Segment Reporting

3 Months Ended

Mar. 31, 2022

Segment Reporting [Abstract]

Segment Reporting

Segment Reporting

Our products include smokeable tobacco products, consisting of combustible cigarettes manufactured and sold by PM USA, and machine-made large cigars and pipe tobacco manufactured and sold by Middleton; oral tobacco products, consisting of MST and snus products manufactured and sold by USSTC, and oral nicotine pouches manufactured and sold by Helix. These products and services constitute our reportable segments of smokeable products and oral tobacco products at March 31, 2022. The financial services and the innovative tobacco products businesses, which include the heated tobacco business and Helix ROW, are included in all other.

Prior to the sale of our wine business on October 1, 2021, wine produced and/or sold by Ste. Michelle was a reportable segment.

Our chief operating decision maker (“CODM”) reviews operating companies income (loss) (“OCI”) to evaluate the performance of, and allocate resources to, our segments. OCI for our segments is defined as operating income before general corporate expenses and amortization of intangibles. Interest and other debt expense, net, along with 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 our CODM.

Segment data were as follows:

	For the Three Months Ended March 31,
(in millions)	2022		2021
Net Revenues:
Smokeable products	$	5,265	$	5,250
Oral tobacco products	613		626
Wine	—		150
All other	14		10
Net revenues	$	5,892	$	6,036
Earnings before Income Taxes:
OCI:
Smokeable products	$	2,559	$	2,372
Oral tobacco products	407		392
Wine	—		18
All other	(5)		(14)
Amortization of intangibles	(17)		(17)
General corporate expenses	(60)		(61)
Operating income	2,884		2,690
Interest and other debt expense, net	281		308
Net periodic benefit income, excluding service cost	(46)		(43)
Loss on early extinguishment of debt	—		649
(Income) losses from equity investments	(34)		(51)
(Gain) loss on Cronos-related financial instruments	10		(110)
Earnings before income taxes	$	2,673	$	1,937

The comparability of OCI for our reportable segments was affected by the following:

▪Non-Participating Manufacturer (“NPM”) Adjustment Items: We recorded pre-tax income for NPM adjustment items of $60 million and $32 million for the three months ended March 31, 2022 and 2021, respectively, to cost of sales in our 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 Master Settlement Agreement (such dispute resolutions are referred to as “NPM Adjustment Items” and are more fully described in Health Care Cost Recovery Litigation in Note 10. Contingencies).

▪Tobacco and Health and Certain Other Litigation Items: We recorded pre-tax charges related to tobacco and health and certain other litigation items of $12 million and $35 million for the three months ended March 31, 2022 and 2021, respectively, in our smokeable products segment. We included these costs in marketing, administration and research costs in our condensed consolidated statements of earnings. For further discussion, see Note 10. Contingencies.

▪Acquisition-Related Costs: We recorded pre-tax acquisition-related costs of $37 million for the three months ended March 31, 2021 in our oral tobacco products segment primarily for the settlement of an arbitration related to the 2019 on! transaction. We included these costs in marketing, administration and research costs in our condensed consolidated statements of earnings.