XML 29 R16.htm IDEA: XBRL DOCUMENT v3.21.2
Segment Reporting
 6 Months Ended
Jun. 30, 2021
Segment Reporting [Abstract]  
Segment Reporting Segment Reporting
The products of Altria’s subsidiaries 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; and wine produced and/or distributed by Ste. Michelle. The products and services of these subsidiaries constitute Altria’s reportable segments of smokeable products, oral tobacco products and wine. The financial services and the innovative tobacco products businesses, which include the heated tobacco business and Helix ROW, are included in all other.
Altria’s chief operating decision maker (the “CODM”) reviews operating companies income (loss) (“OCI”) to evaluate the performance of, and allocate resources to, the segments. OCI 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,
(in millions)2021202020212020
Net Revenues:
Smokeable products$11,300 $11,209 $6,050 $5,603 
Oral tobacco products1,319 1,261 693 660 
Wine317 277 167 131 
All other36 (21)26 (27)
Net revenues$12,972 $12,726 $6,936 $6,367 
Earnings before Income Taxes:
OCI:
Smokeable products$5,148 $4,820 $2,776 $2,450 
Oral tobacco products864 861 472 447 
Wine45 (366)27 13 
All other(26)(56)(12)(51)
Amortization of intangibles(35)(37)(18)(18)
General corporate expenses(120)(90)(59)(45)
Operating income5,876 5,132 3,186 2,796 
Interest and other debt expense, net(603)(583)(295)(308)
Loss on early extinguishment of debt(649)— — — 
Net periodic benefit income, excluding service cost89 55 46 28 
Income (losses) from equity investments126 166 75 9 
Gain (loss) on Cronos-related financial instruments7 (97)(103)40 
Earnings before income taxes$4,846 $4,673 $2,909 $2,565 
The comparability of OCI for the reportable segments was affected by the following:
▪Non-Participating Manufacturer (“NPM”) Adjustment Items: For the six months ended June 30, 2021, pre-tax income for NPM adjustment items of $32 million was recorded to cost of sales 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 in Note 11. 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,
(in millions)2021202020212020
Smokeable products segment$43 $39 $8 $17 
Interest and other debt expense, net— 3 — 1 
Total$43 $42 $8 $18 
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 11. Contingencies.
▪COVID-19 Special Items: Net pre-tax charges of $50 million ($41 million in the smokeable products segment and $9 million in the oral tobacco products segment) related to the COVID-19 pandemic were recorded in Altria’s condensed consolidated statements of earnings for the six and three months ended June 30, 2020. The net pre-tax charges, which were directly related to disruptions caused by or efforts to mitigate the impact of the COVID-19 pandemic, were all recorded in costs of sales and included premium pay, personal protective equipment and health screenings, which were partially offset by certain employment tax credits. The COVID-19 special items do not include the inventory-related implementation costs associated with the wine business strategic reset discussed below. These implementation costs were due to increased inventory levels, which were further negatively impacted by the COVID-19 pandemic, including economic uncertainty and government restrictions.
▪Implementation and Acquisition-Related Costs:
Wine Business Strategic Reset: During the six months ended June 30, 2020, Ste. Michelle recorded pre-tax implementation costs of $394 million associated with a strategic reset initiated in the first quarter of 2020 to maximize Ste. Michelle’s profitability and achieve improved long-term cash flow generation. Substantially all of the charges consisted of the following: (i) write-off of inventory ($292 million) as Ste. Michelle no longer believed that the benefit of the blending and production plans for its inventory outweighed inventory carrying cost given the reduced product volume demand; and (ii) estimated losses on future non-cancelable grape purchase commitments that Ste. Michelle believed no longer had a future economic benefit ($100 million). These charges were included in cost of sales in Altria’s condensed consolidated statements of earnings.
Acquisition-Related Costs: For the six months ended June 30, 2021, Altria recorded pre-tax acquisition-related costs of $37 million in the oral tobacco products segment primarily for the settlement of an arbitration related to the 2019 on! transaction. These costs were included in marketing, administration and research costs in Altria’s condensed consolidated statements of earnings.