Consolidating Financial Information (Tables)

12 Months Ended

Dec. 31, 2013

Condensed Consolidating Balance Sheets

December 31, 2013

(In millions)


	Parent			Issuer			Non- guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Assets:
Cash and cash equivalents	$	341		$	1,002		$	111	$	—		$	1,454
Short term investments—available for sale securities		—			157			—		—			157
Accounts receivable, less allowances of $3		—			8			11		—			19
Other receivables (1)		—			24			93		(88	)		29
Inventories		—			412			87		—			499
Deferred income taxes		—			549			6		—			555
Other current assets		—			19			4		—			23

Total current assets		341			2,171			312		(88	)		2,736
Investment in subsidiaries		—			148			—		(148	)		—
Plant and equipment, net		—			315			1		—			316
Long term investments—available for sale securities		—			93			—		—			93
Goodwill		—			—			102		—			102
Intangible assets		—			—			87		—			87
Deferred income taxes		—			48			3		—			51
Other assets		125			151			—		(125	)		151

Total assets	$	466		$	2,926		$	505	$	(361	)	$	3,536

Liabilities and Shareholders’ Equity (Deficit):
Accounts and drafts payable	$	—		$	37		$	5	$	—		$	42
Accrued liabilities (1)		13			434			14		(84	)		377
Settlement costs		—			1,224			—		—			1,224
Income taxes		1			11			—		(4	)		8

Total current liabilities		14			1,706			19		(88	)		1,651
Long-term debt		—			3,560			—		—			3,560
Investment in subsidiaries		2,516			—			—		(2,516	)		—
Postretirement pension, medical and life insurance benefits		—			305			—		—			305
Other liabilities		—			44			165		(125	)		84

Total liabilities		2,530			5,615			184		(2,729	)		5,600

Shareholders’ Equity (Deficit):
Common stock		4			—			—		—			4
Additional paid-in capital		256			130			177		(307	)		256
Retained earnings/accumulated (deficit)		(1,438	)		(2,688	)		143		2,545			(1,438	)
Accumulated other comprehensive income (loss)		(130	)		(131	)		1		130			(130	)
Treasury stock		(756	)		—			—		—			(756	)

Total shareholders’ equity (deficit)		(2,064	)		(2,689	)		321		2,368			(2,064	)

Total liabilities and shareholders’ equity (deficit)	$	466		$	2,926		$	505	$	(361	)	$	3,536

(1)	Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount.

Condensed Consolidating Balance Sheets

December 31, 2012

(In millions)


	Parent			Issuer			Non- guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Assets:
Cash and cash equivalents	$	150		$	1,471		$	99	$	—		$	1,720
Accounts receivable, less allowances of $3		—			8			10		—			18
Other receivables (1)		1			41			77		(67	)		52
Inventories		—			369			41		—			410
Deferred income taxes		—			555			2		—			557
Other current assets		—			12			8		—			20

Total current assets		151			2,456			237		(67	)		2,777
Investment in subsidiaries		—			118			—		(118	)		—
Plant and equipment, net		—			298			—		—			298
Goodwill		—			—			64		—			64
Intangible assets		—			—			57		—			57
Deferred income taxes		—			45			5		(2	)		48
Other assets		125			152			—		(125	)		152

Total assets	$	276		$	3,069		$	363	$	(312	)	$	3,396

Liabilities and Shareholders’ Equity (Deficit):
Accounts and drafts payable	$	—		$	35		$	4	$	—		$	39
Accrued liabilities (1)		14			399			10		(67	)		356
Settlement costs		—			1,183			—		—			1,183
Income taxes		—			—			23		—			23

Total current liabilities		14			1,617			37		(67	)		1,601
Long-term debt		—			3,111			—		—			3,111
Investment in subsidiaries		2,037			—			—		(2,037	)		—
Postretirement pension, medical and life insurance benefits		—			409			—		—			409
Other liabilities		2			39			138		(127	)		52

Total liabilities		2,053			5,176			175		(2,231	)		5,173

Shareholders’ Equity (Deficit):
Common stock		5			—			—		—			5
Additional paid-in capital		298			92			72		(164	)		298
Retained earnings/accumulated (deficit)		2,351			(1,958	)		116		1,842			2,351
Accumulated other comprehensive income (loss)		(241	)		(241	)		—		241			(241	)
Treasury stock		(4,190	)		—			—		—			(4,190	)

Total shareholders’ equity (deficit)		(1,777	)		(2,107	)		188		1,919			(1,777	)

Total liabilities and shareholders’ equity (deficit)	$	276		$	3,069		$	363	$	(312	)	$	3,396

(1)	Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount.

