Document and Entity Information
Document and Entity Information | ||
3 Months Ended
Mar. 31, 2010 | Apr. 19, 2010
| |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | 2010-03-31 | |
Document Fiscal Year Focus | 2,010 | |
Document Fiscal Period Focus | Q1 | |
Trading Symbol | MO | |
Entity Registrant Name | Altria Group, Inc. | |
Entity Central Index Key | 0000764180 | |
Current Fiscal Year End Date | --12-31 | |
Entity Well-known Seasoned Issuer | Yes | |
Entity Current Reporting Status | Yes | |
Entity Voluntary Filers | No | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 2,082,565,977 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 12 Months Ended
Dec. 31, 2009 |
Consumer products | ||
Cash and cash equivalents | $3,290 | $1,871 |
Receivables (less allowances of $3 in 2010 and 2009) | 170 | 96 |
Inventories: | ||
Leaf tobacco | 984 | 993 |
Other raw materials | 160 | 157 |
Work in process | 281 | 293 |
Finished product | 388 | 367 |
Inventory, net, Total | 1,813 | 1,810 |
Deferred income taxes | 1,261 | 1,336 |
Other current assets | 504 | 660 |
Total current assets | 7,038 | 5,773 |
Property, plant and equipment, at cost | 6,012 | 6,144 |
Less accumulated depreciation | 3,377 | 3,460 |
Property, plant and equipment, net, Total | 2,635 | 2,684 |
Goodwill | 5,174 | 5,174 |
Other intangible assets, net | 12,132 | 12,138 |
Investment in SABMiller | 5,177 | 4,980 |
Other assets | 1,102 | 1,097 |
Total consumer products assets | 33,258 | 31,846 |
Financial services | ||
Finance assets, net | 4,715 | 4,803 |
Other assets | 26 | 28 |
Total financial services assets | 4,741 | 4,831 |
TOTAL ASSETS | 37,999 | 36,677 |
Consumer products | ||
Short-term borrowings | 200 | |
Current portion of long-term debt | 775 | 775 |
Accounts payable | 311 | 494 |
Accrued liabilities: | ||
Marketing | 460 | 467 |
Taxes, except income taxes | 364 | 318 |
Employment costs | 92 | 239 |
Settlement charges | 4,712 | 3,635 |
Other | 1,189 | 1,354 |
Income taxes | 204 | |
Dividends payable | 733 | 710 |
Total current liabilities | 9,040 | 7,992 |
Long-term debt | 11,185 | 11,185 |
Deferred income taxes | 4,468 | 4,383 |
Accrued pension costs | 1,157 | 1,157 |
Accrued postretirement health care costs | 2,347 | 2,326 |
Other liabilities | 1,223 | 1,248 |
Total consumer products liabilities | 29,420 | 28,291 |
Financial services | ||
Deferred income taxes | 4,013 | 4,180 |
Other liabilities | 269 | 102 |
Total financial services liabilities | 4,282 | 4,282 |
Total liabilities | 33,702 | 32,573 |
Contingencies (Note 12) | ||
Redeemable noncontrolling interest | 32 | 32 |
STOCKHOLDERS' EQUITY | ||
Common stock, par value $0.33 1/3 per share (2,805,961,317 shares issued) | 935 | 935 |
Additional paid-in capital | 5,820 | 5,997 |
Earnings reinvested in the business | 22,683 | 22,599 |
Accumulated other comprehensive losses | (1,491) | (1,561) |
Cost of repurchased stock (723,486,547 shares in 2010 and 729,932,673 shares in 2009) | (23,684) | (23,901) |
Total stockholders' equity attributable to Altria Group, Inc. | 4,263 | 4,069 |
Noncontrolling interests | 2 | 3 |
Total stockholders' equity | 4,265 | 4,072 |
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $37,999 | $36,677 |
1_Condensed Consolidated Balanc
Condensed Consolidated Balance Sheets (Parenthetical) (USD $) | ||
In Millions, except Share data | Mar. 31, 2010
| Dec. 31, 2009
|
Receivables, allowances | $3 | $3 |
Common stock, par value | 0.3333 | 0.3333 |
Common stock, shares issued | 2,805,961,317 | 2,805,961,317 |
Repurchased stock, shares | 723,486,547 | 729,932,673 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Earnings (USD $) | ||
In Millions, except Per Share data | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
Net revenues | $5,760 | $4,523 |
Cost of sales | 1,867 | 1,770 |
Excise taxes on products | 1,809 | 711 |
Gross profit | 2,084 | 2,042 |
Marketing, administration and research costs | 641 | 717 |
Exit costs | 7 | 128 |
Amortization of intangibles | 6 | 6 |
Operating income | 1,430 | 1,191 |
Interest and other debt expense, net | 287 | 336 |
Earnings from equity investment in SABMiller | (138) | (106) |
Earnings before income taxes | 1,281 | 961 |
Provision for income taxes | 468 | 372 |
Net earnings | $813 | $589 |
Per share data: | ||
Basic earnings per share | 0.39 | 0.28 |
