Condensed Consolidating Financial Information

12 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Condensed Consolidating Financial Information

Condensed Consolidating Financial Information

PM USA, which is a 100% owned subsidiary of Altria Group, Inc., has guaranteed Altria Group, Inc.’s obligations under its outstanding debt securities, borrowings under its Credit Agreement and amounts outstanding under its commercial paper program (the “Guarantees”). Pursuant to the Guarantees, PM USA fully and unconditionally guarantees, as primary obligor, the payment and performance of Altria Group, Inc.’s obligations under the guaranteed debt instruments (the “Obligations”), subject to release under certain customary circumstances as noted below.

The Guarantees provide that PM USA guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of the Obligations. The liability of PM USA under the Guarantees is absolute and unconditional irrespective of: any lack of validity, enforceability or genuineness of any provision of any agreement or instrument relating thereto; any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from any agreement or instrument relating thereto; any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the Obligations; or any other circumstance that might otherwise constitute a defense available to, or a discharge of, Altria Group, Inc. or PM USA.

The obligations of PM USA under the Guarantees are limited to the maximum amount as will not result in PM USA’s obligations under the Guarantees constituting a fraudulent transfer or conveyance, after giving effect to such maximum amount and all other contingent and fixed liabilities of PM USA that are relevant under Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to the Guarantees. For this purpose, “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.

PM USA will be unconditionally released and discharged from the Obligations upon the earliest to occur of:

▪the date, if any, on which PM USA consolidates with or merges into Altria Group, Inc. or any successor;

▪the date, if any, on which Altria Group, Inc. or any successor consolidates with or merges into PM USA;

▪the payment in full of the Obligations pertaining to such Guarantees; and

▪the rating of Altria Group, Inc.’s long-term senior unsecured debt by Standard & Poor’s of A or higher.

At December 31, 2015, the respective principal 100% owned subsidiaries of Altria Group, Inc. and PM USA were not limited by long-term debt or other agreements in their ability to pay cash dividends or make other distributions with respect to their equity interests.

The following sets forth the condensed consolidating balance sheets as of December 31, 2015 and 2014, condensed consolidating statements of earnings and comprehensive earnings for the years ended December 31, 2015, 2014 and 2013, and condensed consolidating statements of cash flows for the years ended December 31, 2015, 2014 and 2013 for Altria Group, Inc., PM USA and, collectively, Altria Group, Inc.’s other subsidiaries that are not guarantors of Altria Group, Inc.’s debt instruments (the “Non-Guarantor Subsidiaries”). The financial information is based on Altria Group, Inc.’s understanding of the Securities and Exchange Commission (“SEC”) interpretation and application of Rule 3-10 of SEC Regulation S-X.

The financial information may not necessarily be indicative of results of operations or financial position had PM USA and the Non-Guarantor Subsidiaries operated as independent entities. Altria Group, Inc. and PM USA account for investments in their subsidiaries under the equity method of accounting.

Condensed Consolidating Balance Sheets

(in millions of dollars)

____________________________

at December 31, 2015	Altria Group, Inc.		PM USA		Non- Guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Assets
Cash and cash equivalents	$	2,313	$	—	$	56	$	—		$	2,369
Receivables	—		7		117		—			124
Inventories:
Leaf tobacco	—		562		395		—			957
Other raw materials	—		123		58		—			181
Work in process	—		5		439		—			444
Finished product	—		121		328		—			449
	—		811		1,220		—			2,031
Due from Altria Group, Inc. and subsidiaries	—		3,821		1,807		(5,628		)	—
Deferred income taxes	—		1,268		7		(100		)	1,175
Other current assets	284		65		112		(74		)	387
Total current assets	2,597		5,972		3,319		(5,802		)	6,086
Property, plant and equipment, at cost	—		3,102		1,775		—			4,877
Less accumulated depreciation	—		2,157		738		—			2,895
	—		945		1,037		—			1,982
Goodwill	—		—		5,285		—			5,285
Other intangible assets, net	—		2		12,026		—			12,028
Investment in SABMiller	5,483		—		—		—			5,483
Investment in consolidated subsidiaries	11,648		2,715		—		(14,363		)	—
Finance assets, net	—		—		1,239		—			1,239
Due from Altria Group, Inc. and subsidiaries	4,790		—		—		(4,790		)	—
Other assets	92		536		131		(327		)	432
Total Assets	$	24,610	$	10,170	$	23,037	$	(25,282	)	$	32,535