Condensed Consolidating Statements of Income

Condensed Consolidating Statements of Income

For the Year Ended December 31, 2013

(In millions)


	Parent			Issuer			Non- guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net sales (including excise taxes of $1,978)	$	—		$	6,720		$	1,333		$	(1,103	)	$	6,950
Cost of sales (including excise taxes of $1,978)		—			4,071			160			—			4,231

Gross profit		—			2,649			1,173			(1,103	)		2,719
Selling, general and administrative (1)		2			1,692			74			(1,103	)		665

Operating income		(2	)		957			1,099			—			2,054
Investment income		6			2			—			(6	)		2
Interest expense		—			(172	)		(6	)		6			(172	)

Income before taxes		4			787			1,093			—			1,884
Income taxes		4			295			405			—			704
Equity in earnings of subsidiaries		1,180			690			—			(1,870	)		—

Net income	$	1,180		$	1,182		$	688		$	(1,870	)	$	1,180

(1)	Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount.

Condensed Consolidating Statements of Income

For the Year Ended December 31, 2012

(In millions)


	Parent			Issuer			Non- guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net sales (including excise taxes of $1,987)	$	—		$	6,562		$	1,118		$	(1,057	)	$	6,623
Cost of sales (including excise taxes of $1,987)		—			4,201			40			—			4,241

Gross profit		—			2,361			1,078			(1,057	)		2,382
Selling, general and administrative (1)		1			1,536			24			(1,057	)		504

Operating income		(1	)		825			1,054			—			1,878
Investment income		—			3			1			—			4
Interest expense		(1	)		(151	)		(2	)		—			(154	)

Income before taxes		(2	)		677			1,053			—			1,728
Income taxes		(1	)		238			392			—			629
Equity in earnings of subsidiaries		1,100			661			—			(1,761	)		—

Net income	$	1,099		$	1,100		$	661		$	(1,761	)	$	1,099

(1)	Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount.

Condensed Consolidating Statements of Income

For the Year Ended December 31, 2011

(In millions)


	Parent		Issuer			Non- guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net sales (including excise taxes of $2,014)	$	—	$	6,466		$	—		$	—		$	6,466
Cost of sales (including excise taxes of $2,014)		—		4,123			—			—			4,123

Gross profit		—		2,343			—			—			2,343
Selling, general and administrative (1)		—		1,473			(1,022	)		—			451

Operating income		—		870			1,022			—			1,892
Investment income		1		1			1			—			3
Interest expense		—		(125	)		—			—			(125	)

Income before taxes		1		746			1,023			—			1,770
Income taxes		—		290			364			—			654
Equity in earnings of subsidiaries		1,115		659			—			(1,774	)		—

Net income	$	1,116	$	1,115		$	659		$	(1,774	)	$	1,116

(1)	Includes intercompany royalties between Issuer and non-guarantor subsidiaries of a corresponding amount.

Condensed Consolidating Statements of Comprehensive Income

Condensed Consolidating Statements of Comprehensive Income

For the Year Ended December 31, 2013

(In millions)


	Parent		Issuer		Non- guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Net income	$	1,180	$	1,182	$	688	$	(1,870	)	$	1,180

Other comprehensive income, net of tax:
Defined benefit retirement plans gain, net of tax expense of $41		110		110		—		(110	)		110
Foreign currency translation adjustments, net of tax benefit of $–		1		—		1		(1	)		1

Other comprehensive income		111		110		1		(111	)		111

Comprehensive income	$	1,291	$	1,292	$	689	$	(1,981	)	$	1,291

Condensed Consolidating Statements of Comprehensive Income

For the Year Ended December 31, 2012

(In millions)


	Parent		Issuer			Non- guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Net income	$	1,099	$	1,100		$	661	$	(1,761	)	$	1,099

Other comprehensive loss, net of tax:
Defined benefit retirement plans loss, net of tax benefit of $(4)		—		(13	)		—		—			(13	)

