Condensed Consolidating Financial Information

12 Months Ended

Dec. 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 December 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 December 31, 2016 and 2015, condensed consolidating statements of earnings and comprehensive earnings for the years ended December 31, 2016, 2015 and 2014, and condensed consolidating statements of cash flows for the years ended December 31, 2016, 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

(in millions of dollars)

____________________________

at December 31, 2016	Altria Group, Inc.		PM USA		Non- Guarantor Subsidiaries		Total Consolidating Adjustments			Consolidated
Assets
Cash and cash equivalents	$	4,521	$	1	$	47	$	—		$	4,569
Receivables	—		8		143		—			151
Inventories:
Leaf tobacco	—		541		351		—			892
Other raw materials	—		111		53		—			164
Work in process	—		3		509		—			512
Finished product	—		112		371		—			483
	—		767		1,284		—			2,051
Due from Altria Group, Inc. and subsidiaries	—		3,797		1,511		(5,308		)	—
Other current assets	170		118		201		—			489
Total current assets	4,691		4,691		3,186		(5,308		)	7,260
Property, plant and equipment, at cost	—		2,971		1,864		—			4,835
Less accumulated depreciation	—		2,073		804		—			2,877
	—		898		1,060		—			1,958
Goodwill	—		—		5,285		—			5,285
Other intangible assets, net	—		2		12,034		—			12,036
Investment in AB InBev	17,852		—		—		—			17,852
Investment in consolidated subsidiaries	11,636		2,632		—		(14,268		)	—
Finance assets, net	—		—		1,028		—			1,028
Due from Altria Group, Inc. and subsidiaries	4,790		—		—		(4,790		)	—
Other assets	18		1,748		131		(1,384		)	513
Total Assets	$	38,987	$	9,971	$	22,724	$	(25,750	)	$	45,932

Condensed Consolidating Balance Sheets (Continued)

(in millions of dollars)

____________________________

at December 31, 2016	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Liabilities
Accounts payable	$	1		$	92		$	332		$	—		$	425
Accrued liabilities:
Marketing	—			619			128			—			747
Employment costs	104			14			171			—			289
Settlement charges	—			3,696			5			—			3,701
Other	261			438			326			—			1,025
Dividends payable	1,188			—			—			—			1,188
Due to Altria Group, Inc. and subsidiaries	5,030			237			41			(5,308		)	—
Total current liabilities	6,584			5,096			1,003			(5,308		)	7,375
Long-term debt	13,881			—			—			—			13,881
Deferred income taxes	5,424			—			4,376			(1,384		)	8,416
Accrued pension costs	207			—			598			—			805
Accrued postretirement health care costs	—			1,453			764			—			2,217
Due to Altria Group, Inc. and subsidiaries	—			—			4,790			(4,790		)	—
Other liabilities	121			146			160			—			427
Total liabilities	26,217			6,695			11,691			(11,482		)	33,121
Contingencies
Redeemable noncontrolling interest	—			—			38			—			38
Stockholders’ Equity
Common stock	935			—			9			(9		)	935
Additional paid-in capital	5,893			3,310			11,585			(14,895		)	5,893
Earnings reinvested in the business	36,906			237			1,118			(1,355		)	36,906
Accumulated other comprehensive losses	(2,052		)	(271		)	(1,720		)	1,991			(2,052		)
Cost of repurchased stock	(28,912		)	—			—			—			(28,912		)
Total stockholders’ equity attributable to Altria Group, Inc.	12,770			3,276			10,992			(14,268		)	12,770
Noncontrolling interests	—			—			3			—			3
Total stockholders’ equity	12,770			3,276			10,995			(14,268		)	12,773
Total Liabilities and Stockholders’ Equity	$	38,987		$	9,971		$	22,724		$	(25,750	)	$	45,932

Condensed Consolidating Balance Sheets

(in millions of dollars)

