Condensed Consolidating Financial Information | Condensed Consolidating Financial Information: PM USA, which is a 100% owned subsidiary of Altria Group, Inc., has guaranteed Altria Group, Inc.’s obligations under its outstanding debt securities, borrowings under its Credit Agreement and amounts outstanding under its commercial paper program (the “Guarantees”). Pursuant to the Guarantees, PM USA fully and unconditionally guarantees, as primary obligor, the payment and performance of Altria Group, Inc.’s obligations under the guaranteed debt instruments (the “Obligations”), subject to release under certain customary circumstances as noted below. The Guarantees provide that PM USA guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of the Obligations. The liability of PM USA under the Guarantees is absolute and unconditional irrespective of: any lack of validity, enforceability or genuineness of any provision of any agreement or instrument relating thereto; any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from any agreement or instrument relating thereto; any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the Obligations; or any other circumstance that might otherwise constitute a defense available to, or a discharge of, Altria Group, Inc. or PM USA. The obligations of PM USA under the Guarantees are limited to the maximum amount as will not result in PM USA’s obligations under the Guarantees constituting a fraudulent transfer or conveyance, after giving effect to such maximum amount and all other contingent and fixed liabilities of PM USA that are relevant under Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to the Guarantees. For this purpose, “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors. PM USA will be unconditionally released and discharged from the Obligations upon the earliest to occur of: ▪ the date, if any, on which PM USA consolidates with or merges into Altria Group, Inc. or any successor; ▪ the date, if any, on which Altria Group, Inc. or any successor consolidates with or merges into PM USA; ▪ the payment in full of the Obligations pertaining to such Guarantees; and ▪ the rating of Altria Group, Inc.’s long-term senior unsecured debt by Standard & Poor’s Ratings Services of A or higher. At June 30, 2017 , the respective principal 100% owned subsidiaries of Altria Group, Inc. and PM USA were not limited by long-term debt or other agreements in their ability to pay cash dividends or make other distributions with respect to their equity interests. The following sets forth the condensed consolidating balance sheets as of June 30, 2017 and December 31, 2016 , condensed consolidating statements of earnings and comprehensive earnings for the six and three months ended June 30, 2017 and 2016 , and condensed consolidating statements of cash flows for the six months ended June 30, 2017 and 2016 for Altria Group, Inc., PM USA and, collectively, Altria Group, Inc.’s other subsidiaries that are not guarantors of Altria Group, Inc.’s debt instruments (the “Non-Guarantor Subsidiaries”). The financial information is based on Altria Group, Inc.’s understanding of the Securities and Exchange Commission (“SEC”) interpretation and application of Rule 3-10 of SEC Regulation S-X. The financial information may not necessarily be indicative of results of operations or financial position had PM USA