Diluted earnings per share | 0.39 | 0.28 |
Dividends declared | 0.35 | 0.32 |
2_Condensed Consolidated Statem
Condensed Consolidated Statements of Stockholders' Equity (USD $) | |||||||||||||||||||
In Millions | Common Stock
| Additional Paid-in Capital
| Earnings Reinvested in the Business
| Accumulated Other Comprehensive Losses
| Cost of Repurchased Stock
| Comprehensive Earnings
| Non-controlling Interests
| Total
| |||||||||||
Balances at Dec. 31, 2008 | $935 | $6,350 | $22,131 | ($2,181) | ($24,407) | $2,828 | |||||||||||||
Comprehensive earnings: | |||||||||||||||||||
Net earnings | 3,206 | 3,206 | 1 | 3,207 | |||||||||||||||
Other comprehensive earnings, net of income taxes: | |||||||||||||||||||
Currency translation adjustments | 3 | 3 | 3 | ||||||||||||||||
Change in net loss and prior service cost | 375 | 375 | 375 | ||||||||||||||||
Ownership share of SABMiller other comprehensive earnings | 242 | 242 | 242 | ||||||||||||||||
Total other comprehensive earnings | 620 | 620 | |||||||||||||||||
Total comprehensive earnings | 3,826 | [1] | 1 | [1] | 3,827 | [1] | |||||||||||||
Exercise of stock options and other stock award activity | (353) | 506 | 153 | ||||||||||||||||
Cash dividends declared ($0.35 in 2010 and $1.32 in 2009 per share) | (2,738) | (2,738) | |||||||||||||||||
Other | 2 | 2 | |||||||||||||||||
Balances at Dec. 31, 2009 | 935 | 5,997 | 22,599 | (1,561) | (23,901) | 3 | 4,072 | ||||||||||||
Comprehensive earnings: | |||||||||||||||||||
Net earnings | 813 | 813 | 813 | ||||||||||||||||
Other comprehensive earnings, net of income taxes: | |||||||||||||||||||
Change in net loss and prior service cost | 31 | 31 | 31 | ||||||||||||||||
Ownership share of SABMiller other comprehensive earnings | 39 | 39 | 39 | ||||||||||||||||
Total other comprehensive earnings | 70 | 70 | |||||||||||||||||
Total comprehensive earnings | 883 | 883 | |||||||||||||||||
Exercise of stock options and other stock award activity | (177) | 217 | 40 | ||||||||||||||||
Cash dividends declared ($0.35 in 2010 and $1.32 in 2009 per share) | (729) | (729) | |||||||||||||||||
Other | (1) | (1) | |||||||||||||||||
Balances at Mar. 31, 2010 | $935 | $5,820 | $22,683 | ($1,491) | ($23,684) | $2 | $4,265 | ||||||||||||
[1]Total comprehensive earnings were $599 million for the quarter ended March 31, 2009, all of which were comprehensive earnings attributable to Altria Group, Inc. |
3_Condensed Consolidated Statem
Condensed Consolidated Statements of Stockholders' Equity (Parenthetical) (USD $) | |||
3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 | 12 Months Ended
Dec. 31, 2009 | |
Dividends declared | 0.35 | 0.32 | 1.32 |
4_Condensed Consolidated Statem
Condensed Consolidated Statements of Cash Flows (USD $) | ||
In Millions | 3 Months Ended
Mar. 31, 2010 | 3 Months Ended
Mar. 31, 2009 |
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ||
Net earnings - Consumer products | $804 | $518 |
- Financial services | 9 | 71 |
Net earnings | 813 | 589 |
Consumer products | ||
Depreciation and amortization | 69 | 78 |
Deferred income tax provision | 69 | 81 |
Earnings from equity investment in SABMiller | (138) | (106) |
Exit costs, net of cash paid | (77) | 55 |
Cash effects of changes, net of the effects from acquired companies: | ||
Receivables, net | (58) | 18 |
Inventories | (3) | (168) |
Accounts payable | (8) | (6) |
Income taxes | 341 | 258 |
Accrued liabilities and other current assets | (176) | 133 |
Accrued settlement charges | 1,077 | 1,046 |
Pension plan contributions | (6) | (19) |
Pension provisions and postretirement, net | 50 | 69 |
Other | 38 | 21 |
Financial services | ||
Deferred income tax benefit | (167) | (358) |
Other | 217 | 352 |
Net cash provided by operating activities | 2,041 | 2,043 |
Consumer products | ||
Capital expenditures | (38) | (43) |
Acquisition of UST LLC, net of acquired cash | (10,244) | |
Other | 15 | (58) |
Financial services | ||
Proceeds from finance assets | 40 | 464 |
Net cash provided by (used in) investing activities | 17 | (9,881) |
Consumer products | ||
Net issuance of short-term borrowings | 200 | 630 |
Long-term debt issued | 4,221 | |
Dividends paid on Altria Group, Inc. common stock | (706) | (661) |
Issuance of Altria Group, Inc. common stock | 21 | 11 |
Financing fees and debt issuance costs | (132) | |
Other | (154) | (289) |
