Condensed Consolidating Financial Information

3 Months Ended

Mar. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Condensed Consolidating Financial Information

Condensed Consolidating Financial Information:

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

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

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

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

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

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

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

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

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

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

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

Condensed Consolidating Balance Sheets

March 31, 2015

(in millions of dollars)

	Altria Group, Inc.		PM USA		Non- Guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Assets
Cash and cash equivalents	$	3,639	$	—	$	35	$	—		$	3,674
Receivables	—		4		168		—			172
Inventories:
Leaf tobacco	—		624		395		—			1,019
Other raw materials	—		129		71		—			200
Work in process	—		10		400		—			410
Finished product	—		155		301		—			456
	—		918		1,167		—			2,085
Due from Altria Group, Inc. and subsidiaries	8		5,121		1,498		(6,627		)	—
Deferred income taxes	1		1,189		9		(56		)	1,143
Other current assets	250		66		90		(247		)	159
Total current assets	3,898		7,298		2,967		(6,930		)	7,233
Property, plant and equipment, at cost	—		3,113		1,671		—			4,784
Less accumulated depreciation	—		2,112		700		—			2,812
	—		1,001		971		—			1,972
Goodwill	—		—		5,285		—			5,285
Other intangible assets, net	—		2		12,042		—			12,044
Investment in SABMiller	5,850		—		—		—			5,850
Investment in consolidated subsidiaries	11,407		2,769		—		(14,176		)	—
Finance assets, net	—		—		1,360		—			1,360
Due from Altria Group, Inc. and subsidiaries	4,790		—		—		(4,790		)	—
Other assets	145		534		115		(326		)	468
Total Assets	$	26,090	$	11,604	$	22,740	$	(26,222	)	$	34,212

Condensed Consolidating Balance Sheets (Continued)

March 31, 2015

(in millions of dollars)

	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Liabilities
Current portion of long-term debt	$	1,000		$	—		$	—		$	—		$	1,000
Accounts payable	19			125			130			—			274
Accrued liabilities:
Marketing	—			512			93			—			605
Employment costs	12			10			45			—			67
Settlement charges	—			4,544			7			—			4,551
Other	266			451			229			(56		)	890
Income taxes	—			508			221			(247		)	482
Dividends payable	1,026			—			—			—			1,026
Due to Altria Group, Inc. and subsidiaries	6,257			354			16			(6,627		)	—
Total current liabilities	8,580			6,504			741			(6,930		)	8,895
Long-term debt	12,901			—			—			—			12,901
Deferred income taxes	1,638			—			4,595			(326		)	5,907
Accrued pension costs	232			—			746			—			978
Accrued postretirement health care costs	—			1,598			856			—			2,454
Due to Altria Group, Inc. and subsidiaries	—			—			4,790			(4,790		)	—
Other liabilities	206			152			157			—			515
Total liabilities	23,557			8,254			11,885			(12,046		)	31,650
Contingencies
Redeemable noncontrolling interest	—			—			34			—			34
Stockholders’ Equity
Common stock	935			—			9			(9		)	935
Additional paid-in capital	5,754			3,310			11,338			(14,648		)	5,754
Earnings reinvested in the business	26,271			377			1,067			(1,444		)	26,271
Accumulated other comprehensive losses	(2,945		)	(337		)	(1,588		)	1,925			(2,945		)
Cost of repurchased stock	(27,482		)	—			—			—			(27,482		)
Total stockholders’ equity attributable to Altria Group, Inc.	2,533			3,350			10,826			(14,176		)	2,533
Noncontrolling interests	—			—			(5		)	—			(5		)
Total stockholders’ equity	2,533			3,350			10,821			(14,176		)	2,528
Total Liabilities and Stockholders’ Equity	$	26,090		$	11,604		$	22,740		$	(26,222	)	$	34,212

Condensed Consolidating Balance Sheets

December 31, 2014

(in millions of dollars)

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

Condensed Consolidating Balance Sheets (Continued)

December 31, 2014

(in millions of dollars)

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

Condensed Consolidating Statements of Earnings and Comprehensive Earnings

For the Three Months Ended March 31, 2015

(in millions of dollars)

	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Net revenues	$	—		$	5,068		$	745	$	(9	)	$	5,804
Cost of sales	—			1,566			240		(9		)	1,797
Excise taxes on products	—			1,480			52		—			1,532
Gross profit	—			2,022			453		—			2,475
Marketing, administration and research costs	42			465			103		—			610
Operating (expense) income	(42		)	1,557			350		—			1,865
Interest and other debt expense (income), net	154			(1		)	56		—			209
Loss on early extinguishment of debt	228			—			—		—			228
Earnings from equity investment in SABMiller	(134		)	—			—		—			(134		)
(Loss) earnings before income taxes and equity earnings of subsidiaries	(290		)	1,558			294		—			1,562
(Benefit) provision for income taxes	(143		)	584			103		—			544
Equity earnings of subsidiaries	1,165			61			—		(1,226		)	—
Net earnings	1,018			1,035			191		(1,226		)	1,018
Net earnings attributable to noncontrolling interests	—			—			—		—			—
Net earnings attributable to Altria Group, Inc.	$	1,018		$	1,035		$	191	$	(1,226	)	$	1,018
Net earnings	$	1,018		$	1,035		$	191	$	(1,226	)	$	1,018
Other comprehensive (losses) earnings, net of deferred income taxes	(263		)	4			35		(39		)	(263		)
Comprehensive earnings	755			1,039			226		(1,265		)	755
Comprehensive earnings attributable to noncontrolling interests	—			—			—		—			—
Comprehensive earnings attributable to Altria Group, Inc.	$	755		$	1,039		$	226	$	(1,265	)	$	755