Condensed Consolidating Balance Sheets (Continued)

(in millions of dollars)

____________________________

at December 31, 2015	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Liabilities
Current portion of long-term debt	$	—		$	—		$	4		$	—		$	4
Accounts payable	3			104			293			—			400
Accrued liabilities:
Marketing	—			586			109			—			695
Employment costs	18			11			169			—			198
Settlement charges	—			3,585			5			—			3,590
Other	354			616			285			(174		)	1,081
Dividends payable	1,110			—			—			—			1,110
Due to Altria Group, Inc. and subsidiaries	5,427			191			10			(5,628		)	—
Total current liabilities	6,912			5,093			875			(5,802		)	7,078
Long-term debt	12,903			—			12			—			12,915
Deferred income taxes	1,547			—			4,443			(327		)	5,663
Accrued pension costs	215			—			1,062			—			1,277
Accrued postretirement health care costs	—			1,460			785			—			2,245
Due to Altria Group, Inc. and subsidiaries	—			—			4,790			(4,790		)	—
Other liabilities	153			126			168			—			447
Total Liabilities	21,730			6,679			12,135			(10,919		)	29,625
Contingencies
Redeemable noncontrolling interest	—			—			37			—			37
Stockholders’ Equity
Common stock	935			—			9			(9		)	935
Additional paid-in capital	5,813			3,310			11,456			(14,766		)	5,813
Earnings reinvested in the business	27,257			436			1,099			(1,535		)	27,257
Accumulated other comprehensive losses	(3,280		)	(255		)	(1,692		)	1,947			(3,280		)
Cost of repurchased stock	(27,845		)	—			—			—			(27,845		)
Total stockholders’ equity attributable to Altria Group, Inc.	2,880			3,491			10,872			(14,363		)	2,880
Noncontrolling interests	—			—			(7		)	—			(7		)
Total stockholders’ equity	2,880			3,491			10,865			(14,363		)	2,873
Total Liabilities and Stockholders’ Equity	$	24,610		$	10,170		$	23,037		$	(25,282	)	$	32,535

Condensed Consolidating Balance Sheets

(in millions of dollars)

____________________________

at December 31, 2014	Altria Group, Inc.		PM USA		Non- Guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Assets
Cash and cash equivalents	$	3,281	$	3	$	37	$	—		$	3,321
Receivables	—		6		118		—			124
Inventories:
Leaf tobacco	—		616		375		—			991
Other raw materials	—		132		68		—			200
Work in process	—		4		425		—			429
Finished product	—		134		286		—			420
	—		886		1,154		—			2,040
Due from Altria Group, Inc. and subsidiaries	568		3,535		1,279		(5,382		)	—
Deferred income taxes	—		1,190		9		(56		)	1,143
Other current assets	54		101		122		(27		)	250
Total current assets	3,903		5,721		2,719		(5,465		)	6,878
Property, plant and equipment, at cost	—		3,112		1,643		—			4,755
Less accumulated depreciation	—		2,091		681		—			2,772
	—		1,021		962		—			1,983
Goodwill	—		—		5,285		—			5,285
Other intangible assets, net	—		2		12,047		—			12,049
Investment in SABMiller	6,183		—		—		—			6,183
Investment in consolidated subsidiaries	10,665		2,775		—		(13,440		)	—
Finance assets, net	—		—		1,614		—			1,614
Due from Altria Group, Inc. and subsidiaries	4,790		—		—		(4,790		)	—
Other assets	148		541		121		(327		)	483
Total Assets	$	25,689	$	10,060	$	22,748	$	(24,022	)	$	34,475

Condensed Consolidating Balance Sheets (Continued)

(in millions of dollars)

