Segment Reporting

12 Months Ended

Dec. 31, 2016

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

At December 31, 2016, the products of Altria Group, Inc.’s subsidiaries include smokeable tobacco products, consisting of cigarettes manufactured and sold by PM USA and machine-made large cigars and pipe tobacco manufactured and sold by Middleton; smokeless tobacco products, 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 (the “CODM”) 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 general corporate expenses and amortization of intangibles. 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 the CODM. Information about total assets by segment is not disclosed because such information is not reported to or used by the CODM. 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)	2016			2015			2014
Net revenues:
Smokeable products	$	22,851		$	22,792		$	21,939
Smokeless products	2,051			1,879			1,809
Wine	746			692			643
All other	96			71			131
Net revenues	$	25,744		$	25,434		$	24,522
Earnings before income taxes:
Operating companies income (loss):
Smokeable products	$	7,768		$	7,569		$	6,873
Smokeless products	1,177			1,108			1,061
Wine	164			152			134
All other	(99		)	(169		)	(185		)
Amortization of intangibles	(21		)	(21		)	(20		)
General corporate expenses	(222		)	(237		)	(241		)
Reductions of PMI and Mondelēz tax-related receivables	—			(41		)	(2		)
Corporate asset impairment and exit costs	(5		)	—			—
Operating income	8,762			8,361			7,620
Interest and other debt expense, net	(747		)	(817		)	(808		)
Loss on early extinguishment of debt	(823		)	(228		)	(44		)
Earnings from equity investment in SABMiller	795			757			1,006
Gain on AB InBev/SABMiller business combination	13,865			5			—
Earnings before income taxes	$	21,852		$	8,078		$	7,774

The smokeable products segment included net revenues of $22,199 million, $22,193 million and $21,363 million for the years ended December 31, 2016, 2015 and 2014, respectively, related to cigarettes and net revenues of $652 million, $599 million and $576 million for the years ended December 31, 2016, 2015 and 2014, respectively, related to cigars.

PM USA, USSTC and Middleton’s largest customer, McLane Company, Inc., accounted for approximately 25%, 26% and 27% of Altria Group, Inc.’s consolidated net revenues for the years ended December 31, 2016, 2015 and 2014, respectively. In addition, Core-Mark Holding Company, Inc. accounted for approximately 14% and 10% of Altria Group, Inc.’s consolidated net revenues for the years ended December 31, 2016 and 2015, respectively. Substantially all of these net revenues were reported in the smokeable products and smokeless products segments. Sales to three distributors accounted for approximately 69%, 66% and 67% of net revenues for the wine segment for the years ended December 31, 2016, 2015 and 2014, respectively.

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

	For the Years Ended December 31,
(in millions)	2016		2015		2014
Depreciation expense:
Smokeable products	$	93	$	117	$	112
Smokeless products	26		27		22
Wine	36		32		30
General corporate and other	28		28		24
Total depreciation expense	$	183	$	204	$	188
Capital expenditures:
Smokeable products	$	55	$	56	$	49
Smokeless products	52		113		40
Wine	59		42		46
General corporate and other	23		18		28
Total capital expenditures	$	189	$	229	$	163

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, 2016, 2015 and 2014, pre-tax expense (income) for NPM adjustment items was recorded in Altria Group, Inc.’s consolidated statements of earnings as follows:

(in millions)	2016		2015			2014
Smokeable products segment	$	12	$	(97	)	$	(43	)
Interest and other debt expense, net	6		13			(47		)
Total	$	18	$	(84	)	$	(90	)

NPM adjustment items result 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 19. Contingencies). The amounts shown in the table above for the smokeable products segment were recorded by PM USA as increases (reductions) to cost of sales, which decreased (increased) operating companies income in the smokeable products segment.

▪Tobacco and Health Litigation Items: For the years ended December 31, 2016, 2015 and 2014, 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)	2016		2015		2014
Smokeable products segment	$	88	$	127	$	27
General corporate	—		—		15
Interest and other debt expense, net	17		23		2
Total	$	105	$	150	$	44

During 2016, PM USA recorded pre-tax charges of $88 million in marketing, administration and research costs, primarily related to settlements in the Miner and Aspinall cases totaling approximately $67 million, and $16 million related to a judgment in the Merino case. In addition, during 2016, PM USA recorded $17 million in interest costs primarily related to Aspinall. For further discussion, see Note 19. Contingencies.

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 19. 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 19. Contingencies.

▪Asset Impairment and Exit Costs: See Note 5. Asset Impairment, Exit and Implementation Costs for a breakdown of these costs by segment.