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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2021
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 |
For the transition period
from
to
Commission File Number 1-08940
Altria Group, Inc.
(Exact name of registrant as specified in its charter)
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Virginia |
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13-3260245 |
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(State or other jurisdiction of incorporation or
organization) |
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(I.R.S. Employer
Identification No.) |
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6601 West Broad Street, |
Richmond, |
Virginia |
23230 |
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(Address of principal executive offices) |
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(Zip Code) |
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Registrant’s telephone number, including area
code (804)
274-2200
Former
name, former address and former fiscal year, if changed since last
report
Securities registered pursuant to Section 12(b) of the
Act:
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Title
of each
class
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Trading Symbols |
Name of each exchange on which registered |
Common Stock, $0.33 1/3 par value
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MO |
New York Stock Exchange |
1.000% Notes due 2023
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MO23A |
New York Stock Exchange |
1.700% Notes due 2025
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MO25 |
New York Stock Exchange |
2.200% Notes due 2027
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MO27 |
New York Stock Exchange |
3.125% Notes due 2031
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MO31 |
New York Stock Exchange |
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes
þ
No
¨
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such
files). Yes
þ No ¨
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,” “accelerated filer,”
“smaller reporting company,” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer |
|
þ |
|
Accelerated filer |
|
☐ |
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|
Non-accelerated filer |
|
☐ |
|
Smaller reporting company |
|
☐ |
|
|
|
|
Emerging growth company |
|
☐ |
If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act.
¨
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No þ
At October 21, 2021, there were 1,836,988,822 shares outstanding of
the registrant’s common stock, par value $0.33 1/3 per
share.
ALTRIA GROUP, INC.
TABLE OF CONTENTS
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Page No. |
PART I - |
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FINANCIAL INFORMATION |
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Item 1. |
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Financial Statements (Unaudited) |
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Item 2. |
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Item 3. |
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Item 4. |
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PART II - |
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OTHER INFORMATION |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 6. |
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Signature |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in millions of dollars)
(Unaudited)
______________________________
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September 30, 2021 |
|
December 31, 2020 |
Assets |
|
|
|
|
Cash and cash equivalents |
|
$ |
2,957 |
|
|
$ |
4,945 |
|
Receivables |
|
36 |
|
|
137 |
|
Inventories: |
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|
|
|
Leaf tobacco |
|
644 |
|
|
844 |
|
Other raw materials |
|
159 |
|
|
200 |
|
Work in process |
|
30 |
|
|
502 |
|
Finished product |
|
300 |
|
|
420 |
|
|
|
1,133 |
|
|
1,966 |
|
|
|
|
|
|
|
|
|
|
|
Assets held for sale |
|
1,490 |
|
|
— |
|
Other current assets |
|
404 |
|
|
69 |
|
Total current assets |
|
6,020 |
|
|
7,117 |
|
Property, plant and equipment, at cost |
|
4,418 |
|
|
5,150 |
|
Less accumulated depreciation |
|
2,900 |
|
|
3,138 |
|
|
|
1,518 |
|
|
2,012 |
|
Goodwill |
|
5,177 |
|
|
5,177 |
|
Other intangible assets, net |
|
12,326 |
|
|
12,615 |
|
Investments in equity securities ($1,740 million and $1,868 million
at September 30, 2021 and December 31, 2020, respectively, measured
at fair value)
|
|
13,874 |
|
|
19,529 |
|
|
|
|
|
|
Other assets |
|
649 |
|
|
964 |
|
Total Assets |
|
$ |
39,564 |
|
|
$ |
47,414 |
|
See notes to condensed consolidated financial
statements.
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Continued)
(in millions of dollars, except share and per share
data)
(Unaudited)
________________________________________________
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|
September 30, 2021 |
|
December 31, 2020 |
Liabilities |
|
|
|
|
|
|
|
|
|
Current portion of long-term debt |
|
$ |
1,105 |
|
|
$ |
1,500 |
|
Accounts payable |
|
266 |
|
|
380 |
|
Accrued liabilities: |
|
|
|
|
Marketing |
|
680 |
|
|
523 |
|
|
|
|
|
|
|
|
|
|
|
Settlement charges |
|
2,996 |
|
|
3,564 |
|
Other |
|
1,109 |
|
|
1,494 |
|
|
|
|
|
|
Dividends payable |
|
1,661 |
|
|
1,602 |
|
Liabilities held for sale |
|
295 |
|
|
— |
|
Total current liabilities |
|
8,112 |
|
|
9,063 |
|
Long-term debt |
|
27,022 |
|
|
27,971 |
|
Deferred income taxes |
|
3,557 |
|
|
4,532 |
|
Accrued pension costs |
|
280 |
|
|
551 |
|
Accrued postretirement health care costs |
|
1,512 |
|
|
1,951 |
|
Other liabilities |
|
307 |
|
|
381 |
|
Total liabilities |
|
40,790 |
|
|
44,449 |
|
Contingencies (Note 12) |
|
|
|
|
Redeemable noncontrolling interest |
|
39 |
|
|
40 |
|
Stockholders’ (Deficit) Equity |
|
|
|
|
Common stock, par value $0.33 1/3 per share
(2,805,961,317 shares issued)
|
|
935 |
|
|
935 |
|
Additional paid-in capital |
|
5,846 |
|
|
5,910 |
|
Earnings reinvested in the business |
|
30,685 |
|
|
34,679 |
|
Accumulated other comprehensive losses |
|
(3,430) |
|
|
(4,341) |
|
Cost of repurchased stock
(967,321,022 shares at September 30, 2021 and
947,542,152 shares at December 31, 2020)
|
|
(35,303) |
|
|
(34,344) |
|
Total stockholders’ (deficit) equity attributable to
Altria |
|
(1,267) |
|
|
2,839 |
|
Noncontrolling interests |
|
2 |
|
|
86 |
|
Total stockholders’ (deficit) equity |
|
(1,265) |
|
|
2,925 |
|
Total Liabilities and Stockholders’ (Deficit) Equity |
|
$ |
39,564 |
|
|
$ |
47,414 |
|
See notes to condensed consolidated financial
statements.
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Earnings (Losses)
(in millions of dollars, except per share data)
(Unaudited)
_____________________________________
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For the Nine Months Ended September 30, |
|
For the Three Months Ended September 30, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Net revenues |
|
$ |
19,758 |
|
|
$ |
19,849 |
|
|
$ |
6,786 |
|
|
$ |
7,123 |
|
Cost of sales |
|
5,348 |
|
|
5,909 |
|
|
1,858 |
|
|
1,961 |
|
Excise taxes on products |
|
3,733 |
|
|
4,063 |
|
|
1,255 |
|
|
1,445 |
|
Gross profit |
|
10,677 |
|
|
9,877 |
|
|
3,673 |
|
|
3,717 |
|
Marketing, administration and research costs |
|
1,850 |
|
|
1,585 |
|
|
722 |
|
|
557 |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
8,827 |
|
|
8,292 |
|
|
2,951 |
|
|
3,160 |
|
Interest and other debt expense, net |
|
869 |
|
|
893 |
|
|
266 |
|
|
310 |
|
Loss on early extinguishment of debt |
|
649 |
|
|
— |
|
|
— |
|
|
— |
|
Net periodic benefit income, excluding service cost |
|
(152) |
|
|
(58) |
|
|
(63) |
|
|
(3) |
|
(Income) losses from equity investments |
|
5,789 |
|
|
306 |
|
|
5,915 |
|
|
472 |
|
Impairment of JUUL equity securities |
|
— |
|
|
2,600 |
|
|
— |
|
|
2,600 |
|
(Gain) loss on Cronos-related financial instruments |
|
128 |
|
|
202 |
|
|
135 |
|
|
105 |
|
|
|
|
|
|
|
|
|
|
Earnings (losses) before income taxes |
|
1,544 |
|
|
4,349 |
|
|
(3,302) |
|
|
(324) |
|
Provision (benefit) for income taxes |
|
693 |
|
|
1,817 |
|
|
(582) |
|
|
632 |
|
Net earnings (losses) |
|
851 |
|
|
2,532 |
|
|
(2,720) |
|
|
(956) |
|
Net (earnings) losses attributable to noncontrolling
interests |
|
— |
|
|
11 |
|
|
(2) |
|
|
4 |
|
Net earnings (losses) attributable to Altria |
|
$ |
851 |
|
|
$ |
2,543 |
|
|
$ |
(2,722) |
|
|
$ |
(952) |
|
Per share data: |
|
|
|
|
|
|
|
|
Basic earnings (losses) per share attributable to
Altria |
|
$ |
0.46 |
|
|
$ |
1.37 |
|
|
$ |
(1.48) |
|
|
$ |
(0.51) |
|
Diluted earnings (losses) per share attributable to
Altria |
|
$ |
0.46 |
|
|
$ |
1.36 |
|
|
$ |
(1.48) |
|
|
$ |
(0.51) |
|
|
|
|
|
|
|
|
|
|
See notes to condensed consolidated financial
statements.