____________________________

at December 31, 2014	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Liabilities
Current portion of long-term debt	$	1,000		$	—		$	—		$	—		$	1,000
Accounts payable	18			118			280			—			416
Accrued liabilities:
Marketing	—			505			113			—			618
Employment costs	18			10			158			—			186
Settlement charges	—			3,495			5			—			3,500
Other	321			400			287			(83		)	925
Dividends payable	1,028			—			—			—			1,028
Due to Altria Group, Inc. and subsidiaries	4,414			402			566			(5,382		)	—
Total current liabilities	6,799			4,930			1,409			(5,465		)	7,673
Long-term debt	13,693			—			—			—			13,693
Deferred income taxes	1,754			—			4,661			(327		)	6,088
Accrued pension costs	233			—			779			—			1,012
Accrued postretirement health care costs	—			1,608			853			—			2,461
Due to Altria Group, Inc. and subsidiaries	—			—			4,790			(4,790		)	—
Other liabilities	196			151			156			—			503
Total Liabilities	22,675			6,689			12,648			(10,582		)	31,430
Contingencies
Redeemable noncontrolling interest	—			—			35			—			35
Stockholders’ Equity
Common stock	935			—			9			(9		)	935
Additional paid-in capital	5,735			3,310			10,688			(13,998		)	5,735
Earnings reinvested in the business	26,277			402			995			(1,397		)	26,277
Accumulated other comprehensive losses	(2,682		)	(341		)	(1,623		)	1,964			(2,682		)
Cost of repurchased stock	(27,251		)	—			—			—			(27,251		)
Total stockholders’ equity attributable to Altria Group, Inc.	3,014			3,371			10,069			(13,440		)	3,014
Noncontrolling interests	—			—			(4		)	—			(4		)
Total stockholders’ equity	3,014			3,371			10,065			(13,440		)	3,010
Total Liabilities and Stockholders’ Equity	$	25,689		$	10,060		$	22,748		$	(24,022	)	$	34,475

Condensed Consolidating Statements of Earnings and Comprehensive Earnings

(in millions of dollars)

_____________________________

for the year ended December 31, 2015	Altria Group, Inc.			PM USA		Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net revenues	$	—		$	22,133	$	3,342		$	(41	)	$	25,434
Cost of sales	—			6,664		1,117			(41		)	7,740
Excise taxes on products	—			6,369		211			—			6,580
Gross profit	—			9,100		2,014			—			11,114
Marketing, administration and research costs	189			2,094		425			—			2,708
Changes to Mondelēz & PMI tax-related receivables/payables	41			—		—			—			41
Asset impairment and exit costs	—			—		4			—			4
Operating (expense) income	(230		)	7,006		1,585			—			8,361
Interest and other debt expense, net	560			33		224			—			817
Loss on early extinguishment of debt	228			—		—			—			228
Earnings from equity investment in SABMiller	(757		)	—		—			—			(757		)
Other income, net	(5		)	—		—			—			(5		)
(Loss) Earnings before income taxes and equity earnings of subsidiaries	(256		)	6,973		1,361			—			8,078
(Benefit) provision for income taxes	(184		)	2,536		483			—			2,835
Equity earnings of subsidiaries	5,313			268		—			(5,581		)	—
Net earnings	5,241			4,705		878			(5,581		)	5,243
Net earnings attributable to noncontrolling interests	—			—		(2		)	—			(2		)
Net earnings attributable to Altria Group, Inc.	$	5,241		$	4,705	$	876		$	(5,581	)	$	5,241
Net earnings	$	5,241		$	4,705	$	878		$	(5,581	)	$	5,243
Other comprehensive (losses) earnings, net of deferred income taxes	(598		)	86		(69		)	(17		)	(598		)
Comprehensive earnings	4,643			4,791		809			(5,598		)	4,645
Comprehensive earnings attributable to noncontrolling interests	—			—		(2		)	—			(2		)
Comprehensive earnings attributable to Altria Group, Inc.	$	4,643		$	4,791	$	807		$	(5,598	)	$	4,643

Condensed Consolidating Statements of Earnings and Comprehensive Earnings

(in millions of dollars)