____________________________

at December 31, 2015	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		)	—
Other current assets	284		65		112		(74		)	387
Total current assets	2,597		4,704		3,312		(5,702		)	4,911
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		1,804		138		(1,431		)	531
Total Assets	$	24,538	$	10,170	$	23,037	$	(26,286	)	$	31,459

Condensed Consolidating Balance Sheets (Continued)

(in millions of dollars)

____________________________

at December 31, 2015	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	255			616			276			(74		)	1,073
Dividends payable	1,110			—			—			—			1,110
Due to Altria Group, Inc. and subsidiaries	5,427			191			10			(5,628		)	—
Total current liabilities	6,813			5,093			866			(5,702		)	7,070
Long-term debt	12,831			—			12			—			12,843
Deferred income taxes	1,646			—			4,452			(1,431		)	4,667
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			(11,923		)	28,549
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		$	(26,286	)	$	31,459

Condensed Consolidating Statements of Earnings and Comprehensive Earnings

(in millions of dollars)

_____________________________

for the year ended December 31, 2016	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net revenues	$	—		$	22,146		$	3,633		$	(35	)	$	25,744
Cost of sales	—			6,628			1,153			(35		)	7,746
Excise taxes on products	—			6,187			220			—			6,407
Gross profit	—			9,331			2,260			—			11,591
Marketing, administration and research costs	165			1,996			489			—			2,650
Asset impairment and exit costs	5			97			77			—			179
Operating (expense) income	(170		)	7,238			1,694			—			8,762
Interest and other debt expense, net	519			10			218			—			747
Loss on early extinguishment of debt	823			—			—			—			823
Earnings from equity investment in SABMiller	(795		)	—			—			—			(795		)
Gain on AB InBev/SABMiller business combination	(13,865		)	—			—			—			(13,865		)
Earnings before income taxes and equity earnings of subsidiaries	13,148			7,228			1,476			—			21,852
Provision for income taxes	4,453			2,631			524			—			7,608
Equity earnings of subsidiaries	5,544			268			—			(5,812		)	—
Net earnings	14,239			4,865			952			(5,812		)	14,244
Net earnings attributable to noncontrolling interests	—			—			(5		)	—			(5		)
Net earnings attributable to Altria Group, Inc.	$	14,239		$	4,865		$	947		$	(5,812	)	$	14,239
Net earnings	$	14,239		$	4,865		$	952		$	(5,812	)	$	14,244
Other comprehensive earnings (losses), net of deferred income taxes	1,228			(16		)	(28		)	44			1,228
Comprehensive earnings	15,467			4,849			924			(5,768		)	15,472
Comprehensive earnings attributable to noncontrolling interests	—			—			(5		)	—			(5		)
Comprehensive earnings attributable to Altria Group, Inc.	$	15,467		$	4,849		$	919		$	(5,768	)	$	15,467

Condensed Consolidating Statements of Earnings and Comprehensive Earnings

(in millions of dollars)

_____________________________

for the year ended December 31, 2015	Altria Group, Inc.			PM USA		Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net revenues	$	—		$	22,133	$	3,342		$	(41	)	$	25,434
Cost of sales	—			6,664		1,117			(41		)	7,740
Excise taxes on products	—			6,369		211			—			6,580
Gross profit	—			9,100		2,014			—			11,114
Marketing, administration and research costs	189			2,094		425			—			2,708
Reduction of PMI tax-related receivable	41			—		—			—			41
Asset impairment and exit costs	—			—		4			—			4
Operating (expense) income	(230		)	7,006		1,585			—			8,361
Interest and other debt expense, net	560			33		224			—			817
Loss on early extinguishment of debt	228			—		—			—			228
Earnings from equity investment in SABMiller	(757		)	—		—			—			(757		)
Gain on AB InBev/SABMiller business combination	(5		)	—		—			—			(5		)
(Loss) earnings before income taxes and equity earnings of subsidiaries	(256		)	6,973		1,361			—			8,078
(Benefit) provision for income taxes	(184		)	2,536		483			—			2,835
Equity earnings of subsidiaries	5,313			268		—			(5,581		)	—
Net earnings	5,241			4,705		878			(5,581		)	5,243
Net earnings attributable to noncontrolling interests	—			—		(2		)	—			(2		)
Net earnings attributable to Altria Group, Inc.	$	5,241		$	4,705	$	876		$	(5,581	)	$	5,241
Net earnings	$	5,241		$	4,705	$	878		$	(5,581	)	$	5,243
Other comprehensive (losses) earnings, net of deferred income taxes	(598		)	86		(69		)	(17		)	(598		)
Comprehensive earnings	4,643			4,791		809			(5,598		)	4,645
Comprehensive earnings attributable to noncontrolling interests	—			—		(2		)	—			(2		)
Comprehensive earnings attributable to Altria Group, Inc.	$	4,643		$	4,791	$	807		$	(5,598	)	$	4,643