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Earnings
(Losses)
(in millions of dollars)
(Unaudited)
_____________________
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|
For the Nine Months Ended September 30, |
|
For the Three Months Ended September 30, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Net earnings (losses) |
|
$ |
851 |
|
|
$ |
2,532 |
|
|
$ |
(2,720) |
|
|
$ |
(956) |
|
Other comprehensive earnings (losses), net of deferred income
taxes: |
|
|
|
|
|
|
|
|
Benefit plans |
|
383 |
|
|
27 |
|
|
6 |
|
|
(15) |
|
ABI |
|
495 |
|
|
(928) |
|
|
161 |
|
|
(15) |
|
Currency translation adjustments and other |
|
33 |
|
|
(16) |
|
|
5 |
|
|
23 |
|
Other comprehensive earnings (losses), net of deferred
income taxes
|
|
911 |
|
|
(917) |
|
|
172 |
|
|
(7) |
|
|
|
|
|
|
|
|
|
|
Comprehensive earnings (losses) |
|
1,762 |
|
|
1,615 |
|
|
(2,548) |
|
|
(963) |
|
Comprehensive (earnings) losses attributable to noncontrolling
interests |
|
— |
|
|
11 |
|
|
(2) |
|
|
4 |
|
Comprehensive earnings (losses) attributable to Altria |
|
$ |
1,762 |
|
|
$ |
1,626 |
|
|
$ |
(2,550) |
|
|
$ |
(959) |
|
See notes to condensed consolidated financial
statements.
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ (Deficit)
Equity
for the Nine Months Ended September 30, 2021 and 2020
(in millions of dollars, except per share data)
(Unaudited)
_______________________________________
|
|
|
|
|
|
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Altria |
|
|
|
|
|
|
Common
Stock |
|
Additional
Paid-in
Capital |
|
Earnings
Reinvested
in the
Business |
|
Accumulated
Other
Comprehensive
Losses |
|
Cost of
Repurchased
Stock |
|
Non-
controlling
Interests |
|
Total
Stockholders’
(Deficit) Equity |
Balances, December 31, 2020 |
|
$ |
935 |
|
|
$ |
5,910 |
|
|
$ |
34,679 |
|
|
$ |
(4,341) |
|
|
$ |
(34,344) |
|
|
$ |
86 |
|
|
$ |
2,925 |
|
Net earnings (losses)
(1)
|
|
— |
|
|
— |
|
|
851 |
|
|
— |
|
|
— |
|
|
(4) |
|
|
847 |
|
Other comprehensive earnings (losses), net of deferred income
taxes
|
|
— |
|
|
— |
|
|
— |
|
|
911 |
|
|
— |
|
|
— |
|
|
911 |
|
Stock award activity |
|
— |
|
|
13 |
|
|
— |
|
|
— |
|
|
13 |
|
|
— |
|
|
26 |
|
Cash dividends declared ($2.62 per share)
|
|
— |
|
|
— |
|
|
(4,845) |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,845) |
|
Repurchases of common stock |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(972) |
|
|
— |
|
|
(972) |
|
Other
(2)
|
|
— |
|
|
(77) |
|
|
— |
|
|
— |
|
|
— |
|
|
(80) |
|
|
(157) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, September 30, 2021 |
|
$ |
935 |
|
|
$ |
5,846 |
|
|
$ |
30,685 |
|
|
$ |
(3,430) |
|
|
$ |
(35,303) |
|
|
$ |
2 |
|
|
$ |
(1,265) |
|
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Attributable to Altria |
|
|
|
|
|
|
Common
Stock |
|
Additional
Paid-in
Capital |
|
Earnings
Reinvested
in the
Business |
|
Accumulated
Other
Comprehensive
Losses |
|
Cost of
Repurchased
Stock |
|
Non-
controlling
Interests |
|
Total
Stockholders’
(Deficit) Equity |
Balances, December 31, 2019 |
|
$ |
935 |
|
|
$ |
5,970 |
|
|
$ |
36,539 |
|
|
$ |
(2,864) |
|
|
$ |
(34,358) |
|
|
$ |
97 |
|
|
$ |
6,319 |
|
Net earnings (losses)
(1)
|
|
— |
|
|
— |
|
|
2,543 |
|
|
— |
|
|
— |
|
|
(13) |
|
|
2,530 |
|
Other comprehensive earnings (losses), net of deferred income
taxes
|
|
— |
|
|
— |
|
|
— |
|
|
(917) |
|
|
— |
|
|
— |
|
|
(917) |
|
Stock award activity
|
|
— |
|
|
3 |
|
|
— |
|
|
— |
|
|
14 |
|
|
— |
|
|
17 |
|
Cash dividends declared ($2.54 per share)
|
|
— |
|
|
— |
|
|
(4,726) |
|
|
— |
|
|
— |
|
|
— |
|
|
(4,726) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
9 |
|
|
9 |
|
Balances, September 30, 2020 |
|
$ |
935 |
|
|
$ |
5,973 |
|
|
$ |
34,356 |
|
|
$ |
(3,781) |
|
|
$ |
(34,344) |
|
|
$ |
93 |
|
|
$ |
3,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Amounts
attributable to noncontrolling interests for the nine months ended
September 30, 2021 and 2020 exclude net earnings of $4 million and
$2 million, respectively, due to the redeemable noncontrolling
interest related to Stag’s Leap Wine Cellars,
which is reported in the mezzanine equity section on the condensed
consolidated balance sheets.
(2)
Represents the purchase of the remaining noncontrolling interests
in Helix. For additional information, see Note 1.
Background and Basis of Presentation.
See notes to condensed consolidated financial
statements.
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders’ (Deficit)
Equity
for the Three Months Ended September 30, 2021 and 2020
(in
millions of dollars, except per share data)
(Unaudited)
_______________________________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Altria |
|
|
|
|
|
|
Common
Stock |
|
Additional
Paid-in
Capital |
|
Earnings
Reinvested
in the
Business |
|
Accumulated
Other
Comprehensive
Losses |
|
Cost of
Repurchased
Stock |
|
Non-
controlling
Interests |
|
Total
Stockholders’
(Deficit) Equity |
Balances, June 30, 2021 |
|
$ |
935 |
|
|
$ |
5,840 |
|
|
$ |
35,065 |
|
|
$ |
(3,602) |
|
|
$ |
(34,981) |
|
|
$ |
2 |
|
|
$ |
3,259 |
|
Net earnings (losses)
(1)
|
|
— |
|
|
— |
|
|
(2,722) |
|
|
— |
|
|
— |
|
|
— |
|
|
(2,722) |
|
Other comprehensive earnings (losses), net of deferred income
taxes
|
|
— |
|
|
— |
|
|
— |
|
|
172 |
|
|
— |
|
|
— |
|
|
172 |
|
Stock award activity
|
|
— |
|
|
6 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
6 |
|
Cash dividends declared $0.90 per share)
|
|
— |
|
|
— |
|
|
(1,658) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,658) |
|
Repurchases of common stock |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(322) |
|
|
— |
|
|
(322) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, September 30, 2021
|
|
$ |
935 |
|
|
$ |
5,846 |
|
|
$ |
30,685 |
|
|
$ |
(3,430) |
|
|
$ |
(35,303) |
|
|
$ |
2 |
|
|
$ |
(1,265) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable to Altria |
|
|
|
|
|
|
Common
Stock |
|
Additional
Paid-in
Capital |
|
Earnings
Reinvested
in the
Business |
|
Accumulated
Other
Comprehensive
Losses |
|
Cost of
Repurchased
Stock |
|
Non-
controlling
Interests |
|
Total
Stockholders’
(Deficit) Equity |
Balances, June 30, 2020 |
|
$ |
935 |
|
|
$ |
5,964 |
|
|
$ |
36,908 |
|
|
$ |
(3,774) |
|
|
$ |
(34,345) |
|
|
$ |
98 |
|
|
$ |
5,786 |
|
Net earnings (losses)
(1)
|
|
— |
|
|
— |
|
|
(952) |
|
|
— |
|
|
— |
|
|
(5) |
|
|
(957) |
|
Other comprehensive earnings (losses), net of deferred income
taxes
|
|
— |
|
|
— |
|
|
— |
|
|
(7) |
|
|
— |
|
|
— |
|
|
(7) |
|
Stock award activity
|
|
— |
|
|
9 |
|
|
— |
|
|
— |
|
|
1 |
|
|
— |
|
|
10 |
|
Cash dividends declared ($0.86 per share)
|
|
— |
|
|
— |
|
|
(1,600) |
|
|
— |
|
|
— |
|
|
— |
|
|
(1,600) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balances, September 30, 2020 |
|
$ |
935 |
|
|
$ |
5,973 |
|
|
$ |
34,356 |
|
|
$ |
(3,781) |
|
|
$ |
(34,344) |
|
|
$ |
93 |
|
|
$ |
3,232 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Amounts attributable to noncontrolling interests for the three
months ended September 30, 2021 and 2020 exclude net earnings of $2
million and $1 million, respectively, due to the redeemable
noncontrolling interest related to Stag’s Leap Wine
Cellars,
which is reported in the mezzanine equity section on the condensed
consolidated balance sheets.
See notes to condensed consolidated financial
statements.
