Plans
|
|
ABI
|
|
Currency
Translation
Adjustments and Other
|
|
Accumulated
Other
Comprehensive
Losses
|
||||||||
|
|
(in millions)
|
||||||||||||||
Balances, December 31, 2019
|
|
$
|
(2,192
|
)
|
|
$
|
(693
|
)
|
|
$
|
21
|
|
|
$
|
(2,864
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive earnings (losses) before reclassifications
|
|
—
|
|
|
(1,140
|
)
|
|
(39
|
)
|
|
(1,179
|
)
|
||||
Deferred income taxes
|
|
—
|
|
|
238
|
|
|
—
|
|
|
238
|
|
||||
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes
|
|
—
|
|
|
(902
|
)
|
|
(39
|
)
|
|
(941
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Amounts reclassified to net earnings
|
|
56
|
|
|
(15
|
)
|
|
—
|
|
|
41
|
|
||||
Deferred income taxes
|
|
(14
|
)
|
|
4
|
|
|
—
|
|
|
(10
|
)
|
||||
Amounts reclassified to net earnings, net of deferred income taxes
|
|
42
|
|
|
(11
|
)
|
|
—
|
|
|
31
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive earnings (losses), net of deferred income taxes
|
|
42
|
|
|
(913
|
)
|
(1)
|
(39
|
)
|
|
(910
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Balances, June 30, 2020
|
|
$
|
(2,150
|
)
|
|
$
|
(1,606
|
)
|
|
$
|
(18
|
)
|
|
$
|
(3,774
|
)
|
|
|
For the Three Months Ended June 30, 2020
|
||||||||||||||
|
|
Benefit Plans
|
|
ABI
|
|
Currency
Translation
Adjustments and Other
|
|
Accumulated
Other
Comprehensive
Losses
|
||||||||
|
|
(in millions)
|
||||||||||||||
Balances, March 31, 2020
|
|
$
|
(2,171
|
)
|
|
$
|
(395
|
)
|
|
$
|
33
|
|
|
$
|
(2,533
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive earnings (losses) before reclassifications
|
|
—
|
|
|
(1,528
|
)
|
|
(51
|
)
|
|
(1,579
|
)
|
||||
Deferred income taxes
|
|
—
|
|
|
323
|
|
|
—
|
|
|
323
|
|
||||
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes
|
|
—
|
|
|
(1,205
|
)
|
|
(51
|
)
|
|
(1,256
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Amounts reclassified to net earnings
|
|
28
|
|
|
(8
|
)
|
|
—
|
|
|
20
|
|
||||
Deferred income taxes
|
|
(7
|
)
|
|
2
|
|
|
—
|
|
|
(5
|
)
|
||||
Amounts reclassified to net earnings, net of deferred income taxes
|
|
21
|
|
|
(6
|
)
|
|
—
|
|
|
15
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive earnings (losses), net of deferred income taxes
|
|
21
|
|
|
(1,211
|
)
|
(1)
|
(51
|
)
|
|
(1,241
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Balances, June 30, 2020
|
|
$
|
(2,150
|
)
|
|
$
|
(1,606
|
)
|
|
$
|
(18
|
)
|
|
$
|
(3,774
|
)
|
|
|
For the Six Months Ended June 30, 2019
|
||||||||||||||
|
|
Benefit Plans
|
|
ABI
|
|
Currency
Translation
Adjustments and Other
|
|
Accumulated
Other
Comprehensive
Losses
|
||||||||
|
|
(in millions)
|
||||||||||||||
Balances, December 31, 2018
|
|
$
|
(2,168
|
)
|
|
$
|
(374
|
)
|
|
$
|
(5
|
)
|
|
$
|
(2,547
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive earnings (losses) before reclassifications
|
|
—
|
|
|
(182
|
)
|
|
13
|
|
|
(169
|
)
|
||||
Deferred income taxes
|
|
—
|
|
|
39
|
|
|
(2
|
)
|
|
37
|
|
||||
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes
|
|
—
|
|
|
(143
|
)
|
|
11
|
|
|
(132
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Amounts reclassified to net earnings
|
|
78
|
|
|
(31
|
)
|
|
—
|
|
|
47
|
|
||||
Deferred income taxes
|
|
(20
|
)
|
|
6
|
|
|
—
|
|
|
(14
|
)
|
||||
Amounts reclassified to net earnings, net of deferred income taxes
|
|
58
|
|
|
(25
|
)
|
|
—
|
|
|
33
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive earnings (losses), net of deferred income taxes
|
|
58
|
|
|
(168
|
)
|
(1)
|
11
|
|
|
(99
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Balances, June 30, 2019
|
|
$
|
(2,110
|
)
|
|
$
|
(542
|
)
|
|
$
|
6
|
|
|
$
|
(2,646
|
)
|
|
|
For the Three Months Ended June 30, 2019
|
||||||||||||||
|
|
Benefit Plans
|
|
ABI
|
|
Currency
Translation
Adjustments and Other
|
|
Accumulated
Other
Comprehensive
Losses
|
||||||||
|
|
(in millions)
|
||||||||||||||
Balances, March 31, 2019
|
|
$
|
(2,139
|
)
|
|
$
|
(573
|
)
|
|
$
|
(5
|
)
|
|
$
|
(2,717
|
)
|
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive earnings (losses) before reclassifications
|
|
—
|
|
|
56
|
|
|
13
|
|
|
69
|
|
||||
Deferred income taxes
|
|
—
|
|
|
(10
|
)
|
|
(2
|
)
|
|
(12
|
)
|
||||
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes
|
|
—
|
|
|
46
|
|
|
11
|
|
|
57
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Amounts reclassified to net earnings
|
|
39
|
|
|
(19
|
)
|
|
—
|
|
|
20
|
|
||||
Deferred income taxes
|
|
(10
|
)
|
|
4
|
|
|
—
|
|
|
(6
|
)
|
||||
Amounts reclassified to net earnings, net of deferred income taxes
|
|
29
|
|
|
(15
|
)
|
|
—
|
|
|
14
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Other comprehensive earnings (losses), net of deferred income taxes
|
|
29
|
|
|
31
|
|
(1)
|
11
|
|
|
71
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Balances, June 30, 2019
|
|
$
|
(2,110
|
)
|
|
$
|
(542
|
)
|
|
$
|
6
|
|
|
$
|
(2,646
|
)
|
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
|
(in millions)
|
||||||||||||||
Benefit Plans: (1)
|
|
|
|
|
|
|
|
|
||||||||
Net loss
|
|
$
|
69
|
|
|
$
|
93
|
|
|
$
|
35
|
|
|
$
|
44
|
|
Prior service cost/credit
|
|
(13
|
)
|
|
(15
|
)
|
|
(7
|
)
|
|
(5
|
)
|
||||
|
|
56
|
|
|
78
|
|
|
28
|
|
|
39
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
ABI (2)
|
|
(15
|
)
|
|
(31
|
)
|
|
(8
|
)
|
|
(19
|
)
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Pre-tax amounts reclassified from accumulated other comprehensive losses to net earnings
|
|
$
|
41
|
|
|
$
|
47
|
|
|
$
|
20
|
|
|
$
|
20
|
|
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
|
(in millions)
|
||||||||||||||
Net revenues:
|
|
|
|
|
|
|
|
|
||||||||
Smokeable products
|
|
$
|
11,209
|
|
|
$
|
10,788
|
|
|
$
|
5,603
|
|
|
$
|
5,853
|
|
Oral tobacco products
|
|
1,261
|
|
|
1,142
|
|
|
660
|
|
|
602
|
|
||||
Wine
|
|
277
|
|
|
316
|
|
|
131
|
|
|
165
|
|
||||
All other
|
|
(21
|
)
|
|
1
|
|
|
(27
|
)
|
|
(1
|
)
|
||||
Net revenues
|
|
$
|
12,726
|
|
|
$
|
12,247
|
|
|
$
|
6,367
|
|
|
$
|
6,619
|
|
Earnings before income taxes:
|
|
|
|
|
|
|
|
|
||||||||
OCI:
|
|
|
|
|
|
|
|
|
||||||||
Smokeable products
|
|
$
|
4,820
|
|
|
$
|
4,303
|
|
|
$
|
2,450
|
|
|
$
|
2,371
|
|
Oral tobacco products
|
|
861
|
|
|
778
|
|
|
447
|
|
|
420
|
|
||||
Wine
|
|
(366
|
)
|
|
34
|
|
|
13
|
|
|
19
|
|
||||
All other
|
|
(56
|
)
|
|
(35
|
)
|
|
(51
|
)
|
|
(23
|
)
|
||||
Amortization of intangibles
|
|
(37
|
)
|
|
(16
|
)
|
|
(18
|
)
|
|
(8
|
)
|
||||
General corporate expenses
|
|
(90
|
)
|
|
(108
|
)
|
|
(45
|
)
|
|
(62
|
)
|
||||
Corporate asset impairment and exit costs
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||
Operating income
|
|
5,132
|
|
|
4,955
|
|
|
2,796
|
|
|
2,717
|
|
||||
Interest and other debt expense, net
|
|
(583
|
)
|
|
(696
|
)
|
|
(308
|
)
|
|
(312
|
)
|
||||
Net periodic benefit income, excluding service cost
|
|
55
|
|
|
16
|
|
|
28
|
|
|
15
|
|
||||
Earnings from equity investments
|
|
166
|
|
|
533
|
|
|
9
|
|
|
447
|
|
||||
Gain (loss) on Cronos-related financial instruments
|
|
(97
|
)
|
|
(691
|
)
|
|
40
|
|
|
(266
|
)
|
||||
Earnings before income taxes
|
|
$
|
4,673
|
|
|
$
|
4,117
|
|
|
$
|
2,565
|
|
|
$
|
2,601
|
|
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
|
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
|
(in millions)
|
||||||||||||||
Smokeable products segment
|
|
$
|
39
|
|
|
$
|
40
|
|
|
$
|
17
|
|
|
$
|
25
|
|
Interest and other debt expense, net
|
|
3
|
|
|
5
|
|
|
1
|
|
|
3
|
|
||||
Total
|
|
$
|
42
|
|
|
$
|
45
|
|
|
$
|
18
|
|
|
$
|
28
|
|
▪
|
$0.750 billion at 2.350%, due 2025, interest payable semiannually beginning November 6, 2020;
|
▪
|
$0.750 billion at 3.400%, due 2030, interest payable semiannually beginning November 6, 2020; and
|
▪
|
$0.500 billion at 4.450%, due 2050, interest payable semiannually beginning November 6, 2020.