and the Non-Guarantor Subsidiaries operated as independent entities. Altria Group, Inc. and PM USA account for investments in their subsidiaries under the equity method of accounting. Condensed Consolidating Balance Sheets June 30, 2017 (in millions of dollars) Altria Group, Inc. PM USA Non- Guarantor Subsidiaries Total Consolidating Adjustments Consolidated Assets Cash and cash equivalents $ 2,203 $ 1 $ 51 $ — $ 2,255 Receivables — 8 111 — 119 Inventories: Leaf tobacco — 441 328 — 769 Other raw materials — 112 66 — 178 Work in process — 3 431 — 434 Finished product — 187 431 — 618 — 743 1,256 — 1,999 Due from Altria Group, Inc. and subsidiaries 17 2,728 1,145 (3,890 ) — Other current assets 34 106 104 (6 ) 238 Total current assets 2,254 3,586 2,667 (3,896 ) 4,611 Property, plant and equipment, at cost — 2,975 1,877 — 4,852 Less accumulated depreciation — 2,108 844 — 2,952 — 867 1,033 — 1,900 Goodwill — — 5,307 — 5,307 Other intangible assets, net — 2 12,194 — 12,196 Investment in AB InBev 18,219 — — — 18,219 Investment in consolidated subsidiaries 11,839 2,642 — (14,481 ) — Finance assets, net — — 988 — 988 Due from Altria Group, Inc. and subsidiaries 4,790 — — (4,790 ) — Other assets 20 1,736 127 (1,378 ) 505 Total Assets $ 37,122 $ 8,833 $ 22,316 $ (24,545 ) $ 43,726 Condensed Consolidating Balance Sheets (Continued) June 30, 2017 (in millions of dollars) Altria Group, Inc. PM USA Non- Guarantor Subsidiaries Total Consolidating Adjustments Consolidated Liabilities Accounts payable $ — $ 64 $ 130 $ — $ 194 Accrued liabilities: Marketing — 659 104 — 763 Employment costs 15 9 87 — 111 Settlement charges — 2,216 7 — 2,223 Other 257 509 241 — 1,007 Income taxes 1 — 113 (6 ) 108 Dividends payable 1,176 — — — 1,176 Due to Altria Group, Inc. and subsidiaries 3,505 327 58 (3,890 ) — Total current liabilities 4,954 3,784 740 (3,896 ) 5,582 Long-term debt 13,887 — — — 13,887 Deferred income taxes 5,554 — 4,351 (1,378 ) 8,527 Accrued pension costs 203 — 473 — 676 Accrued postretirement health care costs — 1,431 772 — 2,203 Due to Altria Group, Inc. and subsidiaries — — 4,790 (4,790 ) — Other liabilities 106 151 137 — 394 Total liabilities 24,704 5,366 11,263 (10,064 ) 31,269 Contingencies Redeemable noncontrolling interest — — 36 — 36 Stockholders’ Equity Common stock 935 — 9 (9 ) 935 Additional paid-in capital 5,928 3,310 11,855 (15,165 ) 5,928 Earnings reinvested in the business 37,939 421 814 (1,235 ) 37,939 Accumulated other comprehensive losses (1,838 ) (264 ) (1,664 ) 1,928 (1,838 ) Cost of repurchased stock (30,546 ) — — — (30,546 ) Total stockholders’ equity attributable to Altria Group, Inc. 12,418 3,467 11,014 (14,481 ) 12,418 Noncontrolling interests — — 3 — 3 Total stockholders’ equity 12,418 3,467 11,017 (14,481 ) 12,421 Total Liabilities and Stockholders’ Equity $ 37,122 $ 8,833 $ 22,316 $ (24,545 ) $ 43,726 Condensed Consolidating Balance Sheets December 31, 2016 (in millions of dollars) Altria PM USA Non- Total Consolidated Assets Cash and cash equivalents $ 4,521 $ 1 $ 47 $ — $ 4,569 Receivables — 8 143 — 151 Inventories: Leaf tobacco — 541 351 — 892 Other raw materials — 111 53 — 164 Work in process — 3 509 — 512 Finished product — 112 371 — 483 — 767 1,284 — 2,051 Due from Altria Group, Inc. and subsidiaries — 3,797 1,511 (5,308 ) — Other current assets 170 118 201 — 489 Total current assets 4,691 4,691 3,186 (5,308 ) 7,260 Property, plant and equipment, at cost — 2,971 1,864 — 4,835 Less accumulated depreciation — 2,073 804 — 2,877 — 898 1,060 — 1,958 Goodwill — — 5,285 — 5,285 Other intangible assets, net — 2 12,034 — 12,036 Investment in AB InBev 17,852 — — — 17,852 Investment in consolidated subsidiaries 11,636 2,632 — (14,268 ) — Finance assets, net — — 1,028 — 1,028 Due from Altria Group, Inc. and subsidiaries 4,790 — — (4,790 ) — Other assets 18 1,748 131 (1,384 ) 513 Total Assets $ 38,987 $ 9,971 $ 22,724 $ (25,750 ) $ 45,932 Condensed Consolidating Balance Sheets (Continued) December 31, 2016 (in millions of dollars) Altria PM USA Non- Total Consolidated Liabilities Accounts payable $ 1 $ 92 $ 332 $ — $ 425 Accrued liabilities: Marketing — 619 128 — 747 Employment costs 104 14 171 — 289 Settlement charges — 3,696 5 — 3,701 Other 261 438 326 — 1,025 Dividends payable 1,188 — — — 1,188 Due to Altria Group, Inc. and subsidiaries 5,030 237 41 (5,308 ) — Total current liabilities 6,584 5,096 1,003 (5,308 ) 7,375 Long-term debt 13,881 — — — 13,881 Deferred income taxes 5,424 — 4,376 (1,384 ) 8,416 Accrued pension costs 207 — 598 — 805 Accrued postretirement health care costs — 1,453 764 — 2,217 Due to Altria Group, Inc. and subsidiaries — — 4,790 (4,790 ) — Other liabilities 121 146 160 — 427 Total liabilities 26,217 6,695 11,691 (11,482 ) 33,121 Contingencies Redeemable noncontrolling interest — — 38 — 38 Stockholders’ Equity Common stock 935 — 9 (9 ) 935 Additional paid-in capital 5,893 3,310 11,585 (14,895 ) 5,893 Earnings reinvested in the business 36,906 237 1,118 (1,355 ) 36,906 Accumulated other comprehensive losses (2,052 ) (271 ) (1,720 ) 1,991 (2,052 ) Cost of repurchased stock (28,912 ) — — — (28,912 ) Total stockholders’ equity attributable to Altria Group, Inc. 12,770 3,276 10,992 (14,268 ) 12,770 Noncontrolling interests — — 3 — 3 Total stockholders’ equity 12,770 3,276 10,995 (14,268 ) 12,773 Total Liabilities and Stockholders’ Equity $ 38,987 $ 9,971 $ 22,724 $ (25,750 ) $ 45,932 Condensed Consolidating Statements of Earnings and Comprehensive Earnings For the Six Months Ended June 30, 2017 (in millions of dollars) Altria PM USA Non- Total Consolidated Net revenues $ — $ 10,984 $ 1,780 $ (18 ) $ 12,746 Cost of sales — 3,216 561 (18 ) 3,759 Excise taxes on products — 2,982 107 — 3,089 Gross profit — 4,786 1,112 — 5,898 Marketing, administration and research costs 80 791 225 — 1,096 Asset impairment and exit costs — — 16 — 16 Operating (expense) income (80 ) 3,995 871 — 4,786 Interest and other debt expense, net 253 (6 ) 109 — 356 Earnings from equity investment in AB InBev (163 ) — — — (163 ) Gain on AB InBev/SABMiller business combination (408 ) — — — (408 ) Earnings before income taxes and equity earnings of subsidiaries 238 4,001 762 — 5,001 (Benefit) provision for income taxes (40 ) 1,397 252 — 1,609 Equity earnings of subsidiaries 3,112 152 — (3,264 ) — Net earnings 3,390 2,756 510 (3,264 ) 3,392 Net earnings attributable to noncontrolling interests — — (2 ) — (2 ) Net earnings attributable to Altria Group, Inc. $ 3,390 $ 2,756 $ 508 $ (3,264 ) $ 3,390 Net earnings $ 3,390 $ 2,756 $ 510 $ (3,264 ) $ 3,392 Other comprehensive earnings, net of deferred income taxes 214 7 56 (63 ) 214 Comprehensive earnings 3,604 2,763 566 (3,327 ) 3,606 Comprehensive earnings attributable to noncontrolling interests — — (2 ) — (2 ) Comprehensive earnings attributable to Altria Group, Inc. $ 3,604 $ 2,763 $ 564 $ (3,327 ) $ 3,604 Condensed Consolidating Statements of Earnings and Comprehensive Earnings For the Six Months Ended June 30, 2016 (in millions of dollars) Altria Group, Inc. PM USA Non- Guarantor Subsidiaries Total Consolidating Adjustments Consolidated Net revenues $ — $ 10,910 $ 1,696 $ (19 ) $ 12,587 Cost of sales — 3,317 500 (19 ) 3,798 Excise taxes on products — 3,069 107 — 3,176 Gross profit — 4,524 1,089 — 5,613 Marketing, administration and research costs 73 828 204 — 1,105 Asset impairment and exit costs 5 95 21 — 121 Operating (expense) income (78 ) 3,601 864 — 4,387 Interest and other debt expense, net 264 17 111 — 392 Earnings from equity investment in SABMiller (265 ) — — — (265 ) Gain on AB InBev/SABMiller business combination (157 ) — — — (157 ) Earnings before income taxes and equity earnings of subsidiaries 80 3,584 753 — 4,417 (Benefit) provision for income taxes (37 ) 1,316 266 — 1,545 Equity earnings of subsidiaries 2,753 140 — (2,893 ) — Net earnings 2,870 2,408 487 (2,893 ) 2,872 Net earnings attributable to noncontrolling interests — — (2 ) — (2 ) Net earnings attributable to Altria Group, Inc. $ 2,870 $ 2,408 $ 485 $ (2,893 ) $ 2,870 Net earnings $ 2,870 $ 2,408 $ 487 $ (2,893 ) $ 2,872 Other comprehensive losses, net of deferred income taxes (60 ) (15 ) (129 ) 144 (60 ) Comprehensive earnings 2,810 2,393 358 (2,749 ) 2,812 Comprehensive earnings attributable to noncontrolling interests — — (2 ) — (2 ) Comprehensive earnings attributable to Altria Group, Inc. $ 2,810 $ 2,393 $ 356 $ (2,749 ) $ 2,810 Condensed Consolidating Statements of Earnings and Comprehensive Earnings For the Three Months Ended June 30, 2017 (in millions of dollars) Altria PM USA Non- Total Consolidated Net revenues $ — $ 5,713 $ 960 $ (10 ) $ 6,663 Cost of sales — 1,678 281 (10 ) 1,949 Excise taxes on products — 1,536 59 — 1,595 Gross profit — 2,499 620 — 3,119 Marketing, administration and research costs 40 413 115 — 568 Asset impairment and exit costs — — 12 — 12 Operating (expense) income (40 ) 2,086 493 — 2,539 Interest and other debt expense, net 130 (6 ) 53 — 177 Earnings from equity investment in AB InBev (140 ) — — — (140 ) Gain on AB InBev/SABMiller business combination (408 ) — — — (408 ) Earnings before income taxes and equity earnings of subsidiaries 378 2,092 440 — 2,910 Provision for income taxes 32 734 154 — 920 Equity earnings of subsidiaries 1,643 80 — (1,723 ) — Net earnings 1,989 1,438 286 (1,723 ) 1,990 Net earnings attributable to noncontrolling interests — — (1 ) — (1 ) Net earnings attributable to Altria Group, Inc. $ 1,989 $ 1,438 $ 285 $ (1,723 ) $ 1,989 Net earnings $ 1,989 $ 1,438 $ 286 $ (1,723 ) $ 1,990 Other comprehensive earnings, net of deferred income taxes 374 4 28 (32 ) 374 Comprehensive earnings 2,363 1,442 314 (1,755 ) 2,364 Comprehensive earnings attributable to noncontrolling interests — — (1 ) — (1 ) Comprehensive earnings attributable to $ 2,363 $ 1,442 $ 313 $ (1,755 ) $ 2,363 Condensed Consolidating Statements of Earnings and Comprehensive Earnings For the Three Months Ended June 30, 2016 (in millions of dollars) Altria PM USA Non- Total Consolidated Net revenues $ — $ 5,645 $ 886 $ (10 ) $ 6,521 Cost of sales — 1,675 259 (10 ) 1,924 Excise taxes on products — 1,582 58 — 1,640 Gross