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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
_________________________


Tobacco and Health Litigation Items: For the years ended December 31, 2017, 2016 and 2015, pre-tax charges related to certain tobacco and health litigation items were recorded in Altria Group, Inc.’s consolidated statements of earnings as follows:
(in millions)
 
2017

 
2016

 
2015

Smokeable products segment
 
$
72

 
$
88

 
$
127

Interest and other debt expense, net
 
8

 
17

 
23

Total
 
$
80

 
$
105

 
$
150

During 2017, PM USA recorded pre-tax charges of $72 million in marketing, administration and research costs and $8 million in interest costs, substantially all of which related to 11 Engle progeny cases. For further discussion, see Note 18. Contingencies.
During 2016, PM USA recorded pre-tax charges of $88 million in marketing, administration and research costs, primarily related to settlements in the Miner and Aspinall cases totaling approximately $67 million, and $16 million related to a judgment in the Merino case. In addition, during 2016, PM USA recorded $17 million in interest costs primarily related to Aspinall. For further discussion, see Note 18. Contingencies.
During 2015, PM USA recorded pre-tax charges in marketing, administration and research costs in seven state Engle progeny cases and Schwarz of $59 million and $25 million, respectively, as well as $14 million and $9 million, respectively, in interest costs related to these cases. Additionally in 2015, PM USA and certain other cigarette manufacturers reached an agreement to resolve approximately 415 pending federal Engle progeny cases. As a result of the agreement, PM USA recorded a pre-tax provision of approximately $43 million in marketing, administration and research costs. For further discussion, see Note 18. Contingencies.
 
Settlement for Lump Sum Pension Payments: In the third quarter of 2017, Altria Group, Inc. made a voluntary, limited-time offer to former employees with vested benefits in the Altria Retirement Plan who had not commenced receiving benefit payments and who met certain other conditions. Eligible participants were offered the opportunity to make a one-time election to receive their pension benefit as a single lump sum payment or as a monthly annuity. As a result of the 2017 lump sum distributions, a one-time pre-tax settlement charge of $81 million was recorded in 2017 in Altria Group, Inc.’s consolidated statement of earnings as follows:
For the Year Ended December 31, 2017
(in millions)
Cost of Sales

 
Marketing, Administration and Research Costs

 
Total

Smokeable products
$
39

 
$
18

 
$
57

Smokeless products

 
16

 
16

General corporate and other

 
8

 
8

Total
$
39

 
$
42

 
$
81

For further discussion, see Note 16. Benefit Plans.
Smokeless Products Recall: During 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 reduced smokeless products segment operating companies income by approximately $60 million in 2017.
Asset Impairment, Exit and Implementation Costs: See Note 4. Asset Impairment, Exit and Implementation Costs for a breakdown of these costs by segment.
Note 16. Benefit Plans
Subsidiaries of Altria Group, Inc. sponsor noncontributory defined benefit pension plans covering the majority of all employees of Altria Group, Inc. and its subsidiaries. However, employees hired on or after a date specific to their employee group are not eligible to participate in these noncontributory defined benefit pension plans but are instead eligible to participate in a defined contribution plan with enhanced benefits. This transition for new hires occurred from October 1, 2006 to January 1, 2008. In addition, effective January 1, 2010, certain employees of UST’s subsidiaries and Middleton who were participants in noncontributory defined benefit pension plans ceased to earn additional benefit service under those plans and became eligible to participate in a defined contribution plan with enhanced benefits. Altria Group, Inc. and its subsidiaries also provide postretirement health care and other benefits to the majority of retired employees.
The plan assets and benefit obligations of Altria Group, Inc.’s pension plans and postretirement plans are measured at December 31 of each year. In December 2017, Altria Group, Inc. made a contribution of $270 million to a trust to fund certain


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