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Segment Reporting | 12 Months Ended
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Dec. 31, 2022
Segment Reporting [Abstract] |
Segment Reporting | Segment Reporting Our operating companies’ products include (i) 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; and (ii) 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 constituted our reportable segments of smokeable products and oral tobacco products at December 31, 2022. The financial services business, the IQOS System heated tobacco business and Helix ROW were 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. For further discussion, see Note 1. Background and Basis of Presentation. 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 cost (income), 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. We do not disclose information about total assets by segment because such information is not reported to or used by our CODM. Substantially all of our long-lived assets were located in the United States at December 31, 2022. Segment goodwill and other intangible assets, net, are disclosed in Note 4. Goodwill and Other Intangible Assets, net. The accounting policies of the segments were the same at December 31, 2022 as those described in Note 2. Summary of Significant Accounting Policies. Segment data were as follows:
| For the Years Ended December 31,
(in millions) | 2022 |  | 2021 |  | 2020
Net revenues: |  |  |  |  |
Smokeable products | $ | 22,476 |  |  | $ | 22,866 |  |  | $ | 23,089 |
Oral tobacco products | 2,580 |  |  | 2,608 |  |  | 2,533 |
Wine | — |  |  | 494 |  |  | 614 |
All other | 40 |  |  | 45 |  |  | (83) |
Net revenues | $ | 25,096 |  |  | $ | 26,013 |  |  | $ | 26,153 |
Earnings before income taxes: |  |  |  |  |
OCI: |  |  |  |  |
Smokeable products | $ | 10,688 |  |  | $ | 10,394 |  |  | $ | 9,985 |
Oral tobacco products | 1,632 |  |  | 1,659 |  |  | 1,718 |
Wine | — |  |  | 21 |  |  | (360) |
All other | (36) |  |  | (97) |  |  | (172) |
Amortization of intangibles | (73) |  |  | (72) |  |  | (72) |
General corporate expenses | (292) |  |  | (345) |  |  | (226) |
Operating income | 11,919 |  |  | 11,560 |  |  | 10,873 |
Interest and other debt expense, net | 1,058 |  |  | 1,162 |  |  | 1,209 |
Loss on early extinguishment of debt | — |  |  | 649 |  |  | — |
Net periodic benefit income, excluding service cost | (184) |  |  | (202) |  |  | (77) |
(Income) losses from investments in equity securities | 3,641 |  |  | 5,979 |  |  | 111 |
Impairment of JUUL equity securities | — |  |  | — |  |  | 2,600 |
Loss on Cronos-related financial instruments | 15 |  |  | 148 |  |  | 140 |
Earnings before income taxes | $ | 7,389 |  |  | $ | 3,824 |  |  | $ | 6,890 |
The smokeable products segment included net revenues of $21,457 million, $21,877 million and $22,135 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to cigarettes and net revenues of $1,019 million, $989 million and $954 million for the years ended December 31, 2022, 2021 and 2020, respectively, related to cigars. Substantially all of our net revenues for the years ended December 31, 2022, 2021 and 2020 were from sales generated in the United States. PM USA, USSTC, Helix and Middleton’s customer, Performance Food Group Company, which acquired Core-Mark Holding Company, Inc. in 2021, accounted for approximately 24% and 23% of our consolidated net revenues for the years ended December 31, 2022 and 2021, respectively. Core-Mark Holding Company, Inc. accounted for 17% of our consolidated net revenues for the year ended December 31, 2020. In addition, McLane Company, Inc., accounted for approximately 23%, 23% and 26% of our consolidated net revenues for the years ended December 31, 2022, 2021 and 2020, respectively. Substantially all of these net revenues were reported in the smokeable products and oral tobacco products segments. No other customer accounted for more than 10% of our consolidated net revenues for the years ended December 31, 2022, 2021 and 2020. Details of our depreciation expense and capital expenditures were as follows:
| For the Years Ended December 31,
(in millions) | 2022 |  | 2021 |  | 2020
Depreciation expense: |  |  |  |  |
Smokeable products | $ | 87 |  |  | $ | 80 |  |  | $ | 81 |
Oral tobacco products | 33 |  |  | 34 |  |  | 32 |
Wine | — |  |  | 27 |  |  | 40 |
General corporate and other | 33 |  |  | 31 |  |  | 32 |
Total depreciation expense | $ | 153 |  |  | $ | 172 |  |  | $ | 185 |
Capital expenditures: |  |  |  |  |
Smokeable products | $ | 68 |  |  | $ | 48 |  |  | $ | 49 |
Oral tobacco products | 90 |  |  | 43 |  |  | 67 |
Wine | — |  |  | 12 |  |  | 31 |
General corporate and other | 47 |  |  | 66 |  |  | 84 |
Total capital expenditures | $ | 205 |  |  | $ | 169 |  |  | $ | 231 |
