Condensed Consolidating Financial Information

3 Months Ended

Mar. 31, 2016

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, 2016, 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, 2016 and December 31, 2015, condensed consolidating statements of earnings and comprehensive earnings for the three months ended March 31, 2016 and 2015, and condensed consolidating statements of cash flows for the three months ended March 31, 2016 and 2015 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, 2016

(in millions of dollars)

	Altria Group, Inc.		PM USA		Non- Guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Assets
Cash and cash equivalents	$	3,749	$	—	$	66	$	—		$	3,815
Receivables	—		6		98		—			104
Inventories:
Leaf tobacco	—		594		400		—			994
Other raw materials	—		118		60		—			178
Work in process	—		8		428		—			436
Finished product	—		157		343		—			500
	—		877		1,231		—			2,108
Due from Altria Group, Inc. and subsidiaries	16		5,129		1,820		(6,965		)	—
Deferred income taxes	—		1,268		7		(100		)	1,175
Other current assets	301		21		80		(106		)	296
Total current assets	4,066		7,301		3,302		(7,171		)	7,498
Property, plant and equipment, at cost	—		3,069		1,780		—			4,849
Less accumulated depreciation	—		2,141		753		—			2,894
	—		928		1,027		—			1,955
Goodwill	—		—		5,285		—			5,285
Other intangible assets, net	—		2		12,021		—			12,023
Investment in SABMiller	5,743		—		—		—			5,743
Investment in consolidated subsidiaries	11,131		2,709		—		(13,840		)	—
Finance assets, net	—		—		1,165		—			1,165
Due from Altria Group, Inc. and subsidiaries	4,790		—		—		(4,790		)	—
Other assets	19		571		141		(337		)	394
Total Assets	$	25,749	$	11,511	$	22,941	$	(26,138	)	$	34,063

Condensed Consolidating Balance Sheets (Continued)

March 31, 2016

(in millions of dollars)

	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Liabilities
Current portion of long-term debt	$	—		$	—		$	4		$	—		$	4
Accounts payable	—			107			101			—			208
Accrued liabilities:
Marketing	—			578			109			—			687
Employment costs	66			5			66			—			137
Settlement charges	—			4,753			7			—			4,760
Other	323			569			329			(100		)	1,121
Income taxes	—			522			174			(106		)	590
Dividends payable	1,109			—			—			—			1,109
Due to Altria Group, Inc. and subsidiaries	6,720			220			25			(6,965		)	—
Total current liabilities	8,218			6,754			815			(7,171		)	8,616
Long-term debt	12,834			—			12			—			12,846
Deferred income taxes	1,638			—			4,305			(337		)	5,606
Accrued pension costs	204			—			1,275			—			1,479
Accrued postretirement health care costs	—			1,483			831			—			2,314
Due to Altria Group, Inc. and subsidiaries	—			—			4,790			(4,790		)	—
Other liabilities	110			130			177			—			417
Total liabilities	23,004			8,367			12,205			(12,298		)	31,278
Contingencies
Redeemable noncontrolling interest	—			—			37			—			37
Stockholders’ Equity
Common stock	935			—			9			(9		)	935
Additional paid-in capital	5,818			3,310			11,446			(14,756		)	5,818
Earnings reinvested in the business	27,367			106			1,089			(1,195		)	27,367
Accumulated other comprehensive losses	(3,327		)	(272		)	(1,848		)	2,120			(3,327		)
Cost of repurchased stock	(28,048		)	—			—			—			(28,048		)
Total stockholders’ equity attributable to Altria Group, Inc.	2,745			3,144			10,696			(13,840		)	2,745
Noncontrolling interests	—			—			3			—			3
Total stockholders’ equity	2,745			3,144			10,699			(13,840		)	2,748
Total Liabilities and Stockholders’ Equity	$	25,749		$	11,511		$	22,941		$	(26,138	)	$	34,063

Condensed Consolidating Balance Sheets

December 31, 2015

(in millions of dollars)

	Altria Group, Inc.		PM USA		Non- Guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Assets
Cash and cash equivalents	$	2,313	$	—	$	56	$	—		$	2,369
Receivables	—		7		117		—			124
Inventories:
Leaf tobacco	—		562		395		—			957
Other raw materials	—		123		58		—			181
Work in process	—		5		439		—			444
Finished product	—		121		328		—			449
	—		811		1,220		—			2,031
Due from Altria Group, Inc. and subsidiaries	—		3,821		1,807		(5,628		)	—
Deferred income taxes	—		1,268		7		(100		)	1,175
Other current assets	284		65		112		(74		)	387
Total current assets	2,597		5,972		3,319		(5,802		)	6,086
Property, plant and equipment, at cost	—		3,102		1,775		—			4,877
Less accumulated depreciation	—		2,157		738		—			2,895
	—		945		1,037		—			1,982
Goodwill	—		—		5,285		—			5,285
Other intangible assets, net	—		2		12,026		—			12,028
Investment in SABMiller	5,483		—		—		—			5,483
Investment in consolidated subsidiaries	11,648		2,715		—		(14,363		)	—
Finance assets, net	—		—		1,239		—			1,239
Due from Altria Group, Inc. and subsidiaries	4,790		—		—		(4,790		)	—
Other assets	20		536		131		(327		)	360
Total Assets	$	24,538	$	10,170	$	23,037	$	(25,282	)	$	32,463

