Altria Group (MO) 10-K risk factor changes: FY2016 vs FY2015

Achievement of future results is subject to risks, uncertainties and assumptions that may prove to be [removed: ___________________________________________________][added: inaccurate.]

Litigation is subject to uncertainty and it is possible that there [removed: could be adverse developments in pending or future cases.]

[removed: An unfavorable outcome or settlement of pending tobacco-related or] other litigation could encourage the commencement of additional litigation.

[removed: Damages claimed in some tobacco-related or other] litigation are significant and, in certain cases, range in the billions of dollars.

Furthermore, in those cases where plaintiffs are successful, Altria Group, Inc. [added: or its subsidiaries may also be required to pay interest and attorneys’ fees.]

[removed: As discussed in Note 18,] Contingencies to the consolidated financial statements in Item 8 (“Note [removed: 18”),] [added: 19”),] tobacco litigation plaintiffs have challenged the constitutionality of Florida’s bond cap statute in several cases and plaintiffs may challenge state bond cap statutes in other jurisdictions as well.

In certain litigation, [removed: PM USA faces] [added: Altria Group, Inc. and its subsidiaries may face] potentially significant non-monetary remedies.

For example, in the lawsuit brought by the United States Department of Justice, discussed in Note [removed: 18,] [added: 19,] the district court did not impose monetary penalties but ordered significant non-monetary remedies, including the issuance of “corrective statements” in various media.

[removed: 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 it, as well as valid bases for appeal of adverse verdicts.

Legal Proceedings of this Annual Report on Form 10-K (“Item 3”), Note [removed: 18] [added: 19] and Exhibits 99.1 and 99.2 to this Annual Report on Form 10-K for a discussion of pending tobacco-related litigation.

Significant federal, state and local governmental actions, including actions by the FDA, and various private sector actions may continue to have an adverse impact on our tobacco subsidiaries’ [removed: businesses.][added: businesses and sales volumes.]

As described in Tobacco Space - Business Environment in Item 7, [removed: PM USA faces] [added: our cigarette subsidiaries face] significant governmental and private sector actions, including efforts aimed at reducing the incidence of [added: tobacco use and efforts seeking to hold these subsidiaries responsible for the adverse health effects associated with both smoking and exposure to environmental tobacco smoke.]

Actions by the FDA and other federal, state or local governments or agencies, including those specific actions described in Tobacco Space - Business Environment in Item 7, may impact the [added: adult tobacco] consumer acceptability of [added: or access to] tobacco [removed: products,] [added: products (for example, through product standards including those that our tobacco companies may be unable to achieve),] limit adult tobacco consumer choices, delay or prevent the launch of new or modified tobacco products or products with claims of reduced risk, require the recall or other removal of tobacco products from the marketplace (for example as a result of product contamination or a determination by the FDA that one or more tobacco products do not satisfy the statutory requirements for substantial equivalence), restrict communications to adult tobacco consumers, restrict the ability to differentiate tobacco products, create a competitive advantage or disadvantage for certain tobacco companies, impose additional manufacturing, labeling or packing requirements, interrupt manufacturing or otherwise significantly increase the cost of doing business, or restrict or prevent the use of specified tobacco products in certain locations or the sale of tobacco products by certain retail establishments.

See Tobacco Space - Business Environment in Item 7 for a more detailed [removed: discussion of these risks.][added: discussion.]

[added: Significant methods of] competition include product quality, taste, price, product innovation, marketing, packaging, distribution and promotional activities.

See Tobacco Space - Business Environment - Summary in Item 7 for additional discussion concerning evolving adult tobacco consumer preferences, including [removed: increased consumer awareness of, and expenditures on,] e-vapor products.

[removed: Continued growth] [added: Growth] of this product category could [removed: further] contribute to reductions in cigarette consumption levels and cigarette industry sales volume [added: and could adversely affect the growth rates of other tobacco products.]

Our financial services business (conducted through PMCC) holds investments in finance leases, principally in transportation (including aircraft), power [removed: generation] [added: generation, real estate] and manufacturing [removed: equipment and facilities.][added: equipment.]

Its lessees are [removed: also] subject to [removed: intense] [added: significant] competition and [added: uncertain] economic conditions.

