Segment Reporting

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

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

As discussed in Note 1. Background and Basis of Presentation, beginning with the first quarter of 2013, Altria Group, Inc. revised its reportable segments. Prior years’ segment data have been recast to conform with the current year’s segment presentation.

Altria Group, Inc.’s chief operating decision maker reviews operating companies income to evaluate the performance of and allocate resources to the segments. Operating companies income for the segments excludes general corporate expenses and amortization of intangibles. Interest and other debt expense, net and provision for income taxes are centrally managed at the corporate level and, accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by Altria Group, Inc.’s chief operating decision maker. Information about total assets by segment is not disclosed because such information is not reported to or used by Altria Group, Inc.’s chief operating decision maker. Segment goodwill and other intangible assets, net, are disclosed in Note 3. Goodwill and Other Intangible Assets, net. The accounting policies of the segments are the same as those described in Note 2. Summary of Significant Accounting Policies.

Segment data were as follows:

	For the Years Ended December 31,
(in millions)	2013			2012			2011
Net revenues:
Smokeable products	$	21,868		$	22,216		$	21,970
Smokeless products	1,778			1,691			1,627
Wine	609			561			516
All other	211			150			(313		)
Net revenues	$	24,466		$	24,618		$	23,800
Earnings before income taxes:
Operating companies income (loss):
Smokeable products	$	7,063		$	6,239		$	5,737
Smokeless products	1,023			931			859
Wine	118			104			91
All other	157			176			(349		)
Amortization of intangibles	(20		)	(20		)	(20		)
General corporate expenses	(235		)	(229		)	(264		)
Changes to Mondelēz and PMI tax-related receivables/payables	(22		)	52			14
Operating income	8,084			7,253			6,068
Interest and other debt expense, net	(1,049		)	(1,126		)	(1,216		)
Loss on early extinguishment of debt	(1,084		)	(874		)	—
Earnings from equity investment in SABMiller	991			1,224			730
Earnings before income taxes	$	6,942		$	6,477		$	5,582

The smokeable products segment included net revenues of $21,308 million, $21,615 million and $21,403 million for the years ended December 31, 2013, 2012 and 2011, respectively, related to cigarettes and net revenues of $560 million, $601 million and $567 million for the years ended December 31, 2013, 2012 and 2011, respectively, related to cigars.

PM USA, USSTC and Middleton’s largest customer, McLane Company, Inc., accounted for approximately 27% of Altria Group, Inc.’s consolidated net revenues for each of the years

ended December 31, 2013, 2012 and 2011. These net revenues were reported in the smokeable products and smokeless products segments. Sales to three distributors accounted for approximately 66% of net revenues for the wine segment for each of the years ended December 31, 2013, 2012 and 2011.

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

	For the Years Ended December 31,
(in millions)	2013		2012		2011
Depreciation expense:
Smokeable products	$	113	$	125	$	145
Smokeless products	25		26		31
Wine	30		27		25
Corporate and other	24		27		32
Total depreciation expense	$	192	$	205	$	233
Capital expenditures:
Smokeable products	$	39	$	48	$	46
Smokeless products	32		36		24
Wine	42		30		25
Corporate and other	18		10		10
Total capital expenditures	$	131	$	124	$	105

Items affecting the comparability of net revenues and/or operating companies income for the reportable segments were as follows:

▪Non-Participating Manufacturer (“NPM”) Adjustment Items: For the year ended December 31, 2013, PM USA recorded pre-tax income of $664 million, which increased operating companies income in the smokeable products segment. This recording of pre-tax income resulted from the following:

▪ a reduction to cost of sales of $519 million for the settlement of disputes with certain states and territories related to the NPM adjustment provision under the 1998 Master Settlement Agreement (the “MSA”) for the years 2003 - 2012; and

▪ a reduction to cost of sales of $145 million for the September 11, 2013 diligent enforcement rulings of the arbitration panel presiding over the NPM adjustment dispute for 2003.

For further discussion of these items (which are referred to collectively as the “NPM Adjustment Items”), see Possible Adjustments in MSA Payments for 2003 - 2012, in Note 18. Contingencies.

▪Tobacco and Health Judgments: See Note 18. Contingencies for pre-tax charges related to tobacco and health judgments recorded in operating companies income in the smokeable products segment.

▪Asset Impairment, Exit, Implementation and Integration Costs: See Note 4. Asset Impairment, Exit, Implementation and Integration Costs for a breakdown of these costs by segment.