Other comprehensive loss		—		(13	)		—		—			(13	)

Comprehensive income	$	1,099	$	1,087		$	661	$	(1,761	)	$	1,086

Condensed Consolidating Statements of Comprehensive Income

For the Year Ended December 31, 2011

(In millions)


	Parent		Issuer			Non- guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Net income	$	1,116	$	1,115		$	659	$	(1,774	)	$	1,116

Other comprehensive loss, net of tax:
Defined benefit retirement plans loss, net of tax benefit of $(64)		—		(119	)		—		—			(119	)

Other comprehensive loss		—		(119	)		—		—			(119	)

Comprehensive income	$	1,116	$	996		$	659	$	(1,774	)	$	997

Condensed Consolidating Statements of Cash Flows

Condensed Consolidating Statements of Cash Flows

For the Year Ended December 31, 2013

(In millions)


	Parent			Issuer			Non- guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net income	$	1,180		$	1,182		$	688		$	(1,870	)	$	1,180
Adjustments to reconcile to net cash provided by operating activities:
Equity income from subsidiaries		(1,180	)		(690	)		—			1,870			—
Depreciation and amortization		—			44			6			—			50
Pension, health and life insurance contributions		—			(44	)		—			—			(44	)
Pension, health and life insurance benefits expense		—			36			—			—			36
Deferred income taxes		(1	)		(39	)		(2	)		—			(42	)
Share-based compensation		1			17			—			—			18
Excess tax benefits from share-based arrangements		—			(13	)		—			—			(13	)
Changes in operating assets and liabilities:
Accounts and other receivables		—			(8	)		(16	)		17			(7	)
Inventories		—			(43	)		(46	)		—			(89	)
Accounts payable and accrued liabilities		(1	)		37			1			(17	)		20
Settlement costs		—			41			—			—			41
Income taxes		2			54			(20	)					36
Other current assets		—			(1	)		4			—			3
Other assets		—			3			—			—			3
Return on investment in subsidiaries		1,913			661			—			(2,574	)		—

Net cash provided by (used in) operating activities		1,914			1,237			615			(2,574	)		1,192

Cash flows from investing activities:
Purchases of investments		—			(276	)		—			—			(276	)
Business acquisition		—			—			(46	)		—			(46	)
Additions to plant and equipment		—			(61	)		(1	)		—			(62	)
Sales, maturities and calls of investments		—			26			—			—			26
Investment in subsidiary		(105	)		—			—			105			—

Net cash provided by (used in) investing activities		(105	)		(311	)		(47	)		105			(358	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		—			500			—			—			500
Dividends paid		(823	)		(1,913	)		(661	)		2,574			(823	)
Shares repurchased		(795	)		—			—			—			(795	)
Debt issuance costs		—			(4	)		—			—			(4	)
Contributions from parent		—			—			105			(105	)		—
Proceeds from exercise of stock options		—			9			—			—			9
Excess tax benefits from share-based arrangements		—			13			—			—			13

Net cash provided by (used in) financing activities		(1,618	)		(1,395	)		(556	)		2,469			(1,100	)
Effect of foreign currency rate changes on cash and cash equivalents		—			—			—			—			—
Change in cash and cash equivalents		191			(469	)		12			—			(266	)
Cash and cash equivalents, beginning of year		150			1,471			99			—			1,720

Cash and cash equivalents, end of year	$	341		$	1,002		$	111		$	—		$	1,454

Condensed Consolidating Statements of Cash Flows

For the Year Ended December 31, 2012

(In millions)


	Parent			Issuer			Non- guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net income	$	1,099		$	1,100		$	661		$	(1,761	)	$	1,099
Adjustments to reconcile to net cash provided by operating activities:
Equity income from subsidiaries		(1,100	)		(661	)		—			1,761			—
Depreciation and amortization		—			38			1			—			39
Pension, health and life insurance contributions		—			(43	)		—			—			(43	)
Pension, health and life insurance benefits expense		—			44			—			—			44
Deferred income taxes		1			(10	)		(2	)		—			(11	)
Share-based compensation		1			19			—			—			20
Excess tax benefits from share-based arrangements		—			(11	)		—			—			(11	)
Changes in operating assets and liabilities:
Accounts and other receivables		—			877			(10	)		(875	)		(8	)
Inventories		—			(92	)		(26	)		—			(118	)
Accounts payable and accrued liabilities		—			50			(861	)		875			64
Settlement costs		—			32			—			—			32
Income taxes		(1	)		43			17						59
Other current assets		—			13			(8	)		—			5
Other assets		—			(1	)		—			—			(1	)
Return on investment in subsidiaries		1,495			550			—			(2,045	)		—