|
▪
|
tax expense resulting from lower earnings on Altria’s equity investment in Cronos, which is taxed at a lower foreign tax rate; and
|
▪
|
net tax expense for adjustments resulting from amended returns and audit adjustments related to prior years.
|
▪
|
tax expense resulting from lower earnings on Altria’s equity investment in Cronos, which is taxed at a lower foreign tax rate; and
|
•
|
net tax expense for adjustments resulting from amended returns and audit adjustments related to prior years;
|
•
|
net tax benefits related to Altria’s equity investment in Cronos, which included a valuation allowance release on a deferred tax asset.
|
(in millions)
|
|
2020
|
|
||
Balance at beginning of year
|
|
$
|
2,324
|
|
|
Additions to valuation allowance charged to income tax expense
|
|
32
|
|
|
|
Reductions to valuation allowance credited to income tax benefit
|
|
(141
|
)
|
|
|
Foreign currency translation
|
|
5
|
|
|
|
Balance at end of year
|
|
$
|
2,220
|
|
|
|
July 24, 2020
|
|
July 26, 2019
|
|
July 23, 2018
|
Individual Smoking and Health Cases (1)
|
116
|
|
90
|
|
97
|
Health Care Cost Recovery Actions (2)
|
—
|
|
1
|
|
1
|
E-vapor Cases(3)
|
621
|
|
|
|
|
Other Tobacco-Related Cases(4)
|
4
|
|
4
|
|
6
|
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||
(in millions)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Accrued liability for tobacco and health litigation items at beginning of period (1)
|
$
|
14
|
|
|
$
|
112
|
|
|
$
|
10
|
|
|
$
|
20
|
|
Pre-tax charges for:
|
|
|
|
|
|
|
|
||||||||
Tobacco and health litigation
|
39
|
|
(2)
|
40
|
|
|
17
|
|
|
25
|
|
||||
Related interest costs
|
3
|
|
|
5
|
|
|
1
|
|
|
3
|
|
||||
Payments (1)
|
(34
|
)
|
(3)
|
(144
|
)
|
|
(6
|
)
|
|
(35
|
)
|
||||
Accrued liability for tobacco and health litigation items at end of period (1)
|
$
|
22
|
|
|
$
|
13
|
|
|
$
|
22
|
|
|
$
|
13
|
|
Currently Pending Engle Cases with Accrued Liabilities
(rounded to nearest $ million)
|
|||||||
Plaintiff
|
Verdict Date
|
Defendant(s)
|
Court
|
Compensatory Damages (All Defendants)
|
Punitive Damages (PM USA)
|
Appeal Status
|
Accrual (1)
|
Berger (Cote)
|
September 2014
|
PM USA
|
Federal Court - Middle District of Florida
|
$6 million
|
$21 million
|
The Eleventh Circuit Court of Appeals reinstated the punitive and compensatory damages awards and remanded the case to the district court. PM USA’s challenge to the punitive damages award was denied by the district court. PM USA’s appeal to the Eleventh Circuit Court of Appeals is pending.
|
$6 million accrual in the fourth quarter of 2018
|
Santoro
|
March 2017
|
PM USA, R.J. Reynolds and Liggett Group(2)
|
Broward
|
$2 million (<$1 million PM USA)
|
<$1 million
|
The Fourth District Court of Appeal affirmed the compensatory damages award and reinstated the punitive damages award. Defendants’ motion for rehearing was denied. PM USA plans to appeal.
|
<$1 million accrual for compensatory damages award in the second quarter of 2020
|
Other Currently Pending Engle Cases with Verdicts Against PM USA
(rounded to nearest $ million)
|
||||||
Plaintiff
|
Verdict Date
|
Defendant(s)
|
Court
|
Compensatory Damages (1)
|
Punitive Damages
(PM USA) |
Appeal Status
|
Duignan
|
February 2020(2)
|
PM USA and
R.J. Reynolds |
Pinellas
|
$3 million
|
$12 million
|
Defendants’ post-trial motions pending.
|
Cuddihee
|
January 2020
|
PM USA
|
Duval
|
$3 million
|
$0
|
Defendant’s post-trial motions denied. Defendant plans to appeal.
|
Rintoul (Caprio)
|
November 2019(2)
|
PM USA and R.J. Reynolds
|
Broward
|
$9 million ($5 million PM USA)
|
$74 million
|
Defendants’ post-trial motion pending.
|
Gloger
|
November 2019(2)
|
PM USA and R.J. Reynolds
|
Miami-Dade
|
$15 million ($5 million PM USA)
|
$11 million
|
Appeal by defendants to Third District Court of Appeal pending.
|
McCall
|
March 2019
|
PM USA
|
Broward
|
<$1 million (<$1 million PM USA)
|
<$1 million
|
New trial ordered on punitive damages.
|
Neff
|
March 2019
|
PM USA and R.J. Reynolds
|
Broward
|
$4 million
|
$2 million
|
Appeals by plaintiff and defendants to Fourth District Court of Appeal pending.
|
Frogel
|
March 2019
|
PM USA
|
Palm Beach
|
<$1 million (<$1 million PM USA)
|
$0
|
Appeals by plaintiff and defendant to Fourth District Court of Appeal pending.
|
Mahfuz
|
February 2019
|
PM USA and R.J. Reynolds
|
Broward
|
$12 million
|
$10 million
|
Appeals by plaintiff and defendants to Fourth District Court of Appeal pending.
|
Holliman
|
February 2019
|
PM USA
|
Miami-Dade
|
$3 million
|
$0
|
Defendant’s appeal to Third District Court of Appeal pending.
|
|
|
|
|
|
|
|
Engle Cases Concluded Within Past 12 Months(1)
(rounded to nearest $ million)
|
||||||
Plaintiff
|
Verdict Date
|
Defendant(s)
|
Court
|
Accrual Date
|
Payment Amount
(if any)
|
Payment Date
|
Landi(2)
|
June 2018
|
PM USA and R.J. Reynolds
|
Broward
|
Second quarter of 2020
|
$10 million
|
July 2020
|
Theis(3)
|
May 2018
|
PM USA and
R.J. Reynolds |
Sarasota
|
First quarter of 2020
|
$17 million
|
February 2020
|
Alvarez Del Real
|
September 2019
|
PM USA
|
Miami-Dade
|
Fourth quarter of 2019
|
<$1 million
|
October 2019
|
Zingaro
|
May 2019
|
PM USA and
R.J. Reynolds |
Broward
|
Third quarter of 2019
|
<$1 million
|
October 2019
|
▪
|
2003 NPM Adjustment. In September 2013, an arbitration panel issued rulings regarding the 15 states and territories that remained in the arbitration, ruling that six of them did not establish valid defenses to the NPM Adjustment for 2003. In June 2014, two of these six states joined the multi-state settlement discussed above. With respect to the remaining four states, following the outcome of challenges in state courts, PM USA ultimately recorded $74 million primarily as a reduction to cost of sales, with the final adjustment being recorded in the third quarter of 2017. Subsequently, another one of the six states joined the multi-state settlement. Two potential disputes remain outstanding regarding the amount of interest due to PM USA and there is no assurance that PM USA will prevail in either of these disputes.
|
▪
|
2004 and Subsequent NPM Adjustments. PM USA has continued to pursue the NPM Adjustments for 2004 and subsequent years in multi-state arbitrations against the states that did not join either of the settlements discussed above. In September 2019, a New Mexico state appellate court affirmed a trial court’s order compelling New Mexico to arbitrate the 2004 NPM Adjustment claims in the multi-state arbitration with the other states. In November 2019, the New Mexico Supreme Court declined to review that decision. The arbitration hearing has not yet been scheduled. The Montana state courts ruled that Montana may litigate its claims in state court, rather than participate in a multi-state arbitration and the PMs have agreed not to contest the applicability of the 2004 NPM Adjustment to Montana. In April 2020, the State of Montana filed a motion in Montana state court against the PMs, including PM USA and a Nat Sherman affiliate, claiming that Montana’s share of the NPM Adjustment amounts should be paid to the state in advance of the resolution of disputes over the applicability of those adjustments. PM USA and the Nat Sherman affiliate have been placing the disputed NPM Adjustment amounts in the disputed payments account established pursuant to the terms of the MSA. Montana seeks a total of approximately $43 million in disputed payments from all defendants combined, as well as treble and punitive damages.
|
▪
|
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.
