ý | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Virginia | 13-3260245 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
6601 West Broad Street, Richmond, Virginia | 23230 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | þ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | Smaller reporting company | ¨ | |||
Emerging growth company | ¨ |
Page No. | ||||
PART I - | FINANCIAL INFORMATION | |||
Item 1. | Financial Statements (Unaudited) | |||
Item 2. | ||||
Item 3. | ||||
Item 4. | ||||
PART II - | OTHER INFORMATION | |||
Item 1. | ||||
Item 1A. | ||||
Item 2. | ||||
Item 6. | ||||
Signature |
March 31, 2019 | December 31, 2018 | |||||||
Assets | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Receivables | ||||||||
Inventories: | ||||||||
Leaf tobacco | ||||||||
Other raw materials | ||||||||
Work in process | ||||||||
Finished product | ||||||||
Income taxes | ||||||||
Other current assets | ||||||||
Total current assets | ||||||||
Property, plant and equipment, at cost | ||||||||
Less accumulated depreciation | ||||||||
Goodwill | ||||||||
Other intangible assets, net | ||||||||
Investments in equity securities | ||||||||
Other assets | ||||||||
Total Assets | $ | $ |
March 31, 2019 | December 31, 2018 | |||||||
Liabilities | ||||||||
Short-term borrowings | $ | $ | ||||||
Current portion of long-term debt | ||||||||
Accounts payable | ||||||||
Accrued liabilities: | ||||||||
Marketing | ||||||||
Settlement charges | ||||||||
Other | ||||||||
Dividends payable | ||||||||
Total current liabilities | ||||||||
Long-term debt | ||||||||
Deferred income taxes | ||||||||
Accrued pension costs | ||||||||
Accrued postretirement health care costs | ||||||||
Other liabilities | ||||||||
Total liabilities | ||||||||
Contingencies (Note 12) | ||||||||
Redeemable noncontrolling interest | ||||||||
Stockholders’ Equity | ||||||||
Common stock, par value $0.33 1/3 per share (2,805,961,317 shares issued) | ||||||||
Additional paid-in capital | ||||||||
Earnings reinvested in the business | ||||||||
Accumulated other comprehensive losses | ( | ) | ( | ) | ||||
Cost of repurchased stock (934,207,054 shares at March 31, 2019 and 931,903,722 shares at December 31, 2018) | ( | ) | ( | ) | ||||
Total stockholders’ equity attributable to Altria | ||||||||
Noncontrolling interests | ||||||||
Total stockholders’ equity | ||||||||
Total Liabilities and Stockholders’ Equity | $ | $ |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net revenues | $ | $ | ||||||
Cost of sales | ||||||||
Excise taxes on products | ||||||||
Gross profit | ||||||||
Marketing, administration and research costs | ||||||||
Asset impairment and exit costs | ||||||||
Operating income | ||||||||
Interest and other debt expense, net | ||||||||
Net periodic benefit income, excluding service cost | ( | ) | ( | ) | ||||
Earnings from equity investment in AB InBev | ( | ) | ( | ) | ||||
Loss on Cronos-related financial instruments | ||||||||
Loss on AB InBev/SABMiller business combination | ||||||||
Earnings before income taxes | ||||||||
Provision for income taxes | ||||||||
Net earnings | ||||||||
Net earnings attributable to noncontrolling interests | ( | ) | ( | ) | ||||
Net earnings attributable to Altria | $ | $ | ||||||
Per share data: | ||||||||
Basic and diluted earnings per share attributable to Altria | $ | $ |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Net earnings | $ | $ | ||||||
Other comprehensive earnings (losses), net of deferred income taxes: | ||||||||
Benefit plans | ||||||||
AB InBev | ( | ) | ( | ) | ||||
Other comprehensive losses, net of deferred income taxes | ( | ) | ( | ) | ||||
Comprehensive earnings | ||||||||
Comprehensive earnings attributable to noncontrolling interests | ( | ) | ( | ) | ||||
Comprehensive earnings attributable to Altria | $ | $ |
Attributable to Altria | ||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Earnings Reinvested in the Business | Accumulated Other Comprehensive Losses | Cost of Repurchased Stock | Non-controlling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||
Balances, December 31, 2018 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||
Net earnings (1) | — | — | — | — | — | |||||||||||||||||||||||
Other comprehensive losses, net of deferred income taxes | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||
Stock award activity | — | ( | ) | — | — | — | ( | ) | ||||||||||||||||||||
Cash dividends declared ($0.80 per share) | — | — | ( | ) | — | — | — | ( | ) | |||||||||||||||||||
Repurchases of common stock | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Balances, March 31, 2019 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
Attributable to Altria | ||||||||||||||||||||||||||||
Common Stock | Additional Paid-in Capital | Earnings Reinvested in the Business | Accumulated Other Comprehensive Losses | Cost of Repurchased Stock | Non-controlling Interests | Total Stockholders’ Equity | ||||||||||||||||||||||
Balances, December 31, 2017 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||||
Net earnings (1) | — | — | — | — | — | |||||||||||||||||||||||
Other comprehensive losses, net of deferred income taxes | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||
Stock award activity | — | ( | ) | — | — | — | ( | ) | ||||||||||||||||||||
Cash dividends declared ($0.70 per share) | — | — | ( | ) | — | — | — | ( | ) | |||||||||||||||||||
Repurchases of common stock | — | — | — | — | ( | ) | — | ( | ) | |||||||||||||||||||
Balances, March 31, 2018 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Cash Provided by (Used in) Operating Activities | ||||||||
Net earnings | $ | $ | ||||||
Adjustments to reconcile net earnings to operating cash flows: | ||||||||
Depreciation and amortization | ||||||||
Deferred income tax (benefit) provision | ( | ) | ||||||
Earnings from equity investment in AB InBev | ( | ) | ( | ) | ||||
Loss on AB InBev/SABMiller business combination | ||||||||
Loss on Cronos-related financial instruments | ||||||||
Asset impairment and exit costs, net of cash paid | ( | ) | ||||||
Cash effects of changes: | ||||||||
Receivables | ( | ) | ||||||
Inventories | ( | ) | ( | ) | ||||
Accounts payable | ( | ) | ( | ) | ||||
Income taxes | ||||||||
Accrued liabilities and other current assets | ( | ) | ( | ) | ||||
Accrued settlement charges | ||||||||
Pension plan contributions | ( | ) | ( | ) | ||||
Pension provisions and postretirement, net | ( | ) | ||||||
Other, net | ||||||||
Net cash provided by operating activities | ||||||||
Cash Used in Investing Activities | ||||||||
Capital expenditures | ( | ) | ( | ) | ||||
Investment in Cronos | ( | ) | ||||||
Other, net | ( | ) | ( | ) | ||||
Net cash used in investing activities | $ | ( | ) | $ | ( | ) |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
Cash Provided by (Used in) Financing Activities | ||||||||
Repayment of short-term borrowings | $ | ( | ) | $ | ||||
Long-term debt issued | ||||||||
Repurchases of common stock | ( | ) | ( | ) | ||||
Dividends paid on common stock | ( | ) | ( | ) | ||||
Other | ( | ) | ( | ) | ||||
Net cash provided by (used in) financing activities | ( | ) | ||||||
Cash, cash equivalents and restricted cash: | ||||||||
Increase | ||||||||
Balance at beginning of period | ||||||||
Balance at end of period | $ | $ | ||||||
The following table provides a reconciliation of cash, cash equivalents and restricted cash to the amounts reported on Altria’s condensed consolidated balance sheets: | ||||||||
At March 31, 2019 | At December 31, 2018 | |||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash included in other current assets (1) | ||||||||
Restricted cash included in other assets (1) | ||||||||
Cash, cash equivalents and restricted cash | $ | $ |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in millions, except per share data) | ||||||||
Total number of shares repurchased | ||||||||
Aggregate cost of shares repurchased | $ | $ | ||||||
Average price per share of shares repurchased | $ | $ |
For the Three Months Ended March 31, 2019 | For the Three Months Ended March 31, 2018 | ||||||||||||||||||||||
Asset Impairment and Exit Costs | Implementation Costs (1) | Total | Asset Impairment and Exit Costs | Implementation Costs (2) | Total | ||||||||||||||||||
(in millions) | |||||||||||||||||||||||
Smokeable products | $ | $ | $ | $ | $ | $ | |||||||||||||||||
Smokeless products | |||||||||||||||||||||||
All other | ( | ) | ( | ) | |||||||||||||||||||
General corporate | |||||||||||||||||||||||
Total | |||||||||||||||||||||||
Plus amounts included in net periodic benefit income, excluding service cost (3) | |||||||||||||||||||||||
Total | $ | $ | $ | $ | $ | $ |
For the Three Months Ended March 31, 2019 | |||
(in millions) | |||
Balances at December 31, 2018 | $ | ||
Charges | |||
Cash spent | ( | ) | |
Balances at March 31, 2019 | $ |
Carrying Amount | ||||||||
March 31, 2019 | December 31, 2018 | |||||||
(in millions) | ||||||||
AB InBev | $ | $ | ||||||
JUUL | ||||||||
Cronos (1) | ||||||||
Total | $ | $ |
▪ |
▪ | anti-dilution protections to purchase Cronos common shares to maintain its ownership percentage. Certain of the anti-dilution protections provide Altria the ability to purchase additional Cronos common shares at a per share exercise price of CAD $ |
▪ | a warrant providing Altria the ability to purchase up to an additional approximately |
▪ | $ |
▪ | $ |
▪ | $ |
▪ | $ |
March 31, 2019 | March 8, 2019 | March 31, 2019 | March 8, 2019 | |||||
Fixed-price Preemptive Rights | Warrant | |||||||
Expected life (1) | 2.27 years | 2.32 years | 3.94 years | 4 years | ||||
Expected volatility (2) | ||||||||
Risk-free interest rate (3)(4) | ||||||||
Expected dividend yield (5) |
(in millions) | ||||
Balance at December 31, 2018 | $ | |||
Investment in Fixed-price Preemptive Rights and warrant | ||||
Pre-tax losses recognized in net earnings | ( | ) | ||
Balance at March 31, 2019 | $ |
Fair Value of Assets | Fair Value of Liabilities | |||||||||||||||||
Balance Sheet Classification | March 31, 2019 | December 31, 2018 | Balance Sheet Classification | March 31, 2019 | December 31, 2018 | |||||||||||||
Derivatives designated as hedging instruments: | (in millions) | |||||||||||||||||
Foreign currency contracts | Other current assets | $ | $ | Other accrued liabilities | $ | $ | ||||||||||||
Foreign currency contracts | Other assets | Other liabilities | ||||||||||||||||
Total | $ | $ | $ | $ | ||||||||||||||
Derivatives not designated as hedging instruments: | ||||||||||||||||||
Cronos warrant | Investments in equity securities | $ | $ | |||||||||||||||
Fixed-price Preemptive Rights | Investments in equity securities | |||||||||||||||||
Total | $ | $ | ||||||||||||||||
Total derivatives | $ | $ | $ | $ |
Gain (Loss) Recognized in Accumulated Other Comprehensive Losses | Gain Recognized in Net Earnings (1) | |||||||||||||||
For the Three Months Ended March 31, | ||||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in millions) | ||||||||||||||||
Foreign currency contracts | $ | $ | ( | ) | $ | $ | ||||||||||
Foreign currency denominated debt | ||||||||||||||||
Total | $ | $ | ( | ) | $ | $ |
For the Three Months Ended March 31, | |||||||||||||||
Pension | Postretirement | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
(in millions) | |||||||||||||||
Service cost | $ | $ | $ | $ | |||||||||||
Interest cost | |||||||||||||||
Expected return on plan assets | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Amortization: | |||||||||||||||
Net loss | |||||||||||||||
Prior service cost (credit) | ( | ) | ( | ) | |||||||||||
Curtailment | |||||||||||||||
Net periodic benefit (income) cost | $ | ( | ) | $ | $ | $ |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in millions) | ||||||||
Net earnings attributable to Altria | $ | $ | ||||||
Less: Distributed and undistributed earnings attributable to share-based awards | ( | ) | ( | ) | ||||
Earnings for basic and diluted EPS | $ | $ | ||||||
Weighted-average shares for basic and diluted EPS |
For the Three Months Ended March 31, 2019 | |||||||||||||||||
Benefit Plans | AB InBev | Currency Translation Adjustments and Other | Accumulated Other Comprehensive Losses | ||||||||||||||
(in millions) | |||||||||||||||||
Balances, December 31, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Other comprehensive losses before reclassifications | ( | ) | ( | ) | |||||||||||||
Deferred income taxes | |||||||||||||||||
Other comprehensive losses before reclassifications, net of deferred income taxes | ( | ) | ( | ) | |||||||||||||
Amounts reclassified to net earnings | ( | ) | |||||||||||||||
Deferred income taxes | ( | ) | ( | ) | |||||||||||||
Amounts reclassified to net earnings, net of deferred income taxes | ( | ) | |||||||||||||||
Other comprehensive earnings (losses), net of deferred income taxes | ( | ) | (1 | ) | ( | ) | |||||||||||
Balances, March 31, 2019 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
For the Three Months Ended March 31, 2018 | |||||||||||||||||
Benefit Plans | AB InBev | Currency Translation Adjustments and Other | Accumulated Other Comprehensive Losses | ||||||||||||||
(in millions) | |||||||||||||||||
Balances, December 31, 2017 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Other comprehensive losses before reclassifications | ( | ) | ( | ) | |||||||||||||
Deferred income taxes | |||||||||||||||||
Other comprehensive losses before reclassifications, net of deferred income taxes | ( | ) | ( | ) | |||||||||||||
Amounts reclassified to net earnings | ( | ) | |||||||||||||||
Deferred income taxes | ( | ) | ( | ) | |||||||||||||
Amounts reclassified to net earnings, net of deferred income taxes | ( | ) | |||||||||||||||
Other comprehensive earnings (losses), net of deferred income taxes | ( | ) | (1 | ) | ( | ) | |||||||||||
Balances, March 31, 2018 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in millions) | ||||||||
Benefit Plans: (1) | ||||||||
Net loss | $ | $ | ||||||
Prior service cost/credit | ( | ) | ( | ) | ||||
AB InBev (2) | ( | ) | ( | ) | ||||
Pre-tax amounts reclassified from accumulated other comprehensive losses to net earnings | $ | $ |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in millions) | ||||||||
Net revenues: | ||||||||
Smokeable products | $ | $ | ||||||
Smokeless products | ||||||||
Wine | ||||||||
All other | ||||||||
Net revenues | $ | $ | ||||||
Earnings before income taxes: | ||||||||
Operating companies income (loss): | ||||||||
Smokeable products | $ | $ | ||||||
Smokeless products | ||||||||
Wine | ||||||||
All other | ( | ) | ( | ) | ||||
Amortization of intangibles | ( | ) | ( | ) | ||||
General corporate expenses | ( | ) | ( | ) | ||||
Corporate asset impairment and exit costs | ( | ) | ||||||
Operating income | ||||||||
Interest and other debt expense, net | ( | ) | ( | ) | ||||
Net periodic benefit income, excluding service cost | ||||||||
Earnings from equity investment in AB InBev | ||||||||
Loss on Cronos-related financial instruments | ( | ) | ||||||
Loss on AB InBev/SABMiller business combination | ( | ) | ||||||
Earnings before income taxes | $ | $ |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in millions) | ||||||||
Smokeable products segment | $ | $ | ||||||
Interest and other debt expense, net | ||||||||
Total | $ | $ |
▪ | $ |
▪ | $ |
▪ | $ |
▪ | $ |
▪ | $ |
▪ | $ |
▪ | $ |
▪ | € |
▪ | € |
▪ | € |
▪ | € |
▪ | tax benefits of $ |
• | tax benefits of $ |
• | tax expense of $ |
▪ | tax benefits of $ |
April 22, 2019 | April 23, 2018 | April 27, 2017 | |||
Individual Smoking and Health Cases (1) | |||||
Smoking and Health Class Actions and Aggregated Claims Litigation (2) | |||||
Health Care Cost Recovery Actions (3) | |||||
“Lights/Ultra Lights” Class Actions |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in millions) | ||||||||
Accrued liability for tobacco and health litigation items at beginning of period (1) | $ | $ | ||||||
Pre-tax charges for: | ||||||||
Tobacco and health litigation | ||||||||
Related interest costs | ||||||||
Payments (1) | ( | ) | ( | ) | ||||
Accrued liability for tobacco and health litigation items at end of period (1) | $ | $ |
Currently Pending Engle Cases with Accrued Liabilities (rounded to nearest $ million) | |||||||
Plaintiff | Verdict Date | Defendant(s) | Court | Compensatory Damages (All Defendants) | Punitive Damages (PM USA) | Appeal Status | Accrual(1) |
Berger (Cote) | September 2014 | PM USA | Federal Court - Middle District of Florida | $6 million | $21 million | The Eleventh Circuit Court of Appeals reinstated the punitive and compensatory damages awards and remanded the case to the district court. PM USA’s challenge to the punitive damages award in the district court is pending. | $6 million accrual in the fourth quarter of 2018 |
Other Currently Pending Engle Cases with Verdicts Against PM USA (rounded to nearest $ million) | ||||||
Plaintiff | Verdict Date | Defendant(s) | Court | Compensatory Damages(1) | Punitive Damages (PM USA) | Appeal Status |
McCall | March 2019 | PM USA | Broward | <$1 million (<$1 million PM USA) | <$1 million | New trial ordered on punitive damages. |
Neff | March 2019 | PM USA and R.J. Reynolds | Broward | $4 million | $2 million | Post-trial motions pending. |
Frogel | March 2019 | PM USA | Palm Beach | <$1 million (<$1 million PM USA) | $0 | Post-trial motions pending. |
Mahfuz | February 2019 | PM USA and R.J. Reynolds | Broward | $12 million | $10 million | Post-trial motions pending. |
Holliman | February 2019 | PM USA | Miami-Dade | $3 million | $0 | Post-trial motions pending. |
Other Currently Pending Engle Cases with Verdicts Against PM USA (rounded to nearest $ million) | ||||||
Plaintiff | Verdict Date | Defendant(s) | Court | Compensatory Damages(1) | Punitive Damages (PM USA) | Appeal Status |
Chadwell | September 2018 | PM USA | Miami-Dade | $2 million | $0 | Appeals by plaintiff and defendant to Third District Court of Appeal pending. |
Kaplan | July 2018 | PM USA and R.J. Reynolds | Broward | $2 million | $2 million | Appeals by plaintiff and defendants to Fourth District Court of Appeal pending. |
Landi | June 2018 | PM USA and R.J. Reynolds | Broward | $8 million | $5 million | Appeals by plaintiff and defendants to Fourth District Court of Appeal pending. |
Theis | May 2018 | PM USA and R.J. Reynolds | Sarasota | $7 million | $10 million | Defendants’ appeal to Second District Court of Appeal pending. |
Freeman | March 2018 | PM USA | Alachua | $4 million | $0 | Defendant’s appeal to First District Court of Appeal pending. |
Gloger | February 2018 | PM USA and R.J. Reynolds | Miami-Dade | $8 million | $5 million | Third District Court of Appeal reversed judgment and ordered a new trial; plaintiff’s motion for rehearing pending. |
Bryant | December 2017 | PM USA | Escambia | <$1 million | <$1 million | Defendant’s appeal to First District Court of Appeal pending. |
R. Douglas | November 2017 | PM USA | Duval | <$1 million | $0 | Awaiting entry of final judgment by the trial court. |
Wallace | October 2017 | PM USA and R.J. Reynolds | Brevard | $12 million | $16 million | Fifth District Court of Appeal affirmed trial court judgment. |
Sommers | April 2017 | PM USA | Miami-Dade | $1 million | $0 | New trial ordered on punitive damages; appeals by plaintiff and defendant to Third District Court of Appeal pending. |
Santoro | March 2017 | PM USA, R.J. Reynolds and Liggett Group | Broward | $2 million | $0 | Trial court set aside punitive damages award; appeals by plaintiff and defendants to Fourth District Court of Appeal pending. |
Cooper | September 2015 | PM USA and R.J. Reynolds | Broward | $5 million (<$1 million PM USA) | $0 | Fourth District Court of Appeal affirmed judgment and granted a new trial on punitive damages. |