Net cash provided by (used in) operating activities		1,495			1,948			(228	)		(2,045	)		1,170

Cash flows from investing activities:
Business acquisition, net of cash acquired (1)		(125	)		—			(135	)		125			(135	)
Additions to plant and equipment		—			(74	)		—			—			(74	)
Investment in subsidiary		(70	)		—			—			70			—

Net cash provided by (used in) investing activities		(195	)		(74	)		(135	)		195			(209	)

Cash flows from financing activities:
Shares repurchased		(578	)		—			—			—			(578	)
Proceeds from issuance of long-term debt		—			500			125			(125	)		500
Dividends paid		(807	)		(1,495	)		(550	)		2,045			(807	)
Debt issuance costs		—			(5	)		—			—			(5	)
Contributions from parent		—			—			70			(70	)		—
Proceeds from exercise of stock options		—			5			—			—			5
Excess tax benefits from share-based arrangements		—			10			—			—			10

Net cash provided by (used in) financing activities		(1,385	)		(985	)		(355	)		1,850			(875	)

Change in cash and cash equivalents		(85	)		889			(718	)		—			86
Cash and cash equivalents, beginning of year		235			582			817			—			1,634

Cash and cash equivalents, end of year	$	150		$	1,471		$	99		$	—		$	1,720

(1)	$125 million reflected as cash flows used by Parent consists of a loan from Parent to a Non-guarantor Subsidiary.

Condensed Consolidating Statements of Cash Flows

For the Year Ended December 31, 2011

(In millions)


	Parent			Issuer			Non- guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash flows from operating activities:
Net income	$	1,116		$	1,115		$	659		$	(1,774	)	$	1,116
Adjustments to reconcile to net cash provided by operating activities:
Equity income from subsidiaries		(1,115	)		(659	)		—			1,774			—
Depreciation and amortization		—			37			—			—			37
Pension, health and life insurance contributions		—			(42	)		—			—			(42	)
Pension, health and life insurance benefits expense		—			28			—			—			28
Deferred income taxes		—			(16	)		1			—			(15	)
Share-based compensation		—			16			—			—			16
Excess tax benefits from share-based arrangements		—			(4	)		—			—			(4	)
Changes in operating assets and liabilities:
Accounts and other receivables		(1	)		(873	)		(2	)		877			1
Accounts payable and accrued liabilities		12			(37	)		869			(877	)		(33	)
Settlement costs		—			91			—			—			91
Income taxes		—			(2	)		(4	)					(6	)
Other current assets		—			(10	)		—			—			(10	)
Other assets		—			(170	)		(213	)		387			4
Return on investment in subsidiaries		1,730			1,212			—			(2,942	)		—

Net cash provided by (used in) operating activities		1,742			686			1,310			(2,555	)		1,183

Cash flows from investing activities:
Additions to plant and equipment		—			(56	)		—			—			(56	)
Return of capital		252			—			—			(252	)		—

Net cash provided by (used in) investing activities		252			(56	)		—			(252	)		(56	)

Cash flows from financing activities:
Shares repurchased		(1,586	)		—			—			—			(1,586	)
Proceeds from issuance of long-term debt		387			750			—			(387	)		750
Dividends paid		(723	)		(1,982	)		(1,212	)		3,194			(723	)
Debt issuance costs		—			(9	)		—			—			(9	)
Proceeds from exercise of stock options		—			8			—			—			8
Excess tax benefits from share-based arrangements		—			4			—			—			4

Net cash provided by (used in) financing activities		(1,922	)		(1,229	)		(1,212	)		2,807			(1,556	)

Change in cash and cash equivalents		72			(599	)		98			—			(429	)
Cash and cash equivalents, beginning of year		163			1,181			719			—			2,063

Cash and cash equivalents, end of year	$	235		$	582		$	817		$	—		$	1,634