|
|
Net Earnings
|
|
Diluted EPS
|
||||
|
(in millions, except per share data)
|
||||||
For the six months ended June 30, 2019
|
$
|
3,116
|
|
|
$
|
1.66
|
|
|
|
|
|
||||
2019 Asset impairment, exit, implementation and acquisition-related costs
|
158
|
|
|
0.08
|
|
||
2019 Tobacco and health litigation items
|
34
|
|
|
0.02
|
|
||
2019 ABI-related special items 1
|
27
|
|
|
0.02
|
|
||
2019 Cronos-related special items
|
384
|
|
|
0.21
|
|
||
2019 Tax items
|
41
|
|
|
0.02
|
|
||
Subtotal 2019 special items
|
644
|
|
|
0.35
|
|
||
|
|
|
|
||||
2020 Implementation and acquisition-related costs
|
(306
|
)
|
|
(0.16
|
)
|
||
2020 Tobacco and health litigation items
|
(32
|
)
|
|
(0.02
|
)
|
||
2020 ABI-related special items
|
(139
|
)
|
|
(0.07
|
)
|
||
2020 Cronos-related special items
|
(1
|
)
|
|
—
|
|
||
2020 COVID-19 special items
|
(37
|
)
|
|
(0.02
|
)
|
||
2020 Tax items
|
(51
|
)
|
|
(0.03
|
)
|
||
Subtotal 2020 special items
|
(566
|
)
|
|
(0.30
|
)
|
||
|
|
|
|
||||
Fewer shares outstanding
|
—
|
|
|
0.01
|
|
||
Change in tax rate
|
(15
|
)
|
|
(0.01
|
)
|
||
Operations
|
316
|
|
|
0.17
|
|
||
For the six months ended June 30, 2020
|
$
|
3,495
|
|
|
$
|
1.88
|
|
|
|
|
|
||||
2020 Reported Net Earnings
|
$
|
3,495
|
|
|
$
|
1.88
|
|
2019 Reported Net Earnings
|
$
|
3,116
|
|
|
$
|
1.66
|
|
% Change
|
12.2
|
%
|
|
13.3
|
%
|
||
|
|
|
|
||||
2020 Adjusted Net Earnings and Adjusted Diluted EPS
|
$
|
4,061
|
|
|
$
|
2.18
|
|
2019 Adjusted Net Earnings and Adjusted Diluted EPS 1
|
$
|
3,760
|
|
|
$
|
2.01
|
|
% Change
|
8.0
|
%
|
|
8.5
|
%
|
|
Net Earnings
|
|
Diluted EPS
|
||||
|
(in millions, except per share data)
|
||||||
For the three months ended June 30, 2019
|
$
|
1,996
|
|
|
$
|
1.07
|
|
|
|
|
|
||||
2019 Asset impairment, exit and implementation costs
|
33
|
|
|
0.02
|
|
||
2019 Tobacco and health litigation items
|
21
|
|
|
0.01
|
|
||
2019 ABI-related special items 1
|
(102
|
)
|
|
(0.06
|
)
|
||
2019 Cronos-related special items
|
56
|
|
|
0.03
|
|
||
2019 Tax items
|
22
|
|
|
0.01
|
|
||
Subtotal 2019 special items
|
30
|
|
|
0.01
|
|
||
|
|
|
|
||||
2020 Implementation and acquisition-related costs
|
(6
|
)
|
|
—
|
|
||
2020 Tobacco and health litigation items
|
(13
|
)
|
|
(0.01
|
)
|
||
2020 ABI-related special items
|
(95
|
)
|
|
(0.05
|
)
|
||
2020 Cronos-related special items
|
94
|
|
|
0.05
|
|
||
2020 COVID-19 special items
|
(37
|
)
|
|
(0.02
|
)
|
||
2020 Tax items
|
(27
|
)
|
|
(0.02
|
)
|
||
Subtotal 2020 special items
|
(84
|
)
|
|
(0.05
|
)
|
||
|
|
|
|
||||
Fewer shares outstanding
|
—
|
|
|
0.01
|
|
||
Change in tax rate
|
(14
|
)
|
|
(0.01
|
)
|
||
Operations
|
15
|
|
|
0.01
|
|
||
For the three months ended June 30, 2020
|
$
|
1,943
|
|
|
$
|
1.04
|
|
|
|
|
|
||||
2020 Reported Net Earnings
|
$
|
1,943
|
|
|
$
|
1.04
|
|
2019 Reported Net Earnings
|
$
|
1,996
|
|
|
$
|
1.07
|
|
% Change
|
(2.7
|
)%
|
|
(2.8
|
)%
|
||
|
|
|
|
||||
2020 Adjusted Net Earnings and Adjusted Diluted EPS
|
$
|
2,027
|
|
|
$
|
1.09
|
|
2019 Adjusted Net Earnings and Adjusted Diluted EPS 1
|
$
|
2,026
|
|
|
$
|
1.08
|
|
% Change
|
—
|
%
|
|
0.9
|
%
|
▪
|
Investments in ABI and Cronos:
|
▪
|
the fair value of Altria’s equity investment in ABI historically exceeding its carrying value since October 2016, when Altria obtained its ownership interest in ABI, with the exception of certain periods starting in September 2018;
|
▪
|
a history of significant recovery in stock price during 2019, as well as an increase from March 31, 2020 to July 24, 2020, which Altria believes indicates investor confidence in ABI’s ability to implement its business strategies and deleveraging plans;
|
▪
|
the period of time (less than one year) that ABI shares have traded below Altria’s carrying value;
|
▪
|
the continued industry disruption and volatility associated with the COVID-19 pandemic, resulting in stock performance among ABI competitors that Altria does not believe are reflective of actual underlying equity values;
|
▪
|
ABI’s recent proactive actions to preserve financial flexibility through the period of significant financial market and operational volatility and uncertainty associated with the COVID-19 pandemic, including the following actions since December 31, 2019: (i) ABI’s 50% reduction to its final 2019 dividend paid in the second quarter of 2020; (ii) ABI’s borrowing of the full $9 billion commitment under its revolving credit facility, which was subsequently repaid in full as of June 30, 2020; and (iii) ABI’s debt issuances for general corporate purposes;
|
▪
|
while ABI’s leverage has recently increased to preserve financial flexibility, ABI continues to be committed to its long-term deleveraging initiative, including the following actions in 2020: (i) ABI’s 50% reduction to its final 2019 dividend paid in the second quarter of 2020; (ii) ABI’s completion of the sale of its Australia subsidiary in the second quarter of 2020 and affirmation that substantially all proceeds from the divestiture will be used to reduce debt; (iii) ABI’s cash tender offer to purchase certain outstanding notes; and (iv) ABI’s redemption of the outstanding principal amount of certain notes;
|
▪
|
ABI’s global platform (world’s largest brewer by volume and one of the world’s top ten consumer products companies by revenue) with strong market positions in key markets, geographic diversification, experienced management team, strict financial discipline (cost management and efficiency) and expected earnings and history of performance;
|
▪
|
the strategic plans implemented by ABI in response to the adverse impacts of the COVID-19 pandemic, including the ability to leverage learnings from recovering markets, to better position ABI for a robust recovery; and
|
▪
|
Altria’s ownership of restricted shares being subject to a five-year lock-up (subject to limited exceptions) ending October 10, 2021, which Altria believes provides sufficient time to allow for an anticipated recovery in the fair value of its investment in ABI.