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in millions of dollars)
(Unaudited)
_____________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
2021 |
|
2020 |
Cash Provided by (Used in) Operating Activities |
|
|
|
|
Net earnings (losses) |
|
$ |
851 |
|
|
$ |
2,532 |
|
Adjustments to reconcile net earnings (losses) to operating cash
flows: |
|
|
|
|
Depreciation and amortization |
|
190 |
|
|
192 |
|
Deferred income tax provision (benefit) |
|
(1,180) |
|
|
(111) |
|
(Income) losses from equity investments |
|
5,789 |
|
|
306 |
|
Dividends from ABI |
|
119 |
|
|
108 |
|
|
|
|
|
|
(Gain) loss on Cronos-related financial instruments |
|
128 |
|
|
202 |
|
Impairment of JUUL equity securities |
|
— |
|
|
2,600 |
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt |
|
649 |
|
|
— |
|
|
|
|
|
|
Cash effects of changes: |
|
|
|
|
Receivables |
|
(7) |
|
|
1 |
|
Inventories |
|
118 |
|
|
136 |
|
Accounts payable |
|
3 |
|
|
24 |
|
Income taxes |
|
(200) |
|
|
— |
|
Accrued liabilities and other current assets |
|
(104) |
|
|
(504) |
|
Accrued settlement charges |
|
(568) |
|
|
(140) |
|
Pension plan contributions |
|
(23) |
|
|
(16) |
|
Pension provisions and postretirement, net |
|
(127) |
|
|
(35) |
|
Other, net
(1)
|
|
104 |
|
|
549 |
|
Net cash provided by (used in) operating activities |
|
5,742 |
|
|
5,844 |
|
Cash Provided by (Used in) Investing Activities |
|
|
|
|
Capital expenditures |
|
(102) |
|
|
(162) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other, net |
|
60 |
|
|
55 |
|
Net cash provided by (used in) investing activities |
|
$ |
(42) |
|
|
$ |
(107) |
|
(1)
2020 primarily reflects inventory-related amounts associated with
the wine business strategic reset. For further discussion, see Note
9.
Segment Reporting.
See notes to condensed consolidated financial
statements.
Altria Group, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Continued)
(in millions of dollars)
(Unaudited)
_____________________
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
2021 |
|
2020 |
Cash Provided by (Used in) Financing Activities |
|
|
|
|
Proceeds from short-term borrowings |
|
$ |
— |
|
|
$ |
3,000 |
|
Repayment of short-term borrowings |
|
— |
|
|
(3,000) |
|
Long-term debt issued |
|
5,472 |
|
|
1,993 |
|
Long-term debt repaid |
|
(6,542) |
|
|
(1,000) |
|
Repurchases of common stock |
|
(972) |
|
|
— |
|
Dividends paid on common stock |
|
(4,787) |
|
|
(4,690) |
|
|
|
|
|
|
|
|
|
|
|
Premiums and fees related to early extinguishment of
debt |
|
(623) |
|
|
— |
|
Other, net |
|
(216) |
|
|
(16) |
|
Net cash provided by (used in) financing activities |
|
(7,668) |
|
|
(3,713) |
|
Cash, cash equivalents and restricted cash: |
|
|
|
|
Increase (decrease) |
|
(1,968) |
|
|
2,024 |
|
Balance at beginning of period |
|
5,006 |
|
|
2,160 |
|
Balance at end of period |
|
$ |
3,038 |
|
|
$ |
4,184 |
|
|
|
|
|
|
The following table provides a reconciliation of cash, cash
equivalents and restricted cash to the amounts reported on Altria’s
condensed consolidated balance sheets: |
|
|
At September 30, 2021 |
|
At December 31, 2020 |
Cash and cash equivalents |
|
$ |
2,957 |
|
|
$ |
4,945 |
|
Restricted cash included in other current assets
(1)
|
|
— |
|
|
1 |
|
Restricted cash included in other assets
(1)
|
|
45 |
|
|
60 |
|
Cash included in assets held for sale
(2)
|
|
36 |
|
|
— |
|
Cash, cash equivalents and restricted cash |
|
$ |
3,038 |
|
|
$ |
5,006 |
|
(1)Restricted
cash consisted of cash deposits collateralizing appeal bonds posted
by PM USA to obtain stays of judgments pending appeals. See Note
12.
Contingencies.
(2)
Cash included in assets held for sale at September 30, 2021 is
related to the Ste. Michelle Transaction. For further discussion,
see Note 3.
Assets Held for Sale.
See notes to condensed consolidated financial
statements.
Altria Group, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1. Background and Basis of Presentation
When used in these notes, the term
“Altria,”
refers to Altria Group, Inc. and its subsidiaries, unless the
context requires otherwise.
▪Background:
At September 30, 2021, Altria’s wholly owned subsidiaries
included Philip Morris USA Inc. (“PM USA”), which is engaged in the
manufacture and sale of cigarettes in the United States; John
Middleton Co. (“Middleton”), which is engaged in the manufacture
and sale of machine-made large cigars and pipe tobacco and is a
wholly owned subsidiary of PM USA; UST LLC (“UST”), which through
its wholly owned subsidiaries, including U.S. Smokeless Tobacco
Company LLC (“USSTC”) and Ste. Michelle Wine Estates Ltd. (“Ste.
Michelle”), is engaged in the manufacture and sale of moist
smokeless tobacco products (“MST”), snus products and wine; Helix
Innovations LLC (“Helix”), which operates in the United States and
Canada, and Helix Innovations GmbH and its subsidiaries (“Helix
ROW”), which operate internationally in the rest-of-world, are
engaged in the manufacture and sale of
on!
oral nicotine pouches; and Philip Morris Capital Corporation
(“PMCC”), which maintains a portfolio of finance assets,
substantially all of which are leveraged leases.
On July 8, 2021, UST entered into a share purchase agreement
pursuant to which it agreed to sell its subsidiary, International
Wine & Spirits Ltd. (“IWS”), which includes Ste. Michelle. The
sale was completed on October 1, 2021. At September 30, 2021, the
assets and liabilities associated with the pending sale of IWS were
classified as assets held for sale on Altria’s condensed
consolidated balance sheet. For further discussion, see Note
3.
Assets Held for Sale.
Altria owns 100% of the global
on!
business as a result of transactions in December 2020 and April
2021 to purchase the remaining 20% interest in (i) Helix ROW and
(ii) Helix, respectively.
The total purchase price of the December 2020 and April 2021
transactions was approximately $250 million.
Other Altria wholly owned subsidiaries included Altria Group
Distribution Company, which provides sales and distribution
services to certain Altria operating subsidiaries, and Altria
Client Services LLC, which provides various support services in
areas such as legal, regulatory, consumer engagement, finance,
human resources and external affairs to Altria and its
subsidiaries. Altria’s access to the operating cash flows of its
wholly owned subsidiaries consists of cash received from the
payment of dividends and distributions, and the payment of interest
on intercompany loans by its subsidiaries. At September 30,
2021, Altria’s significant wholly owned subsidiaries were not
limited by contractual obligations in their ability to pay cash
dividends or make other distributions with respect to their equity
interests.
At September 30, 2021, Altria’s investments in equity
securities consisted of Anheuser-Busch InBev SA/NV (“ABI”), Cronos
Group Inc. (“Cronos”) and JUUL Labs, Inc. (“JUUL”). Altria accounts
for its investments in ABI and Cronos under the equity method of
accounting using a one-quarter lag. Altria accounts for its equity
investment in JUUL under the fair value option.
For further discussion of Altria’s investments in equity
securities, see Note 4.
Investments in Equity Securities.
▪Dividends
and Share Repurchases:
In August 2021, Altria’s Board of Directors (the “Board of
Directors” or “Board”) approved a 4.7% increase in the quarterly
dividend rate to $0.90 per share of Altria common stock versus the
previous rate of $0.86 per share. The current annualized dividend
rate is $3.60. Future dividend payments remain subject to the
discretion of the Board.
In July 2019, the Board of Directors authorized a $1.0 billion
share repurchase program. In April 2020, the Board rescinded the
$500 million remaining in this program as part of Altria’s efforts
to enhance its liquidity position in response to the COVID-19
pandemic. Altria did not repurchase any shares in
2020.
In January 2021, the Board authorized a new $2.0 billion share
repurchase program, of which $1,028 million was remaining at
September 30, 2021. In October 2021, the Board authorized a $1.5
billion expansion of this program to $3.5 billion. The timing of
share repurchases under this program depends upon marketplace
conditions and other factors, and the program remains subject to
the discretion of the Board.
Altria’s share repurchase activity for the nine and three months
ended September 30, 2021 was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
(in millions, except per share data) |
For the Nine Months Ended September 30, 2021 |
|
For the Three Months Ended September 30, 2021 |
Total number of shares repurchased
|
20.2 |
|
|
6.7 |
|
Aggregate cost of shares repurchased
|
$ |
972 |
|
|
$ |
322 |
|
Average price per share of shares repurchased
|
$ |
48.17 |
|
|
$ |
48.35 |
|
▪Basis
of Presentation:
The interim condensed consolidated financial statements of Altria
are unaudited. It is the opinion of Altria’s management that all
adjustments necessary for a fair statement of the interim results
presented have been reflected in the interim condensed consolidated
financial statements. 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.
Certain immaterial prior year amounts have been reclassified to
conform with the current year’s presentation.
These statements should be read in conjunction with Altria’s
audited consolidated financial statements and related notes, which
appear in Altria’s Annual Report on Form 10-K for the year ended
December 31, 2020 (the “2020 Form 10-K”).
On January 1, 2021, Altria adopted Accounting Standards Update
(“ASU”) 2019-12,
Income Taxes (Topic 740): Simplifying the Accounting for Income
Taxes
(“ASU No. 2019-12”). This guidance removes certain exceptions for
investments, intraperiod allocations and interim calculations, and
adds guidance to reduce complexity in accounting for income taxes.
The adoption of ASU No. 2019-12 did not have a material impact on
Altria’s condensed consolidated financial statements.
Additionally, on January 1, 2021, Altria adopted ASU No.