McCoy | July 2015 | PM USA, R.J. Reynolds and Lorillard | Broward | $2 million (<$1 million PM USA) | $3 million | Fourth District Court of Appeal reversed judgment and ordered a new trial; plaintiff requested review by the Florida Supreme Court; case currently stayed. |
D. Brown | January 2015 | PM USA | Federal Court - Middle District of Florida | $8 million | $9 million | Appeal to U.S. Court of Appeals for the Eleventh Circuit pending. |
Kerrivan | October 2014 | PM USA and R.J. Reynolds | Federal Court - Middle District of Florida | $16 million | $16 million | Appeals by plaintiff and defendants to U.S. Court of Appeals for the Eleventh Circuit pending. |
Harris | July 2014 | PM USA, R.J. Reynolds and Lorillard | Federal Court - Middle District of Florida | $2 million (<$ 1 million PM USA) | $0 | Awaiting entry of amended final judgment applying comparative fault. |
Engle Cases Concluded Within Past 12 Months (rounded to nearest $ million) | ||||||
Plaintiff | Verdict Date | Defendant(s) | Court | Accrual Date | Payment Amount (if any) | Payment Date |
J. Brown | February 2017 | PM USA and R.J. Reynolds | Pinellas | First quarter of 2019 | $4 million | April 2019 |
L. Martin | May 2017 | PM USA | Miami-Dade | First quarter of 2019 | $2 million | April 2019 |
Danielson | November 2015 | PM USA | Escambia | First quarter of 2019 | $3 million | March 2019 |
S. Martin | November 2016 | PM USA and R.J. Reynolds | Broward | First quarter of 2019 | $5 million | March 2019 |
Searcy | April 2013 | PM USA and R.J. Reynolds | Federal Court - Middle District of Florida | Third quarter of 2018 | $2 million | March 2019 |
Boatright | November 2014 | PM USA and Liggett Group | Polk | Second quarter of 2018 | $42 million | March 2019 |
M. Brown | May 2015 | PM USA | Duval | Second quarter of 2018 | $8 million | March 2019 |
Jordan | August 2015 | PM USA | Duval | Second quarter of 2018 | $11 million | March 2019 |
Pardue | December 2016 | PM USA and R.J. Reynolds | Alachua | Second and Third quarters of 2018 | $11 million | March 2019 |
McKeever | February 2015 | PM USA | Broward | Fourth quarter of 2017 | $21 million | March 2019 |
Boulter | December 2018 | PM USA and R.J. Reynolds | Lee | Fourth quarter of 2018 | <$1 million | January 2019 |
Simon | September 2018 | PM USA and R.J. Reynolds | Broward | Fourth quarter of 2018 | <$1 million | October 2018 |
Perrotto | November 2014 | PM USA, R.J. Reynolds and Lorillard | Palm Beach | Third quarter of 2018 | $1 million | September 2018 |
Gore | March 2015 | PM USA and R.J. Reynolds | Indian River | First quarter of 2018 | $1 million | September 2018 |
Putney | April 2010 | PM USA, R.J. Reynolds and Liggett Group | Broward | Third quarter of 2018 | $5 million | September 2018 |
Sermons | July 2016 | PM USA and R.J. Reynolds | Duval | Third quarter of 2018 | <$1 million | August 2018 |
Tognoli | November 2015 | PM USA | Broward | Fourth quarter of 2017 | $1 million | May 2018 |
Howles | November 2016 | PM USA and R.J. Reynolds | Broward | First quarter of 2018 | $6 million | May 2018 |
Purdo | April 2016 | PM USA and R.J. Reynolds | Palm Beach | First quarter of 2018 | $10 million | May 2018 |
Griffin | June 2014 | PM USA | Federal Court - Middle District of Florida | Second quarter of 2017 | $1 million | May 2018 |
Ledoux | December 2015 | PM USA and R.J. Reynolds | Miami-Dade | Fourth quarter of 2017 | $20 million | May 2018 |
Burkhart | May 2014 | PM USA, R.J. Reynolds and Lorillard | Federal Court - Middle District of Florida | Second quarter of 2018 | $2 million | May 2018 |
Engle Cases Concluded Within Past 12 Months (rounded to nearest $ million) | ||||||
Plaintiff | Verdict Date | Defendant(s) | Court | Accrual Date | Payment Amount (if any) | Payment Date |
Barbose | November 2015 | PM USA and R.J. Reynolds | Pasco | Fourth quarter of 2017 | $12 million | May 2018 |
Allen | November 2014 | PM USA and R.J. Reynolds | Duval | First quarter of 2018 | $10 million | May 2018 |
Ahrens | February 2016 | PM USA and R.J. Reynolds | Pinellas | Fourth quarter of 2017 | $7 million | May 2018 |
▪ | 2003 NPM Adjustment. In September 2013, an arbitration panel issued rulings regarding the |
▪ | 2004 and Subsequent NPM Adjustments. PM USA has continued to pursue the NPM Adjustments for 2004 and subsequent years in multi-state arbitrations against the states that did not join either of the settlements discussed above. New Mexico is currently appealing a trial court ruling that the state must participate in the multi-state arbitration for 2004. The Montana state courts ruled that Montana may litigate its claims in state court, rather than participate in a multi-state arbitration and the PMs have agreed not to contest the applicability of the 2004 NPM Adjustment to Montana. |
▪ | defendants falsely denied, distorted and minimized the significant adverse health consequences of smoking; |
▪ | defendants hid from the public that cigarette smoking and nicotine are addictive; |
▪ | defendants falsely denied that they control the level of nicotine delivered to create and sustain addiction; |
▪ | defendants falsely marketed and promoted “low tar/light” cigarettes as less harmful than full-flavor cigarettes; |
▪ | defendants falsely denied that they intentionally marketed to youth; |
▪ | defendants publicly and falsely denied that ETS is hazardous to non-smokers; and |
▪ | defendants suppressed scientific research. |
▪ | its application to defendants’ subsidiaries; |
▪ | the prohibition on the use of express or implied health messages or health descriptors, but only to the extent of extraterritorial application; |
▪ | its point-of-sale display provisions; and |
▪ | its application to Brown & Williamson Holdings. |
▪ | the date, if any, on which PM USA consolidates with or merges into Altria or any successor; |
▪ | the date, if any, on which Altria 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’s long-term senior unsecured debt by Standard & Poor’s Ratings Services of A or higher. |
Altria | PM USA | Non- Guarantor Subsidiaries | Total Consolidating Adjustments | Consolidated | ||||||||||||||||
Assets | ||||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
Receivables | ||||||||||||||||||||
Inventories: | ||||||||||||||||||||
Leaf tobacco | ||||||||||||||||||||
Other raw materials | ||||||||||||||||||||
Work in process | ||||||||||||||||||||
Finished product | ||||||||||||||||||||
Due from Altria and subsidiaries | ( | ) | ||||||||||||||||||
Income taxes | ( | ) | ||||||||||||||||||
Other current assets | ||||||||||||||||||||
Total current assets | ( | ) | ||||||||||||||||||
Property, plant and equipment, at cost | ||||||||||||||||||||
Less accumulated depreciation | ||||||||||||||||||||
Goodwill | ||||||||||||||||||||
Other intangible assets, net | ||||||||||||||||||||
Investments in equity securities | ||||||||||||||||||||
Investment in consolidated subsidiaries | ( | ) | ||||||||||||||||||
Due from Altria and subsidiaries | ( | ) | ||||||||||||||||||
Other assets | ( | ) | ||||||||||||||||||
Total Assets | $ | $ | $ | $ | ( | ) | $ |
Altria | PM USA | Non- Guarantor Subsidiaries | Total Consolidating Adjustments | Consolidated | ||||||||||||||||
Liabilities | ||||||||||||||||||||
Current portion of long-term debt | $ | $ | $ | $ | $ | |||||||||||||||
Accounts payable | ||||||||||||||||||||
Accrued liabilities: | ||||||||||||||||||||
Marketing | ||||||||||||||||||||
Settlement charges | ||||||||||||||||||||
Other | ( | ) | ||||||||||||||||||
Dividends payable | ||||||||||||||||||||
Due to Altria and subsidiaries | ( | ) | ||||||||||||||||||
Total current liabilities | ( | ) | ||||||||||||||||||
Long-term debt | ||||||||||||||||||||
Deferred income taxes | ( | ) | ||||||||||||||||||
Accrued pension costs | ||||||||||||||||||||
Accrued postretirement health care costs | ||||||||||||||||||||
Due to Altria and subsidiaries | ( | ) | ||||||||||||||||||
Other liabilities | ||||||||||||||||||||
Total liabilities | ( | ) | ||||||||||||||||||
Contingencies | ||||||||||||||||||||
Redeemable noncontrolling interest | ||||||||||||||||||||
Stockholders’ Equity | ||||||||||||||||||||
Common stock | ( | ) | ||||||||||||||||||
Additional paid-in capital | ( | ) | ||||||||||||||||||
Earnings reinvested in the business | ( | ) | ||||||||||||||||||
Accumulated other comprehensive losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Cost of repurchased stock | ( | ) | ( | ) | ||||||||||||||||
Total stockholders’ equity attributable to Altria | ( | ) | ||||||||||||||||||
Noncontrolling interests | ||||||||||||||||||||
Total stockholders’ equity | ( | ) | ||||||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | $ | $ | $ | ( | ) | $ |
Altria | PM USA | Non- Guarantor Subsidiaries | Total Consolidating Adjustments | Consolidated | ||||||||||||||||
Assets | ||||||||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
Receivables | ||||||||||||||||||||
Inventories: | ||||||||||||||||||||
Leaf tobacco | ||||||||||||||||||||
Other raw materials | ||||||||||||||||||||
Work in process | ||||||||||||||||||||
Finished product | ||||||||||||||||||||
Due from Altria and subsidiaries | ( | ) | ||||||||||||||||||
Income taxes | ( | ) | ||||||||||||||||||
Other current assets | ||||||||||||||||||||
Total current assets | ( | ) | ||||||||||||||||||
Property, plant and equipment, at cost | ||||||||||||||||||||
Less accumulated depreciation | ||||||||||||||||||||
Goodwill | ||||||||||||||||||||
Other intangible assets, net | ||||||||||||||||||||
Investments in equity securities | ||||||||||||||||||||
Investment in consolidated subsidiaries | ( | ) | ||||||||||||||||||
Due from Altria and subsidiaries | ( | ) | ||||||||||||||||||
Other assets | ( | ) | ||||||||||||||||||
Total Assets | $ | $ | $ | $ | ( | ) | $ |
Altria | PM USA | Non- Guarantor Subsidiaries | Total Consolidating Adjustments | Consolidated | ||||||||||||||||
Liabilities | ||||||||||||||||||||
Short-term borrowings | $ | $ | $ | $ | $ | |||||||||||||||
Current portion of long-term debt | ||||||||||||||||||||
Accounts payable | ||||||||||||||||||||
Accrued liabilities: | ||||||||||||||||||||
Marketing | ||||||||||||||||||||
Settlement charges | ||||||||||||||||||||
Other | ( | ) | ||||||||||||||||||
Dividends payable | ||||||||||||||||||||
Due to Altria and subsidiaries | ( | ) | ||||||||||||||||||
Total current liabilities | ( | ) | ||||||||||||||||||
Long-term debt | ||||||||||||||||||||
Deferred income taxes | ( | ) | ||||||||||||||||||
Accrued pension costs | ||||||||||||||||||||
Accrued postretirement health care costs | ||||||||||||||||||||
Due to Altria and subsidiaries | ( | ) | ||||||||||||||||||
Other liabilities | ||||||||||||||||||||
Total liabilities | ( | ) | ||||||||||||||||||
Contingencies | ||||||||||||||||||||
Redeemable noncontrolling interest | ||||||||||||||||||||
Stockholders’ Equity | ||||||||||||||||||||
Common stock | ( | ) | ||||||||||||||||||
Additional paid-in capital | ( | ) | ||||||||||||||||||
Earnings reinvested in the business | ( | ) | ||||||||||||||||||
Accumulated other comprehensive losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Cost of repurchased stock | ( | ) | ( | ) | ||||||||||||||||
Total stockholders’ equity attributable to Altria | ( | ) | ||||||||||||||||||
Noncontrolling interests | ||||||||||||||||||||
Total stockholders’ equity | ( | ) | ||||||||||||||||||
Total Liabilities and Stockholders’ Equity | $ | $ | $ | $ | ( | ) | $ |
Altria | PM USA | Non- Guarantor Subsidiaries | Total Consolidating Adjustments | Consolidated | ||||||||||||||||
Net revenues | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Cost of sales | ( | ) | ||||||||||||||||||
Excise taxes on products | ||||||||||||||||||||
Gross profit | ||||||||||||||||||||
Marketing, administration and research costs | ||||||||||||||||||||
Asset impairment and exit costs | ||||||||||||||||||||
Operating (expense) income | ( | ) | ||||||||||||||||||
Interest and other debt expense (income), net | ( | ) | ||||||||||||||||||
Net periodic benefit cost (income), excluding service cost | ( | ) | ( | ) | ||||||||||||||||
Earnings from equity investment in AB InBev | ( | ) | ( | ) | ||||||||||||||||
Loss on Cronos-related financial instruments | ||||||||||||||||||||
(Loss) earnings before income taxes and equity earnings of subsidiaries | ( | ) | ||||||||||||||||||
(Benefit) provision for income taxes | ( | ) | ||||||||||||||||||
Equity earnings of subsidiaries | ( | ) | ||||||||||||||||||
Net earnings | ( | ) | ||||||||||||||||||
Net earnings attributable to noncontrolling interests | ( | ) | ( | ) | ||||||||||||||||
Net earnings attributable to Altria | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Net earnings | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Other comprehensive (losses) earnings, net of deferred income taxes | ( | ) | ( | ) | ( | ) | ||||||||||||||
Comprehensive earnings | ( | ) | ||||||||||||||||||
Comprehensive earnings attributable to noncontrolling interests | ( | ) | ( | ) | ||||||||||||||||
Comprehensive earnings attributable to Altria | $ | $ | $ | $ | ( | ) | $ |
Altria | PM USA | Non- Guarantor Subsidiaries | Total Consolidating Adjustments | Consolidated | ||||||||||||||||
Net revenues | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Cost of sales | ( | ) | ||||||||||||||||||
Excise taxes on products | ||||||||||||||||||||
Gross profit | ||||||||||||||||||||
Marketing, administration and research costs | ||||||||||||||||||||
Asset impairment and exit costs | ||||||||||||||||||||
Operating (expense) income | ( | ) | ||||||||||||||||||
Interest and other debt expense (income), net | ( | ) | ||||||||||||||||||
Net periodic benefit cost (income), excluding service cost | ( | ) | ( | ) | ( | ) | ||||||||||||||
Earnings from equity investment in AB InBev | ( | ) | ( | ) | ||||||||||||||||
Loss on AB InBev/SABMiller business combination | ||||||||||||||||||||
Earnings before income taxes and equity earnings of subsidiaries | ||||||||||||||||||||
(Benefit) provision for income taxes | ( | ) | ||||||||||||||||||
Equity earnings of subsidiaries | ( | ) | ||||||||||||||||||
Net earnings | ( | ) | ||||||||||||||||||
Net earnings attributable to noncontrolling interests | ( | ) | ( | ) | ||||||||||||||||
Net earnings attributable to Altria | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Net earnings | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Other comprehensive (losses) earnings, net of deferred income taxes | ( | ) | ( | ) | ( | ) | ||||||||||||||
Comprehensive earnings | ( | ) | ||||||||||||||||||
Comprehensive earnings attributable to noncontrolling interests | ( | ) | ( | ) | ||||||||||||||||
Comprehensive earnings attributable to Altria | $ | $ | $ | $ | ( | ) | $ |
Altria | PM USA | Non- Guarantor Subsidiaries | Total Consolidating Adjustments | Consolidated | ||||||||||||||||
Cash Provided by Operating Activities | ||||||||||||||||||||
Net cash provided by operating activities | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Cash Used in Investing Activities | ||||||||||||||||||||
Capital expenditures | ( | ) | ( | ) | ( | ) | ||||||||||||||
Investment in Cronos | ( | ) | ( | ) | ||||||||||||||||
Investment in consolidated subsidiaries | ( | ) | ||||||||||||||||||
Other, net | ( | ) | ( | ) | ( | ) | ||||||||||||||
Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||
Cash Provided by (Used in) Financing Activities | ||||||||||||||||||||
Repayment of short-term borrowings | ( | ) | ( | ) | ||||||||||||||||
Long-term debt issued | ||||||||||||||||||||
Repurchases of common stock | ( | ) | ( | ) | ||||||||||||||||
Dividends paid on common stock | ( | ) | ( | ) | ||||||||||||||||
Changes in amounts due to/from Altria and subsidiaries | ( | ) | ( | ) | ||||||||||||||||
Cash dividends paid to parent | ( | ) | ( | ) | ||||||||||||||||
Other | ( | ) | ( | ) | ( | ) | ||||||||||||||
Net cash provided by (used in) financing activities | ( | ) | ||||||||||||||||||
Cash, cash equivalents and restricted cash (1): | ||||||||||||||||||||
Increase (decrease) | ( | ) | ||||||||||||||||||
Balance at beginning of period | ||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | $ |
Altria | PM USA | Non- Guarantor Subsidiaries | Total Consolidating Adjustments | Consolidated | ||||||||||||||||
Cash Provided by Operating Activities | ||||||||||||||||||||
Net cash provided by operating activities | $ | $ | $ | $ | ( | ) | $ | |||||||||||||
Cash Provided by (Used in) Investing Activities | ||||||||||||||||||||
Capital expenditures | ( | ) | ( | ) | ( | ) | ||||||||||||||
Other | ( | ) | ( | ) | ||||||||||||||||
Net cash used in investing activities | ( | ) | ( | ) | ( | ) | ||||||||||||||
Cash Provided by (Used in) Financing Activities | ||||||||||||||||||||
Repurchases of common stock | ( | ) | ( | ) | ||||||||||||||||
Dividends paid on common stock | ( | ) | ( | ) | ||||||||||||||||
Changes in amounts due to/from Altria and subsidiaries | ( | ) | ||||||||||||||||||
Cash dividends paid to parent | ( | ) | ( | ) | ||||||||||||||||
Other | ( | ) | ( | ) | ( | ) | ||||||||||||||
Net cash provided by (used in) financing activities | ( | ) | ( | ) | ( | ) | ||||||||||||||
Cash, cash equivalents and restricted cash (1): | ||||||||||||||||||||
Increase (decrease) | ( | ) | ||||||||||||||||||
Balance at beginning of period | ||||||||||||||||||||
Balance at end of period | $ | $ | $ | $ | $ |
Standards | Description | Effective Date for Public Entity | Effect on Financial Statements |
ASU Nos. 2016-13 and 2018-19 Measurement of Credit Losses on Financial Instruments (Topic 326) | The guidance replaces the current incurred loss impairment methodology for recognizing credit losses for financial assets with a methodology that reflects the entity’s current estimate of all expected credit losses and requires consideration of a broader range of reasonable and supportable information for estimating credit losses. | The guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. | The adoption of this guidance is not expected to have a material impact on Altria’s consolidated financial statements. |
ASU No. 2018-15 Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (Subtopic 350-40) | The guidance aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). | The guidance is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period. | Altria is in the process of evaluating the impact of this guidance on its consolidated financial statements and related disclosures. |
Net Earnings | Diluted EPS | ||||||
(in millions, except per share data) | |||||||
For the three months ended March 31, 2018 | $ | 1,894 | $ | 1.00 | |||
2018 NPM Adjustment Items | (51 | ) | (0.03 | ) | |||
2018 Asset impairment, exit and implementation costs | 2 | — | |||||
2018 Tobacco and health litigation items | 20 | 0.01 | |||||
2018 AB InBev special items | (92 | ) | (0.04 | ) | |||
2018 Loss on AB InBev/SABMiller business combination | 26 | 0.01 | |||||
2018 Tax items | 1 | — | |||||
Subtotal 2018 special items | (94 | ) | (0.05 | ) | |||
2019 Asset impairment, exit, implementation and acquisition-related costs | (125 | ) | (0.06 | ) | |||
2019 Tobacco and health litigation items | (13 | ) | (0.01 | ) | |||
2019 AB InBev special items | (90 | ) | (0.05 | ) | |||
2019 Loss on Cronos-related financial instruments | (328 | ) | (0.17 | ) | |||
2019 Tax items | (19 | ) | (0.01 | ) | |||
Subtotal 2019 special items | (575 | ) | (0.30 | ) | |||
Fewer shares outstanding | — | 0.01 | |||||
Change in tax rate | (17 | ) | (0.01 | ) | |||
Operations | (88 | ) | (0.05 | ) | |||
For the three months ended March 31, 2019 | $ | 1,120 | $ | 0.60 | |||
▪ | higher interest and other debt expense, net due to debt incurred from the Cronos Group Inc. (“Cronos”) and JUUL Labs, Inc. (“JUUL”) transactions; and |
▪ | lower earnings from Altria’s equity investment in AB InBev; |
▪ | higher income from the smokeless products segment. |