The comparability of OCI for our reportable segments and the all other category was affected by the following: ▪Non-Participating Manufacturer (“NPM”) Adjustment Items: We recorded pre-tax (income) expense for NPM adjustment items as follows:
|  | For the Years Ended December 31,
(in millions) |  | 2022 |  | 2021 |  | 2020
Smokeable products segment |  | $ | (63) |  |  | $ | (53) |  |  | $ | 4 |
Interest and other debt expense, net |  | (5) |  |  | (23) |  |  | — |
Total |  | $ | (68) |  |  | $ | (76) |  |  | $ | 4 |
We recorded the amounts in the table shown above for the smokeable products segment as (reductions) increases to cost of sales in our consolidated statements of earnings, which (increased) decreased OCI 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 17. Contingencies). ▪Tobacco and Health and Certain Other Litigation Items: We recorded pre-tax charges related to tobacco and health and certain other litigation items as follows:
|  | For the Years Ended December 31,
(in millions) |  | 2022 |  | 2021 |  | 2020
Smokeable products segment |  | $ | 101 |  |  | $ | 83 |  |  | $ | 79 |
General corporate expenses |  | 27 |  |  | 90 |  |  | — |
Interest and other debt expense, net |  | 3 |  |  | 9 |  |  | 4 |
Total |  | $ | 131 |  |  | $ | 182 |  |  | $ | 83 |
We recorded the amounts shown in the table above for the smokeable products segment and general corporate expenses in marketing, administration and research costs in our consolidated statements of earnings. For further discussion, see Note 17. Contingencies. ▪Ste. Michelle Transaction: We recorded pre-tax disposition-related costs of $51 million for the year ended December 31, 2021 in our former wine segment, which consisted of a pre-tax charge of $41 million to record the assets and liabilities associated with the Ste. Michelle Transaction at their fair value less costs to sell and $10 million of other disposition-related costs. We included these costs in marketing, administration and research costs in our consolidated statements of earnings. ▪Acquisition-Related Costs: We recorded pre-tax acquisition-related costs of $37 million for the year ended December 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 consolidated statements of earnings. ▪Wine Business Strategic Reset: We recorded pre-tax implementation costs of $411 million for the year ended December 31, 2020, in our former wine segment, associated with a strategic reset initiated in the first quarter of 2020 intended 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). ▪PMCC Residual Value Adjustments: For the year ended December 31, 2020, we recorded pre-tax charges of $125 million (as a reduction to net revenues in the all other category) related to the decrease in unguaranteed residual values of certain PMCC leased assets. There were no such adjustments in 2022 or 2021. ▪COVID-19 Special Items: We recorded net pre-tax charges of $50 million ($41 million in the smokeable products segment and $9 million in the oral tobacco products segment) in our consolidated statement of earnings for the year ended December 31, 2020 related to the COVID-19 pandemic. These 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 cost of sales and included premium pay, personal protective equipment and health screenings, which were partially offset by certain employment tax credits.

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 31 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8924-108599 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 34 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8981-108599 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8721-108599 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 40 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9031-108599 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (f) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (e) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 26 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8844-108599 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 41 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9038-108599 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 32 -Subparagraph (d) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8933-108599 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 22 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8736-108599 Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 42 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e9054-108599 Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 15 -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8657-108599 Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -SubTopic 10 -Section 50 -Paragraph 21 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=126901519&loc=d3e8721-108599 Reference 14: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 280 -URI https://asc.fasb.org/topic&trid=2134510 + Details
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