|
|
For the Six Months Ended June 30
|
|
For the Three Months Ended June 30
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
||||||||||||||
Net revenues:
|
|
|
|
|
|
|
|
||||||||
Smokeable products
|
$
|
11,209
|
|
|
$
|
10,788
|
|
|
$
|
5,603
|
|
|
$
|
5,853
|
|
Oral tobacco products
|
1,261
|
|
|
1,142
|
|
|
660
|
|
|
602
|
|
||||
Wine
|
277
|
|
|
316
|
|
|
131
|
|
|
165
|
|
||||
All other
|
(21
|
)
|
|
1
|
|
|
(27
|
)
|
|
(1
|
)
|
||||
Net revenues
|
$
|
12,726
|
|
|
$
|
12,247
|
|
|
$
|
6,367
|
|
|
$
|
6,619
|
|
|
|
|
|
|
|
|
|
||||||||
Excise taxes on products:
|
|
|
|
|
|
|
|
||||||||
Smokeable products
|
$
|
2,543
|
|
|
$
|
2,592
|
|
|
$
|
1,265
|
|
|
$
|
1,389
|
|
Oral tobacco products
|
65
|
|
|
63
|
|
|
34
|
|
|
32
|
|
||||
Wine
|
9
|
|
|
10
|
|
|
5
|
|
|
5
|
|
||||
Other
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Excise taxes on products
|
$
|
2,618
|
|
|
$
|
2,665
|
|
|
$
|
1,305
|
|
|
$
|
1,426
|
|
|
|
|
|
|
|
|
|
||||||||
Operating income:
|
|
|
|
|
|
|
|
||||||||
OCI:
|
|
|
|
|
|
|
|
||||||||
Smokeable products
|
$
|
4,820
|
|
|
$
|
4,303
|
|
|
$
|
2,450
|
|
|
$
|
2,371
|
|
Oral tobacco products
|
861
|
|
|
778
|
|
|
447
|
|
|
420
|
|
||||
Wine
|
(366
|
)
|
|
34
|
|
|
13
|
|
|
19
|
|
||||
All other
|
(56
|
)
|
|
(35
|
)
|
|
(51
|
)
|
|
(23
|
)
|
||||
Amortization of intangibles
|
(37
|
)
|
|
(16
|
)
|
|
(18
|
)
|
|
(8
|
)
|
||||
General corporate expenses
|
(90
|
)
|
|
(108
|
)
|
|
(45
|
)
|
|
(62
|
)
|
||||
Corporate asset impairment and exit
costs
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||
Operating income
|
$
|
5,132
|
|
|
$
|
4,955
|
|
|
$
|
2,796
|
|
|
$
|
2,717
|
|
(in millions of dollars, except per share data)
|
Earnings before Income Taxes
|
Provision for Income Taxes
|
Net Earnings
|
Net Earnings Attributable
to Altria
|
Diluted EPS
|
||||||||||
2020 Reported
|
$
|
4,673
|
|
$
|
1,185
|
|
$
|
3,488
|
|
$
|
3,495
|
|
$
|
1.88
|
|
ABI-related special items
|
176
|
|
37
|
|
139
|
|
139
|
|
0.07
|
|
|||||
Implementation and acquisition-related costs
|
403
|
|
97
|
|
306
|
|
306
|
|
0.16
|
|
|||||
Tobacco and health litigation items
|
42
|
|
10
|
|
32
|
|
32
|
|
0.02
|
|
|||||
Cronos-related special items
|
1
|
|
—
|
|
1
|
|
1
|
|
—
|
|
|||||
COVID-19 special items
|
50
|
|
13
|
|
37
|
|
37
|
|
0.02
|
|
|||||
Tax items
|
—
|
|
(51
|
)
|
51
|
|
51
|
|
0.03
|
|
|||||
2020 Adjusted for Special Items
|
$
|
5,345
|
|
$
|
1,291
|
|
$
|
4,054
|
|
$
|
4,061
|
|
$
|
2.18
|
|
|
|
|
|
|
|
||||||||||
2019 Reported
|
$
|
4,117
|
|
$
|
999
|
|
$
|
3,118
|
|
$
|
3,116
|
|
$
|
1.66
|
|
ABI-related special items 1
|
34
|
|
7
|
|
27
|
|
27
|
|
0.02
|
|
|||||
Asset impairment, exit, implementation and acquisition-related costs
|
204
|
|
46
|
|
158
|
|
158
|
|
0.08
|
|
|||||
Tobacco and health litigation items
|
45
|
|
11
|
|
34
|
|
34
|
|
0.02
|
|
|||||
Cronos-related special items
|
544
|
|
160
|
|
384
|
|
384
|
|
0.21
|
|
|||||
Tax items
|
—
|
|
(41
|
)
|
41
|
|
41
|
|
0.02
|
|
|||||
2019 Adjusted for Special Items
|
$
|
4,944
|
|
$
|
1,182
|
|
$
|
3,762
|
|
$
|
3,760
|
|
$
|
2.01
|
|
(in millions of dollars, except per share data)
|
Earnings before Income Taxes
|
Provision for Income Taxes
|
Net Earnings
|
Net Earnings Attributable
to Altria
|
Diluted EPS
|
||||||||||
2020 Reported
|
$
|
2,565
|
|
$
|
627
|
|
$
|
1,938
|
|
$
|
1,943
|
|
$
|
1.04
|
|
ABI-related special items
|
120
|
|
25
|
|
95
|
|
95
|
|
0.05
|
|
|||||
Implementation and acquisition-related costs
|
8
|
|
2
|
|
6
|
|
6
|
|
—
|
|
|||||
Tobacco and health litigation items
|
18
|
|
5
|
|
13
|
|
13
|
|
0.01
|
|
|||||
Cronos-related special items
|
(88
|
)
|
6
|
|
(94
|
)
|
(94
|
)
|
(0.05
|
)
|
|||||
COVID-19 special items
|
50
|
|
13
|
|
37
|
|
37
|
|
0.02
|
|
|||||
Tax items
|
—
|
|
(27
|
)
|
27
|
|
27
|
|
0.02
|
|
|||||
2020 Adjusted for Special Items
|
$
|
2,673
|
|
$
|
651
|
|
$
|
2,022
|
|
$
|
2,027
|
|
$
|
1.09
|
|
|
|
|
|
|
|
||||||||||
2019 Reported
|
$
|
2,601
|
|
$
|
604
|
|
$
|
1,997
|
|
$
|
1,996
|
|
$
|
1.07
|
|
ABI-related special items 1
|
(129
|
)
|
(27
|
)
|
(102
|
)
|
(102
|
)
|
(0.06
|
)
|
|||||
Asset impairment, exit and implementation costs
|
45
|
|
12
|
|
33
|
|
33
|
|
0.02
|
|
|||||
Tobacco and health litigation items
|
28
|
|
7
|
|
21
|
|
21
|
|
0.01
|
|
|||||
Cronos-related special items
|
119
|
|
63
|
|
56
|
|
56
|
|
0.03
|
|
|||||
Tax items
|
—
|
|
(22
|
)
|
22
|
|
22
|
|
0.01
|
|
|||||
2019 Adjusted for Special Items
|
$
|
2,664
|
|
$
|
637
|
|
$
|
2,027
|
|
$
|
2,026
|
|
$
|
1.08
|
|
▪
|
Tobacco and Health Litigation Items: For a discussion of tobacco and health litigation items and a breakdown of these costs by segment, see Note 12. Contingencies to the condensed consolidated financial statements in Item 1 (“Note 12”) and Tobacco and Health Litigation Items in Note 9, respectively.
|
▪
|
Asset Impairment, Exit, Implementation and Acquisition-Related Costs: Pre-tax asset implementation and acquisition-related costs were $403 million and $8 million for the six and three months ended June 30, 2020, respectively. Pre-tax asset impairment, exit, implementation and acquisition-related costs were $204 million and $45 million for the six and three months ended June 30, 2019, respectively.
|
▪
|
ABI-Related Special Items: Altria’s earnings from its equity investment in ABI for the six months ended June 30, 2020 included net pre-tax charges of $176 million, consisting primarily of Altria’s share of ABI’s net mark-to-market losses on certain ABI financial instruments associated with its share commitments, partially offset by a gain resulting from ABI’s hedge on a portion of the expected proceeds from ABI’s sale of its Australia subsidiary and an additional net gain related to the completion in October 2019 of ABI’s initial public offering of a minority stake of its Asia Pacific subsidiary, Budweiser Brewing Company APAC Limited. Altria’s earnings from its equity investment in ABI for the three months ended June 30, 2020 included net pre-tax charges of $120 million, consisting primarily of Altria’s share of ABI’s net mark-to-market losses on certain ABI financial instruments associated with its share commitments, partially offset by a gain resulting from ABI’s hedge on a portion of the expected proceeds from ABI’s sale of its Australia subsidiary.
|
▪
|
Cronos-Related Special Items: For the six and three months ended June 30, 2020 and 2019, Altria recorded net pre-tax (income) expense consisting of the following:
|
|
For the Six Months Ended June 30
|
|
For the Three Months Ended June 30
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
|
(in millions)
|
|
(in millions)
|
||||||||||||
(Gain) loss on Cronos-related financial instruments(1)
|
$
|
97
|
|
|
$
|
691
|
|
|
$
|
(40
|
)
|
|
$
|
266
|
|
Earnings from equity investments(2)
|
(96
|
)
|
|
(147
|
)
|
|
(48
|
)
|
|
(147
|
)
|
||||
Total Cronos-related special items - (income) expense
|
$
|
1
|
|
|
$
|
544
|
|
|
$
|
(88
|
)
|
|
$
|
119
|
|
(1)
|
The 2020 amounts and substantially all of the 2019 amounts are related to the non-cash change in the fair value of the warrant and certain anti-dilution protections (the “Fixed-price Preemptive Rights”) acquired in the Cronos transaction.
|
(2)
|
Substantially all of these amounts represent Altria’s share of Cronos’s non-cash change in the fair value of Cronos’s derivative financial instruments associated with the issuance of additional shares.
|
▪
|
COVID-19 Special Items: For the six and three months ended June 30, 2020, Altria recorded net pre-tax charges totaling $50 million directly related to disruptions caused by or efforts to mitigate the impact of the COVID-19 pandemic. These net charges included premium pay, personal protective equipment and health screenings, partially offset by certain employment tax credits. The COVID-19 special items do not include the inventory-related implementation costs associated with the wine business strategic reset. These implementation costs discussed above were due to increased inventory levels, which were further negatively impacted by government restrictions and economic uncertainty surrounding the COVID-19 pandemic.
|
▪
|
Tax Items: Tax items for the six and three months ended June 30, 2020 included net tax expense of $51 million and $27 million, respectively, due primarily to tax expense of $34 million and $13 million, respectively, for a tax basis adjustment to Altria’s investment in ABI and net tax expense of $12 million for adjustments resulting from amended returns and audit adjustments related to prior years.
|
▪
|
pending and threatened litigation and bonding requirements;
|
▪
|
restrictions and requirements imposed by the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”), and restrictions and requirements (and related enforcement actions) that have been, and in the future will be, imposed by the 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:
|
▪
|
restrictions on the sale of certain tobacco products, 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;
|
▪
|
increased efforts by tobacco control advocates and other private sector entities (including retail establishments) to further restrict the availability and use of tobacco products;
|
▪
|
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 Altria’s tobacco subsidiaries operate, including competitive disadvantages related to cigarette price increases attributable to the settlement of certain litigation;
|
▪
|
illicit trade in tobacco products;
|
▪
|
potential adverse changes in prices, availability and quality of tobacco, other raw materials and components; and
|
▪
|
the COVID-19 pandemic.
|
▪
|
impose restrictions on the advertising, promotion, sale and distribution of tobacco products (see Final Tobacco Marketing Rule below);
|
▪
|
establish pre-market review pathways for new and modified tobacco products (see Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement below);
|
▪
|
prohibit any express or implied claims that a tobacco product is or may be less harmful than other tobacco products without FDA authorization;
|
▪
|
authorize the FDA to impose tobacco product standards that are appropriate for the protection of the public health; and
|
▪
|
equip the FDA with a variety of investigatory and enforcement tools, including the authority to inspect product manufacturing and other facilities.