Net cash (used in) provided by financing activities | (639) | 3,780 |
Cash and cash equivalents: | ||
Increase (decrease) | 1,419 | (4,058) |
Balance at beginning of period | 1,871 | 7,916 |
Balance at end of period | $3,290 | $3,858 |
Background and Basis of Present
Background and Basis of Presentation | |
3 Months Ended
Mar. 31, 2010 | |
Background and Basis of Presentation: | Note 1. Background and Basis of Presentation: Background At March 31, 2010, Altria Group, Inc.s wholly-owned subsidiaries included Philip Morris USA Inc. (PM USA), which is engaged in the manufacture and sale of cigarettes and certain smokeless products in the United States; UST LLC (UST), which through its subsidiaries is engaged in the manufacture and sale of smokeless products and wine; and John Middleton Co. (Middleton), which is engaged in the manufacture and sale of machine-made large cigars and pipe tobacco. Philip Morris Capital Corporation (PMCC), another wholly-owned subsidiary of Altria Group, Inc., maintains a portfolio of leveraged and direct finance leases. In addition, Altria Group, Inc. held a 27.2% economic and voting interest in SABMiller plc (SABMiller) at March 31, 2010. Altria Group, Inc.s access to the operating cash flows of its subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany loans by its subsidiaries. As discussed in Note 2. UST Acquisition, on January 6, 2009, Altria Group, Inc. acquired all of the outstanding common stock of UST, whose direct and indirect wholly-owned subsidiaries include U.S. Smokeless Tobacco Company LLC (USSTC) and Ste. Michelle Wine Estates Ltd. (Ste. Michelle). As a result of the acquisition, UST has become an indirect wholly-owned subsidiary of Altria Group, Inc. In February 2010, Altria Group, Inc.s Board of Directors approved a 2.9% increase in the quarterly dividend to $0.35 per common share. The present annualized dividend rate is $1.40 per Altria Group, Inc. common share. Future dividend payments remain subject to the discretion of Altria Group, Inc.s Board of Directors. Basis of Presentation The interim condensed consolidated financial statements of Altria Group, Inc. are unaudited. It is the opinion of Altria Group, Inc.s management that all adjustments necessary for a fair statement of the interim results presented have been reflected therein. All such adjustments were of a normal recurring nature. Net revenues and net earnings for any interim period are not necessarily indicative of results that may be expected for the entire year. These statements should be read in conjunction with the consolidated financial statements and related notes, which appear in Altria Group, Inc.s Annual Report to Shareholders and which are incorporated by reference into Altria Group, Inc.s Annual Report on Form 10-K for the year ended December 31, 2009. Balance sheet accounts are segregated by two broad types of businesses. Consumer products assets and liabilities are classified as either current or non-current, whereas financial services assets and liabilities are unclassified, in accordance with respective industry practices. |
UST Acquisition
UST Acquisition | |
3 Months Ended
Mar. 31, 2010 | |
UST Acquisition: | Note 2. UST Acquisition: On January 6, 2009, Altria Group, Inc. acquired all of the outstanding common stock of UST. The transaction was valued at approximately $11.7 billion, which represented a purchase price of $10.4 billion and included the assumption of approximately $1.3 billion of debt, which together with acquisition-related costs and payments of approximately $0.6 billion (consisting primarily of financing fees, the funding of USTs non-qualified pension plans, investment banking fees and the early retirement of USTs revolving credit facility), represented a total cash outlay of approximately $11 billion. Additionally, costs incurred to effect the acquisition, as well as costs to restructure UST, are being recognized as expenses in the periods in which the costs are incurred. For the three months ended March 31, 2010 and 2009, Altria Group, Inc. incurred acquisition-related charges, as well as restructuring and integration costs consisting of the following: FortheThreeMonthsEndedMarch 31, 2010 2009 (in millions) Exit costs $2 $103 Integration costs 8 16 Inventory adjustments 5 17 Financing fees 87 Transaction costs 60 Total $15 $283 Total