2020-01,
Investments - Equity Securities (Topic 321), Investments - Equity
Method and Joint Ventures (Topic 323), and Derivatives and Hedging
(Topic 815):
Clarifying the Interactions between Topic 321, Topic 323, and Topic
815
(“ASU No. 2020-01”). This guidance provides clarification of the
interaction of rules for equity securities, the equity method of
accounting, and forward contracts and purchase options on certain
types of securities. The adoption of ASU No. 2020-01 did not have a
material impact on Altria’s condensed consolidated financial
statements.
For a description of issued accounting guidance applicable to, but
not yet adopted by, Altria, see Note 13.
New Accounting Guidance Not Yet Adopted.
Note 2. Revenues from Contracts with Customers
Altria disaggregates net revenues based on product type. For
further discussion, see Note 9.
Segment Reporting.
In 2020, a majority of Altria’s businesses offered cash discounts
to customers for prompt payment and calculated cash discounts as a
percentage of the list price based on historical experience and
agreed-upon payment terms. Beginning in the first quarter of 2021
for USSTC and the third quarter of 2021 for PM USA, cash discounts
were calculated as a flat rate per unit, based on agreed-upon
payment terms. Altria’s businesses record receivables net of the
cash discounts on Altria’s condensed consolidated balance
sheets.
Altria’s businesses that receive payments in advance of product
shipment record such payments as deferred revenue. These payments
are included in other accrued liabilities on Altria’s condensed
consolidated balance sheets until control of such products is
obtained by the customer. Deferred revenue was $260 million and
$301 million at September 30, 2021 and December 31, 2020,
respectively. When cash is received in advance of product shipment,
Altria’s businesses satisfy their performance obligations within
three days of receiving payment. At September 30, 2021 and
December 31, 2020, there were no differences between amounts
recorded as deferred revenue and amounts subsequently recognized as
revenue.
Receivables were $144 million (including $108 million in assets
held for sale) and $137 million at September 30, 2021 and
December 31, 2020, respectively. At September 30, 2021
and December 31, 2020, there were no expected differences
between amounts recorded and subsequently received, and Altria’s
businesses did not record an allowance for doubtful accounts
against these receivables.
Altria’s businesses record an allowance for returned goods, which
is included in other accrued liabilities on Altria’s condensed
consolidated balance sheets. While all of Altria’s tobacco
operating companies sell tobacco products with dates relative to
freshness as printed on product packaging, it is USSTC’s policy to
accept authorized sales returns from its customers for products
that have passed such dates due to the limited shelf life of
USSTC’s MST and snus products. Altria’s businesses record estimated
sales returns, which are based principally on historical volume and
return rates, as a reduction to revenues. Actual sales returns will
differ from estimated sales returns to the extent actual results
differ from estimated assumptions. Altria’s businesses reflect
differences between actual and estimated sales returns in the
period in which the actual amounts become known. These differences,
if any, have not had a material impact on Altria’s condensed
consolidated financial statements. All returned goods are destroyed
upon return and not included in inventory. Consequently, Altria’s
businesses do not record an asset for their right to recover goods
from customers upon return.
Sales incentives include variable payments related to goods sold by
Altria’s businesses. Altria’s businesses include estimates of
variable consideration as a reduction to revenues upon shipment of
goods to customers. The sales incentives that require significant
estimates and judgments are as follows:
Price promotion payments-
Altria’s businesses make price promotion payments, substantially
all of which are made to their retail partners, to incent the
promotion of certain product offerings in select geographic
areas.
Wholesale and retail participation payments-
Altria’s businesses make payments to their wholesale and retail
partners to incent merchandising and sharing of sales data in
accordance with each business’s trade agreements.
These estimates primarily include estimated wholesale to retail
sales volume and historical acceptance rates. Actual payments will
differ from estimated payments to the extent actual results differ
from estimated assumptions. Differences between actual and
estimated payments are reflected in the period such information
becomes available. These differences, if any, have not had a
material impact on Altria’s condensed consolidated financial
statements.
Note 3. Assets Held for Sale
On July 8, 2021, UST entered into a share purchase agreement
pursuant to which it agreed to sell its subsidiary, IWS, which
includes Ste. Michelle, to an entity controlled by investment funds
managed by Sycamore Partners Management, L.P. in an all-cash
transaction with a purchase price of approximately $1.2 billion and
the assumption of certain liabilities of IWS and its subsidiaries
(the “Ste. Michelle Transaction”).
At September 30, 2021, the assets and liabilities associated
with the Ste. Michelle Transaction were classified as assets held
for sale and were measured at their fair value less costs to sell,
resulting in a pre-tax charge of $41 million. A reserve (as shown
below), representing the adjustment to record the assets and
liabilities at their fair value less costs to sell, was included as
a component of assets held for sale in Altria’s condensed
consolidated balance sheets at September 30, 2021. Altria
recorded an additional pre-tax charge of $10 million for
disposition-related costs related to the Ste. Michelle Transaction.
The total pre-tax charges of $51 million were included in the wine
segment and recorded in marketing, administration and research
costs in Altria’s condensed consolidated statements of earnings
(losses) for the nine and three months ended September 30,
2021.
On October 1, 2021, UST completed the sale of IWS and received
approximately $1.2 billion in net cash proceeds. Altria expects to
record additional adjustments related to the Ste. Michelle
Transaction in the fourth quarter of 2021 and does not expect these
adjustments to be material.
The major classes of assets and liabilities of IWS classified as
held for sale at September 30, 2021 were as follows:
|
|
|
|
|
|
|
|
|
(in millions) |
|
September 30, 2021 |
Assets held for sale |
|
|
Cash and cash equivalents |
|
$ |
36 |
|
Receivables |
|
108 |
|
Inventories |
|
715 |
|
Property, plant and equipment, net of accumulated
depreciation |
|
407 |
|
Other intangible assets, net |
|
236 |
|
Other assets |
|
29 |
|
Total assets |
|
1,531 |
|
Reserve |
|
(41) |
|
Total assets held for sale |
|
1,490 |
|
|
|
|
Liabilities held for sale |
|
|
Accounts payable |
|
114 |
|
Accrued liabilities |
|
83 |
|
Accrued pension costs |
|
49 |
|
Other liabilities |
|
49 |
|
Total liabilities held for sale |
|
295 |
|
|
|
|
Assets and liabilities held for sale, net |
|
$ |
1,195 |
|
Note 4. Investments in Equity Securities
The carrying amount of Altria’s investments consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
|
September 30, 2021 |
|
December 31, 2020 |
ABI |
|
$ |
11,237 |
|
|
$ |
16,651 |
|
JUUL
|
|
1,705 |
|
|
1,705 |
|
Cronos
(1)
|
|
932 |
|
|
1,173 |
|
Total
|
|
$ |
13,874 |
|
|
$ |
19,529 |
|
(1)
Atria’s investment in Cronos at September 30, 2021 consisted of
Altria’s equity method investment in Cronos ($897 million), the
Cronos warrant ($32 million) and the Fixed-price Preemptive Rights
($3 million), (collectively, “Investment in Cronos”). The
Investment in Cronos at December 31, 2020 consisted of Altria’s
equity method investment in Cronos ($1,010 million), the Cronos
warrant ($139 million) and the Fixed-price Preemptive Rights ($24
million). See below for further discussion.
Income (losses) from equity investments accounted for under the
equity method of accounting and fair value option consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
For the Three Months Ended September 30, |
(in millions) |
2021 |
|
2020 |
|
2021 |
|
2020 |
ABI
(1)
|
$ |
(5,644) |
|
|
$ |
(306) |
|
|
$ |
(6,036) |
|
|
$ |
(418) |
|
Cronos |
(145) |
|
|
— |
|
|
21 |
|
|
(54) |
|
Income (losses) from investments under equity method of
accounting |
(5,789) |
|
|
(306) |
|
|
$ |
(6,015) |
|
|
$ |
(472) |
|
JUUL |
— |
|
|
— |
|
|
100 |
|
|
— |
|
Income (losses) from equity investments |
$ |
(5,789) |
|
|
$ |
(306) |
|
|
$ |
(5,915) |
|
|
$ |
(472) |
|
(1)
For the nine and three months ended September 30, 2021, Altria
recorded a non-cash, pre-tax impairment charge of $6,157 million
related to its equity investment in ABI. See below for further
discussion.
Investment in ABI
At September 30, 2021, Altria had an approximate 10% ownership
interest in ABI, consisting of 185 million restricted shares of ABI
(the “Restricted Shares”) and 12 million ordinary shares of ABI.
The Restricted Shares:
▪are
unlisted and not admitted to trading on any stock
exchange;
▪are
convertible by Altria into ordinary shares of ABI on a one-for-one
basis;
▪rank
equally with ordinary shares of ABI with regards to dividends and
voting rights; and
▪have
director nomination rights with respect to ABI.
The Restricted Shares were subject to a
five-year lock-up period that ended October 10, 2021. As of
this filing, Altria has not elected to convert its Restricted
Shares into ordinary shares of ABI.
Altria accounts for its investment in ABI under the equity method
of accounting because Altria has the ability to exercise
significant influence over the operating and financial policies of
ABI, including having active representation on ABI’s board of
directors and certain ABI board committees. Through this
representation, Altria participates in ABI policy making
processes.
Altria reports its share of ABI’s results using a one-quarter lag
because ABI’s results are not available in time for Altria to
record them in the concurrent period.
