Segment Reporting

3 Months Ended

Mar. 31, 2017

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting:

The products of Altria Group, Inc.’s subsidiaries include smokeable tobacco products, consisting of cigarettes manufactured and sold by PM USA and Nat Sherman, machine-made large cigars and pipe tobacco manufactured and sold by Middleton and premium cigars sold by Nat Sherman; smokeless tobacco products manufactured and sold by USSTC; 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 (the “CODM”) reviews operating companies income to evaluate the performance of, and allocate resources to, the segments. Operating companies income for the segments is defined as operating income before 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 the CODM.

Segment data were as follows:

	For the Three Months Ended March 31,
	2017			2016
	(in millions)
Net revenues:
Smokeable products	$	5,458		$	5,422
Smokeless products	466			479
Wine	140			145
All other	19			20
Net revenues	$	6,083		$	6,066
Earnings before income taxes:
Operating companies income (loss):
Smokeable products	$	2,041		$	1,751
Smokeless products	249			280
Wine	21			28
All other	(13		)	(21		)
Amortization of intangibles	(5		)	(5		)
General corporate expenses	(46		)	(51		)
Corporate asset impairment and exit costs	—			(5		)
Operating income	2,247			1,977
Interest and other debt expense, net	(179		)	(200		)
Earnings from equity investment in AB InBev/SABMiller	23			66
Gain on AB InBev/SABMiller business combination	—			40
Earnings before income taxes	$	2,091		$	1,883

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

Non-Participating Manufacturer (“NPM”) Adjustment Items - Pre-tax (income) expense for NPM adjustment items was recorded in Altria Group, Inc.’s condensed consolidated statements of earnings as follows:

	For the Three Months Ended March 31,
	2017			2016
	(in millions)
Smokeable products segment	$	(8	)	$	12
Interest and other debt expense, net	7			6
Total	$	(1	)	$	18

NPM adjustment items result 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 (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) increases to cost of sales, which (increased) decreased operating companies income in the smokeable products segment.

Tobacco and Health Litigation Items - 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 Three Months Ended March 31,
	2017		2016
	(in millions)
Smokeable products segment	$	1	$	26
Interest and other debt expense, net	—		12
Total	$	1	$	38

During the first quarter of 2016, PM USA recorded pre-tax charges, primarily related to the Aspinall case, of $26 million in marketing, administration and research costs and $12 million in interest costs. For further discussion, see “Lights/Ultra Lights” Cases - State Trial Court Class Certification Settlements in Note 9. Contingencies.

Smokeless Products Recall - During the first quarter of 2017, USSTC voluntarily recalled certain smokeless tobacco products manufactured at its Franklin Park, Illinois facility due to a product tampering incident (the “Recall”). USSTC estimates that the Recall-related costs and the share impact from the Recall reduced smokeless products segment operating companies income by approximately $60 million in the first quarter of 2017.

Asset Impairment, Exit and Implementation Costs - See Note 2. Asset Impairment, Exit and Implementation Costs for a breakdown of these costs by segment.