|
▪
|
restricts the use of non-tobacco trade and brand names on cigarettes and smokeless tobacco products;
|
▪
|
prohibits sampling of all tobacco products except that sampling of smokeless tobacco products is permitted in qualified adult-only facilities;
|
▪
|
prohibits the sale or distribution of items such as hats and tee shirts with cigarette or smokeless tobacco brands or logos;
|
▪
|
prohibits cigarettes and smokeless tobacco brand name sponsorship of any athletic, musical, artistic or other social or cultural event, or any entry or team in any event; and
|
▪
|
requires the development by the FDA of graphic warnings for cigarettes, establishes warning requirements for other tobacco products, and gives the FDA the authority to require new warnings for any type of tobacco product (see FDA Regulatory Actions - Graphic Warnings below).
|
▪
|
issued ANPRMs relating to potential product standards for nicotine in cigarettes, flavors in all tobacco products (including menthol in cigarettes and characterizing flavors in all cigars); and, for e-vapor products, to protect against known public health risks such as concerns about youth exposure to liquid nicotine;
|
▪
|
took actions to restrict youth access to e-vapor products;
|
▪
|
reconsidered the processes used by the FDA to review certain reports and new product applications; and
|
▪
|
revisited the timelines (previously extended by the FDA) to submit applications for tobacco products first regulated by the FDA in 2016.
|
▪
|
All tobacco products on the market as of February 15, 2007, and not subsequently modified, are Grandfathered Products and exempt from the pre-market authorization requirement;
|
▪
|
Cigarette and smokeless tobacco products that were modified or first introduced into the market between February 15, 2007 and March 22, 2011 are generally considered “Provisional Products” for which SE reports were required to be filed by March 22, 2011. These reports must demonstrate that the product has the same characteristics as a product on the market as of February 15, 2007 or to a product previously determined to be substantially equivalent, or has different characteristics but does not raise different questions of public health; and
|
▪
|
Tobacco products that were first regulated by the FDA in 2016, including cigars, e-vapor products and oral nicotine pouches that are not Grandfathered Products, are generally products for which either an SE report or PMTA needs to be filed by September 9, 2020.
|
▪
|
cartridge-based, flavored e-vapor products (other than tobacco and menthol flavors) unless such products have received market authorization from the FDA; and
|
▪
|
all e-vapor products (in any format or flavor):
|
◦
|
for which a manufacturer has failed or is failing to take adequate measures to prevent access by those under the age of 21 (referred to in the FDA guidance as “minors”);
|
◦
|
targeted to minors and the marketing for which is likely to promote use of such products by minors; or
|
◦
|
offered for sale after the court-ordered filing deadline and for which the manufacturer has either not submitted a PMTA or for which an application was timely filed but an adverse decision on the application was issued by the FDA.
|
▪
|
Nicotine in cigarettes and other combustible tobacco products: In March 2018, the FDA issued an ANPRM seeking comments on the potential public health benefits and any possible adverse effects of lowering nicotine in combustible cigarettes to non-addictive or minimally addictive levels. Among other issues, the FDA sought comments on whether (i) smokers would compensate by smoking more cigarettes to obtain the same level of nicotine as with their current product and (ii) whether the proposed rule would create an illicit trade of cigarettes containing nicotine at levels higher than a non-addictive threshold that may be established by the FDA. The FDA also sought comments on whether a nicotine product standard should apply to other combustible tobacco products, including cigars. Were the FDA to develop and finalize a product standard for nicotine in combustible products, and if the standard were upheld in the courts, it could have a material adverse effect on the business, consolidated results of operations, cash flows or financial position of Altria and its tobacco subsidiaries.
|
▪
|
Flavors in tobacco products: As discussed above under FDA’s Comprehensive Plan for Tobacco and Nicotine Regulation, the FDA indicated that it is considering proposing rulemaking for a product standard that would seek to ban menthol in combustible tobacco products, including cigarettes and cigars, and that it intends to propose a product standard that would ban characterizing flavors in all cigars, including Grandfathered Products and those that have received SE determinations from the FDA - an intention reiterated in the FDA’s January 2020 guidance. In March 2018, the FDA issued an ANPRM seeking comments on the role, if any, that flavors (including menthol) in tobacco products may play in attracting youth and in helping some smokers switch to potentially less harmful forms of nicotine delivery. While the FDA has yet to define “characterizing flavors” with respect to cigars, most of Middleton’s cigar products contain added flavors and may be subject to any action by the FDA to ban flavors in cigars. The FDA also may ban characterizing flavors in all other tobacco products, including oral nicotine pouches. If these regulations become final and are upheld in the courts, it could have a material adverse effect on the business, consolidated results of operations, cash flows or financial position of Altria and its tobacco subsidiaries, including adversely affecting the value of Altria’s investment in JUUL.
|
▪
|
NNN in Smokeless Tobacco: In January 2017, the FDA proposed a product standard for N-nitrosonornicotine (“NNN”) levels in finished smokeless tobacco products. If the proposed rule, in present form, were to become final and upheld in the courts, it could have a material adverse effect on the business, consolidated results of operations, cash flows or financial position of Altria and USSTC.
|
▪
|
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; and/or
|
▪
|
otherwise significantly increase the cost of doing business.
|
|
Operating Results
|
||||||||||||||||||||
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||||||||
|
2020
|
|
2019
|
|
Change
|
|
2020
|
|
2019
|
|
Change
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net revenues
|
$
|
11,209
|
|
|
$
|
10,788
|
|
|
3.9
|
%
|
|
$
|
5,603
|
|
|
$
|
5,853
|
|
|
(4.3
|
)%
|
Excise taxes
|
(2,543
|
)
|
|
(2,592
|
)
|
|
|
|
(1,265
|
)
|
|
(1,389
|
)
|
|
|
||||||
Revenues net of excise taxes
|
$
|
8,666
|
|
|
$
|
8,196
|
|
|
|
|
$
|
4,338
|
|
|
$
|
4,464
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Reported OCI
|
$
|
4,820
|
|
|
$
|
4,303
|
|
|
12.0
|
%
|
|
$
|
2,450
|
|
|
$
|
2,371
|
|
|
3.3
|
%
|
Asset impairment, exit and implementation costs
|
—
|
|
|
75
|
|
|
|
|
—
|
|
|
31
|
|
|
|
||||||
Tobacco and health litigation items
|
39
|
|
|
40
|
|
|
|
|
17
|
|
|
25
|
|
|
|
||||||
COVID-19 special items
|
41
|
|
|
—
|
|
|
|
|
41
|
|
|
—
|
|
|
|
||||||
Adjusted OCI
|
$
|
4,900
|
|
|
$
|
4,418
|
|
|
10.9
|
%
|
|
$
|
2,508
|
|
|
$
|
2,427
|
|
|
3.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Reported OCI margins 1
|
55.6
|
%
|
|
52.5
|
%
|
|
3.1 pp
|
|
|
56.5
|
%
|
|
53.1
|
%
|
|
3.4 pp
|
|
||||
Adjusted OCI margins 1
|
56.5
|
%
|
|
53.9
|
%
|
|
2.6 pp
|
|
|
57.8
|
%
|
|
54.4
|
%
|
|
3.4 pp
|
|
|
Shipment Volume
|
||||||||||||||||
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||||
|
2020
|
|
2019
|
|
Change
|
|
2020
|
|
2019
|
|
Change
|
||||||
|
(sticks in millions)
|
||||||||||||||||
Cigarettes:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Marlboro
|
43,632
|
|
|
44,266
|
|
|
(1.4
|
)%
|
|
21,790
|
|
|
23,799
|
|
|
(8.4
|
)%
|
Other premium
|
2,265
|
|
|
2,470
|
|
|
(8.3
|
)%
|
|
1,128
|
|
|
1,305
|
|
|
(13.6
|
)%
|
Discount
|
4,075
|
|
|
4,215
|
|
|
(3.3
|
)%
|
|
2,030
|
|
|
2,253
|
|
|
(9.9
|
)%
|
Total cigarettes
|
49,972
|
|
|
50,951
|
|
|
(1.9
|
)%
|
|
24,948
|
|
|
27,357
|
|
|
(8.8
|
)%
|
Cigars:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Black & Mild
|
849
|
|
|
805
|
|
|
5.5
|
%
|
|
419
|
|
|
425
|
|
|
(1.4
|
)%
|
Other
|
5
|
|
|
5
|
|
|
—
|
%
|
|
3
|
|
|
3
|
|
|
—
|
%
|
Total cigars
|
854
|
|
|
810
|
|
|
5.4
|
%
|
|
422
|
|
|
428
|
|
|
(1.4
|
)%
|
Total smokeable products
|
50,826
|
|
|
51,761
|
|
|
(1.8
|
)%
|
|
25,370
|
|
|
27,785
|
|
|
(8.7
|
)%
|
|
Retail Share
|
||||||||||||||||
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||||
|
2020
|
|
2019
|
|
Percentage Point Change
|
|
2020
|
|
2019
|
|
Percentage Point Change
|
||||||
Cigarettes:
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Marlboro
|
42.8
|
%
|
|
43.3
|
%
|
|
(0.5
|
)
|
|
42.8
|
%
|
|
43.4
|
%
|
|
(0.6
|
)
|
Other premium
|
2.3
|
|
|
2.5
|
|
|
(0.2
|
)
|
|
2.3
|
|
|
2.5
|
|
|
(0.2
|
)
|
Discount
|
4.0
|
|
|
4.1
|
|
|
(0.1
|
)
|
|
3.9
|
|
|
4.1
|
|
|
(0.2
|
)
|
Total cigarettes
|
49.1
|
%
|
|
49.9
|
%
|
|
(0.8
|
)
|
|
49.0
|
%
|
|
50.0
|
%
|
|
(1.0
|
)
|
▪
|
Effective June 21, 2020, PM USA increased the list price on all of its cigarette brands by $0.11 per pack.