acquisition-related charges, as well as restructuring and integration costs incurred since the September 2008 announcement of the acquisition, were $511 million. During the remainder of 2010, Altria Group, Inc. expects to incur additional charges and costs of approximately $35 million related to the acquisition of UST. USTs financial position and results of operations have been consolidated with Altria Group, Inc. as of January 6, 2009. Pro forma results of Altria Group, Inc., for the three months ended March 31, 2009 assuming the acquisition had occurred on January 1, 2009, would not have been materially different from the actual results reported for the three months ended March 31, 2009. |
Exit, Implementation and Integr
Exit, Implementation and Integration Costs | |
3 Months Ended
Mar. 31, 2010 | |
Exit, Implementation and Integration Costs: | Note 3. Exit, Implementation and Integration Costs: Pre-tax exit, implementation and integration costs for the three months ended March 31, 2010 and 2009 consisted of the following: For the Three Months Ended March31, 2010 ExitCosts Implementation Costs Integration Costs Total (in millions) Cigarettes $ 5 $ 24 $ - $ 29 Smokeless products 2 7 9 Cigars 1 1 Wine 1 1 Total $ 7 $ 24 $ 9 $ 40 For the Three Months Ended March31, 2009 ExitCosts Implementation Costs Integration Costs Total (in millions) Cigarettes $ 19 $ 18 $ - $ 37 Smokeless products 101 15 116 Cigars 3 3 Wine 2 1 3 General corporate 6 6 Total $ 128 $ 18 $ 19 $ 165 The movement in the severance liability and details of exit costs for Altria Group, Inc. for the three months ended March 31, 2010 was as follows: Severance Other Total (in millions) Severance liability balance, December 31, 2009 $ 228 $ - $ 228 Charges 1 6 7 Cash spent (70 ) (14 ) (84 ) Other 8 8 Severance liability balance, March 31, 2010 $ 159 $ - $ 159 Integration and Restructuring Program: Altria Group, Inc. has largely completed a restructuring program that commenced in December 2008, and was expanded in August 2009. Pursuant to this program, Altria Group, Inc. restructured its corporate, manufacturing, and sales and marketing services functions in connection with the integration of UST into its operations and its focus on optimizing company-wide cost structures in light of ongoing declines in U.S. cigarette volumes. As a result of this restructuring program, Altria Group, Inc. incurred aggregate pre-tax charges of $10 million and $126 million during the three months ended March 31, 2010 and 2009, respectively. The charges are primarily related to employee separation costs, lease exit costs, relocation of employees and other costs related to the integration of UST operations. Substantially all of these charges will result in cash expenditures. The $10 million in pre-tax charges for this program during the three months ended March 31, 2010, was reported in the smokeless products segment and wine segment as pre-tax charges of $9 million and $1 million, respectively. These charges included total exit costs of $2 million and integration costs of $8 million. The $126 million in pre-tax charges for this program during the three months e |
Benefit Plans
Benefit Plans | |
3 Months Ended
Mar. 31, 2010 | |
Benefit Plans: | Note 4. Benefit Plans: Subsidiaries of Altria Group, Inc. sponsor noncontributory defined benefit pension plans covering substantially all employees of the Altria Group companies. In certain subsidiaries, employees hired on or after a date specific to their employee group instead are eligible to participate in an enhanced defined contribution plan. This transition for new hires occurred from October 1, 2006 to January 1, 2008. In addition, Altria Group, Inc. and its subsidiaries provide health care and other benefits to the majority of retired employees. Pension Plans Components of Net Periodic Benefit Cost Net periodic pension cost consisted of the following: FortheThreeMonths Ended March31, 2010 2009 (in millions) Service cost $ 21 $ 25 Interest cost 89 87 Expected return on plan assets (104 ) (106 ) Amortization: Net loss 33 27 Prior service cost 3 3 Termination and curtailment (12 ) Net periodic pension cost $ 42 $ 24 Termination and curtailment in 2009 shown in the table above primarily reflects curtailment gains related to the restructuring of USTs operations subsequent to the acquisition, partially