Condensed Consolidating Balance Sheets (Continued)

December 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	$	—		$	—		$	4		$	—		$	4
Accounts payable	3			104			293			—			400
Accrued liabilities:
Marketing	—			586			109			—			695
Employment costs	18			11			169			—			198
Settlement charges	—			3,585			5			—			3,590
Other	354			616			285			(174		)	1,081
Dividends payable	1,110			—			—			—			1,110
Due to Altria Group, Inc. and subsidiaries	5,427			191			10			(5,628		)	—
Total current liabilities	6,912			5,093			875			(5,802		)	7,078
Long-term debt	12,831			—			12			—			12,843
Deferred income taxes	1,547			—			4,443			(327		)	5,663
Accrued pension costs	215			—			1,062			—			1,277
Accrued postretirement health care costs	—			1,460			785			—			2,245
Due to Altria Group, Inc. and subsidiaries	—			—			4,790			(4,790		)	—
Other liabilities	153			126			168			—			447
Total liabilities	21,658			6,679			12,135			(10,919		)	29,553
Contingencies
Redeemable noncontrolling interest	—			—			37			—			37
Stockholders’ Equity
Common stock	935			—			9			(9		)	935
Additional paid-in capital	5,813			3,310			11,456			(14,766		)	5,813
Earnings reinvested in the business	27,257			436			1,099			(1,535		)	27,257
Accumulated other comprehensive losses	(3,280		)	(255		)	(1,692		)	1,947			(3,280		)
Cost of repurchased stock	(27,845		)	—			—			—			(27,845		)
Total stockholders’ equity attributable to Altria Group, Inc.	2,880			3,491			10,872			(14,363		)	2,880
Noncontrolling interests	—			—			(7		)	—			(7		)
Total stockholders’ equity	2,880			3,491			10,865			(14,363		)	2,873
Total Liabilities and Stockholders’ Equity	$	24,538		$	10,170		$	23,037		$	(25,282	)	$	32,463

Condensed Consolidating Statements of Earnings and Comprehensive Earnings

For the Three Months Ended March 31, 2016

(in millions of dollars)

	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net revenues	$	—		$	5,265		$	810		$	(9	)	$	6,066
Cost of sales	—			1,642			241			(9		)	1,874
Excise taxes on products	—			1,487			49			—			1,536
Gross profit	—			2,136			520			—			2,656
Marketing, administration and research costs	36			415			108			—			559
Asset impairment and exit costs	5			94			21			—			120
Operating (expense) income	(41		)	1,627			391			—			1,977
Interest and other debt expense, net	129			15			56			—			200
Earnings from equity investment in SABMiller	(66		)	—			—			—			(66		)
Gain on derivative financial instrument	(40		)	—			—			—			(40		)
(Loss) earnings before income taxes and equity earnings of subsidiaries	(64		)	1,612			335			—			1,883
(Benefit) provision for income taxes	(49		)	603			111			—			665
Equity earnings of subsidiaries	1,232			60			—			(1,292		)	—
Net earnings	1,217			1,069			224			(1,292		)	1,218
Net earnings attributable to noncontrolling interests	—			—			(1		)	—			(1		)
Net earnings attributable to Altria Group, Inc.	$	1,217		$	1,069		$	223		$	(1,292	)	$	1,217
Net earnings	$	1,217		$	1,069		$	224		$	(1,292	)	$	1,218
Other comprehensive losses, net of deferred income taxes	(47		)	(17		)	(156		)	173			(47		)
Comprehensive earnings	1,170			1,052			68			(1,119		)	1,171
Comprehensive earnings attributable to noncontrolling interests	—			—			(1		)	—			(1		)
Comprehensive earnings attributable to Altria Group, Inc.	$	1,170		$	1,052		$	67		$	(1,119	)	$	1,170

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 Cash Flows

For the Three Months Ended March 31, 2016

(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	$	1,433		$	2,780		$	108		$	(1,632	)	$	2,689
Cash Provided by (Used in) Investing Activities
Capital expenditures	—			(7		)	(19		)	—			(26		)
Proceeds from finance assets	—			—			56			—			56
Other	—			—			4			—			4
Net cash (used in) provided by investing activities	—			(7		)	41			—			34
Cash Provided by (Used in) Financing Activities
Repurchases of common stock	(168		)	—			—			—			(168		)
Dividends paid on common stock	(1,108		)	—			—			—			(1,108		)
Changes in amounts due to/from Altria Group, Inc. and subsidiaries	1,279			(1,374		)	95			—			—
Cash dividends paid to parent	—			(1,399		)	(233		)	1,632			—
Other	—			—			(1		)	—			(1		)
Net cash provided by (used in) financing activities	3			(2,773		)	(139		)	1,632			(1,277		)
Cash and cash equivalents:
Increase	1,436			—			10			—			1,446
Balance at beginning of period	2,313			—			56			—			2,369
Balance at end of period	$	3,749		$	—		$	66		$	—		$	3,815

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