|
▪
|
Effective February 16, 2020, PM USA increased the list price on all of its cigarette brands by $0.08 per pack.
|
▪
|
Effective January 12, 2020, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.08 per five-pack.
|
▪
|
Effective October 20, 2019, PM USA increased the list price on all of its cigarette brands by $0.08 per pack.
|
▪
|
Effective August 4, 2019, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.04 per five-pack.
|
▪
|
Effective June 16, 2019, PM USA increased the list price on all of its cigarette brands by $0.06 per pack, except for L&M, which had no list price change.
|
▪
|
Effective February 24, 2019, PM USA increased the list price on Marlboro and L&M by $0.11 per pack and Parliament and Virginia Slims by $0.16 per pack. In addition, PM USA increased the list price on all of its other cigarette brands by $0.31 per pack.
|
|
Operating Results
|
||||||||||||||||||||
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||||||||
|
2020
|
|
2019
|
|
Change
|
|
2020
|
|
2019
|
|
Change
|
||||||||||
Net revenues
|
$
|
1,261
|
|
|
$
|
1,142
|
|
|
10.4
|
%
|
|
$
|
660
|
|
|
$
|
602
|
|
|
9.6
|
%
|
Excise taxes
|
(65
|
)
|
|
(63
|
)
|
|
|
|
(34
|
)
|
|
(32
|
)
|
|
|
||||||
Revenues net of excise taxes
|
$
|
1,196
|
|
|
$
|
1,079
|
|
|
|
|
$
|
626
|
|
|
$
|
570
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Reported OCI
|
$
|
861
|
|
|
$
|
778
|
|
|
10.7
|
%
|
|
$
|
447
|
|
|
$
|
420
|
|
|
6.4
|
%
|
Asset impairment, exit, implementation and acquisition-related costs
|
2
|
|
|
11
|
|
|
|
|
—
|
|
|
2
|
|
|
|
||||||
COVID-19 special items
|
9
|
|
|
—
|
|
|
|
|
9
|
|
|
—
|
|
|
|
||||||
Adjusted OCI
|
$
|
872
|
|
|
$
|
789
|
|
|
10.5
|
%
|
|
$
|
456
|
|
|
$
|
422
|
|
|
8.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Reported OCI margins 1
|
72.0
|
%
|
|
72.1
|
%
|
|
(0.1) pp
|
|
|
71.4
|
%
|
|
73.7
|
%
|
|
(2.3) pp
|
|
||||
Adjusted OCI margins 1
|
72.9
|
%
|
|
73.1
|
%
|
|
(0.2) pp
|
|
|
72.8
|
%
|
|
74.0
|
%
|
|
(1.2) pp
|
|
|
Shipment Volume
|
||||||||||||||||
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||||
|
2020
|
|
2019
|
|
Change
|
|
2020
|
|
2019
|
|
Change
|
||||||
|
(cans and packs in millions)
|
||||||||||||||||
Copenhagen
|
263.9
|
|
|
257.9
|
|
|
2.3
|
%
|
|
138.9
|
|
|
132.7
|
|
|
4.7
|
%
|
Skoal
|
104.9
|
|
|
108.5
|
|
|
(3.3
|
)%
|
|
53.6
|
|
|
58.2
|
|
|
(7.9
|
)%
|
Other1
|
41.7
|
|
|
33.0
|
|
|
26.4
|
%
|
|
21.3
|
|
|
17.1
|
|
|
24.6
|
%
|
Total oral tobacco products
|
410.5
|
|
|
399.4
|
|
|
2.8
|
%
|
|
213.8
|
|
|
208.0
|
|
|
2.8
|
%
|
|
Retail Share
|
||||||||||||||||
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||||
|
2020
|
|
2019
|
|
Percentage Point Change
|
|
2020
|
|
2019
|
|
Percentage Point Change
|
||||||
Copenhagen
|
32.3
|
%
|
|
34.4
|
%
|
|
(2.1
|
)
|
|
32.1
|
%
|
|
34.1
|
%
|
|
(2.0
|
)
|
Skoal
|
14.2
|
|
|
15.2
|
|
|
(1.0
|
)
|
|
14.1
|
|
|
15.4
|
|
|
(1.3
|
)
|
Other1
|
3.7
|
|
|
3.5
|
|
|
0.2
|
|
|
3.8
|
|
|
3.5
|
|
|
0.3
|
|
Total oral tobacco products
|
50.2
|
%
|
|
53.1
|
%
|
|
(2.9
|
)
|
|
50.0
|
%
|
|
53.0
|
%
|
|
(3.0
|
)
|
▪
|
Effective July 21, 2020, USSTC increased the list price on its Skoal Blend products by $0.15 per can. USSTC also increased the list price on its Husky, Red Seal and Copenhagen brands and the balance of its Skoal products by $0.07 per can.
|
▪
|
Effective February 18, 2020, USSTC increased the list price on its Skoal X-TRA products by $0.56 per can. USSTC also increased the list price on its Skoal Blend products by $0.16 cents per can and increased the list price on its Husky, Red Seal and Copenhagen brands and the balance of its Skoal products by $0.07 per can.
|
▪
|
Effective October 22, 2019, USSTC increased the list price on its Skoal X-TRA products and select Copenhagen products by $0.09 per can. USSTC also increased the list price on its Husky and Red Seal brands and the balance of its Copenhagen and Skoal products by $0.04 per can.
|
▪
|
Effective July 23, 2019, USSTC increased the list price on its Skoal X-TRA products and select Copenhagen products by $0.08 per can. USSTC also increased the list price on its Husky and Red Seal brands and the balance of its Copenhagen and Skoal products by $0.03 per can.
|
▪
|
Effective April 30, 2019, USSTC increased the list price on its Skoal X-TRA products and select Copenhagen products by $0.17 per can. USSTC also increased the list price on its Husky and Red Seal brands and its Copenhagen and Skoal popular price products by $0.12 per can. In addition, USSTC increased the list price on the balance of its Copenhagen and Skoal products by $0.07 per can.
|
|
Operating Results
|
||||||||||||||||||||
|
For the Six Months Ended June 30,
|
|
For the Three Months Ended June 30,
|
||||||||||||||||||
|
2020
|
|
2019
|
|
Change
|
|
2020
|
|
2019
|
|
Change
|
||||||||||
Net revenues
|
$
|
277
|
|
|
$
|
316
|
|
|
(12.3
|
)%
|
|
$
|
131
|
|
|
$
|
165
|
|
|
(20.6
|
)%
|
Excise taxes
|
(9
|
)
|
|
(10
|
)
|
|
|
|
(5
|
)
|
|
(5
|
)
|
|
|
||||||
Revenues net of excise taxes
|
$
|
268
|
|
|
$
|
306
|
|
|
|
|
$
|
126
|
|
|
$
|
160
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Reported OCI
|
$
|
(366
|
)
|
|
$
|
34
|
|
|
(100.0)%+
|
|
|
$
|
13
|
|
|
$
|
19
|
|
|
(31.6
|
)%
|
Implementation costs
|
394
|
|
|
—
|
|
|
|
|
2
|
|
|
—
|
|
|
|
||||||
Adjusted OCI
|
$
|
28
|
|
|
$
|
34
|
|
|
(17.6
|
)%
|
|
$
|
15
|
|
|
$
|
19
|
|
|
(21.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Reported OCI margins 1
|
(100.0)%+
|
|
|
11.1
|
%
|
|
(100.0)%+
|
|
|
10.3
|
%
|
|
11.9
|
%
|
|
(1.6) pp
|
|
||||
Adjusted OCI margins 1
|
10.4
|
%
|
|
11.1
|
%
|
|
(0.7) pp
|
|
|
11.9
|
%
|
|
11.9
|
%
|
|
0.0 pp
|
|
▪
|
proceeds of $16.3 billion from the issuance of long-term senior unsecured notes in 2019; and
|
▪
|
repayment of $1.0 billion in full of Altria senior unsecured notes at scheduled maturity in January 2020;
|
▪
|
repayments of $12.8 billion of short-term borrowings in 2019;
|
▪
|
proceeds of $2.0 billion from the issuance of long-term senior unsecured notes in 2020; and
|
▪
|
repurchases of common stock in 2019.
|
|
Short-term Debt
|
|
Long-term Debt
|
|
Outlook
|
Moody’s Investors Service, Inc. (“Moody’s”)
|
P-2
|
|
A3
|
|
Stable (1)
|
Standard & Poor’s Ratings Services (“Standard & Poor’s”)
|
A-2
|
|
BBB
|
|
Stable
|
Fitch Ratings Ltd.
|
F2
|
|
BBB
|
|
Stable
|
▪
|
issued $2.0 billion of long-term senior unsecured notes;
|
▪
|
did not repurchase any shares during the first half of 2020 (in April 2020, the Board of Directors rescinded the $500 million remaining in its $1.0 billion share repurchase program);
|
▪
|
as permitted under recent federal government COVID-19 tax relief, deferred approximately $450 million of estimated federal income tax payments from April 2020 and deferred an additional $475 million from June 2020. All federal income tax payment deferrals were paid in July 2020;
|
▪
|
as permitted under recent state governments COVID-19 tax relief, deferred approximately $140 million of estimated state income tax payments from the first half of 2020 to July 2020, and will defer future payments as allowable. Substantially all state income tax payment deferrals were paid in July 2020; and
|
▪
|
deferred federal excise tax payments of approximately $1,350 million due between April 2020 and June 2020 by 90 days to July 2020 through September 2020. Approximately $450 million was paid in July 2020.