offset by termination benefits related to Altria Group, Inc.s restructuring programs. For more information on Altria Group, Inc.s restructuring programs, see Note 3. Exit, Implementation and Integration Costs. Employer Contributions Altria Group, Inc. presently makes, and plans to make, contributions, to the extent that they are tax deductible and to pay benefits that relate to plans for salaried employees that cannot be funded under Internal Revenue Service regulations. Employer contributions of $6 million were made to Altria Group, Inc.s pension plans during the three months ended March 31, 2010. Currently, Altria Group, Inc. anticipates additional employer contributions during the remainder of 2010 of approximately $14 million to $44 million to its pension plans, based on current tax law. However, these estimates are subject to change as a result of changes in tax and other benefit laws, as well as asset performance significantly above or below the assumed long-term rate of return on pension assets, or changes in interest rates. Postretirement Benefit Plans Net postretirement health care costs consisted of the following: FortheThreeMonths Ended March31, 2010 2009 (in millions) Service cost $ 9 $ 10 Interest cost 35 36 Amortization: Net loss 8 10 Prior service credit (4 ) (2 ) Termination and curtailment 18 Net postretirement health care costs $ 48 $ 72 Termination and curtailment in 2009 shown in the table above primarily reflects termination b |
Goodwill and Other Intangible A
Goodwill and Other Intangible Assets, net | |
3 Months Ended
Mar. 31, 2010 | |
Goodwill and Other Intangible Assets, net: | Note 5. Goodwill and Other Intangible Assets, net: Goodwill and other intangible assets, net, by segment were as follows: Goodwill OtherIntangibleAssets,net March31, 2010 December31, 2009 March31, 2010 December31, 2009 (in millions) (in millions) Cigarettes $ - $ - $ 269 $ 272 Smokeless products 5,023 5,023 8,844 8,845 Cigars 77 77 2,748 2,750 Wine 74 74 271 271 Total $ 5,174 $ 5,174 $ 12,132 $ 12,138 Intangible assets were as follows: March31, 2010 December31, 2009 Gross CarryingAmount AccumulatedAmortization Gross CarryingAmount AccumulatedAmortization (in millions) (in millions) Indefinite-lived intangible assets $ 11,701 $ 11,701 Definite-lived intangible assets 464 $ 33 464 $ 27 Total intangible assets $ 12,165 $ 33 $ 12,165 $ 27 Indefinite-lived intangible assets consist substantially of trademarks from the January 2009 acquisition of UST ($9.1 billion) and the December 2007 acquisition of Middleton ($2.6 billion). Definite-lived intangible assets consist primarily of customer relationships and certain cigarette trademarks. Pre-tax amortization expense for definite-lived intangible assets during the three months ended March 31, 2010 and 2009, was $6 million for each period. Annual amortization expense for each of the next five years is estimated to be approximately $20 million, assuming no additional transactions occur that require the amortization of intangible assets. Goodwill relates to the January 2009 acquisition of UST and the December 2007 acquisition of Middleton. |
Earnings from Equity Investment
Earnings from Equity Investment in SABMiller | |
3 Months Ended
Mar. 31, 2010 | |
Earnings from Equity Investment in SABMiller: | Note 6. Earnings from Equity Investment in SABMiller: Earnings from Altria Group, Inc.s equity investment in SABMiller consisted of the following: FortheThreeMonths Ended March31, 2010 2009 (in millions) Equity earnings $ 106 $ 106 Gains resulting from issuances of common stock by SABMiller 32 $ 138 $ 106 |
Earnings Per Share
Earnings Per Share | |
3 Months Ended
Mar. 31, 2010 | |
Earnings Per Share: | Note 7. Earnings Per Share: Basic and diluted earnings per share (EPS) were calculated using the following: FortheThreeMonthsEndedMarch 31, 2010 2009 (in millions) Net earnings $ 813 $ 589 Less: Distributed and undistributed earnings attributable to unvested restricted and deferred shares (3 ) (2 ) Earnings for basic and diluted EPS $ 810 $ 587 Weighted average shares for basic EPS 2,074 2,061 Add: Incremental shares from stock options 3 6 Weighted average shares for diluted EPS 2,077 2,067 For the three months ended March 31, 2010 computation, there were no antidilutive stock options. For the three months ended March 31, 2009 computation, 1.2 million stock options were excluded from the calculation of weighted average shares for diluted EPS because their effects were antidilutive. |
