Segment Reporting

12 Months Ended

Dec. 31, 2015

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

The products of Altria Group, Inc.’s subsidiaries include smokeable tobacco products comprised of cigarettes manufactured and sold by PM USA and machine-made large cigars and pipe tobacco manufactured and sold by Middleton; smokeless tobacco 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. Information about total assets by segment is not disclosed because such information is not reported to or used by Altria Group, Inc.’s chief operating decision maker. Segment goodwill and other intangible assets, net, are disclosed in Note 4. Goodwill and Other Intangible Assets, net. The accounting policies of the segments are the same as those described in Note 2. Summary of Significant Accounting Policies.

Segment data were as follows:

	For the Years Ended December 31,
(in millions)	2015			2014			2013
Net revenues:
Smokeable products	$	22,792		$	21,939		$	21,868
Smokeless products	1,879			1,809			1,778
Wine	692			643			609
All other	71			131			211
Net revenues	$	25,434		$	24,522		$	24,466
Earnings before income taxes:
Operating companies income (loss):
Smokeable products	$	7,569		$	6,873		$	7,063
Smokeless products	1,108			1,061			1,023
Wine	152			134			118
All other	(169		)	(185		)	157
Amortization of intangibles	(21		)	(20		)	(20		)
General corporate expenses	(237		)	(241		)	(235		)
Changes to Mondelēz and PMI tax-related receivables/payables	(41		)	(2		)	(22		)
Operating income	8,361			7,620			8,084
Interest and other debt expense, net	(817		)	(808		)	(1,049		)
Loss on early extinguishment of debt	(228		)	(44		)	(1,084		)
Earnings from equity investment in SABMiller	757			1,006			991
Other income, net	5			—			—
Earnings before income taxes	$	8,078		$	7,774		$	6,942

The smokeable products segment included net revenues of $22,193 million, $21,363 million and $21,308 million for the years ended December 31, 2015, 2014 and 2013, respectively, related to cigarettes and net revenues of $599 million, $576 million and $560 million for the years ended December 31, 2015, 2014 and 2013, respectively, related to cigars.

PM USA, USSTC and Middleton’s largest customer, McLane Company, Inc., accounted for approximately 26% of Altria Group, Inc.’s consolidated net revenues for the year ended December 31, 2015 and 27% for each of the years ended December 31, 2014 and 2013. In addition, Core-Mark Holding Company, Inc. accounted for approximately 10% of Altria Group, Inc.’s consolidated net revenues for the year ended December 31, 2015. Substantially all of these net revenues were reported in the smokeable products and smokeless products segments. Sales to three distributors accounted for approximately 66%, 67% and 66% of net revenues for the wine segment for the years ended December 31, 2015, 2014 and 2013, respectively.

Details of Altria Group, Inc.’s depreciation expense and capital expenditures were as follows:

	For the Years Ended December 31,
(in millions)	2015		2014		2013
Depreciation expense:
Smokeable products	$	117	$	112	$	113
Smokeless products	27		22		25
Wine	32		30		30
General corporate and other	28		24		24
Total depreciation expense	$	204	$	188	$	192
Capital expenditures:
Smokeable products	$	56	$	49	$	39
Smokeless products	113		40		32
Wine	42		46		42
General corporate and other	18		28		18
Total capital expenditures	$	229	$	163	$	131

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

▪Non-Participating Manufacturer (“NPM”) Adjustment Items: For the years ended December 31, 2015, 2014 and 2013, pre-tax income for NPM adjustment items was recorded in Altria Group, Inc.’s consolidated statements of earnings as follows:

(in millions)	2015			2014		2013
Smokeable products segment	$	97		$	43	$	664
Interest and other debt expense, net	(13		)	47		—
Total	$	84		$	90	$	664

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 18. 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 years ended December 31, 2015, 2014 and 2013, pre-tax charges related to certain tobacco and health litigation items were recorded in Altria Group, Inc.’s consolidated statements of earnings as follows:

(in millions)	2015		2014		2013
Smokeable products segment	$	127	$	27	$	18
General corporate	—		15		—
Interest and other debt expense, net	23		2		4
Total	$	150	$	44	$	22

During 2015, PM USA recorded pre-tax charges in marketing, administration and research costs related to tobacco and health judgments in seven state Engle progeny lawsuits and Schwarz of $59 million and $25 million, respectively, as well as $14 million and $9 million, respectively, in interest costs related to these cases. Additionally in 2015, PM USA and certain other cigarette manufacturers reached an agreement to resolve approximately 415 pending federal Engle progeny cases. As a result of the agreement, 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 18. Contingencies.

During 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 18. Contingencies.

▪Asset Impairment and Exit Costs: During 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 2014, PM USA recorded a pre-tax gain of $10 million.