|
▪
|
received less than reasonably equivalent value or fair consideration therefore; and
|
▪
|
either:
|
▪
|
was insolvent or rendered insolvent by reason of such occurrence;
|
▪
|
was engaged in a business or transaction for which the assets of the Guarantor constituted unreasonably small capital; or
|
▪
|
intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.
|
▪
|
the sum of its debts, including contingent liabilities, was greater than the saleable value of its assets, all at a fair valuation;
|
▪
|
the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or
|
▪
|
it could not pay its debts as they become due.
|
▪
|
the date, if any, on which the Guarantor consolidates with or merges into the Parent or any successor;
|
▪
|
the date, if any, on which the Parent or any successor consolidates with or merges into the Guarantor;
|
▪
|
the payment in full of the Obligations pertaining to such Guarantees; and
|
▪
|
the rating of the Parent’s long-term senior unsecured debt by Standard & Poor’s Ratings Services of A or higher.
|
|
|
Parent
|
|
Guarantor
|
||||||||||||
|
|
June 30, 2020
|
|
December 31, 2019
|
|
June 30, 2020
|
|
December 31, 2019
|
||||||||
Assets
|
|
|
|
|
|
|
|
|
||||||||
Due from Non-Guarantor Subsidiaries
|
|
$
|
96
|
|
|
$
|
88
|
|
|
$
|
158
|
|
|
$
|
158
|
|
Other current assets
|
|
4,881
|
|
|
2,155
|
|
|
740
|
|
|
831
|
|
||||
Total current assets
|
|
4,977
|
|
|
2,243
|
|
|
898
|
|
|
989
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Due from Non-Guarantor Subsidiaries
|
|
$
|
4,790
|
|
|
$
|
4,790
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Other assets
|
|
17,073
|
|
|
18,129
|
|
|
1,731
|
|
|
1,743
|
|
||||
Total non-current assets
|
|
$
|
21,863
|
|
|
$
|
22,919
|
|
|
$
|
1,731
|
|
|
$
|
1,743
|
|
|
|
|
|
|
|
|
|
|
||||||||
Liabilities
|
|
|
|
|
|
|
|
|
||||||||
Due to Non-Guarantor Subsidiaries
|
|
$
|
845
|
|
|
$
|
846
|
|
|
$
|
668
|
|
|
$
|
514
|
|
Other current liabilities
|
|
3,496
|
|
|
3,141
|
|
|
5,181
|
|
|
4,288
|
|
||||
Total current liabilities
|
|
4,341
|
|
|
3,987
|
|
|
5,849
|
|
|
4,802
|
|
||||
|
|
|
|
|
|
|
|
|
||||||||
Total non-current liabilities
|
|
$
|
30,710
|
|
|
$
|
30,422
|
|
|
$
|
1,158
|
|
|
$
|
1,165
|
|
|
|
Parent
|
|
Guarantor
|
||||||||||||
|
|
For the Six Months Ended
June 30, 2020
|
|
For the Year Ended December 31, 2019
|
|
For the Six Months Ended
June 30, 2020
|
|
For the Year Ended December 31, 2019
|
||||||||
Net revenues
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
10,731
|
|
|
$
|
21,065
|
|
Gross profit
|
|
—
|
|
|
—
|
|
|
5,166
|
|
|
9,957
|
|
||||
Net earnings (losses)
|
|
(348
|
)
|
|
132
|
|
|
3,392
|
|
|
6,344
|
|
▪
|
the risks associated with health epidemics and pandemics, including the COVID-19 pandemic and similar outbreaks, such as their impact on our financial performance and financial condition and on our subsidiaries’ and investees’ ability to continue manufacturing and distributing products, and the impact of health epidemics and pandemics on general economic conditions (including any resulting recession or other economic crisis) and, in turn, adult consumer purchasing behavior which may be further impacted by any changes in government stimulus and unemployment payments;
|
▪
|
unfavorable litigation outcomes, including risks associated with adverse jury and judicial determinations, courts and arbitrators reaching conclusions at variance with our, our subsidiaries’ or our investees’ understanding of applicable law, bonding requirements in the jurisdictions that do not limit the dollar amount of appeal bonds, and certain challenges to bond cap statutes;
|
▪
|
government (including FDA) and private sector actions that impact adult tobacco consumer acceptability of, or access to, tobacco products;
|
▪
|
the growth of the e-vapor category and other innovative tobacco products contributing to reductions in cigarette and MST consumption levels and sales volume;
|
▪
|
tobacco product taxation, including lower tobacco product consumption levels and potential shifts in adult consumer purchases as a result of federal, state and local excise tax increases;
|
▪
|
the failure of our tobacco and wine subsidiaries to compete effectively in their respective markets;
|
▪
|
our tobacco and wine subsidiaries’ continued ability to promote brand equity successfully; to anticipate and respond to evolving adult consumer preferences; to develop, manufacture, market and distribute products that appeal to adult consumers (including, where appropriate, through arrangements with, and investments in third parties); to improve productivity; and to protect or enhance margins through cost savings and price increases;
|
▪
|
changes, including in economic conditions (due to the COVID-19 pandemic or otherwise), that result in adult consumers choosing lower-priced brands including discount brands;
|
▪
|
the unsuccessful commercialization of adjacent products or processes by our tobacco subsidiaries and investees, including innovative tobacco products that may reduce the health risks associated with cigarettes and other traditional tobacco products, and that appeal to adult tobacco consumers;
|
▪
|
significant changes in price, availability or quality of tobacco, other raw materials or component parts, including as a result of the COVID-19 pandemic;
|
▪
|
the risks related to the reliance by our tobacco and wine subsidiaries on a few significant facilities and a small number of key suppliers, and the risk of an extended disruption at a facility of, or of service by, a supplier of our tobacco or wine subsidiaries or investees, including as a result of the COVID-19 pandemic;
|
▪
|
required or voluntary product recalls as a result of various circumstances such as product contamination or FDA or other regulatory action;
|
▪
|
the failure of our information systems or service providers’ information systems to function as intended, or cyber-attacks or security breaches;
|
▪
|
unfavorable outcomes of any government investigations of Altria, our subsidiaries or investees;
|
▪
|
a successful challenge to our tax positions;
|
▪
|
the risks related to our and our investees’ international business operations, including failure to prevent violations of various U.S. and foreign laws and regulations such as laws prohibiting bribery and corruption;
|
▪
|
our inability to attract and retain the best talent due to the impact of decreasing social acceptance of tobacco usage and tobacco control actions;
|
▪
|
the adverse effect of acquisitions, investments, dispositions or other events on our credit rating;
|
▪
|
our inability to acquire attractive businesses or make attractive investments on favorable terms, or at all, or to realize the anticipated benefits from an acquisition or investment and our inability to dispose of businesses or investments on favorable terms or at all;
|
▪
|
the risks related to disruption and uncertainty in the credit and capital markets, including risk of access to these markets both generally and at current prevailing rates, which may adversely affect our earnings or dividend rate or both;
|
▪
|
impairment losses as a result of the write down of intangible assets, including goodwill;
|
▪
|
the risks related to Ste. Michelle’s wine business, including competition, unfavorable changes in grape supply, and changes in adult consumer preferences that have resulted and may continue to result in increased inventory levels and inventory write offs, and governmental regulations;
|
▪
|
the risk that any challenge to our investment in JUUL, if successful, could result in a broad range of resolutions such as divestiture of the investment or rescission of the transaction;
|
▪
|
the risks generally related to our investments in JUUL and Cronos, including our inability to realize the expected benefits of our investments in the expected time frames, or at all, due to the risks encountered by our investees in their businesses, such as operational, compliance and regulatory risks at the international, federal, state and local levels, including actions by the FDA, and adverse publicity; potential disruptions to our investees’ management or current or future plans and operations; domestic or international litigation developments, government investigations, tax disputes or otherwise; and impairment of our investments;
|
▪
|
the risks related to our inability to acquire a controlling interest in JUUL as a result of standstill restrictions or to control the material decisions of JUUL, restrictions on our ability to sell or otherwise transfer our shares of JUUL until December 20, 2024, and non-competition restrictions for the same time period subject to certain exceptions;
|
▪
|
the adverse effects of risks encountered by ABI in its business, including effects of the COVID-19 pandemic, foreign currency exchange rates and the impact of movements in ABI’s stock price on our equity investment in ABI, including on our reported earnings from and carrying value of our investment in ABI, which could result in impairment of our investment, and the dividends paid by ABI on the shares we own;
|
▪
|
the risks related to our inability to transfer our equity securities in ABI until October 10, 2021, and, if our ownership percentage decreases below certain levels, the adverse effects of additional tax liabilities, a reduction in the number of directors that we have the right to have appointed to the ABI board of directors, and our potential inability to use the equity method of accounting for our investment in ABI;
|
▪
|
the risk of challenges to the tax treatment of the consideration we received in the ABI/SABMiller business combination and the tax treatment of our equity investment; and
|
▪
|
the risks, including criminal, civil or tax liability for Altria, related to Cronos’s or Altria’s failure to comply with applicable laws, including cannabis laws.
|
3.1
|
10.1
|
10.2
|
10.3
|
10.4
|
22.1
|
31.1
|
31.2
|
32.1
|
32.2
|
99.1
|
99.2
|
(i)
|
twice the cost of fuel, oil, lubricants and other additives;
|
(ii)
|
travel expenses of the crew, including food, lodging and ground transportation;
|
(iii)
|
hangar and tie down costs away from the Company Aircraft's base of operations;
|
(iv)
|
insurance obtained for the specific flight;
|
(v)
|
landing fees, airport taxes and similar assessments;
|
(vi)
|
customs, foreign permit and similar fees directly related to the flight;
|
(vii)
|
in flight food and beverages;
|
(viii)
|
passenger ground transportation; and
|
(ix)
|
flight planning and weather contract services.