The fair value of Altria’s equity investment in ABI is based on (i)
unadjusted quoted prices in active markets for ABI’s ordinary
shares and was classified in Level 1 of the fair value hierarchy
and (ii) observable inputs other than Level 1 prices, such as
quoted prices for similar assets for the Restricted Shares, and was
classified in Level 2 of the fair value hierarchy. Altria can
convert its Restricted Shares to ordinary shares at its discretion.
Therefore, the fair value of each Restricted Share is based on the
value of an ordinary share.
In October 2019, the fair value of Altria’s equity investment in
ABI declined below its carrying value and has not recovered. At
December 31, 2020, the fair value of Altria’s equity
investment in ABI was $13.8 billion (carrying value of $16.7
billion), which was less than its carrying value by approximately
17%. In preparing its financial statements for the period ended
December 31, 2020, Altria evaluated the factors related to the
fair value decline, including the impact on the fair value of ABI’s
shares during the COVID-19 pandemic, which has negatively impacted
ABI’s business. Altria evaluated the duration and magnitude of the
fair value decline, ABI’s financial condition and near-term
prospects and Altria’s intent and ability to hold its
investment in ABI until recovery. Altria concluded that the decline
in fair value of its investment in ABI at December 31, 2020 below
its carrying value was temporary and, therefore, no impairment was
recorded at that time.
Following the consideration of the same factors, Altria, in
preparing its financial statements for the period ended
September 30, 2021, concluded that the decline in fair value
of its investment in ABI at September 30, 2021 was other than
temporary. As a result, Altria recorded a non-cash, pre-tax
impairment charge of $6.2 billion for the nine and three months
ended September 30, 2021, which was recorded to income
(losses) from equity investments in its condensed consolidated
statements of earnings (losses). This impairment charge reflects
the difference between the fair value of Altria’s investment in ABI
using ABI’s share price at September 30, 2021 and the carrying
value of Altria’s equity investment in ABI at September 30,
2021. Altria continues to have confidence in ABI’s (i) long-term
strategies, (ii) premium global brands, (iii) experienced
management team and (iv) capability to successfully navigate its
near-term challenges. Altria further expects that the impacts
related to the COVID-19 pandemic that have negatively impacted
ABI’s global business are transitory, but now also anticipates that
the full recovery to carrying value will take longer than
previously expected. This is evidenced by the resumption of
declines in fair value during the third quarter of 2021, following
positive share price momentum during the first half of 2021. At
September 30, 2021, prior to recording the impairment charge,
the fair value of Altria’s investment in ABI was below the carrying
value by approximately 35%, which represents an additional 18%
reduction in ABI’s share price since December 31, 2020. After
recording the impairment charge, the fair value and carrying value
of Altria’s equity investment in ABI at September 30, 2021
were $11.2 billion.
At September 30, 2021, the carrying value of Altria’s equity
investment in ABI exceeded its share of ABI’s net assets
attributable to equity holders of ABI by approximately $5.1
billion. Substantially all of this difference is comprised of
goodwill and other indefinite-lived intangible assets (consisting
primarily of trademarks).
Investment in JUUL
In December 2018, Altria made an investment in JUUL and received a
35% economic interest in JUUL through non-voting shares, which were
convertible at Altria’s election into voting shares (“Share
Conversion”), and a security convertible into additional non-voting
or voting shares, as applicable, upon settlement or exercise of
certain JUUL convertible securities (the “JUUL
Transaction”).
Altria received a broad preemptive right to purchase JUUL shares,
exercisable each quarter upon dilution, to maintain its ownership
percentage and is subject to a standstill restriction under which
it may not acquire additional JUUL shares above its 35% interest.
Furthermore, Altria agreed not to sell or transfer any of its JUUL
shares until December 20, 2024.
On April 1, 2020, the U.S. Federal Trade Commission (“FTC”) issued
an administrative complaint challenging Altria’s investment in
JUUL. For further discussion, see Note 12.
Contingencies - Antitrust Litigation.
In November 2020, Altria exercised its rights to convert its
non-voting JUUL shares into voting shares. Altria does not
currently intend to exercise its additional governance rights
obtained upon Share Conversion, including the right to elect
directors to JUUL’s board or to vote its JUUL shares other than as
a passive investor, pending the outcome of the FTC administrative
complaint. At September 30, 2021, Altria had a 35% ownership
interest in JUUL, consisting of 42 million voting
shares.
Following Share Conversion in the fourth quarter of 2020, Altria
elected to account for its equity method investment in JUUL under
the fair value option. Under this option, Altria’s condensed
consolidated statements of earnings (losses) include any cash
dividends received from its investment in JUUL and any changes in
the estimated fair value of its investment, which is calculated
quarterly. Altria believes the fair value option provides quarterly
transparency to investors as to the fair market value of Altria’s
investment in JUUL, given the changes and volatility in the e-vapor
category since Altria’s initial investment, as well as the lack of
publicly available information regarding JUUL’s business or a
market-derived valuation.
The following table provides a reconciliation of the beginning and
ending balance of Altria’s investment in JUUL, which is classified
in Level 3 of the fair value hierarchy:
|
|
|
|
|
|
|
|
|
|
|
Investment |
(in millions) |
|
Balance |
Balance at December 31, 2020 |
|
$ |
1,705 |
|
Unrealized gains (losses) included in income (losses) from equity
investments |
|
— |
|
Balance at September 30, 2021 |
|
$ |
1,705 |
|
For the three months ended September 30, 2021, Altria recorded a
non-cash, pre-tax unrealized gain of $100 million, as a result of
changes in the estimated fair value of its investment in JUUL. At
September 30, 2021, the estimated fair value of Altria’s JUUL
investment was $1.7 billion, unchanged from its December 31, 2020
estimated fair value. There were no material
changes to the significant assumptions used in the valuations, as
described below, during the nine and three months ended
September 30, 2021.
Prior to Share Conversion, Altria accounted for its investment in
JUUL as an investment in an equity security. Since the JUUL shares
do not have a readily determinable fair value, Altria elected to
measure its investment in JUUL at its cost minus impairment, if
any, plus or minus changes resulting from observable price changes
in orderly transactions for the identical or a similar investment
of the same issuer. There were no upward or downward adjustments to
the carrying value of Altria’s investment in JUUL resulting from
observable price changes in orderly transactions since the JUUL
Transaction through the date of Share Conversion. In addition,
prior to Share Conversion, Altria reviewed its investment in JUUL
for impairment by performing a qualitative assessment of impairment
indicators on a quarterly basis in connection with the preparation
of its financial statements. If this qualitative assessment
indicated that Altria’s investment in JUUL may be impaired, a
quantitative assessment was performed. If the quantitative
assessment indicated the estimated fair value of the investment was
less than its carrying value, the investment was written down to
its fair value.
In September 2020, JUUL announced a strategic update, which
included its plans for a significant global workforce reduction,
its evaluation of its resource allocation and the possibility of
exiting various international markets. As part of the preparation
of Altria’s financial statements for the period ended September 30,
2020, Altria performed a qualitative assessment of impairment
indicators for its investment in JUUL and determined that JUUL’s
strategic update was an indicator of impairment at September 30,
2020, given the significant deterioration in JUUL’s business
prospects.
Given the existence of this impairment indicator, Altria performed
a quantitative valuation of its investment in JUUL during the third
quarter of 2020 and recorded a non-cash, pre-tax charge of $2.6
billion for the nine and three months ended September 30, 2020,
reported as impairment of JUUL equity securities in its condensed
consolidated statements of earnings (losses). The impairment charge
was driven by Altria’s projections of lower JUUL revenues over time
due to lower pricing assumptions and delays in JUUL achieving
previously forecasted operating margin performance. These drivers
were the result of (i) JUUL’s revised international expansion plans
and (ii) the evolving U.S. e-vapor category and associated
competitive dynamics.
Altria uses an income approach to estimate the fair value of its
investment in JUUL. The income approach reflects the discounting of
future cash flows for the U.S. and international markets at a rate
of return that incorporates the risk-free rate for the use of those
funds, the expected rate of inflation and the risks associated with
realizing future cash flows. Future cash flows were based on a
range of scenarios that consider various potential regulatory and
market outcomes.
In determining the estimated fair value of its investment in JUUL,
as of September 30, 2021 and December 31, 2020, Altria
made various judgments, estimates and assumptions, the most
significant of which were sales volume, operating margins, discount
rates and perpetual growth rates. All significant inputs used in
the valuation are classified in Level 3 of the fair value
hierarchy. Additionally, in determining these significant
assumptions, Altria made judgments regarding the (i) likelihood and
extent of various potential regulatory actions and the continued
adverse public perception impacting the e-vapor category and
specifically JUUL, (ii) risk created by the number and types of
legal cases pending against JUUL and (iii) expectations for the
future state of the e-vapor category, including competitive
dynamics.
Investment in Cronos
At September 30, 2021, Altria had a 41.9% ownership interest
in Cronos, consisting of 156.6 million shares, which Altria
accounts for under the equity method of accounting. Altria’s
ownership percentage decreased from 43.5% at December 31, 2020 due
to the issuance of additional shares by Cronos. Altria reports its
share of Cronos’s results using a one-quarter lag because Cronos’s
results are not available in time for Altria to record them in the
concurrent period.
As part of its Investment in Cronos, at September 30, 2021,
Altria owned:
▪anti-dilution
protections to purchase Cronos common shares, exercisable each
quarter upon dilution, to maintain its ownership percentage.