Reconciliation of 2018 Reported Diluted EPS to 2018 Adjusted Diluted EPS | |||
2018 | |||
2018 Reported diluted EPS | $ | 3.68 | |
NPM Adjustment Items | (0.06 | ) | |
Asset impairment, exit, implementation and acquisition-related costs | 0.23 | ||
Tobacco and health litigation items | 0.05 | ||
AB InBev special items | (0.03 | ) | |
Loss on AB InBev/SABMiller business combination | 0.01 | ||
Tax items | 0.11 | ||
2018 Adjusted diluted EPS | $ | 3.99 |
Expense Excluded from 2019 Forecasted Adjusted Diluted EPS | |||
2019 | |||
Tobacco and health litigation items | $ | 0.01 | |
Asset impairment, exit, implementation and acquisition-related costs (1) | 0.08 | ||
AB InBev special items | 0.05 | ||
Loss on Cronos-related financial instruments | 0.17 | ||
Tax items (2) | 0.04 | ||
$ | 0.35 |
For the Three Months Ended March 31, | |||||||
2019 | 2018 | ||||||
(in millions) | |||||||
Net revenues: | |||||||
Smokeable products | $ | 4,935 | $ | 5,414 | |||
Smokeless products | 540 | 525 | |||||
Wine | 151 | 142 | |||||
All other | 2 | 27 | |||||
Net revenues | $ | 5,628 | $ | 6,108 | |||
Excise taxes on products: | |||||||
Smokeable products | $ | 1,203 | $ | 1,401 | |||
Smokeless products | 31 | 32 | |||||
Wine | 5 | 5 | |||||
Excise taxes on products | $ | 1,239 | $ | 1,438 | |||
Operating income: | |||||||
Operating companies income (loss): | |||||||
Smokeable products | $ | 1,932 | $ | 2,038 | |||
Smokeless products | 358 | 338 | |||||
Wine | 15 | 17 | |||||
All other | (12 | ) | (26 | ) | |||
Amortization of intangibles | (8 | ) | (5 | ) | |||
General corporate expenses | (46 | ) | (46 | ) | |||
Corporate asset impairment and exit costs | (1 | ) | — | ||||
Operating income | $ | 2,238 | $ | 2,316 |
▪ | NPM Adjustment Items: For a discussion of NPM Adjustment Items and a breakdown of these items by segment, see Health Care Cost Recovery Litigation - NPM Adjustment Disputes in Note 12 and NPM Adjustment Items in Note 9, respectively. |
▪ | Tobacco and Health Litigation Items: For a discussion of tobacco and health litigation items and a breakdown of these costs by segment, see Note 12 and Note 9, respectively. |
▪ | Asset Impairment, Exit, Implementation and Acquisition-Related Costs: Pre-tax asset impairment, exit, implementation and acquisition-related costs were $159 million and $3 million for the three months ended March 31, 2019 and 2018, respectively. |
▪ | AB InBev Special Items: Altria’s earnings from its equity investment in AB InBev for the three months ended March 31, 2019 included pre-tax charges of $114 million, consisting primarily of Altria’s share of AB InBev’s mark-to-market losses on AB InBev’s derivative financial instruments used to hedge certain share commitments. |
▪ | Loss on Cronos-Related Financial Instruments: For the three months ended March 31, 2019, Altria recognized a pre-tax unrealized loss of $394 million related to the warrant and certain anti-dilution protections (the “Fixed-price Preemptive Rights”) acquired in the Cronos transaction. Additionally, for the three months ended March 31, 2019, Altria recorded pre-tax losses of $31 million representing changes in the fair values of the forward contracts used to hedge Altria’s foreign currency exchange rate risk related to the Cronos transaction. For further discussion, see Note 5. Financial Instruments to the condensed consolidated financial statements in Item 1. |
▪ | Tax Items: Tax items for the three months ended March 31, 2019 were due primarily to tax expense of $21 million resulting from a partial reversal of the tax basis benefit associated with the deemed repatriation tax recorded in 2017 and tax expense of $11 million for a valuation allowance on foreign tax credit carryforwards that are not realizable, partially offset by tax benefits of $11 million related to the effective settlement in March 2019 of the Internal Revenue Service audit of Altria and its consolidated subsidiaries’ 2014-2015 tax years. |
▪ | pending and threatened litigation and bonding requirements; |
▪ | restrictions and requirements imposed by the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”), and restrictions and requirements (and related enforcement actions) that have been, and in the future will be, imposed by the FDA; |
▪ | actual and proposed excise tax increases, as well as changes in tax structures and tax stamping requirements; |
▪ | bans and restrictions on tobacco use imposed by governmental entities and private establishments and employers; |
▪ | other federal, state and local government actions, including: |
▪ | restrictions on the sale of tobacco products by certain retail establishments, the sale of certain tobacco products with certain characterizing flavors (such as menthol) and the sale of tobacco products in certain package sizes; |
▪ | additional restrictions on the advertising and promotion of tobacco products; |
▪ | other actual and proposed tobacco product legislation and regulation; and |
▪ | governmental investigations; |
▪ | the diminishing prevalence of cigarette smoking and increased efforts by tobacco control advocates and others (including retail establishments) to further restrict tobacco use; |
▪ | changes in adult tobacco consumer purchase behavior, which is influenced by various factors such as economic conditions, excise taxes and price gap relationships, may result in adult tobacco consumers switching to discount products or other lower priced tobacco products; |
▪ | the highly competitive nature of the tobacco categories in which our tobacco subsidiaries operate, including competitive disadvantages related to cigarette price increases attributable to the settlement of certain litigation; |
▪ | illicit trade in tobacco products; and |
▪ | potential adverse changes in prices, availability and quality of tobacco, other raw materials and component parts. |
▪ | imposes restrictions on the advertising, promotion, sale and distribution of tobacco products, including at retail; |
▪ | bans descriptors such as “light,” “mild” or “low” or similar descriptors when used as descriptors of modified risk unless expressly authorized by the FDA; |
▪ | requires extensive product disclosures to the FDA and may require public disclosures; |
▪ | prohibits any express or implied claims that a tobacco product is or may be less harmful than other tobacco products without FDA authorization; |
▪ | imposes reporting obligations relating to contraband activity and grants the FDA authority to impose recordkeeping and other obligations to address illicit trade in tobacco products; |
▪ | changes the language of the cigarette and smokeless tobacco product health warnings, enlarges their size and requires the development by the FDA of graphic warnings for cigarettes, establishes warning requirements for Other Tobacco Products and gives the FDA the authority to require new warnings for any type of tobacco products; |
▪ | authorizes the FDA to adopt product regulations and related actions, including imposing tobacco product standards that are appropriate for the protection of the public health (e.g., related to the use of menthol in cigarettes, flavors in cigars, nicotine yields and other constituents or ingredients) and imposing manufacturing standards for tobacco products (see FDA’s Comprehensive Regulatory Plan for Tobacco and Nicotine Regulation and FDA Regulatory Actions - Potential Product Standards below); |
▪ | establishes pre-market review pathways for new and modified tobacco products for the FDA to follow (see Pre-Market Review Pathways Including Substantial Equivalence below); and |
▪ | equips the FDA with a variety of investigatory and enforcement tools, including the authority to inspect tobacco product manufacturing and other facilities. |
▪ | issuance of advance notices of proposed rulemaking (“ANPRM”) seeking comments for potential future regulations establishing product standards for (i) nicotine in combustible cigarettes, (ii) flavors in tobacco products and (iii) e-vapor products (see FDA Regulatory Actions - Potential Product Standards below); |
▪ | extension of the timelines to submit applications for Other Tobacco Products that were on the market as of August 8, 2016, which the FDA extended in August 2017 (see FDA Regulatory Actions - Substantial Equivalence and Other New Product Processes/Pathways below); |
▪ | the FDA’s reconsideration of its approach to reviewing substantial equivalence reports for provisional products (see FDA Regulatory Actions - Substantial Equivalence and Other New Product Processes/Pathways below). As previously noted, a “provisional” product refers to cigarettes, cigarette tobacco and smokeless tobacco products modified or first commercially available after February 15, 2007 and before March 22, 2011; and |
▪ | the FDA’s planned issuance of foundational regulations identifying the information the FDA expects to be included in substantial equivalence reports and applications for “new tobacco products” and “modified risk tobacco products.” The FDA also plans to finalize guidance on how it intends to review new product applications for e-vapor products. |
▪ | revisiting its compliance policy regarding sales of flavored e-vapor products other than tobacco, mint and menthol by restricting sales to age-restricted, in-person locations and, if sold online, under heightened practices for age verification; |
▪ | proposing rulemaking for a product standard to ban menthol in combustible tobacco products, including cigarettes and cigars; |
▪ | revisiting the extended timeline to submit applications for flavored cigars that were on the market as of August 8, 2016; and |
▪ | proposing rulemaking for a product standard to ban flavors in all cigars. |
▪ | proposing a potential revision to its compliance policy for flavored e-vapor products (other than tobacco, mint and menthol flavors) that would move the deadline for filing pre-market applications from August 2022 to August 2021, and impose restrictions on sales of such tobacco products at in-person locations and online in order to reduce underage access; |
▪ | taking enforcement action against those that target underage users and/or promote underage use of e-vapor and similar tobacco products; and |
▪ | prioritizing enforcement action, beginning 30 days after issuance of final guidance, against flavored cigars (other than tobacco flavor) that either are not Grandfathered Products or have not received market authorization from the FDA to remain on the market. |
▪ | impact the consumer acceptability of tobacco products; |
▪ | delay, discontinue or prevent the sale or distribution of existing, new or modified tobacco products; |
▪ | limit adult tobacco consumer choices; |
▪ | impose restrictions on communications with adult tobacco consumers; |
▪ | create a competitive advantage or disadvantage for certain tobacco companies; |
▪ | impose additional manufacturing, labeling or packaging requirements; |
▪ | impose additional restrictions at retail; |
▪ | result in increased illicit trade in tobacco products; or |
▪ | otherwise significantly increase the cost of doing business. |
▪ | bans the use of color and graphics in cigarette and smokeless tobacco product labeling and advertising; |
▪ | prohibits the sale of cigarettes, smokeless tobacco and covered tobacco products to persons under the age of 18; |
▪ | restricts the use of non-tobacco trade and brand names on cigarettes and smokeless tobacco products; |
▪ | requires the sale of cigarettes and smokeless tobacco in direct, face-to-face transactions; |
▪ | prohibits sampling of cigarettes and covered tobacco products and prohibits sampling of smokeless tobacco products except in qualified adult-only facilities; |
▪ | prohibits the sale or distribution of items such as hats and tee shirts with cigarette or smokeless tobacco brands or logos; and |
▪ | prohibits cigarettes and smokeless tobacco brand name sponsorship of any athletic, musical, artistic or other social or cultural event, or any entry or team in any event. |
▪ | Nicotine and Flavors: Pursuant to the July 2017 Comprehensive Plan, in March 2018 the FDA issued an ANPRM on the following matters: |
▪ | Nicotine in cigarettes and potentially other combustible tobacco products: The potential public health benefits and any possible adverse effects of lowering nicotine in combustible cigarettes to non-addictive or minimally addictive levels through achievable product standards. Specifically, the FDA sought comments on the consequences of such a product standard, including (i) smokers compensating by smoking more cigarettes to obtain the same level of nicotine as with their current product and (ii) the illicit trade of cigarettes containing nicotine at levels higher than a non-addictive threshold that may be established by the FDA. The FDA also sought comments on whether a nicotine product standard should apply to other combustible tobacco products, including cigars. |
▪ | Flavors in all tobacco products: The role that flavors (including menthol) in tobacco products play in attracting youth and may play in helping some smokers switch to potentially less harmful forms of nicotine delivery. The FDA previously released its preliminary scientific evaluation on menthol, which states “that menthol cigarettes pose a public health risk above that seen with non-menthol cigarettes.” The FDA’s evaluation followed an earlier report to the FDA from TPSAC on the impact of the use of menthol in cigarettes on the public health and included a recommendation that the “[r]emoval of menthol cigarettes from the marketplace would benefit public health in the United States” and an observation that any ban on menthol cigarettes could lead to an increase in contraband cigarettes and other potential unintended consequences. As discussed above under FDA’s Comprehensive Regulatory Plan for Tobacco and Nicotine Regulation, in November 2018, the FDA indicated that it is considering proposing rulemaking for a product standard that would seek to ban menthol in combustible tobacco products, including cigarettes and cigars, and that it intends to propose a product standard that would ban characterizing flavors in all cigars. No future |
▪ | NNN in Smokeless Tobacco: In January 2017, the FDA proposed a product standard for N-nitrosonornicotine (“NNN”) levels in finished smokeless tobacco products. USSTC submitted comments to the FDA in July 2017. If the proposed rule as presently proposed were to become final and upheld in the courts, it could have a material adverse effect on the business, consolidated results of operations, cash flows or financial position of Altria and USSTC. |
For the Three Months Ended March 31, | ||||||||||||||||
Net Revenues | Operating Companies Income | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
(in millions) | ||||||||||||||||
Smokeable products | $ | 4,935 | $ | 5,414 | $ | 1,932 | $ | 2,038 | ||||||||
Smokeless products | 540 | 525 | 358 | 338 | ||||||||||||
Total smokeable and smokeless products | $ | 5,475 | $ | 5,939 | $ | 2,290 | $ | 2,376 |
Shipment Volume | ||||||||
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | Change | ||||||
(sticks in millions) | ||||||||
Cigarettes: | ||||||||
Marlboro | 20,467 | 23,653 | (13.5 | )% | ||||
Other premium | 1,165 | 1,409 | (17.3 | )% | ||||
Discount | 1,962 | 2,460 | (20.2 | )% | ||||
Total cigarettes | 23,594 | 27,522 | (14.3 | )% | ||||
Cigars: | ||||||||
Black & Mild | 380 | 375 | 1.3 | % | ||||
Other | 2 | 3 | (33.3 | )% | ||||
Total cigars | 382 | 378 | 1.1 | % | ||||
Total smokeable products | 23,976 | 27,900 | (14.1 | )% |
Retail Share | ||||||||
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | Percentage Point Change | ||||||
Cigarettes: | ||||||||
Marlboro | 43.1 | % | 43.3 | % | (0.2 | ) | ||
Other premium | 2.5 | 2.6 | (0.1 | ) | ||||
Discount | 4.2 | 4.6 | (0.4 | ) | ||||
Total cigarettes | 49.8 | % | 50.5 | % | (0.7 | ) |
▪ | Effective February 24, 2019, PM USA increased the list price on Marlboro and L&M by $0.11 per pack and Parliament and Virginia Slims by $0.16 per pack. In addition, PM USA increased the list price on all of its other cigarette brands by $0.31 per pack. |
▪ | Effective September 23, 2018, PM USA increased the list price on Marlboro and L&M by $0.10 per pack and Parliament and Virginia Slims by $0.15 per pack. In addition, PM USA increased the list price on all of its other cigarette brands by $0.50 per pack. |
▪ | Effective May 6, 2018, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.11 per five-pack. |
▪ | Effective March 25, 2018, PM USA increased the list price on all of its cigarette brands by $0.09 per pack. |
Shipment Volume | |||||||||
For the Three Months Ended March 31, | |||||||||
2019 | 2018 | Change | |||||||
(cans and packs in millions) | |||||||||
Copenhagen | 125.2 | 124.4 | 0.6 | % | |||||
Skoal | 50.3 | 55.0 | (8.5 | )% | |||||
Copenhagen and Skoal | 175.5 | 179.4 | (2.2 | )% | |||||
Other | 15.9 | 16.3 | (2.5 | )% | |||||
Total smokeless products | 191.4 | 195.7 | (2.2 | )% |
Retail Share | |||||||||
For the Three Months Ended March 31, | |||||||||
2019 | 2018 | Percentage Point Change | |||||||
Copenhagen | 35.0 | % | 34.3 | % | 0.7 | ||||
Skoal | 15.4 | 16.2 | (0.8 | ) | |||||
Copenhagen and Skoal | 50.4 | 50.5 | (0.1 | ) | |||||
Other | 3.5 | 3.3 | 0.2 | ||||||
Total smokeless products | 53.9 | % | 53.8 | % | 0.1 |
▪ | Effective November 20, 2018, USSTC increased the list price on its Skoal X-TRA products and select Copenhagen products by $0.17 per can. USSTC also increased the list price on its Husky brand and on the balance of its Copenhagen and Skoal products by $0.07 per can. In addition, USSTC decreased the price on its Red Seal brand by $0.08 per can. |
▪ | Effective June 5, 2018, USSTC increased the list price on all its brands by $0.07 per can. |
For the Three Months Ended March 31, | ||||||||
2019 | 2018 | |||||||
(in millions) | ||||||||
Net revenues | $ | 151 | $ | 142 | ||||
Operating companies income | $ | 15 | $ | 17 |
Short-term Debt | Long-term Debt | Outlook | |||
Moody’s Investors Service, Inc. (“Moody’s”) | P-2 | A3 | Negative | ||
Standard & Poor’s Ratings Services (“Standard & Poor’s”) | A-2 | BBB | Stable | ||
Fitch Ratings Ltd. | F2 | BBB | Stable |
▪ | promote brand equity successfully; |
▪ | anticipate and respond to new and evolving adult consumer preferences; |
▪ | develop, manufacture, market and distribute new and innovative products that appeal to adult consumers (including, where appropriate, through arrangements with, or investments in, third parties); |
▪ | improve productivity; and |
▪ | protect or enhance margins through cost savings and price increases. |
Period | Total Number of Shares Purchased (1) | Average Price Paid Per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||
January 1 - 31, 2019 | — | $ | — | — | $ | 345,671,297 | ||||||||
February 1 - 28, 2019 | 194,438 | $ | 48.84 | — | $ | 345,671,297 | ||||||||
March 1 - 31, 2019 | 2,678,885 | $ | 56.34 | 2,678,300 | $ | 194,780,598 | ||||||||
For the Quarter Ended March 31, 2019 | 2,873,323 | $ | 55.83 | 2,678,300 |
(1) | The total number of shares purchased includes (a) shares purchased under the January 2018 share repurchase program (which totaled 2,678,300 shares in March) and (b) shares withheld by Altria in an amount equal to the statutory withholding taxes for holders who vested in stock-based awards (which totaled 194,438 shares in February and 585 shares in March). |
10.1 |
10.2 |
10.3 |
10.4 |
31.1 |
31.2 |
32.1 |
32.2 |
99.1 |
99.2 |
Updated: February 2019 |
Updated: February 2019 | 2 |
Updated: February 2019 | 3 |
Updated: February 2019 | 4 |
Updated: February 2019 | 5 |
Updated: February 2019 | 6 |
Employee’s Name | Employee’s Signature | ||
Personnel Number | Date |
Updated: February 2019 | 7 |
/s/ W. HILDEBRANDT SURGNER, JR. | ||
By: | W. Hildebrandt Surgner, Jr. Corporate Secretary |