Accumulated Other Comprehensive
Accumulated Other Comprehensive Losses | |
3 Months Ended
Mar. 31, 2010 | |
Accumulated Other Comprehensive Losses: | Note 8. Accumulated Other Comprehensive Losses: The following table sets forth the changes in each component of accumulated other comprehensive losses attributable to Altria Group, Inc.: CurrencyTranslationAdjustments ChangesinNetLoss and PriorService Cost Ownership ofSABMillersOtherComprehensive Earnings AccumulatedOtherComprehensive Losses (in millions) Balances, December31, 2008 $ - $ (2,221 ) $ 40 $ (2,181 ) Period Change 3 375 242 620 Balances, December31, 2009 3 (1,846 ) 282 (1,561 ) Period Change 31 39 70 Balances, March31, 2010 $ 3 $ (1,815 ) $ 321 $ (1,491 ) |
Segment Reporting
Segment Reporting | |
3 Months Ended
Mar. 31, 2010 | |
Segment Reporting: | Note 9. Segment Reporting: The products of Altria Group, Inc.s consumer products subsidiaries include cigarettes manufactured and sold by PM USA, smokeless products manufactured and sold by USSTC and PM USA, machine-made large cigars and pipe tobacco manufactured and sold by Middleton, and wine produced and distributed by Ste. Michelle. Another subsidiary of Altria Group, Inc., PMCC, maintains a portfolio of leveraged and direct finance leases. The products and services of these subsidiaries constitute Altria Group, Inc.s reportable segments of cigarettes, smokeless products, cigars, wine and financial services. Altria Group, Inc.s chief operating decision maker reviews operating companies income to evaluate segment performance and allocate resources. Operating companies income for the segments excludes general corporate expenses and amortization of intangibles. Interest and other debt expense, net (consumer products), 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 Altria Group, Inc.s chief operating decision maker. Segment data were as follows: FortheThreeMonthsEndedMarch 31, 2010 2009 (in millions) Net revenues: Cigarettes $ 5,123 $ 3,896 Smokeless products 381 298 Cigars 135 115 Wine 95 75 Financial services 26 139 Net revenues $ 5,760 $ 4,523 Earnings before income taxes: Operating companies income (loss): Cigarettes $ 1,230 $ 1,143 Smokeless products 178 (2 ) Cigars 47 54 Wine 7 1 Financial services 21 120 Amortization of intangibles (6 ) (6 ) General corporate expenses (47 ) (53 ) UST acquisition-related transaction costs (60 ) Corporate exit costs (6 ) Operating income 1,430 1,191 Interest and other debt expense, net (287 ) (336 ) Earnings from equity investment in SABMiller 138 106 Earnings before income taxes $ 1,281 $ 961 Items affecting the comparability of net revenues and operating companies income for the segments were as follows: UST Inventory Adjustment In connection with the acquisition of UST, Altria Group, Inc.s cost of sales included the following amounts relating to the fair value purchase accounting adjustment of USTs inventory at the acquisition date that was sold during the periods: FortheThreeMonths Ended March31, 2010 2009 (in millions) Smokeless products $ 1 $ 12 Wi |
Income Taxes
Income Taxes | |
3 Months Ended
Mar. 31, 2010 | |
Income Taxes: | Note 10. Income Taxes: The income tax rate of 36.5% for the first quarter of 2010 decreased 2.2 percentage points from 38.7% for the first quarter of 2009, due primarily to certain costs incurred in the first quarter of 2009 related to the acquisition of UST that are not deductible for tax purposes and an increase to the domestic manufacturing deduction, effective January 1, 2010, partially offset by a charge of $12 million in the first quarter of 2010 resulting from the elimination of tax deductions for retiree prescription drug costs reimbursed through subsidies beginning in 2013 pursuant to 2010 enactments of the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act. |
Fair Value Measurements
Fair Value Measurements | |
3 Months Ended
Mar. 31, 2010 | |
Fair Value Measurements: | Note 11. Fair Value Measurements: The aggregate fair value, based substantially on readily available quoted market prices, of Altria Group, Inc.s total debt at March 31, 2010, was $14.7 billion, as compared with its carrying value of $12.2 billion. The aggregate fair value, based substantially on readily available quoted market prices, of Altria Group, Inc.s total debt at December 31, 2009, was $14.4 billion, as compared with its carrying value of $12.0 billion. |