Condensed Consolidating Statements of Earnings and Comprehensive Earnings

(in millions of dollars)

_____________________________

for the year ended December 31, 2014	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Net revenues	$	—		$	21,298		$	3,267		$	(43	)	$	24,522
Cost of sales	—			6,722			1,106			(43		)	7,785
Excise taxes on products	—			6,358			219			—			6,577
Gross profit	—			8,218			1,942			—			10,160
Marketing, administration and research costs	231			1,889			419			—			2,539
Reduction of Mondelēz tax-related receivable	2			—			—			—			2
Asset impairment and exit costs	—			(6		)	5			—			(1		)
Operating (expense) income	(233		)	6,335			1,518			—			7,620
Interest and other debt expense (income), net	614			(46		)	240			—			808
Loss on early extinguishment of debt	—			—			44			—			44
Earnings from equity investment in SABMiller	(1,006		)	—			—			—			(1,006		)
Earnings before income taxes and equity earnings of subsidiaries	159			6,381			1,234			—			7,774
(Benefit) provision for income taxes	(119		)	2,381			442			—			2,704
Equity earnings of subsidiaries	4,792			244			—			(5,036		)	—
Net earnings	5,070			4,244			792			(5,036		)	5,070
Net earnings attributable to noncontrolling interests	—			—			—			—			—
Net earnings attributable to Altria Group, Inc.	$	5,070		$	4,244		$	792		$	(5,036	)	$	5,070
Net earnings	$	5,070		$	4,244		$	792		$	(5,036	)	$	5,070
Other comprehensive losses, net of deferred income taxes	(1,304		)	(110		)	(642		)	752			(1,304		)
Comprehensive earnings	3,766			4,134			150			(4,284		)	3,766
Comprehensive earnings attributable to noncontrolling interests	—			—			—			—			—
Comprehensive earnings attributable to Altria Group, Inc.	$	3,766		$	4,134		$	150		$	(4,284	)	$	3,766

Condensed Consolidating Statements of Cash Flows

(in millions of dollars)

_____________________________

for the year ended December 31, 2016	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash Provided by Operating Activities
Net cash provided by operating activities	$	4,326		$	5,138		$	319		$	(5,992	)	$	3,791
Cash Provided by (Used in) Investing Activities
Capital expenditures	—			(45		)	(144		)	—			(189		)
Proceeds from finance assets	—			—			231			—			231
Proceeds from AB InBev/SABMiller business combination	4,773			—			—			—			4,773
Purchase of AB InBev ordinary shares	(1,578		)	—			—			—			(1,578		)
Payment for derivative financial instrument	(3		)	—			—			—			(3		)
Proceeds from derivative financial instruments	510			—			—			—			510
Other	—			—			(36		)	—			(36		)
Net cash provided by (used in) investing activities	3,702			(45		)	51			—			3,708
Cash Provided by (Used in) Financing Activities
Long-term debt issued	1,976			—			—			—			1,976
Long-term debt repaid	(933		)	—			—			—			(933		)
Repurchases of common stock	(1,030		)	—			—			—			(1,030		)
Dividends paid on common stock	(4,512		)	—			—			—			(4,512		)
Changes in amounts due to/from Altria Group, Inc. and subsidiaries	(530		)	(28		)	558			—			—
Premiums and fees related to early extinguishment of debt	(809		)	—			—			—			(809		)
Cash dividends paid to parent	—			(5,064		)	(928		)	5,992			—
Other	18			—			(9		)	—			9
Net cash used in financing activities	(5,820		)	(5,092		)	(379		)	5,992			(5,299		)
Cash and cash equivalents:
Increase (decrease)	2,208			1			(9		)	—			2,200
Balance at beginning of year	2,313			—			56			—			2,369
Balance at end of year	$	4,521		$	1		$	47		$	—		$	4,569

