Segment Reporting

9 Months Ended

Sep. 30, 2015

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting:

The products of Altria Group, Inc.’s subsidiaries include smokeable products comprised of cigarettes manufactured and sold by PM USA and machine-made large cigars and pipe tobacco manufactured and sold by Middleton; smokeless products, substantially all of which are manufactured and sold by USSTC; and wine produced and/or distributed by Ste. Michelle. The products and services of these subsidiaries constitute Altria Group, Inc.’s reportable segments of smokeable products, smokeless products and wine. The financial services and the innovative tobacco products businesses are included in all other.

Altria Group, Inc.’s chief operating decision maker reviews operating companies income to evaluate the performance of, and allocate resources to, the segments. Operating companies income for the segments is defined as operating income before amortization of intangibles and general corporate expenses. Interest and other debt expense, net, and provision for income taxes are centrally managed at the corporate level and, accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by Altria Group, Inc.’s chief operating decision maker.

Segment data were as follows:

	For the Nine Months Ended September 30,						For the Three Months Ended September 30,
	2015			2014			2015			2014
	(in millions)
Net revenues:
Smokeable products	$	17,235		$	16,428		$	6,040		5,859
Smokeless products	1,393			1,345			482			466
Wine	461			428			166			153
All other	27			63			11			13
Net revenues	$	19,116		$	18,264		$	6,699		$	6,491
Earnings before income taxes:
Operating companies income (loss):
Smokeable products	$	5,831		$	5,160		$	2,121		$	1,840
Smokeless products	830			804			286			280
Wine	97			81			35			31
All other	(139		)	(143		)	(35		)	(89		)
Amortization of intangibles	(16		)	(15		)	(6		)	(5		)
General corporate expenses	(166		)	(174		)	(53		)	(53		)
Changes to Mondelēz and PMI tax-related receivables/payables	(41		)	(5		)	(41		)	(5		)
Operating income	6,396			5,708			2,307			1,999
Interest and other debt expense, net	(609		)	(596		)	(205		)	(213		)
Loss on early extinguishment of debt	(228		)	—			—			—
Earnings from equity investment in SABMiller	546			753			187			328
Earnings before income taxes	$	6,105		$	5,865		$	2,289		$	2,114

The comparability of operating companies income for the reportable segments was affected by the following:

Non-Participating Manufacturer (“NPM”) Adjustment Items - For the nine and three months ended September 30, 2015 and 2014, pre-tax income for NPM adjustment items was recorded in Altria Group, Inc.’s condensed consolidated statements of earnings as follows:

	For the Nine Months Ended September 30,				For the Three Months Ended September 30,
	2015		2014		2015		2014
	(in millions)
Smokeable products segment	$	126	$	43	$	126	$	—
Interest and other debt expense, net	—		47		—		—
Total	$	126	$	90	$	126	$	—

These adjustments resulted from the settlement of, and determinations made in connection with, disputes with certain states and territories related to the NPM adjustment provision under the 1998 Master Settlement Agreement (such settlements and determinations are referred to collectively as “NPM Adjustment Items” and are more fully described in Health Care Cost Recovery Litigation - NPM Adjustment Disputes in Note 10. Contingencies). The amounts shown in the table above for the smokeable products segment were recorded by PM USA as reductions to cost of sales, which increased operating companies income in the smokeable products segment.

Tobacco and Health Litigation Items - For the nine and three months ended September 30, 2015 and 2014, pre-tax charges related to certain tobacco and health litigation items were recorded in Altria Group, Inc.’s condensed consolidated statements of earnings as follows:

	For the Nine Months Ended September 30,				For the Three Months Ended September 30,
	2015		2014		2015		2014
	(in millions)
Smokeable products segment	$	102	$	22	$	54	$	3
General corporate	—		15		—		—
Interest and other debt expense, net	13		2		13		1
Total	$	115	$	39	$	67	$	4

During the third quarter of 2015, PM USA recorded pre-tax charges of $54 million in marketing, administration and research costs related to tobacco and health judgments in six state Engle progeny lawsuits, as well as $13 million in interest costs related to those cases. During the first quarter of 2015, PM USA and certain other cigarette manufacturers reached a tentative agreement to resolve approximately 415 pending federal Engle progeny cases. As a result of the tentative agreement, during the first quarter of 2015, PM USA recorded a pre-tax provision of approximately $43 million in marketing, administration and research costs. For further discussion, see Smoking and Health Litigation in Note 10. Contingencies.

During the second quarter of 2014, Altria Group, Inc. and PM USA recorded an aggregate pre-tax charge of $31 million in marketing, administration and research costs for the estimated costs of implementing the corrective communications remedy in connection with the federal government’s lawsuit against Altria Group, Inc. and PM USA. For further discussion, see Health Care Cost Recovery Litigation - Federal Government’s Lawsuit in Note 10. Contingencies.

Asset Impairment and Exit Costs - During the second quarter of 2014, PM USA sold its Cabarrus, North Carolina manufacturing facility for approximately $66 million in connection with the previously completed manufacturing optimization program associated with PM USA’s closure of the manufacturing facility in 2009. As a result, during the second quarter of 2014, PM USA recorded a pre-tax gain of $10 million.