/s/ W. HILDEBRANDT SURGNER, JR. | ||
By: | W. Hildebrandt Surgner, Jr. Corporate Secretary |
1. | I have reviewed this quarterly report on Form 10-Q of Altria Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ HOWARD A. WILLARD III | |
Howard A. Willard III | |
Chairman and Chief Executive Officer |
1. | I have reviewed this quarterly report on Form 10-Q of Altria Group, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
/s/ WILLIAM F. GIFFORD, JR. | |
William F. Gifford, Jr. | |
Vice Chairman and Chief Financial Officer |
April | 2 |
May | 0 |
June | 2 |
April | 0 |
May | 0 |
June | 0 |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Apr. 15, 2019 |
|
Document And Entity Information [Abstract] | ||
Document type | 10-Q | |
Amendment Tag | false | |
Document period End Date | Mar. 31, 2019 | |
Document Fiscal Year Focus | 2019 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | mo | |
Entity Registrant Name | Altria Group, Inc. | |
Entity Central Index Key | 0000764180 | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Large Accelerated Filer | |
Emerging Growth Company | false | |
Entity Small Business | false | |
Entity Common Stock, Shares Outstanding (in shares) | 1,870,919,863 |
Condensed Consolidated Balance Sheets - USD ($) |
Mar. 31, 2019 |
Dec. 31, 2018 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Assets | ||||
Cash and cash equivalents | $ 3,352,000,000 | $ 1,333,000,000 | ||
Receivables | 158,000,000 | 142,000,000 | ||
Inventories: | ||||
Leaf tobacco | 930,000,000 | 940,000,000 | ||
Other raw materials | 190,000,000 | 186,000,000 | ||
Work in process | 651,000,000 | 647,000,000 | ||
Finished product | 585,000,000 | 558,000,000 | ||
Inventory, net | 2,356,000,000 | 2,331,000,000 | ||
Income taxes | 3,000,000 | 167,000,000 | ||
Other current assets | 393,000,000 | 326,000,000 | ||
Total current assets | 6,262,000,000 | 4,299,000,000 | ||
Property, plant and equipment, at cost | 4,917,000,000 | 4,950,000,000 | ||
Less accumulated depreciation | 2,995,000,000 | 3,012,000,000 | ||
Property, plant and equipment, net | 1,922,000,000 | 1,938,000,000 | ||
Goodwill | 5,196,000,000 | 5,196,000,000 | ||
Other intangible assets, net | 12,327,000,000 | 12,279,000,000 | ||
Investments in equity securities | 32,015,000,000 | 30,496,000,000 | ||
Other assets | 1,511,000,000 | 1,430,000,000 | ||
Total Assets | 59,233,000,000 | 55,638,000,000 | ||
Liabilities | ||||
Short-term borrowings | 0 | 12,704,000,000 | ||
Current portion of long-term debt | 2,144,000,000 | 1,144,000,000 | ||
Accounts payable | 205,000,000 | 399,000,000 | ||
Accrued liabilities: | ||||
Marketing | 490,000,000 | 586,000,000 | ||
Settlement charges | 4,367,000,000 | 3,454,000,000 | ||
Other | 1,412,000,000 | 1,403,000,000 | ||
Dividends payable | 1,501,000,000 | 1,503,000,000 | ||
Total current liabilities | 10,119,000,000 | 21,193,000,000 | ||
Long-term debt | 27,024,000,000 | 11,898,000,000 | ||
Deferred income taxes | 5,353,000,000 | 5,172,000,000 | ||
Accrued pension costs | 497,000,000 | 544,000,000 | ||
Accrued postretirement health care costs | 1,764,000,000 | 1,749,000,000 | ||
Other liabilities | 357,000,000 | 254,000,000 | ||
Total liabilities | 45,114,000,000 | 40,810,000,000 | ||
Contingencies (Note 12) | ||||
Redeemable noncontrolling interest | 38,000,000 | 39,000,000 | ||
Stockholders’ Equity | ||||
Common stock, par value $0.33 1/3 per share (2,805,961,317 shares issued) | 935,000,000 | 935,000,000 | ||
Additional paid-in capital | 5,943,000,000 | 5,961,000,000 | ||
Earnings reinvested in the business | 43,582,000,000 | 43,962,000,000 | ||
Accumulated other comprehensive losses | (2,717,000,000) | (2,547,000,000) | ||
Cost of repurchased stock (934,207,054 shares at March 31, 2019 and 931,903,722 shares at December 31, 2018) | (33,664,000,000) | (33,524,000,000) | ||
Total stockholders’ equity attributable to Altria | 14,079,000,000 | 14,787,000,000 | ||
Noncontrolling interests | 2,000,000 | 2,000,000 | ||
Total stockholders’ equity | 14,081,000,000 | 14,789,000,000 | $ 15,397,000,000 | $ 15,380,000,000 |
Total Liabilities and Stockholders’ Equity | $ 59,233,000,000 | $ 55,638,000,000 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Common stock, par value (usd per share) | $ 0.3333 | $ 0.3333 |
Common stock, shares issued (shares) | 2,805,961,317 | 2,805,961,317 |
Shares repurchased (shares) | 934,207,054 | 931,903,722 |
Condensed Consolidated Statements of Comprehensive Earnings - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Statement of Comprehensive Income [Abstract] | ||
Net earnings | $ 1,121 | $ 1,895 |
Other comprehensive earnings (losses), net of deferred income taxes: | ||
Benefit plans | 29 | 45 |
AB InBev | (199) | (75) |
Other comprehensive losses, net of deferred income taxes | (170) | (30) |
Comprehensive earnings | 951 | 1,865 |
Comprehensive earnings attributable to noncontrolling interests | (1) | (1) |
Comprehensive earnings attributable to Altria | $ 950 | $ 1,864 |
Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Millions |
Total |
Common Stock [Member] |
Additional Paid-in Capital [Member] |
Earnings Reinvested in the Business [Member] |
Accumulated Other Comprehensive Losses [Member] |
Cost of Repurchased Stock [Member] |
Non-controlling Interests [Member] |
|||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Beginning balance at Dec. 31, 2017 | $ 15,380 | $ 935 | $ 5,952 | $ 42,251 | $ (1,897) | $ (31,864) | $ 3 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net earnings | [1] | 1,894 | 1,894 | |||||||||
Other comprehensive losses, net of deferred income taxes | (30) | (30) | ||||||||||
Stock award activity | (5) | (14) | 9 | |||||||||
Cash dividends declared | (1,329) | (1,329) | ||||||||||
Repurchases of common stock | (513) | (513) | ||||||||||
Ending balance at Mar. 31, 2018 | 15,397 | 935 | 5,938 | 42,816 | (1,927) | (32,368) | 3 | |||||
Beginning balance at Dec. 31, 2018 | 14,789 | 935 | 5,961 | 43,962 | (2,547) | (33,524) | 2 | |||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||||
Net earnings | [2] | 1,120 | 1,120 | |||||||||
Other comprehensive losses, net of deferred income taxes | (170) | (170) | ||||||||||
Stock award activity | (7) | (18) | 11 | |||||||||
Cash dividends declared | (1,500) | (1,500) | ||||||||||
Repurchases of common stock | (151) | (151) | ||||||||||
Ending balance at Mar. 31, 2019 | $ 14,081 | $ 935 | $ 5,943 | $ 43,582 | $ (2,717) | $ (33,664) | $ 2 | |||||
|
Condensed Consolidated Statements of Stockholders' Equity (Parenthetical) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Statement of Stockholders' Equity [Abstract] | ||
Net earnings attributable to noncontrolling interests | $ 1 | $ 1 |
Dividends declared (usd per share) | $ 0.8 | $ 0.7 |
Background and Basis of Presentation |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Background and Basis of Presentation | Background and Basis of Presentation: Background At March 31, 2019, Altria Group, Inc.’s (“Altria”) wholly-owned subsidiaries included Philip Morris USA Inc. (“PM USA”), which is engaged in the manufacture and sale of cigarettes in the United States; John Middleton Co. (“Middleton”), which is engaged in the manufacture and sale of machine-made large cigars and pipe tobacco and is a wholly-owned subsidiary of PM USA; Sherman Group Holdings, LLC and its subsidiaries (“Nat Sherman”), which are engaged in the manufacture and sale of super premium cigarettes and the sale of premium cigars; UST LLC (“UST”), which through its wholly-owned subsidiaries, including U.S. Smokeless Tobacco Company LLC (“USSTC”) and Ste. Michelle Wine Estates Ltd. (“Ste. Michelle”), is engaged in the manufacture and sale of smokeless tobacco products and wine; and Philip Morris Capital Corporation (“PMCC”), which maintains a portfolio of finance assets, substantially all of which are leveraged leases. In December 2018, Altria announced the decision to refocus its innovative product efforts, which included the discontinuation of production and distribution of all e-vapor products by Nu Mark LLC (“Nu Mark”). Prior to that time, Nu Mark was engaged in the manufacture and sale of innovative tobacco products. Other Altria wholly-owned subsidiaries included Altria Group Distribution Company, which provides sales and distribution services to certain Altria operating subsidiaries, and Altria Client Services LLC, which provides various support services in areas such as legal, regulatory, consumer engagement, finance, human resources and external affairs to Altria and its subsidiaries. Altria’s access to the operating cash flows of its wholly-owned subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany loans by its subsidiaries. At March 31, 2019, Altria’s principal wholly-owned subsidiaries 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. At March 31, 2019, Altria had a 10.1% economic and voting interest of Anheuser-Busch InBev SA/NV (“AB InBev”), which Altria accounts for under the equity method of accounting using a one-quarter lag. Altria receives cash dividends on its interest in AB InBev and will continue to do so as long as AB InBev pays dividends. In December 2018, Altria, through a wholly-owned subsidiary, purchased shares of non-voting convertible common stock of JUUL Labs, Inc. (“JUUL”), the U.S. leader in e-vapor, representing a 35% economic interest for $12.8 billion. JUUL is engaged in the manufacture and sale of e-vapor products globally. If and when antitrust clearance is obtained, Altria’s non-voting shares will automatically convert to voting shares (“Share Conversion”). At March 31, 2019, Altria had a 35% economic interest in JUUL, which Altria accounts for as an investment in an equity security. Upon Share Conversion, Altria expects to account for its investment in JUUL under the equity method of accounting. Altria has agreed to non-competition obligations generally requiring that it participate in the e-vapor business only through JUUL as long as Altria is supplying JUUL services, which Altria is committed to doing for at least six years. On March 8, 2019, Altria, through a subsidiary, completed its acquisition of a 45% economic and voting interest in Cronos Group Inc. (“Cronos”), a global cannabinoid company headquartered in Toronto, Canada. At March 31, 2019, Altria had a 45% economic and voting interest in Cronos, which Altria accounts for under the equity method of accounting using a one-quarter lag. As a result of the one-quarter lag, no earnings/losses from Altria’s equity investment in Cronos were recorded for the quarter ended March 31, 2019. For further discussion of Altria’s investments in equity securities, see Note 4. Investments in Equity Securities. Share Repurchases In July 2015, Altria’s Board of Directors (the “Board of Directors”) authorized a $1.0 billion share repurchase program that it expanded to $3.0 billion in October 2016 and to $4.0 billion in July 2017 (as expanded, the “July 2015 share repurchase program”). In January 2018, Altria completed the July 2015 share repurchase program, under which it purchased a total of 58.7 million shares of its common stock at an average price of $68.15 per share. Following the completion of the July 2015 share repurchase program, the Board of Directors authorized a new $1.0 billion share repurchase program in January 2018 that it expanded to $2.0 billion in May 2018 (as expanded, the “January 2018 share repurchase program”). At March 31, 2019, Altria had $195 million remaining in the January 2018 share repurchase program. The timing of share repurchases under this program depends upon marketplace conditions and other factors, and the program remains subject to the discretion of the Board of Directors. Altria’s share repurchase activity was as follows:
Basis of Presentation The interim condensed consolidated financial statements of Altria are unaudited. It is the opinion of Altria’s management that all adjustments necessary for a fair statement of the interim results presented have been reflected in the interim condensed consolidated financial statements. All such adjustments were of a normal recurring nature. Net revenues and net earnings for any interim period are not necessarily indicative of results that may be expected for the entire year. These statements should be read in conjunction with the consolidated financial statements and related notes, which appear in Altria’s Annual Report on Form 10-K for the year ended December 31, 2018. On January 1, 2019, Altria adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) and all related ASU amendments (collectively “ASU No. 2016-02”), which requires entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. Altria has elected to apply the guidance retrospectively at the beginning of the period of adoption. As a result, comparative periods prior to adoption will continue to be presented in accordance with prior lease guidance, including disclosures. The impact of the adoption was not material to Altria’s consolidated financial statements. As a result of the adoption, Altria and its subsidiaries, as lessees, recorded right-of-use assets and lease liabilities of $179 million at January 1, 2019 for its leases, which were all operating leases. There was no cumulative effect adjustment to the opening balance of earnings reinvested in the business. Right-of-use assets and lease liabilities on Altria’s condensed consolidated balance sheet at March 31, 2019 were not materially different than the amounts recorded upon adoption of ASU No. 2016-02. Additionally, in accordance with ASU No. 2016-02, lessor accounting for leveraged leases that commenced before the January 1, 2019 adoption date of ASU No. 2016-02 is unchanged unless there is a change in the scope of, or the consideration for, such leases. As a result, adoption of ASU No. 2016-02 as it relates to PMCC’s leveraged leases had no impact on Altria’s financial statements at the adoption date. During the first three months of 2019, PMCC had no new leases nor any changes in the scope of or the consideration for its existing leveraged leases. |
Revenues from Contracts with Customers |
3 Months Ended |
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Mar. 31, 2019 | |
Revenue from Contract with Customer [Abstract] | |
Revenues from Contracts with Customers | Revenues from Contracts with Customers: Altria disaggregates net revenues based on product type. For further discussion, see Note 9. Segment Reporting. Altria’s businesses offer cash discounts to customers for prompt payment and calculate cash discounts as a percentage of the list price based on historical experience and agreed-upon payment terms. Altria’s businesses record an allowance for cash discounts, which is included as a contra-asset against receivables on Altria’s condensed consolidated balance sheets. There was no allowance for cash discounts at March 31, 2019 and December 31, 2018, and there were no differences between amounts recorded as an allowance for cash discounts and cash discounts subsequently given to customers. Altria’s businesses that receive payments in advance of product shipment record such payments as deferred revenue. These payments are included in other accrued liabilities on Altria’s condensed consolidated balance sheets until control of such products is obtained by the customer. Deferred revenue was $233 million and $288 million at March 31, 2019 and December 31, 2018, respectively. When cash is received in advance of product shipment, Altria’s businesses satisfy their performance obligations within three days of receiving payment. At March 31, 2019 and December 31, 2018, there were no differences between amounts recorded as deferred revenue and amounts subsequently recognized as revenue. Receivables, which primarily reflect sales of wine produced and/or distributed by Ste. Michelle, were $158 million and $142 million at March 31, 2019 and December 31, 2018, respectively. At March 31, 2019 and December 31, 2018, there were no expected differences between amounts recorded and subsequently received, and Altria’s businesses did not record an allowance for doubtful accounts against these receivables. Altria’s businesses record an allowance for returned goods, which is included in other accrued liabilities on Altria’s condensed consolidated balance sheets. While all of Altria’s tobacco operating companies sell tobacco products with dates relative to freshness as printed on product packaging, due to the limited shelf life of USSTC’s smokeless tobacco products it is USSTC’s policy to accept authorized sales returns from its customers for products that have passed such dates. Altria’s businesses record estimated sales returns, which are based principally on historical volume and return rates, as a reduction to revenues. Actual sales returns will differ from estimated sales returns to the extent actual results differ from estimated assumptions. Altria’s businesses reflect differences between actual and estimated sales returns in the period in which the actual amounts become known. These differences, if any, have not had a material impact on Altria’s condensed consolidated financial statements. All returned goods are destroyed upon return and not included in inventory. Consequently, Altria’s businesses do not record an asset for their right to recover goods from customers upon return. Sales incentives include variable payments related to goods sold by Altria’s businesses. Altria’s businesses include estimates of variable consideration as a reduction to revenues upon shipment of goods to customers. The sales incentives that require significant estimates and judgments are as follows: Price promotion payments- Altria’s businesses make price promotion payments, substantially all of which are made to their retail partners, to incent the promotion of certain product offerings in select geographic areas. Wholesale and retail participation payments- Altria’s businesses make payments to their wholesale and retail partners to incent merchandising and sharing of sales data in accordance with each business’s trade agreements. |
Asset Impairment, Exit and Implmentation Costs |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asset Impairment, Exit and Implementation Costs | Asset Impairment, Exit and Implementation Costs: Pre-tax asset impairment, exit and implementation costs consisted of the following:
(1) Included in marketing, administration and research costs in Altria’s condensed consolidated statement of earnings. (2) Included in cost of sales in Altria’s condensed consolidated statements of earnings. (3) Represents curtailment costs. See Note 6. Benefit Plans. The 2019 pre-tax asset impairment, exit and implementation costs are related to the cost reduction program discussed below. The movement in the restructuring liabilities, substantially all of which are severance liabilities, was as follows:
Cost Reduction Program In December 2018, Altria announced a cost reduction program that includes, among other things, reducing third-party spending and workforce reductions across the businesses. As a result of the cost reduction program, Altria expects to record total pre-tax restructuring charges of approximately $210 million. Of this amount, Altria incurred pre-tax charges of $121 million in 2018 and expects to record the remainder in 2019. The total estimated charges, substantially all of which will result in cash expenditures, relate primarily to employee separation costs of approximately $180 million and other costs of approximately $30 million. Total pre-tax charges incurred since the inception of this cost reduction program were $182 million. Cash payments related to this cost reduction program of $22 million were made during the three months ended March 31, 2019. There were no cash payments related to this program in 2018.