_____________________________

for the year ended December 31, 2014	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net revenues	$	—		$	21,298		$	3,267		$	(43	)	$	24,522
Cost of sales	—			6,722			1,106			(43		)	7,785
Excise taxes on products	—			6,358			219			—			6,577
Gross profit	—			8,218			1,942			—			10,160
Marketing, administration and research costs	231			1,889			419			—			2,539
Changes to Mondelēz and PMI tax-related receivables/payables	2			—			—			—			2
Asset impairment and exit costs	—			(6		)	5			—			(1		)
Operating (expense) income	(233		)	6,335			1,518			—			7,620
Interest and other debt expense (income), net	614			(46		)	240			—			808
Loss on early extinguishment of debt	—			—			44			—			44
Earnings from equity investment in SABMiller	(1,006		)	—			—			—			(1,006		)
Earnings before income taxes and equity earnings of subsidiaries	159			6,381			1,234			—			7,774
(Benefit) provision for income taxes	(119		)	2,381			442			—			2,704
Equity earnings of subsidiaries	4,792			244			—			(5,036		)	—
Net earnings	5,070			4,244			792			(5,036		)	5,070
Net earnings attributable to noncontrolling interests	—			—			—			—			—
Net earnings attributable to Altria Group, Inc.	$	5,070		$	4,244		$	792		$	(5,036	)	$	5,070
Net earnings	$	5,070		$	4,244		$	792		$	(5,036	)	$	5,070
Other comprehensive losses, net of deferred income taxes	(1,304		)	(110		)	(642		)	752			(1,304		)
Comprehensive earnings	3,766			4,134			150			(4,284		)	3,766
Comprehensive earnings attributable to noncontrolling interests	—			—			—			—			—
Comprehensive earnings attributable to Altria Group, Inc.	$	3,766		$	4,134		$	150		$	(4,284	)	$	3,766

Condensed Consolidating Statements of Earnings and Comprehensive Earnings

(in millions of dollars)

_____________________________

for the year ended December 31, 2013	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Net revenues	$	—		$	21,231		$	3,269	$	(34	)	$	24,466
Cost of sales	—			6,281			959		(34		)	7,206
Excise taxes on products	—			6,553			250		—			6,803
Gross profit	—			8,397			2,060		—			10,457
Marketing, administration and research costs	223			1,837			280		—			2,340
Changes to Mondelēz and PMI tax-related receivables/payables	25			(3		)	—		—			22
Asset impairment and exit costs	—			3			8		—			11
Operating (expense) income	(248		)	6,560			1,772		—			8,084
Interest and other debt expense, net	643			2			404		—			1,049
Loss on early extinguishment of debt	1,084			—			—		—			1,084
Earnings from equity investment in SABMiller	(991		)	—			—		—			(991		)
(Loss) earnings before income taxes and equity earnings of subsidiaries	(984		)	6,558			1,368		—			6,942
(Benefit) provision for income taxes	(488		)	2,406			489		—			2,407
Equity earnings of subsidiaries	5,031			216			—		(5,247		)	—
Net earnings	4,535			4,368			879		(5,247		)	4,535
Net earnings attributable to noncontrolling interests	—			—			—		—			—
Net earnings attributable to Altria Group, Inc.	$	4,535		$	4,368		$	879	$	(5,247	)	$	4,535
Net earnings	$	4,535		$	4,368		$	879	$	(5,247	)	$	4,535
Other comprehensive earnings, net of deferred income taxes	662			198			910		(1,108		)	662
Comprehensive earnings	5,197			4,566			1,789		(6,355		)	5,197
Comprehensive earnings attributable to noncontrolling interests	—			—			—		—			—
Comprehensive earnings attributable to Altria Group, Inc.	$	5,197		$	4,566		$	1,789	$	(6,355	)	$	5,197

Condensed Consolidating Statements of Cash Flows

(in millions of dollars)