Condensed Consolidating Statements of Earnings and Comprehensive Earnings

For the Three Months Ended March 31, 2014

(in millions of dollars)

	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Net revenues	$	—		$	4,818		$	703	$	(4	)	$	5,517
Cost of sales	—			1,541			215		(4		)	1,752
Excise taxes on products	—			1,460			49		—			1,509
Gross profit	—			1,817			439		—			2,256
Marketing, administration and research costs	39			402			79		—			520
Asset impairment and exit costs	—			2			—		—			2
Operating (expense) income	(39		)	1,413			360		—			1,734
Interest and other debt expense (income), net	156			(64		)	61		—			153
Earnings from equity investment in SABMiller	(225		)	—			—		—			(225		)
Earnings before income taxes and equity earnings of subsidiaries	30			1,477			299		—			1,806
(Benefit) provision for income taxes	(23		)	547			107		—			631
Equity earnings of subsidiaries	1,122			53			—		(1,175		)	—
Net earnings	1,175			983			192		(1,175		)	1,175
Net earnings attributable to noncontrolling interests	—			—			—		—			—
Net earnings attributable to Altria Group, Inc.	$	1,175		$	983		$	192	$	(1,175	)	$	1,175
Net earnings	$	1,175		$	983		$	192	$	(1,175	)	$	1,175
Other comprehensive earnings, net of deferred income taxes	60			2			22		(24		)	60
Comprehensive earnings	1,235			985			214		(1,199		)	1,235
Comprehensive earnings attributable to noncontrolling interests	—			—			—		—			—
Comprehensive earnings attributable to Altria Group, Inc.	$	1,235		$	985		$	214	$	(1,199	)	$	1,235

Condensed Consolidating Statements of Cash Flows

For the Three Months Ended March 31, 2015

(in millions of dollars)

	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash Provided by Operating Activities
Net cash provided by operating activities	$	845		$	2,696		$	136		$	(1,179	)	$	2,498
Cash Provided by (Used in) Investing Activities
Capital expenditures	—			(15		)	(33		)	—			(48		)
Proceeds from finance assets	—			—			147			—			147
Other	—			10			(10		)	—			—
Net cash (used in) provided by investing activities	—			(5		)	104			—			99
Cash Provided by (Used in) Financing Activities
Long-term debt repaid	(793		)	—			—			—			(793		)
Repurchases of common stock	(192		)	—			—			—			(192		)
Dividends paid on common stock	(1,026		)	—			—			—			(1,026		)
Changes in amounts due to/from Altria Group, Inc. and subsidiaries	1,750			(1,634		)	(116		)	—			—
Premiums and fees related to early extinguishment of debt	(226		)	—			—			—			(226		)
Cash dividends paid to parent	—			(1,060		)	(119		)	1,179			—
Other	—			—			(7		)	—			(7		)
Net cash used in financing activities	(487		)	(2,694		)	(242		)	1,179			(2,244		)
Cash and cash equivalents:
Increase (decrease)	358			(3		)	(2		)	—			353
Balance at beginning of period	3,281			3			37			—			3,321
Balance at end of period	$	3,639		$	—		$	35		$	—		$	3,674

Condensed Consolidating Statements of Cash Flows

For the Three Months Ended March 31, 2014

(in millions of dollars)

	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash Provided by Operating Activities
Net cash provided by operating activities	$	1,076		$	2,360		$	91		$	(1,402	)	$	2,125
Cash Provided by (Used in) Investing Activities
Capital expenditures	—			(8		)	(19		)	—			(27		)
Proceeds from finance assets	—			—			98			—			98
Other	—			4			1			—			5
Net cash (used in) provided by investing activities	—			(4		)	80			—			76
Cash Provided by (Used in) Financing Activities
Long-term debt repaid	(525		)	—			—			—			(525		)
Repurchases of common stock	(272		)	—			—			—			(272		)
Dividends paid on common stock	(957		)	—			—			—			(957		)
Changes in amounts due to/from Altria Group, Inc. and subsidiaries	1,143			(1,391		)	248			—			—
Cash dividends paid to parent	—			(965		)	(437		)	1,402			—
Other	—			—			(2		)	—			(2		)
Net cash used in financing activities	(611		)	(2,356		)	(191		)	1,402			(1,756		)
Cash and cash equivalents:
Increase (decrease)	465			—			(20		)	—			445
Balance at beginning of period	3,114			1			60			—			3,175
Balance at end of period	$	3,579		$	1		$	40		$	—		$	3,620