Certain of the anti-dilution protections provide Altria the ability
to purchase additional Cronos common shares at a per share exercise
price of Canadian dollar (“CAD”) $16.25 upon the occurrence of
specified events (“Fixed-price Preemptive Rights”). Based on
Altria’s assumptions as of September 30, 2021, Altria estimates the
Fixed-price Preemptive Rights allows Altria to purchase up to an
additional approximately 14 million common shares of Cronos;
and
▪a
warrant providing Altria the ability to purchase an additional
approximate 10% of common shares of Cronos (approximately 83
million common shares at September 30, 2021) at a per share
exercise price of CAD $19.00, which expires on March 8,
2023.
If exercised in full, the exercise prices for the warrant and
Fixed-price Preemptive Rights are approximately CAD $1.6 billion
and CAD $0.2 billion, respectively (approximately USD $1.3 billion
and $0.2 billion, respectively, based on the CAD to USD exchange
rate on October 25, 2021). At September 30, 2021, upon full
exercise of the Fixed-price Preemptive Rights, to the
extent such rights become available, and the warrant, Altria would
own approximately 53% of the outstanding common shares of
Cronos.
For a discussion of derivatives related to the Investment in
Cronos, including Altria’s accounting for changes in the fair value
of these derivatives, see Note 5.
Financial Instruments.
The fair value of Altria’s equity method investment in Cronos is
based on unadjusted quoted prices in active markets for Cronos’s
common shares and was classified in Level 1 of the fair value
hierarchy. In September 2021, the fair value of Altria’s equity
method investment in Cronos declined below its carrying value. At
September 30, 2021, the fair value of Altria’s equity method
investment in Cronos was less than its carrying value by
$14 million or approximately 2%. The fair value of Altria’s
equity method investment in Cronos exceeded its carrying value by
$77 million or approximately 8% at December 31, 2020. Based on
Altria’s evaluation of the duration and magnitude of the fair value
decline at September 30, 2021, Altria concluded that the decline in
fair value of its equity method investment in Cronos below its
carrying value is temporary and, therefore, no impairment was
recorded.
Note 5. Financial Instruments
Altria enters into derivative financial instruments to mitigate the
potential impact of certain market risks, including foreign
currency exchange rate risk. Altria uses various types of
derivative financial instruments, including forward contracts,
options and swaps. Altria does not enter into or hold derivative
financial instruments for trading or speculative
purposes.
Altria’s investment in ABI, whose functional currency is the Euro,
exposes Altria to foreign currency exchange risk on the carrying
value of its investment. To manage this risk, Altria designates
certain foreign exchange contracts, including cross-currency swap
contracts and forward contracts (collectively, “foreign currency
contracts”), and Euro denominated unsecured long-term notes
(“foreign currency denominated debt”) as net investment hedges of
Altria’s investment in ABI.
In May 2021, all outstanding foreign currency contracts matured.
When Altria has foreign currency contracts in effect,
counterparties are domestic and international financial
institutions. Under these contracts, Altria is exposed to potential
losses due to non-performance by these counterparties. Altria
manages its credit risk by entering into transactions with
counterparties with investment grade credit ratings, limiting the
amount of exposure Altria has with each counterparty and monitoring
the financial condition of each counterparty. The counterparty
agreements contain provisions that require Altria to maintain an
investment grade credit rating. In the event Altria’s credit rating
falls below investment grade, counterparties to Altria’s foreign
currency contracts can require Altria to post collateral. No
collateral was received or posted related to derivative assets and
liabilities at December 31, 2020.
The following table provides (i) the aggregate notional amounts of
foreign currency contracts and (ii) the aggregate carrying value
and fair value of foreign currency denominated debt:
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
September 30, 2021 |
|
December 31, 2020 |
Foreign currency contracts (notional amounts) |
$ |
— |
|
|
$ |
1,066 |
|
Foreign currency denominated debt |
|
|
|
Carrying value |
4,905 |
|
|
5,171 |
|
Fair value |
5,288 |
|
|
5,687 |
|
Altria’s estimates of the fair values of its foreign currency
contracts are determined using valuation models with significant
inputs that are readily available in public markets, or can be
derived from observable market transactions, and therefore are
classified in Level 2 of the fair value hierarchy. An adjustment
for credit risk and non-performance risk is included in the fair
values of foreign currency contracts.
The following table provides the aggregate carrying value and fair
value of Altria’s total long-term debt:
|
|
|
|
|
|
|
|
|
|
|
|
(in millions) |
September 30, 2021 |
|
December 31, 2020 |
Carrying value |
$ |
28,127 |
|
|
$ |
29,471 |
|
Fair value |
31,037 |
|
|
34,682 |
|
Altria’s estimate of the fair value of its total long-term debt is
based on observable market information derived from a third-party
pricing source and is classified in Level 2 of the fair value
hierarchy.
The Fixed-price Preemptive Rights and Cronos warrant, which are
further discussed in Note 4.
Investments in Equity Securities,
are derivative financial instruments, which are required to be
recorded at fair value. The fair values of the Fixed-price
Preemptive Rights and Cronos warrant are estimated using
Black-Scholes option-pricing models, adjusted for observable inputs
(which are classified in Level 1 of the fair value hierarchy),
including share price, and unobservable inputs,
including
probability factors and weighting of expected life, volatility
levels and risk-free interest rates (which are classified in Level
3 of the fair value hierarchy) based on the following assumptions
at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-price Preemptive Rights |
|
Cronos Warrant |
|
|
|
|
|
|
September 30, 2021 |
|
December 31, 2020 |
|
September 30, 2021 |
|
December 31, 2020 |
|
|
|
|
Share price
(1)
|
|
C$7.15 |
|
C$8.84 |
|
C$7.15 |
|
C$8.84 |
|
|
|
|
Expected life
(2)
|
|
0.81 year |
|
1.05 years |
|
1.43 years |
|
2.18 years |
|
|
|
|
Expected volatility
(3)
|
|
67.32% |
|
80.68% |
|
67.32% |
|
80.68% |
|
|
|
|
Risk-free interest rate
(4)(5)
|
|
0.24% |
|
0.13% |
|
0.39% |
|
0.21% |
|
|
|
|
Expected dividend yield
(6)
|
|
—% |
|
—% |
|
—% |
|
—% |
|
|
|
|
(1)
Based on the closing market price for Cronos common stock on the
Toronto Stock Exchange on the date indicated.
(2)
Based on the weighted-average expected life of the Fixed-price
Preemptive Rights (with a range from approximately 0.25 year to
4.00 years at September 30, 2021 and 0.25 year to 5 years at
December 31, 2020) and the March 8, 2023 expiration date of
the Cronos warrant.
(3)
Based on a blend of historical volatility of the underlying equity
security and implied volatility from traded options on the
underlying equity security at September 30, 2021. Based on a
blend of historical volatility levels of the underlying equity
security and peer companies at December 31, 2020.
(4)
Based on the implied yield currently available on Canadian Treasury
zero coupon issues (with a range from approximately 0.12% to 0.89%
at September 30, 2021 and 0.06% to 0.39% at December 31,
2020) weighted for the remaining expected life of the Fixed-price
Preemptive Rights.
(5)
Based on the implied yield currently available on Canadian Treasury
zero coupon issues and the expected life of the Cronos
warrant.
(6)
Based on Cronos’s expected dividend payments.
