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SEC Filings

8-K
ALTRIA GROUP, INC. filed this Form 8-K on 02/01/2018
Entire Document
 

Altria Group, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
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tax restructuring charges of $132 million, or $0.04 per share, substantially all of which result in cash expenditures. The charges consisted of employee separation costs of $117 million and other associated costs of $15 million. Total pre-tax charges related to the initiative have been completed.
For the year ended December 31, 2016, total pre-tax asset impairment and exit costs for the initiative of $125 million were recorded in the smokeable products segment ($100 million), smokeless products segment ($13 million), all other ($7 million) and general corporate ($5 million). In addition, for the year ended December 31, 2016, pre-tax implementation costs of $7 million were recorded in the smokeable products segment ($6 million) and smokeless products segment ($1 million). The pre-tax implementation costs were included in marketing, administration and research costs in Altria Group, Inc.’s consolidated statement of earnings.
Cash payments related to the initiative of $32 million were made during the year ended December 31, 2017, for total cash payments of $106 million since inception.
Note 5. Inventories
On January 1, 2017, Altria Group, Inc. adopted ASU No. 2015-11, Inventory (Topic 330): Simplifying the Measurement of Inventory, which requires inventory that is measured using the FIFO or average cost methods to be measured at the lower of cost and net realizable value. Previous guidance required inventory that was measured using the FIFO or average cost methods to be measured at the lower of cost or market. The adoption of this guidance did not have a material impact on Altria Group, Inc.’s consolidated financial statements.
The cost of approximately 59% and 62% of inventories at December 31, 2017 and 2016, respectively, was determined using the LIFO method. The stated LIFO amounts of inventories were approximately $0.7 billion lower than the current cost of inventories at December 31, 2017 and 2016.
Note 6. Investment in AB InBev/SABMiller
At December 31, 2017, Altria Group, Inc. had an approximate 10.2% ownership of AB InBev, consisting of approximately 185 million restricted shares of AB InBev (the “Restricted Shares”) and approximately 12 million ordinary shares of AB InBev. Altria Group, Inc. accounts for its investment in AB InBev under the equity method of accounting because Altria Group, Inc. has the ability to exercise significant influence over the operating and financial policies of AB InBev, including having active representation on AB InBev’s Board of Directors (“AB InBev Board”) and certain AB InBev Board Committees. Through this representation, Altria Group, Inc. participates in AB InBev policy making processes.
Altria Group, Inc. reports its share of AB InBev’s results using a one-quarter lag because AB InBev’s results are not available in time for Altria Group, Inc. to record them in the concurrent period.
Pre-tax earnings from Altria Group, Inc.’s equity investment in AB InBev were $532 million for the year ended December 31, 2017. As a result of the one-quarter lag and the timing of the
 
completion of the Transaction, no earnings from Altria Group, Inc.’s equity investment in AB InBev were recorded for the year ended December 31, 2016.
On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”). Consistent with the one-quarter lag for recording AB InBev’s results, in the first quarter of 2018 Altria Group, Inc. will record its share of AB InBev’s recorded fourth quarter 2017 estimated effect of the Tax Reform Act.
Summary financial data of AB InBev is as follows:
(in millions)
For Altria Group, Inc.’s Year Ended
December 31, 2017 (1)
Net revenues
$
56,004

Gross profit
$
34,376

Earnings from continuing operations
$
6,769

Net earnings
$
6,845

Net earnings attributable to AB InBev
$
5,473

(in millions)
At September 30, 2017 (1)
 
At October 10, 2016 (1)
Current assets
$
30,920

 
$
40,086

Long-term assets
$
213,696

 
$
223,701

Current liabilities
$
37,765

 
$
44,272

Long-term liabilities
$
134,236

 
$
139,112

Noncontrolling interests
$
10,639

 
$
9,177

(1) Reflecting the one-quarter lag: (i) summary financial data of AB InBev’s results for Altria Group, Inc.’s year ended December 31, 2017 include AB InBev’s results for the last three months of 2016 and the first nine months of 2017, and (ii) summary financial data of AB InBev’s financial position is disclosed at September 30, 2017 and October 10, 2016.
At December 31, 2017, Altria Group, Inc.’s carrying amount of its equity investment in AB InBev exceeded its share of AB InBev’s net assets attributable to equity holders of AB InBev by approximately $11.7 billion. Substantially all of this difference is comprised of goodwill and other indefinite-lived intangible assets (consisting primarily of trademarks).
The fair value of Altria Group, Inc.’s equity investment in AB InBev is based on: (i) unadjusted quoted prices in active markets for AB InBev’s ordinary shares and was classified in Level 1 of the fair value hierarchy and (ii) observable inputs other than Level 1 prices, such as quoted prices for similar assets for the Restricted Shares, and was classified in Level 2 of the fair value hierarchy. Altria Group, Inc. may, in certain instances, pledge or otherwise grant a security interest in all or part of its Restricted Shares. In the event the pledgee or security interest holder forecloses on the Restricted Shares, the relevant Restricted Shares will be automatically converted, one-for-one, into ordinary shares. Therefore, the fair value of each Restricted Share is based on the value of an ordinary share. The fair value of Altria Group, Inc.’s equity investment in AB InBev at December 31, 2017 and 2016 was $22.1 billion and $20.9 billion, respectively, compared


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