Contingencies
Contingencies | |
3 Months Ended
Mar. 31, 2010 | |
Contingencies: | Note 12. Contingencies: Legal proceedings covering a wide range of matters are pending or threatened in various United States and foreign jurisdictions against Altria Group, Inc. and its subsidiaries, including PM USA and UST and its subsidiaries, as well as their respective indemnitees. Various types of claims are raised in these proceedings, including product liability, consumer protection, antitrust, tax, contraband shipments, patent infringement, employment matters, claims for contribution and claims of distributors. Litigation is subject to uncertainty and it is possible that there could be adverse developments in pending or future cases. An unfavorable outcome or settlement of pending tobacco-related or other litigation could encourage the commencement of additional litigation. Damages claimed in some tobacco-related and other litigation are or can be significant and, in certain cases, range in the billions of dollars. The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome. Although PM USA has historically been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from seeking to collect judgments while adverse verdicts have been appealed, there remains a risk that such relief may not be obtainable in all cases. This risk has been substantially reduced given that 43 states now limit the dollar amount of bonds or require no bond at all. Altria Group, Inc. and its subsidiaries record provisions in the consolidated financial statements for pending litigation when they determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, except as discussed elsewhere in this Note 12. Contingencies: (i) management has concluded that it is not probable that a loss has been incurred in any of the pending tobacco-related cases; (ii) management is unable to estimate the possible loss or range of loss that could result from an unfavorable outcome in any of the pending tobacco-related cases; and (iii) accordingly, management has not provided any amounts in the consolidated financial statements for unfavorable outcomes, if any. Legal defense costs are expensed as incurred. Altria Group, Inc. and its subsidiaries have achieved substantial success in managing litigation. Nevertheless, litigation is subject to uncertainty and significant challenges remain. It is possible that the consolidated results of operations, cash flows or financial position of Altria Group, Inc., or one or more of its subsidiaries, could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. Altria Group, Inc. and each of its subsidiaries named as a defendant believe, and each has been so advised by counsel handling the respective cases, that it has valid defenses to the litigation pending against |
Condensed Consolidating Financi
Condensed Consolidating Financial Information | |
3 Months Ended
Mar. 31, 2010 | |
Condensed Consolidating Financial Information: | Note 13. Condensed Consolidating Financial Information: PM USA has issued guarantees relating to Altria Group, Inc.s obligations under its outstanding debt securities, borrowings under its revolving credit agreements 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). The Guarantees provide that PM USA fully and unconditionally 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, 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, result in PM USAs obligations under the Guarantees not constituting a fraudulent transfer or conveyance. 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 its obligations under each of the Guarantees 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; or the rating of Altria Group, Inc.s long-term senior unsecured debt by Standard Poors of A or higher. At March 31, 2010, the respective principal wholly-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 common stock. The following sets forth the condensed consolidating balance sheets as of March 31, 2010 and December 31, 2009, condensed consolidating statements of earnings for the three months ended March 31, 2010 and 2009, and condensed consolidating statements of cash flows |