The following table provides a reconciliation of the beginning and
ending balance of the Fixed-price Preemptive Rights and Cronos
warrant, which are classified in Level 3 of the fair value
hierarchy:
|
|
|
|
|
|
|
|
(in millions) |
|
|
|
Balance at December 31, 2019 |
$ |
303 |
|
|
|
|
|
|
|
Pre-tax earnings (losses) recognized in net earnings
(losses) |
(140) |
|
|
|
Balance at December 31, 2020 |
163 |
|
|
|
Pre-tax earnings (losses) recognized in net earnings
(losses) |
(128) |
|
|
|
Balance at September 30, 2021 |
$ |
35 |
|
|
|
Altria elects to record the gross assets and liabilities of
derivative financial instruments executed with the same
counterparty on its condensed consolidated balance sheets. The fair
values of Altria’s derivative financial instruments on a gross
basis included on the condensed consolidated balance sheets were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value of Assets |
|
Fair Value of Liabilities |
(in millions)
|
Balance Sheet Classification |
|
September 30, 2021 |
|
December 31, 2020 |
|
Balance Sheet Classification |
September 30, 2021 |
|
December 31, 2020 |
Derivatives designated as hedging instruments:
|
|
Foreign currency contracts |
Other current assets
|
|
$ |
— |
|
|
$ |
— |
|
|
Other accrued liabilities
|
$ |
— |
|
|
$ |
87 |
|
Foreign currency contracts |
Other assets
|
|
— |
|
|
— |
|
|
Other liabilities
|
— |
|
|
— |
|
Total
|
|
$ |
— |
|
|
$ |
— |
|
|
|
$ |
— |
|
|
$ |
87 |
|
|
|
|
|
|
|
|
|
|
|
|
Derivatives not designated as hedging instruments:
|
|
|
|
|
|
|
|
|
|
|
Cronos warrant
|
Investments in equity securities
|
|
$ |
32 |
|
|
$ |
139 |
|
|
|
|
|
|
Fixed-price Preemptive Rights |
Investments in equity securities
|
|
3 |
|
|
24 |
|
|
|
|
|
|
Total
|
|
|
$ |
35 |
|
|
$ |
163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivatives
|
|
|
$ |
35 |
|
|
$ |
163 |
|
|
|
$ |
— |
|
|
$ |
87 |
|
Altria records in its condensed consolidated statements of earnings
(losses) any changes in the fair values of the Fixed-price
Preemptive Rights and Cronos warrant as gains or losses on
Cronos-related financial instruments in the periods in which the
changes occur. For the nine and three months ended
September 30, 2021 and 2020, Altria recorded non-cash, pre-tax
unrealized gains (losses), representing the changes in the fair
values of the Fixed-price Preemptive Rights and Cronos warrant, as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
For the Three Months Ended September 30, |
(in millions) |
2021 |
|
2020 |
|
2021 |
|
2020 |
Fixed-price Preemptive Rights |
$ |
(21) |
|
|
$ |
(54) |
|
|
$ |
(17) |
|
|
$ |
(25) |
|
Cronos warrant |
(107) |
|
|
(148) |
|
|
(118) |
|
|
(80) |
|
Total |
$ |
(128) |
|
|
$ |
(202) |
|
|
$ |
(135) |
|
|
$ |
(105) |
|
Net Investment Hedging
The pre-tax effects of Altria’s net investment hedges on
accumulated other comprehensive losses and the condensed
consolidated statements of earnings (losses) were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain (Loss) Recognized in Accumulated Other Comprehensive
Losses |
|
Gain (Loss) Recognized in
Net Earnings (Losses) |
|
Gain (Loss) Recognized in Accumulated Other Comprehensive
Losses |
|
Gain (Loss) Recognized in
Net Earnings (Losses) |
|
|
For the Nine Months Ended September 30, |
|
For the Three Months Ended September 30, |
(in millions) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Foreign currency contracts |
|
$ |
16 |
|
|
$ |
(28) |
|
|
$ |
7 |
|
|
$ |
33 |
|
|
$ |
— |
|
|
$ |
(66) |
|
|
$ |
— |
|
|
$ |
8 |
|
Foreign currency denominated debt |
|
270 |
|
|
(215) |
|
|
— |
|
|
— |
|
|
118 |
|
|
(206) |
|
|
— |
|
|
— |
|
Total |
|
$ |
286 |
|
|
$ |
(243) |
|
|
$ |
7 |
|
|
$ |
33 |
|
|
$ |
118 |
|
|
$ |
(272) |
|
|
$ |
— |
|
|
$ |
8 |
|
The changes in the fair value of the foreign currency contracts and
in the carrying value of the foreign currency denominated debt due
to changes in the Euro to USD exchange rate were recognized in
accumulated other comprehensive losses related to ABI. Gains on the
foreign currency contracts arising from components excluded from
effectiveness testing were recognized in interest and other debt
expense, net in the condensed consolidated statements of earnings
(losses) based on an amortization approach.
Note 6. Benefit Plans
Components of Net Periodic Benefit (Income) Cost
Net periodic benefit (income) cost consisted of the
following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension |
|
Postretirement |
|
Pension |
|
Postretirement |
|
For the Nine Months Ended
September 30, |
|
For the Three Months Ended
September 30, |
(in millions) |
2021 |
|
2020 |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Service cost |
$ |
51 |
|
|
$ |
55 |
|
|
$ |
15 |
|
|
$ |
13 |
|
|
$ |
17 |
|
|
$ |
18 |
|
|
$ |
5 |
|
|
$ |
5 |
|
Interest cost |
139 |
|
|
188 |
|
|
29 |
|
|
44 |
|
|
46 |
|
|
62 |
|
|
8 |
|
|
14 |
|
Expected return on plan assets
|
(393) |
|
|
(376) |
|
|
(10) |
|
|
(11) |
|
|
(131) |
|
|
(125) |
|
|
(2) |
|
|
(4) |
|
Amortization: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
99 |
|
|
108 |
|
|
16 |
|
|
7 |
|
|
33 |
|
|
55 |
|
|
2 |
|
|
— |
|
Prior service cost (credit)
|
3 |
|
|
4 |
|
|
(35) |
|
|
(22) |
|
|
1 |
|
|
2 |
|
|
(20) |
|
|
(7) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net periodic benefit
(income) cost
|
$ |
(101) |
|
|
$ |
(21) |
|
|
$ |
15 |
|
|
$ |
31 |
|
|
$ |
(34) |
|
|
$ |
12 |
|
|
$ |
(7) |
|
|
$ |
8 |
|
Employer Contributions
Altria makes contributions to the pension plans to the extent that
the contributions are tax deductible and pays benefits that relate
to plans for salaried employees that cannot be funded under
Internal Revenue Service regulations. Altria made employer
contributions of $23 million to its pension plans and did not make
any contributions to its postretirement plans during the nine
months ended September 30, 2021. Currently, Altria anticipates
making additional employer contributions to its pension plans of up
to approximately $5 million and no additional contributions to its
postretirement plans for the remainder of 2021. However, the
foregoing estimates of 2021 contributions to the pension and
postretirement plans are subject to change as a result of changes
in tax and other benefit laws, changes in interest rates, as well
as asset performance significantly above or below the assumed
long-term rate of return for each respective plan.
During the second quarter of 2021, Altria announced several
amendments to its salaried retiree healthcare plans, primarily
changing its post-age 65 coverage to a private medicare
marketplace. These amendments triggered a plan remeasurement as of
May 31, 2021 and resulted in Altria recording a reduction of $432
million to its accrued postretirement health care costs liability
and a corresponding reduction to its accumulated other
comprehensive losses on its condensed consolidated balance sheet.
Ongoing amortization has been adjusted to reflect these changes as
of June 1, 2021 and is reflected in the amounts shown
above.
Note 7. Earnings (Losses) per Share
Basic and diluted earnings (losses) per share (“EPS”) were
calculated using the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
For the Three Months Ended September 30, |
(in millions) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Net earnings (losses) attributable to Altria |
|
$ |
851 |
|
|
$ |
2,543 |
|
|
$ |
(2,722) |
|
|
$ |
(952) |
|
Less: Distributed and undistributed earnings attributable to
share-based awards
|
|
(8) |
|
|
(6) |
|
|
(2) |
|
|
(1) |
|
Earnings (losses) for basic and diluted EPS |
|
$ |
843 |
|
|
$ |
2,537 |
|
|
$ |
(2,724) |
|
|
$ |
(953) |
|
|
|
|
|
|
|
|
|
|
Weighted-average shares for basic EPS |
|
1,849 |
|
|
1,858 |
|
|
1,842 |
|
|
1,858 |
|
Plus: contingently issuable performance stock units |
|
— |
|
|
1 |
|
|
— |
|
|
1 |
|
Weighted-average shares for diluted EPS |
|
1,849 |
|
|
1,859 |
|
|
1,842 |
|
|
1,859 |
|
Note 8. Other Comprehensive Earnings/Losses
The following tables set forth the changes in each component of
accumulated other comprehensive losses, net of deferred income
taxes, attributable to Altria:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2021 |
(in millions) |
|
Benefit Plans |
|
ABI |
|
Currency
Translation
Adjustments and Other |
|
Accumulated
Other
Comprehensive
Losses |
Balances, December 31, 2020 |
|
$ |
(2,420) |
|
|
$ |
(1,938) |
|
|
$ |
17 |
|
|
$ |
(4,341) |
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (losses) before
reclassifications
|
|
432 |
|
(1)
|
685 |
|
|
35 |
|
|
1,152 |
|
Deferred income taxes |
|
(118) |
|
|
(151) |
|
|
— |
|
|
(269) |
|
Other comprehensive earnings (losses) before reclassifications, net
of deferred income taxes
|
|
314 |
|
|
534 |
|
|
35 |
|
|
883 |
|
|
|
|
|
|
|
|
|
|
Amounts reclassified to net earnings (losses) |