|
(e)
|
designation of each passenger's trip purpose (personal, business, or mixed business/personal);
|
(h)
|
any other information concerning the proposed flight that may be pertinent or required by Operator or Operator's flight crew.
|
(a)
|
he will use the Company Aircraft for and on account of himself, his accompanying personal guests and his own personal business only, and will not accept any compensation whatsoever for any flight or portion thereof conducted under this Agreement;
|
(b)
|
during the term of this Agreement, he will abide by and conform to all such laws, governmental and airport orders, rules and regulations, as shall from time to time be in effect relating in any way to the operation and use of the Company Aircraft by a time-sharing Lessee; and
|
(c)
|
Lessee shall not, directly or indirectly, create or incur any kind of lien or security interest on or affecting the Company Aircraft or do anything or take any action that might result in the creation of such a lien, and Lessee shall, at Lessee's own expense, promptly take such action as may be necessary to discharge any such lien.
|
(a)
|
If to Operator:
|
(b)
|
If to Lessee:
|
(A)
|
ALTRIA CLIENT SERVICES LLC ("OPERATOR") HEREBY CERTIFIES THAT THE COMPANY AIRCRAFT HAVE BEEN INSPECTED AND MAINTAINED WITHIN THE 12 MONTH PERIOD PRECEDING THE DATE OF THIS AGREEMENT IN ACCORDANCE WITH THE PROVISIONS OF FAR PART 91 AND ALL APPLICABLE REQUIREMENTS FOR THE MAINTENANCE AND INSPECTION THEREUNDER HAVE BEEN MET.
|
(B)
|
THE COMPANY AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER PART 91 OF THE FEDERAL AVIATION REGULATIONS FOR OPERATIONS TO BE CONDUCTED UNDER THIS AGREEMENT DURING THE DURATION OF THIS AGREEMENT.
|
(C)
|
ALTRIA CLIENT SERVICES LLC WITH AN ADDRESS OF 6601 WEST BROAD STREET; RICHMOND, VA 23230 ("OPERATOR") AGREES, CERTIFIES AND KNOWINGLY ACKNOWLEDGES THAT WHEN THE COMPANY AIRCRAFT ARE OPERATED UNDER THIS AGREEMENT, IT SHALL BE KNOWN AS, CONSIDERED, AND SHALL IN FACT BE THE OPERATOR OF THE COMPANY AIRCRAFT, AND THAT ALTRIA CLIENT SERVICES LLC UNDERSTANDS ITS RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FEDERAL AVIATION REGULATIONS.
|
(D)
|
THE PARTIES UNDERSTAND THAT AN EXPLANATION OF FACTORS AND PERTINENT FEDERAL AVIATION REGULATIONS BEARING ON OPERATIONAL CONTROL CAN BE OBTAINED FROM THE NEAREST FAA FLIGHT STANDARDS DISTRICT OFFICE.
|
(E)
|
LESSEE AND OPERATOR CERTIFY THAT THEY SHALL COMPLY WITH THE TRUTH-IN-LEASING REQUIREMENTS DEFINED IN EXHIBIT B ATTACHED HERETO.
|
Operator:
|
Lessee:
|
|
|
ALTRIA CLIENT SERVICES LLC
|
|
|
|
By: /s/ SCOTT D. SCOFIELD
|
/s/ WILLIAM F. GIFFORD, JR.
|
Name: Scott D. Scofield
|
William F. Gifford, Jr.
|
Title: Vice President, Total
|
|
Rewards & HR Services
|
|
Registration Number
|
Serial Number
|
Company Aircraft Description
|
N802AG
|
5245
|
2009 Gulfstream Aerospace Corporation G550 Aircraft
|
N803AG
|
4194
|
2010 Gulfstream Aerospace Corporation G450 Aircraft
|
N804AG
|
4199
|
2010 Gulfstream Aerospace Corporation G450 Aircraft
|
1.
|
Mail a copy of the Time Sharing Agreement to the following address via certified mail, return receipt requested, immediately upon execution of the Agreement (14 C.F.R. §91.23(c)(1) requires that the copy be sent within twenty-four (24) hours after it is signed):
|
2.
|
At least forty-eight (48) hours prior to the first flight made under this Agreement, Operator (on behalf of Lessee) shall give notice of the proposed flight by telephone, fax or in person to the FAA Flight Standards District Office located nearest the flight.
|
3.
|
Operator shall carry a copy of the Agreement in the Company Aircraft at all times when the Company Aircraft is being operated under the Agreement. The Agreement shall be made available for review upon request by the Administrator of the Federal Aviation Administration.
|
THIS RELEASE MUST BE SIGNED AND RETURNED TO CHARLIE WHITAKER BY MAY 12, 2020. YOU MAY REVOKE THIS RELEASE WITHIN 7 DAYS AFTER YOU SIGN IT BY SUBMITTING A WRITTEN REVOCATION TO CHARLIE WHITAKER.
|
(a)
|
Severance and Benefits
|
•
|
Medical, Vision and Dental;
|
•
|
Dependent Care Flexible Spending Account;
|
•
|
Altria Retirement Plan
|
•
|
Life Insurance;
|
•
|
Long-Term Disability Plan; and
|
•
|
Employee Assistance Plan.
|
•
|
Medical, Vision and Dental coverage will continue through the last day of the month in which the first of the following occurs: (i) the last payment of your Severance, (ii) your Retirement Date, or (iii) the date you begin Other Employment; and
|
•
|
Coverage for the remaining benefits described above will continue until the first of the following occurs: (i) the last payment of your Severance, (ii) the last day of the month preceding your Retirement Date, or (iii) the date you
|
(b)
|
Unused Vacation
|
(a)
|
In General
|
(b)
|
Claims Released
|
(c)
|
Released Parties
|
(d)
|
Right to Revoke
|
(a)
|
Whistleblower Claims and Other Government Investigations
|
(b)
|
Confidential Information
|
(c)
|
No Future Lawsuit for Released Claims
|
(d)
|
Company Property and Records Management
|
(e)
|
Certification of Compliance
|
(f)
|
Indemnification
|
(g)
|
Non-Disparagement
|
(h)
|
Non-Disclosure
|
(i)
|
Notice of Request for Disclosure
|
(j)
|
Cooperation
|
(k)
|
Prior Non-Disclosure and Non-Competitions Agreement
|
(l)
|
Resignation
|
(m)
|
Non-Admission of Liability
|
(n)
|
Implementation
|
(a)
|
Death
|
(b)
|
Disability
|
(c)
|
Other Employment
|
(d)
|
Retirement
|
(a)
|
Entire Agreement
|
(b)
|
Successors
|
(c)
|
Interpretation and Governing Law
|
Date: May 1, 2020
|
/s/ HOWARD A. WILLARD III
|
|
Howard A. Willard III
|
|
|
|
|
|
|
|
|
|
|
|
|
Date: May 1, 2020
|
By: /s/ CHARLES N. WHITAKER
|
|
Charles N. Whitaker
|
|
Senior Vice President
|
|
Chief Human Resources Officer
|
|
Chief Compliance Officer
|
|
Altria Group, Inc.
|
▪
|
4.750% Notes due May 2021
|
▪
|
3.490% Notes due February 2022
|
▪
|
2.850% Notes due August 2022
|
▪
|
2.950% Notes due May 2023
|
▪
|
4.000% Notes due January 2024
|
▪
|
3.800% Notes due February 2024
|
▪
|
2.350% Notes due May 2025
|
▪
|
4.400% Notes due February 2026
|
▪
|
2.625% Notes due September 2026
|
▪
|
4.800% Notes due February 2029
|
▪
|
3.400% Notes due May 2030
|
▪
|
9.950% Notes due November 2038
|
▪
|
10.200% Notes due February 2039
|
▪
|
5.800% Notes due February 2039
|
▪
|
4.250% Notes due August 2042
|
▪
|
4.500% Notes due May 2043
|
▪
|
5.375% Notes due January 2044
|
▪
|
3.875% Notes due September 2046
|
▪
|
5.950% Notes due February 2049
|
▪
|
4.450% Notes due May 2050
|
▪
|
6.200% Notes due February 2059
|
•
|
1.000% Notes due February 2023
|
•
|
1.700% Notes due June 2025
|
•
|
2.200% Notes due June 2027
|
•
|
3.125% Notes due June 2031
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Altria Group, Inc.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
(a)
|
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;
|
(b)
|
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;
|
(c)
|
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
|
(d)
|
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
|
5.
|
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):
|
(a)
|
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
|
(b)
|
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.
|
|
/s/ WILLIAM F. GIFFORD, JR.
|
|
William F. Gifford, Jr.
|
|
Chief Executive Officer
|
1.
|
I have reviewed this quarterly report on Form 10-Q of Altria Group, Inc.;
|
2.
|
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;
|
3.
|
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;
|
4.
|
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:
|
(a)
|
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;
|
(b)
|
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;
|
(c)
|
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
|
(d)
|
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
|
5.
|
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):
|
(a)
|
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
|
(b)
|
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.
|
|
/s/ SALVATORE MANCUSO
|
|
Salvatore Mancuso
|
|
Executive Vice President and
Chief Financial Officer
|
July
|
0
|
|
|
August
|
0
|
|
|
September
|
0
|
July
|
0
|
|
|
August
|
0
|
|
|
September
|
0
|