profit — 2,388 569 — 2,957 Marketing, administration and research costs 37 413 96 — 546 Asset impairment and exit costs — 1 — — 1 Operating (expense) income (37 ) 1,974 473 — 2,410 Interest and other debt expense, net 135 2 55 — 192 Earnings from equity investment in SABMiller (199 ) — — — (199 ) Gain on AB InBev/SABMiller business combination (117 ) — — — (117 ) Earnings before income taxes and equity earnings of subsidiaries 144 1,972 418 — 2,534 Provision for income taxes 12 713 155 — 880 Equity earnings of subsidiaries 1,521 80 — (1,601 ) — Net earnings 1,653 1,339 263 (1,601 ) 1,654 Net earnings attributable to noncontrolling interests — — (1 ) — (1 ) Net earnings attributable to Altria Group, Inc. $ 1,653 $ 1,339 $ 262 $ (1,601 ) $ 1,653 Net earnings $ 1,653 $ 1,339 $ 263 $ (1,601 ) $ 1,654 Other comprehensive (losses) earnings, net of deferred income taxes (13 ) 2 27 (29 ) (13 ) Comprehensive earnings 1,640 1,341 290 (1,630 ) 1,641 Comprehensive earnings attributable to noncontrolling interests — — (1 ) — (1 ) Comprehensive earnings attributable to $ 1,640 $ 1,341 $ 289 $ (1,630 ) $ 1,640 Condensed Consolidating Statements of Cash Flows For the Six Months Ended June 30, 2017 (in millions of dollars) Altria Group, Inc. PM USA Non- Guarantor Subsidiaries Total Consolidating Adjustments Consolidated Cash Provided by Operating Activities Net cash provided by operating activities $ 3,508 $ 1,427 $ 397 $ (3,384 ) $ 1,948 Cash Provided by (Used in) Investing Activities Capital expenditures — (13 ) (78 ) — (91 ) Proceeds from finance assets — — 45 — 45 Other (4 ) — (196 ) — (200 ) Net cash used in investing activities (4 ) (13 ) (229 ) — (246 ) Cash Provided by (Used in) Financing Activities Repurchases of common stock (1,600 ) — — — (1,600 ) Dividends paid on common stock (2,369 ) — — — (2,369 ) Changes in amounts due to/from Altria Group, Inc. and subsidiaries (1,813 ) 1,158 655 — — Cash dividends paid to parent — (2,572 ) (812 ) 3,384 — Other (40 ) — (7 ) — (47 ) Net cash used in financing activities (5,822 ) (1,414 ) (164 ) 3,384 (4,016 ) Cash and cash equivalents: (Decrease) increase (2,318 ) — 4 — (2,314 ) Balance at beginning of period 4,521 1 47 — 4,569 Balance at end of period $ 2,203 $ 1 $ 51 $ — $ 2,255 Condensed Consolidating Statements of Cash Flows For the Six Months Ended June 30, 2016 (in millions of dollars) Altria Group, Inc. PM USA Non- Guarantor Subsidiaries Total Consolidating Adjustments Consolidated Cash Provided by Operating Activities Net cash provided by operating activities $ 2,853 $ 998 $ 237 $ (3,000 ) $ 1,088 Cash Provided by (Used in) Investing Activities Capital expenditures — (14 ) (63 ) — (77 ) Proceeds from finance assets — — 56 — 56 Other — — (42 ) — (42 ) Net cash used in investing activities — (14 ) (49 ) — (63 ) Cash Provided by (Used in) Financing Activities Repurchases of common stock (341 ) — — — (341 ) Dividends paid on common stock (2,215 ) — — — (2,215 ) Changes in amounts due to/from Altria Group, Inc. and subsidiaries (1,833 ) 1,581 252 — — Cash dividends paid to parent — (2,564 ) (436 ) 3,000 — Other (11 ) — (8 ) — (19 ) Net cash used in financing activities (4,400 ) (983 ) (192 ) 3,000 (2,575 ) Cash and cash equivalents: (Decrease) increase (1,547 ) 1 (4 ) — (1,550 ) Balance at beginning of period 2,313 — 56 — 2,369 Balance at end of period $ 766 $ 1 $ 52 $ — $ 819 |