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Investments in Equity Securities |
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Mar. 31, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investments in Equity Securities | Investments in Equity Securities: Altria’s investments consisted of the following:
(1) Includes investment in Acquired Common Shares ($397 million), the Cronos warrant ($949 million) and the Fixed-price Preemptive Rights ($393 million) as discussed further below. Investment in AB InBev At March 31, 2019, Altria had a 10.1% economic and voting interest of AB InBev, consisting of 185 million restricted shares of AB InBev (the “Restricted Shares”) and 12 million ordinary shares of AB InBev. Altria accounts for its investment in AB InBev under the equity method of accounting because Altria has the ability to exercise significant influence over the operating and financial policies of AB InBev, including having active representation on AB InBev’s Board of Directors (“AB InBev Board”) and certain AB InBev Board committees. Through this representation, Altria participates in AB InBev policy making processes. At December 31, 2018, AB InBev had derivative financial instruments used to hedge the share price related to 92.4 million of its share commitments. AB InBev’s share price in Euros at March 31, 2019 and December 31, 2018 was €74.76 and €57.70, respectively. Consistent with the one-quarter lag for reporting AB InBev’s results in Altria’s financial results, Altria will record its share of AB InBev’s first quarter 2019 mark-to-market gains associated with these derivative financial instruments in the second quarter of 2019. Altria reviews its investment in AB InBev for impairment by comparing the fair value of its investment to its carrying value. If the carrying value of Altria’s investment exceeds its fair value and the loss in value is other than temporary, the investment is considered impaired and impairment is recognized in the period identified. The factors used to make this determination include the duration and magnitude of the fair value decline, AB InBev’s financial condition and near-term prospects, and Altria’s intent and ability to hold its investment in AB InBev until recovery. The fair value of Altria’s equity investment in AB InBev is based on: (i) unadjusted quoted prices in active markets for AB InBev’s ordinary shares and was classified in Level 1 of the fair value hierarchy and (ii) observable inputs other than Level 1 prices, such as quoted prices for similar assets for the Restricted Shares, and was classified in Level 2 of the fair value hierarchy. Altria may, in certain instances, pledge or otherwise grant a security interest in all or part of its Restricted Shares. In the event the pledgee or security interest holder forecloses on the Restricted Shares, the relevant Restricted Shares will be automatically converted, one-for-one, into ordinary shares. Therefore, the fair value of each Restricted Share is based on the value of an ordinary share. In December 2018, Altria, through a wholly-owned subsidiary, purchased shares of JUUL’s non-voting Class C-1 Common Stock for an aggregate price of $12.8 billion, which will convert automatically to shares of voting Class C Common Stock upon antitrust clearance, and a security convertible into additional shares of Class C-1 Common Stock or Class C Common Stock, as applicable, for no additional payment upon settlement or exercise of certain JUUL convertible securities (the “JUUL Transaction”). At March 31, 2019, Altria owned 35% of the issued and outstanding capital stock of JUUL. Upon Share Conversion, Altria will possess 35% of JUUL’s outstanding voting power, except to the extent that Altria’s percentage ownership has decreased, and have the right to designate one-third of the members of the JUUL Board of Directors, subject to proportionate downward adjustment if Altria’s percentage ownership falls below 30%. Altria received a broad preemptive right to purchase JUUL shares to maintain its ownership percentage and is subject to a standstill restriction under which it may not acquire additional JUUL shares above its 35% interest. Furthermore, Altria agreed not to sell or transfer any of its JUUL shares for six years from December 20, 2018. On March 8, 2019, Altria, through a subsidiary, completed its acquisition of:
The total purchase price for the Acquired Common Shares, Fixed-price Preemptive Rights and warrant (collectively, “Investment in Cronos”) was CAD $2.4 billion (USD $1.8 billion). Upon full exercise of the Fixed-price Preemptive Rights, to the extent such rights become available, and the warrant, Altria would own a maximum of 55% of the outstanding common shares of Cronos. In accounting for the acquisition of these assets as of the date of closing, the Fixed-price Preemptive Rights and warrant were recorded at each of their fair values using Black-Scholes option-pricing models, based on the assumptions described in Note 5. Financial Instruments. In addition, a deferred tax liability related to the Fixed-price Preemptive Rights and warrant was recorded. The residual of the purchase price was allocated to the Acquired Common Shares. Accordingly, the CAD $2.4 billion (USD $1.8 billion) purchase price was recorded in USD as follows:
For a discussion of derivatives related to Altria’s Investment in Cronos, including Altria’s accounting for changes in the fair value of these derivatives, see Note 5. Financial Instruments. At March 31, 2019, Altria had a 45% economic and voting interest in Cronos, which Altria accounts for under the equity method of accounting. Altria reports its share of Cronos’s results using a one-quarter lag because Cronos’s results are not available in time for Altria to record them in the concurrent period. As a result of the one-quarter lag, no earnings/losses from Altria’s equity investment in Cronos were recorded for the quarter ended March 31, 2019. |
Financial Instruments |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments | Financial Instruments: Altria enters into derivative financial instruments to mitigate the potential impact of certain market risks, including foreign currency exchange rate risk. Altria uses various types of derivative financial instruments, including forward contracts, options and swaps. Altria does not enter into or hold derivative financial instruments for trading or speculative purposes. Altria’s investment in AB InBev, whose functional currency is the Euro, exposes Altria to foreign currency exchange risk on the carrying value of its investment. To manage this risk, Altria designates certain foreign exchange contracts, including cross-currency swap contracts and forward contracts (collectively “foreign currency contracts”), and Euro denominated notes (“foreign currency denominated debt”) as net investment hedges of Altria’s investment in AB InBev. At March 31, 2019 and December 31, 2018, Altria had foreign currency contracts with aggregate notional amounts of $1,226 million. At March 31, 2019, Altria had foreign currency denominated debt with an aggregate fair value and carrying value of $4,851 million and $4,740 million, respectively. At December 31, 2018, Altria had no foreign currency denominated debt. Altria’s estimates of the fair values of its foreign currency contracts are determined using valuation models with significant inputs that are readily available in public markets, or can be derived from observable market transactions, and therefore are classified in Level 2 of the fair value hierarchy. An adjustment for credit risk and nonperformance risk is included in the fair values of foreign currency contracts. See Note 10. Debt for a discussion of the fair value hierarchy related to Altria’s debt. Altria’s Fixed-price Preemptive Rights and warrant related to its investment in Cronos, which is further discussed in Note 4. Investments in Equity Securities, are derivative financial instruments, which are required to be recorded at fair value. The fair values of the Fixed-price Preemptive Rights and warrant are estimated using Black-Scholes option-pricing models, adjusted for unobservable inputs, including probability factors and weighting of expected life, volatility levels and risk-free interest rates (which are classified in Level 3 of the fair value hierarchy) based on the following assumptions at:
(1) Based on the weighted-average remaining expected life of the Fixed-price Preemptive Rights (with a range from 1.75 years to 7 years) and the March 8, 2023 expiration date of the warrant. (2) Based on a blend of historical volatility levels of the underlying equity security and peer companies. (3) Based on the implied yield currently available on Canadian Treasury zero coupon issues weighted for the remaining expected life of the Fixed-price Preemptive Rights. (4) Based on the implied yield currently available on Canadian Treasury zero coupon issues and the expected life of the warrant. (5) Based on Cronos’s expected dividend payments. The following table provides a reconciliation of the beginning and ending balance of the Fixed-price Preemptive Rights and warrant, which are classified in Level 3 of the fair value hierarchy:
Altria elects to record the gross assets and liabilities of derivative financial instruments executed with the same counterparty on its condensed consolidated balance sheets. The fair values of Altria’s derivative financial instruments on a gross basis included on the condensed consolidated balance sheets were as follows:
Altria records changes in the fair values of the Fixed-price Preemptive Rights and warrant as gains or losses in the periods in which the changes occur. For the three months ended March 31, 2019, Altria recognized pre-tax unrealized losses of $132 million and $262 million, representing the changes in the fair values of the Fixed-price Preemptive Rights and warrant, respectively, which were recorded in loss on Cronos-related financial instruments in Altria’s condensed consolidated statement of earnings. In January and February 2019, Altria entered into derivative financial instruments in the form of forward contracts, which were settled on March 7, 2019, to hedge Altria’s exposure to CAD to USD foreign currency exchange rate movements, in relation to the CAD $2.4 billion purchase price for the Cronos transaction. The aggregate notional amounts of the forward contracts were USD $1.8 billion (CAD $2.4 billion). The forward contracts did not qualify for hedge accounting; therefore, for the three months ended March 31, 2019, pre-tax losses of USD $31 million representing changes in the fair values of the forward contracts were recorded in loss on Cronos-related financial instruments in Altria’s condensed consolidated statement of earnings. Counterparties to Altria’s foreign currency contracts are domestic and international financial institutions. Altria is exposed to potential losses due to non-performance by these counterparties. Altria manages its credit risk by entering into transactions with counterparties with investment grade credit ratings, limiting the amount of exposure Altria has with each counterparty, and monitoring the financial condition of each counterparty. No amounts of collateral were received or posted related to derivative assets and liabilities at March 31, 2019 and December 31, 2018. Net Investment Hedging The pre-tax effects of Altria’s net investment hedges on accumulated other comprehensive losses and the condensed consolidated statements of earnings were as follows:
(1) Related to amounts excluded from effectiveness testing. |
Benefit Plans |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Benefit Plans | Benefit Plans: Components of Net Periodic Benefit (Income) Cost Net periodic benefit (income) cost consisted of the following:
Curtailment costs shown in the table above were related to the cost reduction program discussed in Note 3. Asset Impairment, Exit and Implementation Costs. Employer Contributions |
Earnings Per Share |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Earnings Per Share: Basic and diluted earnings per share (“EPS”) were calculated using the following:
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Other Comprehensive Earnings/Losses |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Comprehensive Earnings/Losses | Other Comprehensive Earnings/Losses: The following tables set forth the changes in each component of accumulated other comprehensive losses, net of deferred income taxes, attributable to Altria:
(1) Amounts are included in net defined benefit plan costs. For further details, see Note 6. Benefit Plans. (2) Amounts are primarily included in earnings from equity investment in AB InBev.
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Segment Reporting |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting | Segment Reporting: The products of Altria’s subsidiaries include smokeable tobacco products, consisting of combustible cigarettes manufactured and sold by PM USA and Nat Sherman, machine-made large cigars and pipe tobacco manufactured and sold by Middleton and premium cigars sold by Nat Sherman; smokeless tobacco products, consisting of moist smokeless tobacco and snus products manufactured and sold by USSTC; and wine produced and/or distributed by Ste. Michelle. The products and services of these subsidiaries constitute Altria’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’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, net periodic benefit cost/income, excluding service cost, 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. Segment data were as follows:
The comparability of operating companies income for the reportable segments was affected by the following: Non-Participating Manufacturer (“NPM”) Adjustment Items - For the three months ended March 31, 2018, pre-tax income of $68 million for NPM adjustment items was recorded by PM USA as a reduction to cost of sales, which increased operating companies income in the smokeable products segment. NPM adjustment items result from the resolutions of certain disputes with states and territories related to the NPM adjustment provision under the 1998 Master Settlement Agreement (such dispute resolutions are referred to as “NPM Adjustment Items” and are more fully described in Health Care Cost Recovery Litigation - NPM Adjustment Disputes in Note 12. Contingencies). Tobacco and Health Litigation Items - Pre-tax charges related to certain tobacco and health litigation items were recorded in Altria’s condensed consolidated statements of earnings as follows:
The amounts shown in the table above for the smokeable products segment were recorded in marketing, administration and research costs. For further discussion, see Note 12. Contingencies. |
Debt |
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Mar. 31, 2019 | |||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||
Debt | Debt: Short-term Borrowings and Borrowing Arrangements At March 31, 2019, Altria had no short-term borrowings. At December 31, 2018, Altria had $12.7 billion of short-term borrowings, net of $96 million of debt issuance costs, under the term loan agreement discussed below. On December 20, 2018, Altria entered into a senior unsecured term loan agreement in connection with its investments in JUUL and Cronos (the “Term Loan Agreement”). At December 31, 2018, Altria had aggregate short-term borrowings under the Term Loan Agreement of $12.8 billion. Borrowings under the Term Loan Agreement were set to mature on December 19, 2019. In February 2019, Altria repaid all of the outstanding $12.8 billion of short-term borrowings under the Term Loan Agreement with net proceeds from the issuance of long-term senior unsecured notes. See Long-term Debt below. Upon repayment, the Term Loan Agreement terminated in accordance with its terms. In the first quarter of 2019, Altria recorded $96 million of pre-tax acquisition-related costs for the write-off of the debt issuance costs related to the Term Loan Agreement, which were recorded in interest and other debt expense, net in Altria’s condensed consolidated statement of earnings. At December 31, 2018, Altria’s estimate of the fair value of its short-term borrowings was derived from discounted future cash flows based on the contractual terms of the Term Loan Agreement and observable interest rates and was classified in Level 2 of the fair value hierarchy. The fair value of Altria’s short-term borrowings at December 31, 2018 approximated its carrying value. At December 31, 2018, accrued interest on short-term borrowings of $15 million was included in other accrued liabilities on Altria’s condensed consolidated balance sheet. Long-term Debt In February 2019, Altria issued USD denominated and Euro denominated long-term senior unsecured notes in the aggregate principal amounts of $11.5 billion and €4.25 billion, respectively (collectively, the “Notes”). Altria immediately converted the proceeds of the Euro denominated notes into USD of $4.8 billion. The net proceeds from the Euro notes and a portion of the net proceeds from the USD notes were used to repay in full the $12.8 billion of short-term borrowings under the Term Loan Agreement, which were incurred to fund Altria’s investment in JUUL. The remaining net proceeds from the USD notes were used to fund Altria’s investment in Cronos in the first quarter of 2019 and for other general corporate purposes. The Notes contain the following terms: USD denominated notes
Euro denominated notes
The Notes are Altria’s senior unsecured obligations and rank equally in right of payment with all of Altria’s existing and future senior unsecured indebtedness. Upon the occurrence of both (i) a change of control of Altria and (ii) the notes ceasing to be rated investment grade by each of Moody’s Investors Service, Inc., Standard & Poor’s Ratings Services and Fitch Ratings Ltd. within a specified time period, Altria will be required to make an offer to purchase the notes at a price equal to 101% of the aggregate principal amount of such notes, plus accrued and unpaid interest to the date of repurchase as and to the extent set forth in the terms of the Notes. Altria designated its Euro denominated notes as a net investment hedge of its investment in AB InBev. For further discussion, see Note 5. Financial Instruments. The obligations of Altria under the Notes are guaranteed by PM USA. For further discussion, see Note 13. Condensed Consolidating Financial Information. Altria’s estimate of the fair value of its debt is based on observable market information derived from a third-party pricing source and is classified in Level 2 of the fair value hierarchy. The aggregate fair value of Altria’s total long-term debt at March 31, 2019 and December 31, 2018, was $29.9 billion and $12.5 billion, respectively, as compared with its carrying value of $29.2 billion and $13.0 billion, respectively. |
Income Taxes |
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Mar. 31, 2019 | |||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||
Income Taxes | Income Taxes: The income tax rate of 26.1% for the three months ended March 31, 2019 increased 2.9 percentage points from the three months ended March 31, 2018. The increase was due primarily to the following:
partially offset by:
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Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Contingencies | Contingencies: Legal proceedings covering a wide range of matters are pending or threatened in various United States and foreign jurisdictions against Altria and its subsidiaries, including PM USA and UST and its subsidiaries, as well as their respective indemnitees. Various types of claims may be raised in these proceedings, including product liability, consumer protection, antitrust, tax, contraband shipments, patent infringement, employment matters, claims for contribution and claims of competitors, shareholders or distributors. Litigation is subject to uncertainty and it is possible that there could be adverse developments in pending or future cases. An unfavorable outcome or settlement of pending tobacco-related or other litigation could encourage the commencement of additional litigation. Damages claimed in some tobacco-related and other litigation are or can be significant and, in certain cases, have ranged in the billions of dollars. The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome. In certain cases, plaintiffs claim that defendants’ liability is joint and several. In such cases, Altria or its subsidiaries may face the risk that one or more co-defendants decline or otherwise fail to participate in the bonding required for an appeal or to pay their proportionate or jury-allocated share of a judgment. As a result, Altria or its subsidiaries under certain circumstances may have to pay more than their proportionate share of any bonding- or judgment-related amounts. Furthermore, in those cases where plaintiffs are successful, Altria or its subsidiaries may also be required to pay interest and attorneys’ fees. Although PM USA has historically been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from seeking to collect judgments while adverse verdicts have been appealed, there remains a risk that such relief may not be obtainable in all cases. This risk has been substantially reduced given that 47 states and Puerto Rico limit the dollar amount of bonds or require no bond at all. As discussed below, however, tobacco litigation plaintiffs have challenged the constitutionality of Florida’s bond cap statute in several cases and plaintiffs may challenge state bond cap statutes in other jurisdictions as well. Such challenges may include the applicability of state bond caps in federal court. States, including Florida, may also seek to repeal or alter bond cap statutes through legislation. Although Altria cannot predict the outcome of such challenges, it is possible that the consolidated results of operations, cash flows or financial position of Altria, or one or more of its subsidiaries, could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome of one or more such challenges. Altria and its subsidiaries record provisions in the condensed consolidated financial statements for pending litigation when they determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, except to the extent discussed elsewhere in this Note 12. Contingencies: (i) management has concluded that it is not probable that a loss has been incurred in any of the pending tobacco-related cases; (ii) management is unable to estimate the possible loss or range of loss that could result from an unfavorable outcome in any of the pending tobacco-related cases; and (iii) accordingly, management has not provided any amounts in the condensed consolidated financial statements for unfavorable outcomes, if any. Litigation defense costs are expensed as incurred. Altria and its subsidiaries have achieved substantial success in managing litigation. Nevertheless, litigation is subject to uncertainty and significant challenges remain. It is possible that the consolidated results of operations, cash flows or financial position of Altria, or one or more of its subsidiaries, could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. Altria and each of its subsidiaries named as a defendant believe, and each has been so advised by counsel handling the respective cases, that it has valid defenses to the litigation pending against it, as well as valid bases for appeal of adverse verdicts. Each of the companies has defended, and will continue to defend, vigorously against litigation challenges. However, Altria and its subsidiaries may enter into settlement discussions in particular cases if they believe it is in the best interests of Altria to do so. Overview of Altria and/or PM USA Tobacco-Related Litigation Types and Number of Cases Claims related to tobacco products generally fall within the following categories: (i) smoking and health cases alleging personal injury brought on behalf of individual plaintiffs; (ii) smoking and health cases primarily alleging personal injury or seeking court-supervised programs for ongoing medical monitoring and purporting to be brought on behalf of a class of individual plaintiffs, including cases in which the aggregated claims of a number of individual plaintiffs are to be tried in a single proceeding; (iii) health care cost recovery cases brought by governmental (both domestic and foreign) plaintiffs seeking reimbursement for health care expenditures allegedly caused by cigarette smoking and/or disgorgement of profits; (iv) class action suits alleging that the uses of the terms “Lights” and “Ultra Lights” constitute deceptive and unfair trade practices, common law or statutory fraud, unjust enrichment, breach of warranty or violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”); and (v) other tobacco-related litigation described below. Plaintiffs’ theories of recovery and the defenses raised in pending smoking and health, health care cost recovery and “Lights/Ultra Lights” cases are discussed below. The table below lists the number of certain tobacco-related cases pending in the United States against PM USA and, in some instances, Altria as of April 22, 2019, April 23, 2018 and April 27, 2017:
(1) Includes 29 cases filed in Massachusetts and 38 non-Engle cases filed in Florida. Does not include individual smoking and health cases brought by or on behalf of plaintiffs in Florida state and federal courts following the decertification of the Engle case (these Engle progeny cases are discussed below in Smoking and Health Litigation - Engle Class Action). Also does not include 1,490 cases brought by flight attendants seeking compensatory damages for personal injuries allegedly caused by exposure to environmental tobacco smoke (“ETS”). The flight attendants allege that they are members of an ETS smoking and health class action in Florida, which was settled in 1997 (Broin). The terms of the court-approved settlement in that case allowed class members to file individual lawsuits seeking compensatory damages, but prohibited them from seeking punitive damages. In March 2018, 923 of these cases were voluntarily dismissed without prejudice. (2) The 2017 pending cases include as one case the 30 civil actions that were to be tried in six consolidated trials in West Virginia (In re: Tobacco Litigation). PM USA was a defendant in nine of the 30 cases. The parties resolved these cases for an immaterial amount and in the second quarter of 2018, the court dismissed all 30 cases. (3) See Health Care Cost Recovery Litigation - Federal Government’s Lawsuit below. International Tobacco-Related Cases As of April 22, 2019, PM USA is a named defendant in 10 health care cost recovery actions in Canada, eight of which also name Altria as a defendant. PM USA and Altria are also named defendants in seven smoking and health class actions filed in various Canadian provinces. See Guarantees and Other Similar Matters below for a discussion of the Distribution Agreement between Altria and Philip Morris International Inc. (“PMI”) that provides for indemnities for certain liabilities concerning tobacco products. Tobacco-Related Cases Set for Trial As of April 22, 2019, 4 Engle progeny cases are set for trial through June 30, 2019. In addition, there are no individual smoking and health cases against PM USA set for trial during this period. Cases against other companies in the tobacco industry may also be scheduled for trial during this period. Trial dates are subject to change. Trial Results Since January 1999, excluding the Engle progeny cases (separately discussed below), verdicts have been returned in 65 smoking and health, “Lights/Ultra Lights” and health care cost recovery cases in which PM USA was a defendant. Verdicts in favor of PM USA and other defendants were returned in 43 of the 65 cases. These 43 cases were tried in Alaska (1), California (7), Connecticut (1), Florida (10), Louisiana (1), Massachusetts (3), Mississippi (1), Missouri (4), New Hampshire (1), New Jersey (1), New York (5), Ohio (2), Pennsylvania (1), Rhode Island (1), Tennessee (2) and West Virginia (2). A motion for a new trial was granted in one of the cases in Florida and in the case in Alaska. In the Alaska case (Hunter), the jury returned a verdict in favor of PM USA in April 2018 in the third trial of this case. In May 2018, plaintiff filed a motion for a new trial, which the court denied. Of the 22 non-Engle progeny cases in which verdicts were returned in favor of plaintiffs, 20 have reached final resolution. See Smoking and Health Litigation - Engle Progeny Trial Results below for a discussion of verdicts in state and federal Engle progeny cases involving PM USA as of April 22, 2019. Judgments Paid and Provisions for Tobacco and Health Litigation Items (Including Engle Progeny Litigation) After exhausting all appeals in those cases resulting in adverse verdicts associated with tobacco-related litigation, since October 2004, PM USA has paid in the aggregate judgments and settlements (including related costs and fees) totaling approximately $668 million and interest totaling approximately $211 million as of March 31, 2019. These amounts include payments for Engle progeny judgments (and related costs and fees) totaling approximately $276 million and interest totaling approximately $49 million. The changes in Altria’s accrued liability for tobacco and health litigation items, including related interest costs, for the periods specified below are as follows:
(1) Includes amounts related to the costs of implementing the corrective communications remedy related to the Federal Government’s Lawsuit discussed below. The accrued liability for tobacco and health litigation items, including related interest costs, was included in liabilities on Altria’s condensed consolidated balance sheets. Pre-tax charges for tobacco and health litigation were included in marketing, administration and research costs on Altria’s condensed consolidated statements of earnings. Pre-tax charges for related interest costs were included in interest and other debt expense, net on Altria’s condensed consolidated statements of earnings. Security for Judgments To obtain stays of judgments pending appeal, PM USA has posted various forms of security. As of March 31, 2019, PM USA has posted appeal bonds totaling approximately $103 million, which have been collateralized with restricted cash that are included in assets on the condensed consolidated balance sheet. Smoking and Health Litigation Overview Plaintiffs’ allegations of liability in smoking and health cases are based on various theories of recovery, including negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, nuisance, breach of express and implied warranties, breach of special duty, conspiracy, concert of action, violations of deceptive trade practice laws and consumer protection statutes, and claims under the federal and state anti-racketeering statutes. Plaintiffs in the smoking and health cases seek various forms of relief, including compensatory and punitive damages, treble/multiple damages and other statutory damages and penalties, creation of medical monitoring and smoking cessation funds, disgorgement of profits, and injunctive and equitable relief. Defenses raised in these cases include lack of proximate cause, assumption of the risk, comparative fault and/or contributory negligence, statutes of limitations and preemption by the Federal Cigarette Labeling and Advertising Act. Non-Engle Progeny Litigation Summarized below are the non-Engle progeny smoking and health cases pending during 2019 in which a verdict was returned in favor of plaintiff and against PM USA. Charts listing certain verdicts for plaintiffs in the Engle progeny cases can be found in Smoking and Health Litigation - Engle Progeny Trial Results below. Capone: In December 2018, a jury in a Florida state court returned a verdict in favor of plaintiff, awarding $225,000 in compensatory damages. In the first quarter of 2019, PM USA recorded a provision on its condensed consolidated balance sheet of approximately $325,000 for the judgment and related costs and paid this amount in April 2019, concluding this litigation. Gentile: In October 2017, a jury in a Florida state court returned a verdict in favor of plaintiff, awarding approximately $7.1 million in compensatory damages and allocating 75% of the fault to PM USA (an amount of approximately $5.3 million). In April 2018, the trial court entered final judgment in favor of plaintiff. In May 2018, PM USA filed a notice of appeal to the Florida Fourth District Court of Appeal. Federal Government’s Lawsuit: See Health Care Cost Recovery Litigation - Federal Government’s Lawsuit below for a discussion of the verdict and post-trial developments in the United States of America health care cost recovery case. Engle Class Action In July 2000, in the second phase of the Engle smoking and health class action in Florida, a jury returned a verdict assessing punitive damages totaling approximately $145 billion against various defendants, including $74 billion against PM USA. Following entry of judgment, PM USA appealed. In May 2003, the Florida Third District Court of Appeal reversed the judgment entered by the trial court and instructed the trial court to order the decertification of the class. Plaintiffs petitioned the Florida Supreme Court for further review. In July 2006, the Florida Supreme Court ordered that the punitive damages award be vacated, that the class approved by the trial court be decertified and that members of the decertified class could file individual actions against defendants within one year of issuance of the mandate. The court further declared the following Phase I findings are entitled to res judicata effect in such individual actions brought within one year of the issuance of the mandate: (i) that smoking causes various diseases; (ii) that nicotine in cigarettes is addictive; (iii) that defendants’ cigarettes were defective and unreasonably dangerous; (iv) that defendants concealed or omitted material information not otherwise known or available knowing that the material was false or misleading or failed to disclose a material fact concerning the health effects or addictive nature of smoking; (v) that defendants agreed to misrepresent information regarding the health effects or addictive nature of cigarettes with the intention of causing the public to rely on this information to their detriment; (vi) that defendants agreed to conceal or omit information regarding the health effects of cigarettes or their addictive nature with the intention that smokers would rely on the information to their detriment; (vii) that all defendants sold or supplied cigarettes that were defective; and (viii) that defendants were negligent. In August 2006, PM USA and plaintiffs sought rehearing from the Florida Supreme Court on parts of its July 2006 opinion. In December 2006, the Florida Supreme Court refused to revise its July 2006 ruling, except that it revised the set of Phase I findings entitled to res judicata effect by excluding finding (v) listed above (relating to agreement to misrepresent information), and added the finding that defendants sold or supplied cigarettes that, at the time of sale or supply, did not conform to the representations of fact made by defendants. In January 2007, the Florida Supreme Court issued the mandate from its revised opinion. In May 2007, defendants filed a petition for writ of certiorari with the United States Supreme Court, which was denied. In February 2008, the trial court decertified the class. Engle Progeny Cases The deadline for filing Engle progeny cases expired in January 2008. As of April 22, 2019, approximately 2,000 state court cases were pending against PM USA or Altria asserting individual claims by or on behalf of approximately 2,600 state court plaintiffs. Because of a number of factors, including, docketing delays, duplicated filings and overlapping dismissal orders, these numbers are estimates. While the Federal Engle Agreement (discussed below) resolved nearly all Engle progeny cases pending in federal court, as of April 22, 2019, approximately 4 cases were pending against PM USA in federal court representing the cases excluded from that agreement. Agreement to Resolve Federal Engle Progeny Cases In 2015, PM USA, R.J. Reynolds Tobacco Company (“R.J. Reynolds”) and Lorillard Tobacco Company (“Lorillard”) resolved approximately 415 pending federal Engle progeny cases (the “Federal Engle Agreement”). Federal cases that were in trial and those that previously reached final verdict were not included in the Federal Engle Agreement. Engle Progeny Trial Results As of April 22, 2019, 130 federal and state Engle progeny cases involving PM USA have resulted in verdicts since the Florida Supreme Court Engle decision. Seventy-three verdicts were returned in favor of plaintiffs and seven verdicts (Skolnick, Calloway, McCoy, Gloger, Duignan, Caprio and Oshinsky-Blacker) that were initially returned in favor of plaintiffs were reversed post-trial or on appeal and remain pending. Skolnick was remanded for a new trial on plaintiff’s concealment and conspiracy claims; Calloway was reversed and remanded for a new trial on an appellate finding that improper arguments by plaintiff’s counsel deprived defendants of a fair trial; McCoy and Gloger were reversed and remanded for a new trial on appellate findings that the trial court erred in admitting certain materials into evidence that deprived defendants of fair trials; Duignan was reversed and remanded for a new trial on an appellate finding that the trial judge erred in responding to a question from the jury during deliberations; Caprio was reversed post-trial after defendants agreed to voluntarily dismiss their appeal in exchange for a full retrial; and Oshinsky-Blacker was reversed post-trial based on plaintiff’s counsel’s improper arguments at trial. Forty-six verdicts were returned in favor of PM USA, of which 41 were state cases. In addition, there have been a number of mistrials, only some of which have resulted in new trials as of April 22, 2019. Four verdicts (Pearson, D. Cohen, Collar and Chacon) that were returned in favor of PM USA were subsequently reversed for new trials. Juries in two cases (Reider and Banks) returned zero damages verdicts in favor of PM USA. Juries in two other cases (Weingart and Hancock) returned verdicts against PM USA awarding no damages, but the trial court in each case decided to award the plaintiffs damages. One case, Pollari, resulted in a verdict in favor of PM USA following a retrial of an initial verdict returned in favor of plaintiff. Plaintiff has filed a motion for a new trial. The charts below list the verdicts and post-trial developments in certain Engle progeny cases in which verdicts were returned in favor of plaintiffs. The first chart lists such cases that are pending as of April 22, 2019 where PM USA has recorded a provision in its condensed consolidated financial statements because an unfavorable outcome is probable and the amount of the loss can be reasonably estimated; the second chart lists other such cases that are pending as of April 22, 2019 but where an unfavorable outcome is not probable and the amount of loss cannot be reasonably estimated; and the third chart lists other such cases that have concluded within the previous 12 months. Unless otherwise noted for a particular case, the jury’s award for compensatory damages will not be reduced by any finding of plaintiff’s comparative fault (see Engle Progeny Appellate Issues below for a discussion of the Florida Supreme Court’s decision in Schoeff). Further, the damages noted reflect adjustments based on post-trial or appellate rulings.
(1)Accrual amounts include interest and associated costs, if applicable. For cases with multiple defendants, if any, accrual amounts reflect the portion of compensatory damages PM USA believes it will have to pay if the case is ultimately decided in plaintiff’s favor after taking into account any portion potentially payable by the other defendant(s).
(1)PM USA’s portion of the compensatory damages award is noted parenthetically where the court has ruled that comparative fault applies.
Engle Progeny Appellate Issues In Douglas, an Engle progeny case against PM USA and R.J. Reynolds, in March 2012, the Florida Second District Court of Appeal issued a decision affirming the judgment of the trial court in favor of the plaintiff and upholding the use of the Engle jury findings with respect to strict liability claims but certified to the Florida Supreme Court the question of whether granting res judicata effect to the Engle jury findings violates defendants’ federal due process rights. In March 2013, the Florida Supreme Court affirmed the final judgment entered in favor of plaintiff upholding the use of the Engle jury findings with respect to strict liability and negligence claims. PM USA’s subsequent petition for writ of certiorari with the United States Supreme Court was unsuccessful. In Graham, an Engle progeny case against PM USA and R.J. Reynolds, in April 2015, the U.S. Court of Appeals for the Eleventh Circuit found in favor of defendants on the basis of federal preemption, reversing the trial court’s denial of judgment as a matter of law. Thereafter, plaintiff filed a petition for rehearing en banc, which the Eleventh Circuit granted in January 2016. In May 2017, the U.S. Court of Appeals for the Eleventh Circuit rejected defendants’ preemption and due process arguments and affirmed the final judgment entered in plaintiff’s favor. In September 2017, defendants filed a petition for writ of certiorari with the United States Supreme Court on due process and federal preemption grounds, which the court denied in January 2018. In January 2016, in Marotta, a case against R.J. Reynolds on appeal to the Florida Fourth District Court of Appeal, the court rejected R.J. Reynolds’s federal preemption defense, but noted the conflict with Graham and certified the preemption question to the Florida Supreme Court. In March 2016, the Florida Supreme Court accepted review of Marotta and in April 2017, affirmed the Fourth District Court of Appeal’s ruling on preemption. In Burkhart and Searcy, Engle progeny cases against PM USA and R.J. Reynolds, defendants argued that application of the Engle findings to the Engle progeny plaintiffs’ concealment and conspiracy claims violated defendants’ due process rights. In March 2018, in Burkhart, the Eleventh Circuit rejected defendants’ due process arguments and affirmed the final judgment entered in plaintiff’s favor. Defendants filed a motion for rehearing challenging that decision, which the Eleventh Circuit denied. In September 2018, in Searcy, the Eleventh Circuit also affirmed the judgment in plaintiff’s favor and in February 2019, the United States Supreme Court denied PM USA’s petition for writ of certiorari. In Soffer, an Engle progeny case against R.J. Reynolds, the Florida Supreme Court ruled in 2016 that Engle progeny plaintiffs can recover punitive damages in connection with all of their claims. Plaintiffs now generally seek punitive damages in connection with all of their claims in Engle progeny cases. In Schoeff, another Engle progeny case against R.J. Reynolds, the Florida Supreme Court ruled in 2016 that comparative fault does not reduce compensatory damages awards for intentional torts. Florida Bond Statute In June 2009, Florida amended its existing bond cap statute by adding a $200 million bond cap that applies to all state Engle progeny lawsuits in the aggregate and establishes individual bond caps for individual Engle progeny cases in amounts that vary depending on the number of judgments in effect at a given time. Plaintiffs in three state Engle progeny cases against R.J. Reynolds in Alachua County, Florida (Alexander, Townsend and Hall) and one case in Escambia County (Clay) challenged the constitutionality of the bond cap statute. The Florida Attorney General intervened in these cases in defense of the constitutionality of the statute. Trial court rulings were rendered in Clay, Alexander, Townsend and Hall, rejecting the plaintiffs’ bond cap statute challenges in those cases. The plaintiffs unsuccessfully appealed these rulings. In February 2016, in the Sikes case against R.J. Reynolds, the trial court held that Florida’s bond cap statute does not stay the execution of judgment after a case is final in the Florida judicial system and before the defendant files a petition for writ of certiorari with the United States Supreme Court. In April 2016, the District Court of Appeal held that the bond cap applies to the period between a Florida Supreme Court ruling and completion of United States Supreme Court writ of certiorari review. In April 2016, PM USA filed motions in the trial court in the R. Cohen and Kayton cases seeking confirmation that the stay on executing the judgment remains in effect through the completion of United States Supreme Court writ of certiorari review or until the time for moving for such review has expired, which the court granted. No federal court has yet addressed the constitutionality of the bond cap statute or the applicability of the bond cap to Engle progeny cases tried in federal court. From time to time, legislation has been presented to the Florida legislature that would repeal the 2009 appeal bond cap statute; however to date, no legislation repealing the statute has passed. Other Smoking and Health Class Actions Since the dismissal in May 1996 of a purported nationwide class action brought on behalf of allegedly addicted smokers, plaintiffs have filed numerous putative smoking and health class action suits in various state and federal courts. In general, these cases purport to be brought on behalf of residents of a particular state or states (although a few cases purport to be nationwide in scope) and raise addiction claims and, in many cases, claims of physical injury as well. Class certification has been denied or reversed by courts in 61 smoking and health class actions involving PM USA in Arkansas (1), California (1), Delaware (1), the District of Columbia (2), Florida (2), Illinois (3), Iowa (1), Kansas (1), Louisiana (1), Maryland (1), Michigan (1), Minnesota (1), Nevada (29), New Jersey (6), New York (2), Ohio (1), Oklahoma (1), Oregon (1), Pennsylvania (1), Puerto Rico (1), South Carolina (1), Texas (1) and Wisconsin (1). As of April 22, 2019, PM USA and Altria are named as defendants, along with other cigarette manufacturers, in seven class actions filed in the Canadian provinces of Alberta, Manitoba, Nova Scotia, Saskatchewan, British Columbia and Ontario. In Saskatchewan, British Columbia (two separate cases) and Ontario, plaintiffs seek class certification on behalf of individuals who suffer or have suffered from various diseases, including chronic obstructive pulmonary disease, emphysema, heart disease or cancer, after smoking defendants’ cigarettes. In the actions filed in Alberta, Manitoba and Nova Scotia, plaintiffs seek certification of classes of all individuals who smoked defendants’ cigarettes. In March 2019, these cases were stayed as a result of three Canadian tobacco manufacturers (none of which are related to Altria or its subsidiaries) seeking protection under Canada’s Companies’ Creditors Arrangement Act (which is similar to Chapter 11 bankruptcy in the U.S.). The companies entered into these proceedings following a Canadian appellate court upholding two smoking and health class action verdicts against those companies totaling approximately CAD $13 billion. See Guarantees and Other Similar Matters below for a discussion of the Distribution Agreement between Altria and PMI that provides for indemnities for certain liabilities concerning tobacco products. Health Care Cost Recovery Litigation Overview In the health care cost recovery litigation, governmental entities seek reimbursement of health care cost expenditures allegedly caused by tobacco products and, in some cases, of future expenditures and damages. Relief sought by some but not all plaintiffs includes punitive damages, multiple damages and other statutory damages and penalties, injunctions prohibiting alleged marketing and sales to minors, disclosure of research, disgorgement of profits, funding of anti-smoking programs, additional disclosure of nicotine yields, and payment of attorney and expert witness fees. Although there have been some decisions to the contrary, most judicial decisions in the United States have dismissed all or most health care cost recovery claims against cigarette manufacturers. Nine federal circuit courts of appeals and eight state appellate courts, relying primarily on grounds that plaintiffs’ claims were too remote, have ordered or affirmed dismissals of health care cost recovery actions. The United States Supreme Court has refused to consider plaintiffs’ appeals from the cases decided by five circuit courts of appeal. In addition to the cases brought in the United States, health care cost recovery actions have also been brought against tobacco industry participants, including PM USA and Altria in Israel (dismissed), the Marshall Islands (dismissed) and Canada (10 cases), and other entities have stated that they are considering filing such actions. In September 2005, in the first of several health care cost recovery cases filed in Canada, the Canadian Supreme Court ruled that legislation passed in British Columbia permitting the lawsuit is constitutional, and, as a result, the case, which had previously been dismissed by the trial court, was permitted to proceed. PM USA’s and other defendants’ challenge to the British Columbia court’s exercise of jurisdiction was rejected by the Court of Appeals of British Columbia and, in April 2007, the Supreme Court of Canada denied review of that decision. Since the beginning of 2008, the Canadian Provinces of British Columbia, New Brunswick, Ontario, Newfoundland and Labrador, Quebec, Alberta, Manitoba, Saskatchewan, Prince Edward Island and Nova Scotia have brought health care reimbursement claims against cigarette manufacturers. PM USA is named as a defendant in the British Columbia and Quebec cases, while both Altria and PM USA are named as defendants in the New Brunswick, Ontario, Newfoundland and Labrador, Alberta, Manitoba, Saskatchewan, Prince Edward Island and Nova Scotia cases. The Nunavut Territory and Northwest Territory have passed similar legislation. All of these cases have been stayed pending resolution of proceedings in Canada involving three tobacco manufacturers (none of which are affiliated with Altria or its subsidiaries). See Smoking and Health Litigation - Other Smoking and Health Class Actions above for a discussion of these proceedings. See Guarantees and Other Similar Matters below for a discussion of the Distribution Agreement between Altria and PMI that provides for indemnities for certain liabilities concerning tobacco products. Settlements of Health Care Cost Recovery Litigation In November 1998, PM USA and certain other tobacco product manufacturers entered into the 1998 Master Settlement Agreement (the “MSA”) with 46 states, the District of Columbia and certain U.S. territories to settle asserted and unasserted health care cost recovery and other claims. PM USA and certain other tobacco product manufacturers had previously entered into agreements to settle similar claims brought by Mississippi, Florida, Texas and Minnesota (together with the MSA, the “State Settlement Agreements”). The State Settlement Agreements require that the original participating manufacturers or “OPMs” (now PM USA and R.J. Reynolds and, with respect to certain brands, ITG Brands, LLC (“ITG”)) make annual payments of approximately $9.4 billion, subject to adjustments for several factors, including inflation, market share and industry volume. In addition, the OPMs are required to pay settling plaintiffs’ attorneys’ fees, subject to an annual cap of $500 million. For the three months ended March 31, 2019 and 2018, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $0.9 billion and $1.0 billion, respectively. These amounts include PM USA’s estimate of amounts related to NPM Adjustments discussed below. NPM Adjustment Disputes PM USA is participating in proceedings regarding the NPM Adjustment for 2003-2018. The “NPM Adjustment” is a reduction in MSA payments made by the OPMs and those manufacturers that are subsequent signatories to the MSA (collectively, the “participating manufacturers” or “PMs”) that applies if the PMs collectively lose at least a specified level of market share to non-participating manufacturers since 1997, subject to certain conditions and defenses. The independent auditor (the “IA”) appointed under the MSA calculates the maximum amount of the NPM Adjustment, if any, for each year. NPM Adjustment Disputes - Settlement with 36 States and Territories and Settlement with New York. PM USA has entered into two settlements of NPM Adjustment disputes with a total of 37 states and territories, one with 36 states and territories (the “multi-state settlement”) and the other with the State of New York. In the multi-state settlement, PM USA, by the end of October 2017, had settled the NPM Adjustment disputes for 2003-2015 with 26 states in exchange for a total of $740 million. In 2018, there were three principal developments with respect to this settlement. First, in the first quarter of 2018, PM USA settled the NPM Adjustment disputes for 2004-2017 with nine additional states. As a result of these additional nine states joining the multi-state settlement, PM USA will receive approximately $81 million for 2004-2017 ($13 million of which relates to the 2015-2017 “transition years”), $68 million of which it received in April 2018 and another $5 million of which it received in April 2019. In connection with this settlement, PM USA recorded a reduction to cost of sales in the amount of $81 million in the first quarter of 2018. Second, in the second quarter of 2018, Pennsylvania joined the multi-state settlement for 2004-2017. As a result, PM USA will receive approximately $90 million for 2004-2017 ($13 million of which relates to the 2015-2017 “transition years”), $77 million of which it received in April 2019. In connection with this settlement, PM USA recorded a reduction to cost of sales in the amount of $90 million in the second quarter of 2018. Third, in the second quarter of 2018, PM USA agreed to settle the NPM Adjustment disputes for 2016 and 2017 with the 26 states mentioned above. As a result, PM USA will receive approximately $77 million for 2016 and 2017, $39 million of which it received in April 2019. In connection with this settlement, PM USA recorded a reduction to cost of sales in the amount of $38 million for the 2017 NPM Adjustment in the second quarter of 2018, having previously recorded a reduction to cost of sales in the amount of $39 million for the 2016 NPM Adjustment in the third quarter of 2017 based on PM USA’s then best estimate regarding 2016. In the first quarter of 2019, PM USA recorded a reduction to cost of sales in the amount of $52 million for its estimate of the 2018 NPM Adjustment it expects to receive for the multi-state settlement. In the NPM Adjustment settlement with New York, which was entered into in 2015, PM USA has received approximately $265 million for 2004-2017. Both the New York settlement and the multi-state settlement also contain provisions resolving certain disputes regarding the application of the NPM Adjustment going forward, although the applicability of those provisions with respect to the signatory states that joined the multi-state settlement after 2017 is contingent on satisfaction, in the PMs’ sole discretion, of certain conditions. 2003 and Subsequent NPM Adjustments - Continuing Disputes with States that have not Settled.