_____________________________

for the year ended December 31, 2015	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash Provided by Operating Activities
Net cash provided by operating activities	$	5,085		$	5,204		$	961		$	(5,440	)	$	5,810
Cash Provided by (Used in) Investing Activities
Capital expenditures	—			(51		)	(178		)	—			(229		)
Proceeds from finance assets	—			—			354			—			354
Payment for derivative financial instrument	(132		)	—			—			—			(132		)
Other	—			10			(18		)	—			(8		)
Net cash (used in) provided by investing activities	(132		)	(41		)	158			—			(15		)
Cash Provided by (Used in) Financing Activities
Long-term debt repaid	(1,793		)	—			—			—			(1,793		)
Repurchases of common stock	(554		)	—			—			—			(554		)
Dividends paid on common stock	(4,179		)	—			—			—			(4,179		)
Changes in amounts due to/from Altria Group, Inc. and subsidiaries	814			(495		)	(319		)	—			—
Premiums and fees related to early extinguishment of debt	(226		)	—			—			—			(226		)
Cash dividends paid to parent	—			(4,671		)	(769		)	5,440			—
Other	17			—			(12		)	—			5
Net cash used in financing activities	(5,921		)	(5,166		)	(1,100		)	5,440			(6,747		)
Cash and cash equivalents:
(Decrease) increase	(968		)	(3		)	19			—			(952		)
Balance at beginning of year	3,281			3			37			—			3,321
Balance at end of year	$	2,313		$	—		$	56		$	—		$	2,369

Condensed Consolidating Statements of Cash Flows

(in millions of dollars)

_____________________________

for the year ended December 31, 2014	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash Provided by Operating Activities
Net cash provided by operating activities	$	4,924		$	4,451		$	707		$	(5,419	)	$	4,663
Cash Provided by (Used in) Investing Activities
Capital expenditures	—			(44		)	(119		)	—			(163		)
Acquisition of Green Smoke, net of acquired cash	—			—			(102		)	—			(102		)
Proceeds from finance assets	—			—			369			—			369
Other	—			70			3			—			73
Net cash provided by investing activities	—			26			151			—			177
Cash Provided by (Used in) Financing Activities
Long-term debt issued	999			—			—			—			999
Long-term debt repaid	(525		)	—			(300		)	—			(825		)
Repurchases of common stock	(939		)	—			—			—			(939		)
Dividends paid on common stock	(3,892		)	—			—			—			(3,892		)
Changes in amounts due to/from Altria Group, Inc. and subsidiaries	(411		)	(351		)	762			—			—
Premiums and fees related to early extinguishment of debt	—			—			(44		)	—			(44		)
Cash dividends paid to parent	—			(4,124		)	(1,295		)	5,419			—
Other	11			—			(4		)	—			7
Net cash used in financing activities	(4,757		)	(4,475		)	(881		)	5,419			(4,694		)
Cash and cash equivalents:
Increase (decrease)	167			2			(23		)	—			146
Balance at beginning of year	3,114			1			60			—			3,175
Balance at end of year	$	3,281		$	3		$	37		$	—		$	3,321

Condensed Consolidating Statements of Cash Flows

(in millions of dollars)

_____________________________

for the year ended December 31, 2013	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash Provided by Operating Activities
Net cash provided by operating activities	$	4,520		$	4,192		$	387		$	(4,724	)	$	4,375
Cash Provided by (Used in) Investing Activities
Capital expenditures	—			(31		)	(100		)	—			(131		)
Proceeds from finance assets	—			—			716			—			716
Other	—			—			17			—			17
Net cash (used in) provided by investing activities	—			(31		)	633			—			602
Cash Provided by (Used in) Financing Activities
Long-term debt issued	4,179			—			—			—			4,179
Long-term debt repaid	(3,559		)	—			—			—			(3,559		)
Repurchases of common stock	(634		)	—			—			—			(634		)
Dividends paid on common stock	(3,612		)	—			—			—			(3,612		)
Changes in amounts due to/from Altria Group, Inc. and subsidiaries	432			240			(672		)	—			—
Premiums and fees related to early extinguishment of debt	(1,054		)	—			—			—			(1,054		)
Cash dividends paid to parent	—			(4,400		)	(324		)	4,724			—
Other	(20		)	—			(2		)	—			(22		)
Net cash used in financing activities	(4,268		)	(4,160		)	(998		)	4,724			(4,702		)
Cash and cash equivalents:
Increase	252			1			22			—			275
Balance at beginning of year	2,862			—			38			—			2,900
Balance at end of year	$	3,114		$	1		$	60		$	—		$	3,175