Segment Reporting

9 Months Ended

Sep. 30, 2014

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 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 innovative tobacco products businesses are included in all other.

Altria Group, Inc.’s chief operating decision maker reviews operating companies income to evaluate the performance of and allocate resources to the segments. Operating companies income for the segments 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.

Segment data were as follows:

	For the Nine Months Ended September 30,						For the Three Months Ended September 30,
	2014			2013			2014			2013
	(in millions)
Net revenues:
Smokeable products	$	16,428		$	16,448		$	5,859		$	5,802
Smokeless products	1,345			1,333			466			485
Wine	428			411			153			148
All other	63			194			13			118
Net revenues	$	18,264		$	18,386		$	6,491		$	6,553
Earnings before income taxes:
Operating companies income (loss):
Smokeable products	$	5,160		$	5,471		$	1,840		$	1,825
Smokeless products	804			769			280			277
Wine	81			73			31			28
All other	(143		)	185			(89		)	92
Amortization of intangibles	(15		)	(15		)	(5		)	(5		)
General corporate expenses	(174		)	(173		)	(53		)	(60		)
Changes to Mondelēz and PMI tax-related receivables/payables	(5		)	(25		)	(5		)	(25		)
Operating income	5,708			6,285			1,999			2,132
Interest and other debt expense, net	(596		)	(794		)	(213		)	(269		)
Earnings from equity investment in SABMiller	753			738			328			255
Earnings before income taxes	$	5,865		$	6,229		$	2,114		$	2,118

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

Non-Participating Manufacturer (“NPM”) Adjustment Items - For the nine and three months ended September 30, 2014 and 2013, pre-tax income for NPM adjustment items was recorded in Altria Group, Inc.’s condensed consolidated statements of earnings as follows:

	For the Nine Months Ended September 30,				For the Three Months Ended September 30,
	2014		2013		2014		2013
	(in millions)
Smokeable products segment	$	43	$	664	$	—	$	145
Interest and other debt expense, net	47		—		—		—
Total	$	90	$	664	$	—	$	145

These adjustments resulted from the settlement of, and determinations made in connection with, disputes with certain states and territories related to the NPM adjustment provision under the 1998 Master Settlement Agreement (the “MSA”) for the years 2003-2012 (such settlements and determinations are referred to collectively as “NPM Adjustment Items” and are more fully described in Health Care Cost Recovery Litigation - NPM Adjustment Disputes in Note 9. Contingencies). The amounts shown in the table above for the smokeable products segment were recorded by PM USA as reductions to cost of sales, which increased operating companies income in the smokeable products segment.

Tobacco and Health Litigation Items - For the nine and three months ended September 30, 2014 and 2013, pre-tax charges related to certain tobacco and health litigation items were recorded in Altria Group, Inc.’s condensed consolidated statements of earnings as follows:

	For the Nine Months Ended September 30,				For the Three Months Ended September 30,
	2014		2013		2014		2013
	(in millions)
Smokeable products segment	$	22	$	18	$	3	$	13
General corporate expenses	15		—		—		—
Interest and other debt expense, net	2		4		1		3
Total	$	39	$	22	$	4	$	16

During the second quarter of 2014, Altria Group, Inc. and PM USA recorded an aggregate pre-tax charge of $31 million in marketing, administration and research costs for the estimated costs of implementing the corrective communications remedy in connection with the federal government’s lawsuit against Altria Group, Inc. and PM USA. For further discussion, see Health Care Cost Recovery Litigation - Federal Government’s Lawsuit in Note 9. Contingencies.

Asset Impairment and Exit Costs - During the second quarter of 2014, PM USA sold its Cabarrus, North Carolina manufacturing facility for approximately $66 million in connection with the previously completed manufacturing optimization program associated with PM USA’s closure of the manufacturing facility in 2009. As a result, during the second quarter of 2014, PM USA recorded a pre-tax gain of $10 million.