Condensed Consolidating Statements of Cash Flows

(in millions of dollars)

_____________________________

for the year ended December 31, 2015	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash Provided by Operating Activities
Net cash provided by operating activities	$	5,085		$	5,204		$	961		$	(5,440	)	$	5,810
Cash Provided by (Used in) Investing Activities
Capital expenditures	—			(51		)	(178		)	—			(229		)
Proceeds from finance assets	—			—			354			—			354
Payment for derivative financial instrument	(132		)	—			—			—			(132		)
Other	—			10			(18		)	—			(8		)
Net cash (used in) provided by investing activities	(132		)	(41		)	158			—			(15		)
Cash Provided by (Used in) Financing Activities
Long-term debt repaid	(1,793		)	—			—			—			(1,793		)
Repurchases of common stock	(554		)	—			—			—			(554		)
Dividends paid on common stock	(4,179		)	—			—			—			(4,179		)
Changes in amounts due to/from Altria Group, Inc. and subsidiaries	814			(495		)	(319		)	—			—
Premiums and fees related to early extinguishment of debt	(226		)	—			—			—			(226		)
Cash dividends paid to parent	—			(4,671		)	(769		)	5,440			—
Other	17			—			(12		)	—			5
Net cash used in financing activities	(5,921		)	(5,166		)	(1,100		)	5,440			(6,747		)
Cash and cash equivalents:
(Decrease) increase	(968		)	(3		)	19			—			(952		)
Balance at beginning of year	3,281			3			37			—			3,321
Balance at end of year	$	2,313		$	—		$	56		$	—		$	2,369

Condensed Consolidating Statements of Cash Flows

(in millions of dollars)

_____________________________

for the year ended December 31, 2014	Altria Group, Inc.			PM USA			Non- Guarantor Subsidiaries			Total Consolidating Adjustments			Consolidated
Cash Provided by Operating Activities
Net cash provided by operating activities	$	4,924		$	4,451		$	707		$	(5,419	)	$	4,663
Cash Provided by (Used in) Investing Activities
Capital expenditures	—			(44		)	(119		)	—			(163		)
Acquisition of Green Smoke, net of acquired cash	—			—			(102		)	—			(102		)
Proceeds from finance assets	—			—			369			—			369
Other	—			70			3			—			73
Net cash provided by investing activities	—			26			151			—			177
Cash Provided by (Used in) Financing Activities
Long-term debt issued	999			—			—			—			999
Long-term debt repaid	(525		)	—			(300		)	—			(825		)
Repurchases of common stock	(939		)	—			—			—			(939		)
Dividends paid on common stock	(3,892		)	—			—			—			(3,892		)
Changes in amounts due to/from Altria Group, Inc. and subsidiaries	(411		)	(351		)	762			—			—
Premiums and fees related to early extinguishment of debt	—			—			(44		)	—			(44		)
Cash dividends paid to parent	—			(4,124		)	(1,295		)	5,419			—
Other	11			—			(4		)	—			7
Net cash used in financing activities	(4,757		)	(4,475		)	(881		)	5,419			(4,694		)
Cash and cash equivalents:
Increase (decrease)	167			2			(23		)	—			146
Balance at beginning of year	3,114			1			60			—			3,175
Balance at end of year	$	3,281		$	3		$	37		$	—		$	3,321