Segment Reporting

6 Months Ended

Jun. 30, 2019

Segment Reporting:

The products of Altria’s subsidiaries include smokeable tobacco products, consisting of combustible 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, consisting of moist smokeless tobacco and snus products manufactured and sold by USSTC; and wine produced and/or distributed by Ste. Michelle. The products and services of these subsidiaries constitute Altria’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’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, net periodic benefit income/cost, excluding service cost, 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 Six Months Ended June 30,						For the Three Months Ended June 30,
	2019			2018			2019			2018
	(in millions)
Net revenues:
Smokeable products	$	10,788		$	10,960		$	5,853		$	5,546
Smokeless products	1,142			1,104			602			579
Wine	316			308			165			166
All other	1			41			(1		)	14
Net revenues	$	12,247		$	12,413		$	6,619		$	6,305
Earnings before income taxes:
Operating companies income (loss):
Smokeable products	$	4,303		$	4,239		$	2,371		$	2,201
Smokeless products	778			715			420			377
Wine	34			44			19			27
All other	(35		)	(83		)	(23		)	(57		)
Amortization of intangibles	(16		)	(10		)	(8		)	(5		)
General corporate expenses	(108		)	(91		)	(62		)	(45		)
Corporate asset impairment and exit costs	(1		)	—			—			—
Operating income	4,955			4,814			2,717			2,498
Interest and other debt expense, net	(696		)	(344		)	(312		)	(178		)
Net periodic benefit income, excluding service cost	16			16			15			9
Earnings from equity investments	533			570			447			228
Loss on Cronos-related financial instruments	(691		)	—			(266		)	—
Loss on ABI/SABMiller business combination	—			(33		)	—			—
Earnings before income taxes	$	4,117		$	5,023		$	2,601		$	2,557

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

Non-Participating Manufacturer (“NPM”) Adjustment Items - For the six and three months ended June 30, 2018, pre-tax income of $145 million and $77 million, respectively, for NPM adjustment items was recorded by PM USA as a reduction to cost of sales, which increased operating companies income in the smokeable products segment. NPM adjustment items result from the resolutions of certain disputes with states and territories related to the NPM adjustment provision under the 1998 Master Settlement Agreement (such dispute resolutions are referred to as “NPM Adjustment Items” and are more fully described in Health Care Cost Recovery Litigation - NPM Adjustment Disputes in Note 12. Contingencies).

Tobacco and Health Litigation Items - Pre-tax charges related to certain tobacco and health litigation items were recorded in Altria’s condensed consolidated statements of earnings as follows:



	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2019		2018		2019		2018
	(in millions)
Smokeable products segment	$	40	$	84	$	25	$	60
Interest and other debt expense, net	5		14		3		10
Total	$	45	$	98	$	28	$	70

The amounts shown in the table above for the smokeable products segment were recorded in marketing, administration and research costs. For further discussion, see Note 12. Contingencies.

Asset Impairment, Exit and Implementation Costs - See Note 3. Asset Impairment, Exit and Implementation Costs for a breakdown of these costs by segment.