The 2004 multi-state arbitration is currently proceeding with all of the states that have not settled other than Montana and New Mexico. Decisions are not expected until the middle of 2019 at the earliest. No assurance can be given as to when proceedings for 2005 and subsequent years will be scheduled or the precise form those proceedings will take. The IA has calculated that PM USA’s share of the maximum potential NPM Adjustments for 2004-2018 is (exclusive of interest or earnings): $388 million for 2004; $181 million for 2005; $154 million for 2006; $185 million for 2007; $250 million for 2008; $211 million for 2009; $218 million for 2010; $166 million for 2011; $214 million for 2012; $224 million for 2013; $258 million for 2014; $299 million for 2015; $292 million for 2016; $285 million for 2017 and $332 million for 2018. These maximum amounts will be reduced, likely substantially, to reflect the settlements with the signatory states and New York, and potentially for current and future calculation disputes and other developments. Finally, PM USA’s recovery of these amounts, even as reduced, is dependent upon subsequent determinations regarding state-specific defenses and disputes with other PMs. Other Disputes Under the State Settlement Agreements The payment obligations of the tobacco product manufacturers that are parties to the State Settlement Agreements, as well as the allocations of any NPM Adjustments and related settlements, have been and may continue to be affected by R.J. Reynolds’s acquisition of Lorillard and its related sale of certain cigarette brands to ITG (the “ITG brands”). In particular, R.J. Reynolds and ITG have asserted that they do not have to make payments on the ITG brands under the Florida, Minnesota and Texas State Settlement Agreements or include the ITG brands for purposes of certain calculations under the State Settlement Agreements. PM USA believes that R.J. Reynolds’s and ITG’s position violates the State Settlement Agreements and applicable law. PM USA further believes that these actions: (i) improperly increased PM USA’s payments for 2015-2018; (ii) may improperly increase PM USA’s payments for subsequent years; (iii) improperly decreased PM USA’s share of the 2015-2018 NPM Adjustments and of the settlements of related disputes; and (iv) may improperly decrease PM USA’s share of NPM Adjustments and related settlements for subsequent years. In January 2017, PM USA and the State of Florida each filed a motion in Florida state court against R.J. Reynolds and ITG seeking to enforce the Florida State Settlement Agreement. In August 2018, the Florida trial court entered final judgment ruling that R.J. Reynolds (and not ITG) must make settlement payments under the Florida State Settlement Agreement on the ITG brands, and ordering R.J. Reynolds to pay PM USA approximately $9.8 million (inclusive of interest) for the 2015-2017 period. R.J. Reynolds and PM USA have each filed notices of appeal of the trial court’s decision, which proceedings may result in further modifications to PM USA’s settlement payments under the Florida State Settlement Agreement. In March 2018, PM USA and the State of Minnesota filed pleadings in Minnesota state court asserting claims against R.J. Reynolds and ITG, similar to those made in Florida, and seeking to enforce the Minnesota State Settlement Agreement. In December 2018, PM USA filed a motion in Mississippi state court seeking to enforce the Mississippi State Settlement Agreement against R.J. Reynolds and ITG with respect to the accuracy of certain submissions made by R.J. Reynolds and ITG relating to payments on the ITG brands. In January 2019, PM USA and the State of Texas each filed a motion in federal court for the Eastern District of Texas against R.J. Reynolds and ITG seeking to enforce the Texas State Settlement Agreement. Federal Government’s Lawsuit In 1999, the United States government filed a lawsuit in the U.S. District Court for the District of Columbia against various cigarette manufacturers, including PM USA, and others, including Altria, asserting claims under three federal statutes. The case ultimately proceeded only under the civil provisions of RICO. In August 2006, the district court held that certain defendants, including Altria and PM USA, violated RICO and engaged in seven of the eight “sub-schemes” to defraud that the government had alleged. Specifically, the court found that:
The court did not impose monetary penalties on defendants, but ordered the following relief: (i) an injunction against “committing any act of racketeering” relating to the manufacturing, marketing, promotion, health consequences or sale of cigarettes in the United States; (ii) an injunction against participating directly or indirectly in the management or control of the Council for Tobacco Research, the Tobacco Institute, or the Center for Indoor Air Research, or any successor or affiliated entities of each; (iii) an injunction against “making, or causing to be made in any way, any material false, misleading, or deceptive statement or representation or engaging in any public relations or marketing endeavor that is disseminated to the United States public and that misrepresents or suppresses information concerning cigarettes;” (iv) an injunction against conveying any express or implied health message or health descriptors on cigarette packaging or in cigarette advertising or promotional material, including “lights,” “ultra lights” and “low tar,” which the court found could cause consumers to believe one cigarette brand is less hazardous than another brand; (v) the issuance of “corrective statements” in various media regarding the adverse health effects of smoking, the addictiveness of smoking and nicotine, the lack of any significant health benefit from smoking “low tar” or “light” cigarettes, defendants’ manipulation of cigarette design to ensure optimum nicotine delivery and the adverse health effects of exposure to ETS; (vi) the disclosure on defendants’ public document websites and in the Minnesota document repository of all documents produced to the government in the lawsuit or produced in any future court or administrative action concerning smoking and health until 2021, with certain additional requirements as to documents withheld from production under a claim of privilege or confidentiality; (vii) the disclosure of disaggregated marketing data to the government in the same form and on the same schedule as defendants now follow in disclosing such data to the Federal Trade Commission (“FTC”) for a period of 10 years; (viii) certain restrictions on the sale or transfer by defendants of any cigarette brands, brand names, formulas or cigarette businesses within the United States; and (ix) payment of the government’s costs in bringing the action. Defendants appealed and, in May 2009, the U.S. Court of Appeals for the District of Columbia Circuit (“D.C. Court of Appeals”) largely affirmed the trial court’s remedial order, but vacated the following aspects of the order:
The D.C. Court of Appeals remanded the case for the trial court to reconsider these four aspects of the injunction and to reformulate its remedial order accordingly. Following several years of appeals relating to the content of the corrective statements remedy described above, in October 2017, the district court approved the parties’ proposed consent order implementing corrective statements in newspapers and on television. The corrective statements began appearing in newspapers and on television in the fourth quarter of 2017. In April 2018, the parties reached agreement on the implementation details of the corrective statements on websites and onserts. The corrective statements began appearing on websites in the second quarter of 2018 and the onserts began appearing in the fourth quarter of 2018. In 2014, Altria and PM USA recorded provisions totaling $31 million for the estimated costs of implementing the corrective communications remedy. The requirements related to corrective statements at point-of-sale remain outstanding. In May 2014, the district court ordered further briefing on the issue, which was completed in June 2014. In May 2018, the parties submitted a joint status report on point-of-sale signage to the district court and the court approved the parties’ proposed briefing schedule. The briefing is complete and the matter is pending before the district court. “Lights/Ultra Lights” Cases Overview Plaintiffs have sought certification of their cases as class actions, alleging among other things, that the uses of the terms “Lights” and/or “Ultra Lights” constitute deceptive and unfair trade practices, common law or statutory fraud, unjust enrichment or breach of warranty, and have sought injunctive and equitable relief, including restitution and, in certain cases, punitive damages. These class actions have been brought against PM USA and, in certain instances, Altria or its other subsidiaries, on behalf of individuals who purchased and consumed various brands of cigarettes, including Marlboro Lights, Marlboro Ultra Lights, Virginia Slims Lights and Superslims, Merit Lights and Cambridge Lights. Defenses raised in these cases include lack of misrepresentation, lack of causation, injury and damages, the statute of limitations, non-liability under state statutory provisions exempting conduct that complies with federal regulatory directives, and the First Amendment. As of April 22, 2019, a total of two such cases are pending in various U.S. state courts, none of which is active. State “Lights” Cases Dismissed, Not Certified or Ordered De-Certified As of April 22, 2019, 21 state courts in 23 “Lights” cases have refused to certify class actions, dismissed class action allegations, reversed prior class certification decisions or have entered judgment in favor of PM USA. State Trial Court Class Certifications State trial courts have certified classes against PM USA in several jurisdictions. Over time, all such cases have been dismissed by the courts at the summary judgment stage, were settled by the parties or were resolved in favor of PM USA. Certain Other Tobacco-Related Litigation E-vapor Litigation In April 2019, Altria, PM USA and JUUL were named as defendants in a tobacco and health class action lawsuit filed in the United States District Court for the Middle District of Florida. The lawsuit involves JUUL e-vapor products and proposes various classes of plaintiffs. The theories of recovery include: violation of RICO; fraud; failure to warn; design defect; negligence; unjust enrichment and deceptive and unfair trade practices. Plaintiffs seek various forms of relief including compensatory and punitive damages. Altria and PM USA are preparing their responses to the lawsuit. UST Litigation UST and/or its tobacco subsidiaries have been named in a number of individual tobacco and health suits over time. Plaintiffs’ allegations of liability in these cases have been based on various theories of recovery, such as negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, breach of implied warranty, addiction and breach of consumer protection statutes. Plaintiffs have typically sought various forms of relief, including compensatory and punitive damages, and certain equitable relief, including but not limited to disgorgement. Defenses raised in these cases include lack of causation, assumption of the risk, comparative fault and/or contributory negligence, and statutes of limitations. In July 2016, USSTC and Altria were named as defendants, along with other named defendants, in one such case in California (Gwynn). In August 2018, the parties agreed to settle the Gwynn case and in September 2018, plaintiffs dismissed their claims with prejudice. Environmental Regulation Altria and its subsidiaries (and former subsidiaries) are subject to various federal, state and local laws and regulations concerning the discharge of materials into the environment, or otherwise related to environmental protection, including, in the United States: the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as “Superfund”), which can impose joint and several liability on each responsible party. Subsidiaries (and former subsidiaries) of Altria are involved in several matters subjecting them to potential costs of remediation and natural resource damages under Superfund or other laws and regulations. Altria’s subsidiaries expect to continue to make capital and other expenditures in connection with environmental laws and regulations. Altria provides for expenses associated with environmental remediation obligations on an undiscounted basis when such amounts are probable and can be reasonably estimated. Such accruals are adjusted as new information develops or circumstances change. Other than those amounts, it is not possible to reasonably estimate the cost of any environmental remediation and compliance efforts that subsidiaries of Altria may undertake in the future. In the opinion of management, however, compliance with environmental laws and regulations, including the payment of any remediation costs or damages and the making of related expenditures, has not had, and is not expected to have, a material adverse effect on Altria’s consolidated results of operations, capital expenditures, financial position or cash flows. Guarantees and Other Similar Matters In the ordinary course of business, certain subsidiaries of Altria have agreed to indemnify a limited number of third parties in the event of future litigation. At March 31, 2019, Altria and certain of its subsidiaries (i) had $56 million of unused letters of credit obtained in the ordinary course of business; (ii) were contingently liable for $30 million of guarantees, consisting of surety bonds, related to their own performance; and (iii) had a redeemable noncontrolling interest of $38 million recorded on its condensed consolidated balance sheet. In addition, from time to time, subsidiaries of Altria issue lines of credit to affiliated entities. These items have not had, and are not expected to have, a significant impact on Altria’s liquidity. Under the terms of a distribution agreement between Altria and PMI (the “Distribution Agreement”), entered into as a result of Altria’s 2008 spin-off of its former subsidiary PMI, liabilities concerning tobacco products will be allocated based in substantial part on the manufacturer. PMI will indemnify Altria and PM USA for liabilities related to tobacco products manufactured by PMI or contract manufactured for PMI by PM USA, and PM USA will indemnify PMI for liabilities related to tobacco products manufactured by PM USA, excluding tobacco products contract manufactured for PMI. Altria does not have a related liability recorded on its condensed consolidated balance sheet at March 31, 2019 as the fair value of this indemnification is insignificant. |
Condensed Consolidating Financial Information |
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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, has guaranteed Altria’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’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 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:
At March 31, 2019, the respective principal 100% owned subsidiaries of Altria 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 March 31, 2019 and December 31, 2018, condensed consolidating statements of earnings and comprehensive earnings for the three months ended March 31, 2019 and 2018, and condensed consolidating statements of cash flows for the three months ended March 31, 2019 and 2018 for Altria, PM USA and, collectively, Altria’s other subsidiaries that are not guarantors of Altria’s debt instruments (the “Non-Guarantor Subsidiaries”). March 31, 2019 (in millions of dollars)
Condensed Consolidating Balance Sheets (Continued) March 31, 2019 (in millions of dollars)
Condensed Consolidating Balance Sheets December 31, 2018 (in millions of dollars)
Condensed Consolidating Balance Sheets (Continued) December 31, 2018 (in millions of dollars)
For the Three Months Ended March 31, 2019 (in millions of dollars)
Condensed Consolidating Statements of Earnings and Comprehensive Earnings For the Three Months Ended March 31, 2018 (in millions of dollars)
For the Three Months Ended March 31, 2019 (in millions of dollars)
(1) Restricted cash consisted of cash deposits collateralizing appeal bonds posted by PM USA to obtain stays of judgments pending appeals. See Note 12. Contingencies. Condensed Consolidating Statements of Cash Flows For the Three Months Ended March 31, 2018 (in millions of dollars)
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New Accounting Guidance Not Yet Adopted |
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Mar. 31, 2019 | |||||||||||||||||||||
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |||||||||||||||||||||
New Accounting Guidance Not Yet Adopted | New Accounting Guidance Not Yet Adopted: The following table provides a description of issued accounting guidance applicable to, but not yet adopted by, Altria:
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Background and Basis of Presentation (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||
New Accounting Pronouncements | On January 1, 2019, Altria adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) and all related ASU amendments (collectively “ASU No. 2016-02”), which requires entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. Altria has elected to apply the guidance retrospectively at the beginning of the period of adoption. As a result, comparative periods prior to adoption will continue to be presented in accordance with prior lease guidance, including disclosures. The impact of the adoption was not material to Altria’s consolidated financial statements. As a result of the adoption, Altria and its subsidiaries, as lessees, recorded right-of-use assets and lease liabilities of $179 million at January 1, 2019 for its leases, which were all operating leases. There was no cumulative effect adjustment to the opening balance of earnings reinvested in the business.The following table provides a description of issued accounting guidance applicable to, but not yet adopted by, Altria:
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Equity Method Investments | Altria reviews its investment in AB InBev for impairment by comparing the fair value of its investment to its carrying value. If the carrying value of Altria’s investment exceeds its fair value and the loss in value is other than temporary, the investment is considered impaired and impairment is recognized in the period identified. The factors used to make this determination include the duration and magnitude of the fair value decline, AB InBev’s financial condition and near-term prospects, and Altria’s intent and ability to hold its investment in AB InBev until recovery. The fair value of Altria’s equity investment in AB InBev is based on: (i) unadjusted quoted prices in active markets for AB InBev’s ordinary shares and was classified in Level 1 of the fair value hierarchy and (ii) observable inputs other than Level 1 prices, such as quoted prices for similar assets for the Restricted Shares, and was classified in Level 2 of the fair value hierarchy. Altria may, in certain instances, pledge or otherwise grant a security interest in all or part of its Restricted Shares. In the event the pledgee or security interest holder forecloses on the Restricted Shares, the relevant Restricted Shares will be automatically converted, one-for-one, into ordinary shares. Therefore, the fair value of each Restricted Share is based on the value of an ordinary share. |
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Equity Security Investments | Since the JUUL shares do not have a readily determinable fair value, Altria has elected to measure its investment in JUUL at its cost minus any impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. |
Background and Basis of Presentation (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Share Repurchase Activity | Altria’s share repurchase activity was as follows:
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Asset Impairment, Exit and Implmentation Costs (Tables) |
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Restructuring and Related Activities [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Costs | Pre-tax asset impairment, exit and implementation costs consisted of the following:
(1) Included in marketing, administration and research costs in Altria’s condensed consolidated statement of earnings. (2) Included in cost of sales in Altria’s condensed consolidated statements of earnings. (3) Represents curtailment costs. See Note 6. Benefit Plans.
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Schedule of Restructuring Reserve by Type of Cost | The movement in the restructuring liabilities, substantially all of which are severance liabilities, was as follows:
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Investments in Equity Securities Investments in Equity Securities (Tables) |
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Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Investment | Altria’s investments consisted of the following:
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Financial Instruments (Tables) |
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurement Inputs and Valuation Techniques | The fair values of the Fixed-price Preemptive Rights and warrant are estimated using Black-Scholes option-pricing models, adjusted for unobservable inputs, including probability factors and weighting of expected life, volatility levels and risk-free interest rates (which are classified in Level 3 of the fair value hierarchy) based on the following assumptions at:
(1) Based on the weighted-average remaining expected life of the Fixed-price Preemptive Rights (with a range from 1.75 years to 7 years) and the March 8, 2023 expiration date of the warrant. (2) Based on a blend of historical volatility levels of the underlying equity security and peer companies. (3) Based on the implied yield currently available on Canadian Treasury zero coupon issues weighted for the remaining expected life of the Fixed-price Preemptive Rights. (4) Based on the implied yield currently available on Canadian Treasury zero coupon issues and the expected life of the warrant. (5) Based on Cronos’s expected dividend payments.
