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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
_________________________


Segment data were as follows:
 
For the Years Ended December 31,
(in millions)
2017

 
2016

 
2015

Net revenues:
 
 
 
 
 
Smokeable products
$
22,636

 
$
22,851

 
$
22,792

Smokeless products
2,155

 
2,051

 
1,879

Wine
698

 
746

 
692

All other
87

 
96

 
71

Net revenues
$
25,576

 
$
25,744

 
$
25,434

Earnings before income taxes:
 
 
 
 
 
Operating companies
income (loss):
 
 
 
 
 
Smokeable products
$
8,408

 
$
7,768

 
$
7,569

Smokeless products
1,300

 
1,177

 
1,108

Wine
147

 
164

 
152

All other
(51
)
 
(99
)
 
(169
)
Amortization of intangibles
(21
)
 
(21
)
 
(21
)
General corporate expenses
(227
)
 
(222
)
 
(237
)
Reduction of PMI tax-related receivable

 

 
(41
)
Corporate asset impairment and exit costs

 
(5
)
 

Operating income
9,556

 
8,762

 
8,361

Interest and other debt expense, net
(705
)
 
(747
)
 
(817
)
Loss on early extinguishment of debt

 
(823
)
 
(228
)
Earnings from equity investment in AB InBev/SABMiller
532

 
795

 
757

Gain on AB InBev/SABMiller business combination
445

 
13,865

 
5

Earnings before income taxes
$
9,828

 
$
21,852

 
$
8,078

The smokeable products segment included net revenues of $21,900 million, $22,199 million and $22,193 million for the years ended December 31, 2017, 2016 and 2015, respectively, related to cigarettes and net revenues of $736 million, $652 million and $599 million for the years ended December 31, 2017, 2016 and 2015, respectively, related to cigars.
PM USA, USSTC, Middleton and Nat Sherman’s largest customer, McLane Company, Inc., accounted for approximately 26%, 25% and 26% of Altria Group, Inc.’s consolidated net revenues for the years ended December 31, 2017, 2016 and 2015, respectively. In addition, Core-Mark Holding Company, Inc. accounted for approximately 14%, 14% and 10% of Altria Group, Inc.’s consolidated net revenues for the years ended December 31, 2017, 2016 and 2015, respectively. Substantially all of these net revenues were reported in the smokeable products and smokeless products segments. Sales to three distributors accounted for approximately 67%, 69% and 66% of net revenues for the wine segment for the years ended December 31, 2017, 2016 and 2015, respectively.
 
Details of Altria Group, Inc.’s depreciation expense and capital expenditures were as follows:
 
For the Years Ended December 31,
(in millions)
2017

 
2016

 
2015

Depreciation expense:
 
 
 
 
 
Smokeable products
$
93

 
$
93

 
$
117

Smokeless products
29

 
26

 
27

Wine
40

 
36

 
32

General corporate and other
26

 
28

 
28

Total depreciation expense
$
188

 
$
183

 
$
204

Capital expenditures:
 
 
 
 
 
Smokeable products
$
39

 
$
55

 
$
56

Smokeless products
61

 
52

 
113

Wine
53

 
59

 
42

General corporate and other
46

 
23

 
18

Total capital expenditures
$
199

 
$
189

 
$
229

The comparability of operating companies income for the reportable segments was affected by the following:
Non-Participating Manufacturer (“NPM”) Adjustment Items: For the years ended December 31, 2017, 2016 and 2015, pre-tax expense (income) for NPM adjustment items was recorded in Altria Group, Inc.’s consolidated statements of earnings as follows:
(in millions)
 
2017

 
2016

 
2015

Smokeable products segment
 
$
(5
)

$
12


$
(97
)
Interest and other debt expense, net
 
9


6


13

Total
 
$
4

 
$
18

 
$
(84
)
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 collectively as “NPM Adjustment Items”). For the year ended December 31, 2015, the NPM Adjustment Items primarily relate to the resolution of the dispute with New York. For further discussion, see Health Care Cost Recovery Litigation - NPM Adjustment Disputes in Note 18. Contingencies. The amounts shown in the table above for the smokeable products segment were recorded by PM USA as increases (reductions) to cost of sales, which decreased (increased) operating companies income in the smokeable products segment.


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