|
92 |
|
|
(49) |
|
|
(2) |
|
|
41 |
|
Deferred income taxes |
|
(23) |
|
|
10 |
|
|
— |
|
|
(13) |
|
Amounts reclassified to net earnings (losses), net of deferred
income taxes |
|
69 |
|
|
(39) |
|
|
(2) |
|
|
28 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (losses), net of deferred income
taxes
|
|
383 |
|
|
495 |
|
(2)
|
33 |
|
|
911 |
|
|
|
|
|
|
|
|
|
|
Balances, September 30, 2021 |
|
$ |
(2,037) |
|
|
$ |
(1,443) |
|
|
$ |
50 |
|
|
$ |
(3,430) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2021 |
(in millions) |
|
Benefit Plans |
|
ABI |
|
Currency
Translation
Adjustments and Other |
|
Accumulated
Other
Comprehensive
Losses |
Balances, June 30, 2021 |
|
$ |
(2,043) |
|
|
$ |
(1,604) |
|
|
$ |
45 |
|
|
$ |
(3,602) |
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (losses) before
reclassifications
|
|
— |
|
|
215 |
|
|
6 |
|
|
221 |
|
Deferred income taxes |
|
(9) |
|
|
(48) |
|
|
— |
|
|
(57) |
|
Other comprehensive earnings (losses) before reclassifications, net
of deferred income taxes
|
|
(9) |
|
|
167 |
|
|
6 |
|
|
164 |
|
|
|
|
|
|
|
|
|
|
Amounts reclassified to net earnings (losses) |
|
20 |
|
|
(7) |
|
|
(1) |
|
|
12 |
|
Deferred income taxes |
|
(5) |
|
|
1 |
|
|
— |
|
|
(4) |
|
Amounts reclassified to net earnings (losses), net of deferred
income taxes |
|
15 |
|
|
(6) |
|
|
(1) |
|
|
8 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (losses), net of deferred income
taxes
|
|
6 |
|
|
161 |
|
(2)
|
5 |
|
|
172 |
|
|
|
|
|
|
|
|
|
|
Balances, September 30, 2021 |
|
$ |
(2,037) |
|
|
$ |
(1,443) |
|
|
$ |
50 |
|
|
$ |
(3,430) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, 2020 |
(in millions) |
|
Benefit Plans |
|
ABI |
|
Currency
Translation
Adjustments and Other |
|
Accumulated
Other
Comprehensive
Losses |
Balances, December 31, 2019 |
|
$ |
(2,192) |
|
|
$ |
(693) |
|
|
$ |
21 |
|
|
$ |
(2,864) |
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (losses) before
reclassifications
|
|
(75) |
|
|
(1,211) |
|
|
(16) |
|
|
(1,302) |
|
Deferred income taxes |
|
19 |
|
|
260 |
|
|
— |
|
|
279 |
|
Other comprehensive earnings (losses) before reclassifications, net
of deferred income taxes
|
|
(56) |
|
|
(951) |
|
|
(16) |
|
|
(1,023) |
|
|
|
|
|
|
|
|
|
|
Amounts reclassified to net earnings (losses) |
|
111 |
|
|
29 |
|
|
— |
|
|
140 |
|
Deferred income taxes |
|
(28) |
|
|
(6) |
|
|
— |
|
|
(34) |
|
Amounts reclassified to net earnings (losses), net of deferred
income taxes |
|
83 |
|
|
23 |
|
|
— |
|
|
106 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (losses), net of deferred income
taxes
|
|
27 |
|
|
(928) |
|
(2)
|
(16) |
|
|
(917) |
|
|
|
|
|
|
|
|
|
|
Balances, September 30, 2020 |
|
$ |
(2,165) |
|
|
$ |
(1,621) |
|
|
$ |
5 |
|
|
$ |
(3,781) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended September 30, 2020 |
(in millions) |
|
Benefit Plans |
|
ABI |
|
Currency
Translation
Adjustments and Other |
|
Accumulated
Other
Comprehensive
Losses |
Balances, June 30, 2020 |
|
$ |
(2,150) |
|
|
$ |
(1,606) |
|
|
$ |
(18) |
|
|
$ |
(3,774) |
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (losses) before
reclassifications
|
|
(75) |
|
|
(71) |
|
|
23 |
|
|
(123) |
|
Deferred income taxes |
|
19 |
|
|
22 |
|
|
— |
|
|
41 |
|
Other comprehensive earnings (losses) before reclassifications, net
of deferred income taxes
|
|
(56) |
|
|
(49) |
|
|
23 |
|
|
(82) |
|
|
|
|
|
|
|
|
|
|
Amounts reclassified to net earnings (losses) |
|
55 |
|
|
44 |
|
|
— |
|
|
99 |
|
Deferred income taxes |
|
(14) |
|
|
(10) |
|
|
— |
|
|
(24) |
|
Amounts reclassified to net earnings (losses), net of deferred
income taxes |
|
41 |
|
|
34 |
|
|
— |
|
|
75 |
|
|
|
|
|
|
|
|
|
|
Other comprehensive earnings (losses), net of deferred income
taxes
|
|
(15) |
|
|
(15) |
|
(2)
|
23 |
|
|
(7) |
|
|
|
|
|
|
|
|
|
|
Balances, September 30, 2020 |
|
$ |
(2,165) |
|
|
$ |
(1,621) |
|
|
$ |
5 |
|
|
$ |
(3,781) |
|
(1)
Reflects the remeasurement impact of salaried retiree healthcare
plan amendments. For further discussion, see Note 6.
Benefit Plans.
(2)
Primarily reflects Altria’s share of ABI’s currency translation
adjustments and the impact of Altria’s designated net investment
hedges. For further discussion of designated net investment hedges,
see Note 5.
Financial Instruments.
The following table sets forth pre-tax amounts by component,
reclassified from accumulated other comprehensive losses to net
earnings (losses):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
For the Three Months Ended September 30, |
(in millions) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Benefit Plans:
(1)
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
124 |
|
|
$ |
129 |
|
|
$ |
39 |
|
|
$ |
60 |
|
Prior service cost/credit |
|
(32) |
|
|
(18) |
|
|
(19) |
|
|
(5) |
|
|
|
92 |
|
|
111 |
|
|
20 |
|
|
55 |
|
ABI
(2)
|
|
(49) |
|
|
29 |
|
|
(7) |
|
|
44 |
|
Currency Translation Adjustments and Other
(2)
|
|
(2) |
|
|
— |
|
|
(1) |
|
|
— |
|
Pre-tax amounts reclassified from accumulated other comprehensive
losses to net earnings (losses) |
|
$ |
41 |
|
|
$ |
140 |
|
|
$ |
12 |
|
|
$ |
99 |
|
|
|
|
|
|
|
|
|
|
(1)
Amounts are included in net defined benefit plan costs. For further
information related to defined benefit plans, see Note 6.
Benefit Plans.
(2)
Amounts are included in (income) losses from equity investments.
For further information related to equity investments, see Note
4.
Investments in Equity Securities.
Note 9. 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, along with net periodic benefit
income/cost, excluding service cost, and provision (benefit) 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 Nine Months Ended September 30, |
|
For the Three Months Ended September 30, |
(in millions) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Net revenues: |
|
|
|
|
|
|
|
|
Smokeable products |
|
$ |
17,275 |
|
|
$ |
17,522 |
|
|
$ |
5,975 |
|
|
$ |
6,313 |
|
Oral tobacco products |
|
1,945 |
|
|
1,901 |
|
|
626 |
|
|
640 |
|
Wine |
|
494 |
|
|
434 |
|
|
177 |
|
|
157 |
|
All other |
|
44 |
|
|
(8) |
|
|
8 |
|
|
13 |
|
Net revenues |
|
$ |
19,758 |
|
|
$ |
19,849 |
|
|
$ |
6,786 |
|
|
$ |
7,123 |
|
Earnings (losses) before income taxes: |
|
|
|
|
|
|
|
|
OCI: |
|
|
|
|
|
|
|
|
Smokeable products |
|
$ |
7,901 |
|
|
$ |
7,609 |
|
|
$ |
2,753 |
|
|
$ |
2,789 |
|
Oral tobacco products |
|
1,269 |
|
|
1,297 |
|
|
405 |
|
|
436 |
|
Wine |
|
21 |
|
|
(347) |
|
|
(24) |
|
|
19 |
|
All other |
|
(56) |
|
|
(63) |
|
|
(30) |
|
|
(7) |
|
Amortization of intangibles |
|
(53) |
|
|
(54) |
|
|
(18) |
|
|
(17) |
|
General corporate expenses |
|
(255) |
|
|
(150) |
|
|
(135) |
|
|
(60) |
|
|
|
|
|
|
|
|
|
|
Operating income |
|
8,827 |
|
|
8,292 |
|
|
2,951 |
|
|
3,160 |
|
Interest and other debt expense, net |
|
(869) |
|
|
(893) |
|
|
(266) |
|
|
(310) |
|
Loss on early extinguishment of debt |
|
(649) |
|
|
— |
|
|
— |
|
|
— |
|
Net periodic benefit income, excluding
service cost
|
|
152 |
|
|
58 |
|
|
63 |
|
|
3 |
|
Income (losses) from equity investments |
|
(5,789) |
|
|
(306) |
|
|
(5,915) |
|
|
(472) |
|
Impairment of JUUL equity securities |
|
— |
|
|
(2,600) |
|
|
— |
|
|
(2,600) |
|
Gain (loss) on Cronos-related financial instruments |
|
(128) |
|
|
(202) |
|
|
(135) |
|
|
(105) |
|
Earnings (losses) before income taxes |
|
$ |
1,544 |
|
|
$ |
4,349 |
|
|
$ |
(3,302) |
|
|
$ |
(324) |
|
The comparability of OCI for the reportable segments was affected
by the following:
▪Non-Participating
Manufacturer (“NPM”) Adjustment Items:
Pre-tax (income) for NPM adjustment items was recorded to Altria’s
condensed consolidated statements of earnings (losses) as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
For the Three Months Ended September 30, |
(in millions) |
|
2021 |
|
2021 |
Smokeable products segment |
|
$ |
(53) |
|
|
$ |
(21) |
|
Interest and other debt expense, net |
|
(23) |
|
|
(23) |
|
Total |
|
$ |
(76) |
|
|
$ |
(44) |
|
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 12.
Contingencies).
The amounts shown in the table above for the smokeable products
segment were recorded as reductions to cost of sales, which
increased OCI in the smokeable products segment.
▪Tobacco
and Health and Certain Other Litigation Items:
Pre-tax charges related to tobacco and health and certain other
litigation items were recorded in Altria’s condensed consolidated
statements of earnings (losses) as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Nine Months Ended September 30, |
|
For the Three Months Ended September 30, |
(in millions) |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Smokeable products segment |
|
$ |
72 |
|
|
$ |
73 |
|
|
$ |
29 |
|
|
$ |
34 |
|
General corporate |
|
70 |
|
|
— |
|
|
70 |
|
|
— |
|
Interest and other debt expense, net |
|
6 |
|
|
3 |
|
|
6 |
|
|
— |
|
Total |
|
$ |
148 |
|
|