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Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation | The following table provides a reconciliation of the beginning and ending balance of the Fixed-price Preemptive Rights and warrant, which are classified in Level 3 of the fair value hierarchy:
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Schedule of Derivative Liabilities at Fair Value | The fair values of Altria’s derivative financial instruments on a gross basis included on the condensed consolidated balance sheets were as follows:
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Pre-tax Effects of Net Investment Hedges on Accumulated Other Comprehensive Losses | The pre-tax effects of Altria’s net investment hedges on accumulated other comprehensive losses and the condensed consolidated statements of earnings were as follows:
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Benefit Plans (Tables) |
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Retirement Benefits [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Periodic Benefit (Income) Cost | Net periodic benefit (income) cost consisted of the following:
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Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share | Basic and diluted earnings per share (“EPS”) were calculated using the following:
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Other Comprehensive Earnings/Losses (Tables) |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accumulated Other Comprehensive Income (Loss) | The following tables set forth the changes in each component of accumulated other comprehensive losses, net of deferred income taxes, attributable to Altria:
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Reclassification out of Accumulated Other Comprehensive Income | The following table sets forth pre-tax amounts by component, reclassified from accumulated other comprehensive losses to net earnings:
(1) Amounts are included in net defined benefit plan costs. For further details, see Note 6. Benefit Plans. (2) Amounts are primarily included in earnings from equity investment in AB InBev.
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Segment Reporting (Tables) |
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Segment Reporting [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Reporting Information, by Segment | Segment data were as follows:
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Schedule of Pre-tax Tobacco and Health Litigation Items | Tobacco and Health Litigation Items - Pre-tax charges related to certain tobacco and health litigation items were recorded in Altria’s condensed consolidated statements of earnings as follows:
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Contingencies (Tables) |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Contingencies |
(1)Accrual amounts include interest and associated costs, if applicable. For cases with multiple defendants, if any, accrual amounts reflect the portion of compensatory damages PM USA believes it will have to pay if the case is ultimately decided in plaintiff’s favor after taking into account any portion potentially payable by the other defendant(s).
(1)PM USA’s portion of the compensatory damages award is noted parenthetically where the court has ruled that comparative fault applies.
(1) Includes 29 cases filed in Massachusetts and 38 non-Engle cases filed in Florida. Does not include individual smoking and health cases brought by or on behalf of plaintiffs in Florida state and federal courts following the decertification of the Engle case (these Engle progeny cases are discussed below in Smoking and Health Litigation - Engle Class Action). Also does not include 1,490 cases brought by flight attendants seeking compensatory damages for personal injuries allegedly caused by exposure to environmental tobacco smoke (“ETS”). The flight attendants allege that they are members of an ETS smoking and health class action in Florida, which was settled in 1997 (Broin). The terms of the court-approved settlement in that case allowed class members to file individual lawsuits seeking compensatory damages, but prohibited them from seeking punitive damages. In March 2018, 923 of these cases were voluntarily dismissed without prejudice. (2) The 2017 pending cases include as one case the 30 civil actions that were to be tried in six consolidated trials in West Virginia (In re: Tobacco Litigation). PM USA was a defendant in nine of the 30 cases. The parties resolved these cases for an immaterial amount and in the second quarter of 2018, the court dismissed all 30 cases. (3) See Health Care Cost Recovery Litigation - Federal Government’s Lawsuit below.The changes in Altria’s accrued liability for tobacco and health litigation items, including related interest costs, for the periods specified below are as follows:
(1) Includes amounts related to the costs of implementing the corrective communications remedy related to the Federal Government’s Lawsuit discussed below. |
Condensed Consolidating Financial Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Condensed Consolidating Balance Sheet | Condensed Consolidating Balance Sheets March 31, 2019 (in millions of dollars)
Condensed Consolidating Balance Sheets (Continued) March 31, 2019 (in millions of dollars)
Condensed Consolidating Balance Sheets December 31, 2018 (in millions of dollars)
Condensed Consolidating Balance Sheets (Continued) December 31, 2018 (in millions of dollars)
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Condensed Consolidating Statements of Earnings and Comprehensive Earnings | Condensed Consolidating Statements of Earnings and Comprehensive Earnings For the Three Months Ended March 31, 2019 (in millions of dollars)
Condensed Consolidating Statements of Earnings and Comprehensive Earnings For the Three Months Ended March 31, 2018 (in millions of dollars)
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Condensed Consolidating Statements of Cash Flows | Condensed Consolidating Statements of Cash Flows For the Three Months Ended March 31, 2019 (in millions of dollars)
(1) Restricted cash consisted of cash deposits collateralizing appeal bonds posted by PM USA to obtain stays of judgments pending appeals. See Note 12. Contingencies. Condensed Consolidating Statements of Cash Flows For the Three Months Ended March 31, 2018 (in millions of dollars)
|
New Accounting Guidance Not Yet Adopted (Tables) |
3 Months Ended | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2019 | |||||||||||||||||||||
New Accounting Pronouncements and Changes in Accounting Principles [Abstract] | |||||||||||||||||||||
Recent Accounting Guidance Not Yet Adopted | The following table provides a description of issued accounting guidance applicable to, but not yet adopted by, Altria:
|
Background and Basis of Presentation (Share Repurchase Table) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Total number of shares repurchased (shares) | 2.7 | 8.0 |
Aggregate cost of shares repurchased | $ 151 | $ 513 |
Average price per share of shares repurchased (usd per share) | $ 56.34 | $ 64.33 |
Revenues from Contracts with Customers (Narrative) (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Revenue from Contract with Customer [Abstract] | ||
Allowance for sales discounts, goods | $ 0 | $ 0 |
Deferred revenue | $ 233,000,000 | 288,000,000 |
Expected period for satisfaction of performance obligation | P3D | |
Receivables | $ 158,000,000 | $ 142,000,000 |
Asset Impairment, Exit and Implementation Costs (Movement in Restructuring Liabilities) (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Restructuring Reserve [Roll Forward] | |
Restructuring reserve, beginning of period | $ 155 |
Charges | 40 |
Cash spent | (35) |
Restructuring reserve, end of period | $ 160 |
Asset Impairment, Exit and Implementation Costs (Narrative) (Details) - USD ($) |
1 Months Ended | 3 Months Ended | |
---|---|---|---|
Dec. 31, 2018 |
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Restructuring Cost and Reserve [Line Items] | |||
Charges | $ 40,000,000 | ||
Restructuring charges | 49,000,000 | $ 3,000,000 | |
Payments for restructuring | 35,000,000 | ||
Cost Reduction Program [Member] | |||
Restructuring Cost and Reserve [Line Items] | |||
Restructuring and related cost, expected cost | $ 210,000,000 | ||
Charges | 182,000,000 | ||
Restructuring charges | 121,000,000 | ||
Payments for restructuring | $ 0 | 22,000,000 | |
Employee Severance [Member] | Cost Reduction Program [Member] | |||
Restructuring Cost and Reserve [Line Items] | |||
Restructuring and related cost, expected cost | 180,000,000 | ||
Other Restructuring [Member] | Cost Reduction Program [Member] | |||
Restructuring Cost and Reserve [Line Items] | |||
Restructuring and related cost, expected cost | $ 30,000,000 |
Investments in Equity Securities (Summary of Investments) (Details) - USD ($) $ in Millions |
Mar. 31, 2019 |
Dec. 31, 2018 |
---|---|---|
Investment [Line Items] | ||
Investments in equity securities | $ 32,015 | $ 30,496 |
Investments | 32,015 | 30,496 |
AB InBev [Member] | ||
Investment [Line Items] | ||
Investments in equity securities | 17,476 | 17,696 |
JUUL [Member] | ||
Investment [Line Items] | ||
Equity securities, Fv-Ni | 12,800 | 12,800 |
Cronos Group Inc. [Member] | ||
Investment [Line Items] | ||
Investments in equity securities | 1,739 | $ 0 |
Equity Contract, Warrant [Member] | ||
Investment [Line Items] | ||
Derivative asset, fair value, gross asset | 949 | |
Equity Contract, Preemptive Rights [Member] | ||
Investment [Line Items] | ||
Derivative asset, fair value, gross asset | 393 | |
Common Stock [Member] | Cronos Group Inc. [Member] | ||
Investment [Line Items] | ||
Investments in equity securities | $ 397 |
Investments in Equity Securities (Investment in AB InBev Narrative) (Details) shares in Millions, $ in Millions |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Mar. 31, 2019
USD ($)
shares
|
Dec. 31, 2018
USD ($)
shares
|
Mar. 31, 2019
€ / shares
|
Dec. 31, 2018
€ / shares
|
|
Schedule of Equity Method Investments [Line Items] | ||||
Investments in equity securities | $ | $ 32,015 | $ 30,496 | ||
AB InBev [Member] | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Derivative instrument, number of shares hedged (in shares) | shares | 92.4 | |||
AB InBev [Member] | ||||
Schedule of Equity Method Investments [Line Items] | ||||
Number of ordinary shares owned (in shares) | shares | 12.0 | |||
Equity method investment, ownership percentage | 10.10% | |||
Number of restricted shares owned (in shares) | shares | 185.0 | |||
Share price (in Euro per share) | € / shares | € 74.76 | € 57.70 | ||
Fair value of equity investment | $ | $ 16,600 | $ 13,100 | ||
Investments in equity securities | $ | $ 17,476 | $ 17,696 | ||
Difference between carrying amount and underlying equity, percentage | 5.00% | 26.00% |
Investments in Equity Securities (Investment in JUUL Narrative) (Details) - JUUL [Member] - USD ($) $ in Billions |
1 Months Ended | ||
---|---|---|---|
Dec. 20, 2018 |
Dec. 31, 2018 |
Mar. 31, 2019 |
|
Schedule of Equity Method Investments [Line Items] | |||
Payments to acquire equity securities Fv-Ni | $ 12.8 | ||
Equity securities Fv Ni, ownership percentage | 35.00% | 35.00% | |
Equity securities, Fv-Ni, ownership percentage upon conversion | 35.00% | ||
Equity securities Fv-Ni, threshold For downward adjustment of board election | 30.00% | ||
Equity securities Fv-Ni, ineligible for sale or transfer, period | 6 years |
Financial Instruments (Beginning and Ending Balances of Fixed-price Preemptive Rights and Warrants) (Details) - Fair Value, Inputs, Level 3 [Member] - Equity Contract [Member] $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Fair Value, Net Derivative Asset (Liability) Measured on Recurring Basis, Unobservable Input Reconciliation [Roll Forward] | |
Balance at begging of period | $ 0 |
Investment in Fixed-price Preemptive Rights and warrant | 1,736 |
Pre-tax losses recognized in net earnings | (394) |
Balance at end of period | $ 1,342 |
Financial Instruments (Effects of Net Investment Hedges on Accumulated Other Comprehensive Losses) (Details) - Net Investment Hedging [Member] - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (Loss) Recognized in Accumulated Other Comprehensive Losses | $ 56 | $ (33) |
Gain Recognized in Net Earnings | 9 | 8 |
Foreign currency contracts [Member] | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (Loss) Recognized in Accumulated Other Comprehensive Losses | 23 | (33) |
Gain Recognized in Net Earnings | 9 | 8 |
Foreign Currency Denominated Debt [Member] | ||
Derivative Instruments, Gain (Loss) [Line Items] | ||
Gain (Loss) Recognized in Accumulated Other Comprehensive Losses | 33 | 0 |
Gain Recognized in Net Earnings | $ 0 | $ 0 |
Benefit Plans (Schedule Of Components Of Net Periodic Benefit Cost (Income)) (Details) - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Pension [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | $ 17 | $ 21 |
Interest cost | 77 | 68 |
Expected return on plan assets | (145) | (146) |
Amortization: | ||
Net loss | 42 | 57 |
Prior service cost (credit) | 1 | 1 |
Curtailment | 7 | 0 |
Net periodic benefit (income) cost | (1) | 1 |
Postretirement [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Service cost | 4 | 4 |
Interest cost | 20 | 19 |
Expected return on plan assets | (4) | (5) |
Amortization: | ||
Net loss | 3 | 9 |
Prior service cost (credit) | (7) | (10) |
Curtailment | 5 | 0 |
Net periodic benefit (income) cost | $ 21 | $ 17 |
Benefit Plans (Narrative) (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2019
USD ($)
| |
Pension [Member] | |
Defined Benefit Plan Disclosure [Line Items] | |
Additional employer contributions | $ 3 |
Pension [Member] | Maximum [Member] | |
Defined Benefit Plan Disclosure [Line Items] | |
Anticipated additional employer contributions | 45 |
Postretirement [Member] | Maximum [Member] | |
Defined Benefit Plan Disclosure [Line Items] | |
Anticipated additional employer contributions | $ 60 |
Earnings Per Share (Basic and Diluted Earnings Per Share) (Details) - USD ($) shares in Millions, $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Earnings Per Share [Abstract] | ||
Net earnings attributable to Altria | $ 1,120 | $ 1,894 |
Less: Distributed and undistributed earnings attributable to share-based awards | (2) | (2) |
Earnings for basic and diluted EPS | $ 1,118 | $ 1,892 |
Weighted-average shares for basic and diluted EPS (in shares) | 1,874 | 1,899 |
Segment Reporting (Schedule of Tobacco and Health Litigation Items) (Details) - PM USA [Member] - Tobacco and Health Litigation Cases [Member] - USD ($) $ in Millions |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Mar. 31, 2018 |
|
Schedule of Pre-tax Tobacco and Health Litigation Charges [Line Items] | ||
Provision related to litigation recorded | $ 17 | $ 28 |
Operating Income (Loss) [Member] | Operating Segments [Member] | Smokeable Products [Member] | ||
Schedule of Pre-tax Tobacco and Health Litigation Charges [Line Items] | ||
Provision related to litigation recorded | 15 | 24 |
Interest And Other Debt Expense, Net [Member] | Segment Reconciling Items [Member] | ||
Schedule of Pre-tax Tobacco and Health Litigation Charges [Line Items] | ||
Provision related to litigation recorded | $ 2 | $ 4 |
Segment Reporting (Narrative) (Details) $ in Millions |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
NPM Adjustment to Cost Of Sales [Member] | Smokeable Products [Member] | Operating Income (Loss) [Member] | PM USA [Member] | NPM [Member] | |
Segment Reporting Information [Line Items] | |
Gain (loss) related to litigation settlement | $ 68 |
Income Taxes (Narrative) (Details) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Income Tax Disclosure [Abstract] | ||
Income tax rate | 26.10% | |
Increase in income tax percentage | 0.029 | |
Tax benefits related to prior audit years | $ 22 | |
Tax benefits related to the 2017 Tax Cuts and Jobs Act | 20 | |
Tax expense related to valuation allowance on foreign tax credit carryforwards | $ 11 | |
Tax benefits related to effective settlement of IRS audit | 11 | |
Unrecognized tax benefits | 55 | 85 |
Unrecognized tax benefits that would impact the effective tax rate | 45 | 59 |
Unrecognized tax benefits that would impact deferred taxes | 10 | $ 26 |
Possible decrease in unrecognized tax benefits | $ 14 |
Contingencies (General Information) (Details) |
Mar. 31, 2019
state
|
---|---|
Commitments and Contingencies Disclosure [Abstract] | |
Number of states that cap bond or require no bond | 47 |
Contingencies (Florida Bond Statute) (Details) - Engle Progeny Cases, State [Member] $ in Millions |
1 Months Ended |
---|---|
Jun. 30, 2009
USD ($)
case
| |
Florida [Member] | |
Loss Contingencies [Line Items] | |
Maximum bond for all defendants | $ | $ 200 |
Alachua County, Florida [Member] | |
Loss Contingencies [Line Items] | |
Number of cases in which plaintiffs that challenged constitutionality of bond cap statute | 3 |
Escambia County, Florida [Member] | |
Loss Contingencies [Line Items] | |
Number of cases in which plaintiffs that challenged constitutionality of bond cap statute | 1 |
Contingencies (Health Care Cost Recovery Litigation) (Details) - Health Care Cost Recovery Actions [Member] |
1 Months Ended | 3 Months Ended | |||
---|---|---|---|---|---|
Nov. 30, 1998
USD ($)
state
|
Mar. 31, 2019
USD ($)
case
|
Mar. 31, 2018
USD ($)
|
Apr. 23, 2018
case
|
Apr. 27, 2017
case
|
|
Loss Contingencies [Line Items] | |||||
Number of cases pending | case | 1 | 1 | |||
Number of states with settled litigation | state | 46 | ||||
State settlement agreements annual payments | $ 9,400,000,000 | ||||
State settlement agreements attorney fees annual cap | $ 500,000,000 | ||||
Litigation settlement | $ 900,000,000 | $ 1,000,000,000.0 | |||
Threatened Litigation [Member] | Canada [Member] | |||||
Loss Contingencies [Line Items] | |||||
Number of cases pending | case | 10 |
Contingencies (Other Disputes Under the State Settlement Agreements) (Details) $ in Millions |
1 Months Ended |
---|---|
Aug. 31, 2018
USD ($)
| |
PM USA [Member] | Other Disputes Under the State Settlement Agreements [Member] | |
Loss Contingencies [Line Items] | |
Amount ordered to be paid from other party | $ 9.8 |
Contingencies (Federal Government's Lawsuit) (Details) - Federal Governments Lawsuit [Member] - USD ($) $ in Millions |
1 Months Ended | 12 Months Ended |
---|---|---|
Aug. 31, 2006 |
Dec. 31, 2014 |
|
Loss Contingencies [Line Items] | ||
Disclosure period | 10 years | |
Implementation of Corrective Communications [Member] | ||
Loss Contingencies [Line Items] | ||
Provision related to litigation recorded | $ 31 |
Contingencies (Lights/Ultra Lights Cases) (Details) |
Apr. 22, 2019
case
court
|
Apr. 23, 2018
case
|
Apr. 27, 2017
case
|
---|---|---|---|
Lights Ultra Lights Class Actions [Member] | |||
Loss Contingencies [Line Items] | |||
Number of cases pending | 3 | 5 | |
Subsequent Event [Member] | Lights Ultra Lights Class Actions [Member] | |||
Loss Contingencies [Line Items] | |||
Number of cases pending | 2 | ||
Subsequent Event [Member] | Lights [Member] | |||
Loss Contingencies [Line Items] | |||
Claims not certified, number | 23 | ||
Subsequent Event [Member] | Lights [Member] | PM USA [Member] | |||
Loss Contingencies [Line Items] | |||
Number of state courts | court | 21 |
Contingencies (UST Litigations Narrative) (Details) |
1 Months Ended |
---|---|
Jul. 31, 2006
case
| |
CALIFORNIA [Member] | UST Litigation [Member] | |
Loss Contingencies [Line Items] | |
Claims filed, number | 1 |
Contingencies (Guarantees and Other Similar Matters Narrative) (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2019 |
Dec. 31, 2018 |
|
Loss Contingencies [Line Items] | ||
Contingent liability related to performance surety bonds | $ 30,000,000 | |
Redeemable noncontrolling interest | 38,000,000 | $ 39,000,000 |
Letter of Credit [Member] | ||
Loss Contingencies [Line Items] | ||
Credit line available under the agreement | 56,000,000 | |
Revolving Credit Facility [Member] | Credit Agreement [Member] | ||
Loss Contingencies [Line Items] | ||
Credit line available under the agreement | $ 3,000,000,000.0 | |
Debt instrument, term | 5 years |
Label | Element | Value | ||
---|---|---|---|---|
Restricted Cash, Current | us-gaap_RestrictedCashCurrent | $ 68,000,000 | ||
Restricted Cash, Current | us-gaap_RestrictedCashCurrent | 57,000,000 | ||
Restricted Cash, Noncurrent | us-gaap_RestrictedCashNoncurrent | 35,000,000 | ||
Restricted Cash, Noncurrent | us-gaap_RestrictedCashNoncurrent | $ 43,000,000 | ||
|
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