[removed: Examples include tobacco-containing and nicotine-containing] [added: containing] products that reduce or eliminate exposure to cigarette smoke and/or constituents identified by public health authorities as harmful.

If our tobacco subsidiaries do not succeed in their efforts to develop and commercialize innovative tobacco products or to obtain regulatory approval for the marketing or sale of products with claims of reduced risk, but one or more of their competitors [added: do succeed, our tobacco subsidiaries may be at a competitive disadvantage.]

[added: From time to time,] Altria Group, Inc. [removed: from time to time] considers acquisitions and may engage in confidential acquisition negotiations that are not publicly announced unless and until those negotiations result in a definitive agreement.

There can be no assurance that we will be able to acquire attractive businesses on favorable [removed: terms,] [added: terms or] that we will realize any of the anticipated benefits from an [removed: acquisition or that acquisitions will be quickly accretive to earnings.][added: acquisition.]

Disruption and uncertainty in the credit and debt capital markets and any resulting adverse impact on credit availability, pricing, credit terms or credit rating may negatively affect the amount of credit available to us and [removed: may also increase our costs and adversely affect our earnings or our dividend rate.]

Altria Group, Inc.’s reported earnings from and carrying value of its equity investment in [removed: SABMiller] [added: AB InBev and the dividends paid by AB InBev on shares owned by Altria Group, Inc.] may be adversely affected by unfavorable foreign currency exchange rates and other factors.

For purposes of financial reporting, the earnings from and carrying value of our equity investment in [removed: SABMiller] [added: AB InBev] are translated into U.S. dollars from various local currencies.

[removed: During times of a strengthening U.S. dollar] against these currencies, our reported earnings from and carrying value of our equity investment in [removed: SABMiller] [added: AB InBev] will be reduced because [removed: the local] [added: these] currencies will translate into fewer U.S. [added: dollars and the dividends that we receive from AB InBev will convert into fewer U.S.] dollars.

[removed: The] [added: Dividends and] earnings from and carrying value of our equity investment in [removed: SABMiller] [added: AB InBev] are also subject to the risks encountered by [removed: SABMiller] [added: AB InBev] in its business.

If an impairment is determined to [removed: exist,] [added: exist in either situation,] we will incur impairment losses, which will reduce our earnings.

Michelle’s grape supply is influenced by consumer demand for wine in relation to industry-wide production levels as well as by weather and crop [added: conditions, particularly in eastern Washington.]

We have implemented administrative, technical and physical safeguards, including testing and auditing protocols, [removed: backup systems and business continuity plans, intended to protect our systems and data.]

We cannot predict whether new investigations may be commenced or the outcome of such investigations, and it is possible that our [added: business could be materially adversely affected by an unfavorable outcome of future investigations.]

AB [removed: InBev’s proposed transaction to effect a business combination with SABMiller] [added: InBev] may not [removed: be completed within] [added: achieve] the [removed: anticipated time frame or at all,] [added: intended benefits of the Transaction,] which could have a negative effect on [removed: the] [added: our reported earnings from and carrying] value of our equity investment in [removed: SABMiller.][added: AB InBev.]

There can be no assurance that AB InBev will be able to successfully integrate SABMiller’s business or otherwise realize the expected benefits of the [removed: proposed transaction.][added: Transaction.]

Any of these outcomes could result in increased costs to [removed: the combined company and dilution to its shareholders,] [added: AB InBev,] and could adversely affect [removed: the combined company’s] [added: AB InBev’s] financial [removed: condition] [added: condition, results of operations or cash flows] and Altria Group, Inc.’s reported earnings from and carrying value of our [added: equity] investment in [removed: the combined company.][added: AB InBev.]

These transfer restrictions will require us to bear the risks associated with our investment in [removed: the combined company] [added: AB InBev] for a five-year period [removed: following completion of the proposed transaction.][added: that expires on October 10, 2021.]

While we expect the equity consideration that we [removed: receive in] [added: received from] the [removed: transaction] [added: Transaction] to qualify for tax-deferred treatment, we cannot provide any assurance that federal and state tax authorities will not challenge the expected tax treatment and, if they do, what the outcome of any such challenge will be.

[removed: It is] [added: We] also [removed: possible] [added: anticipate] that the tax treatment of the dividends Altria Group, Inc. expects to receive from [removed: the combined company may] [added: AB InBev will] not be as favorable as that [removed: applied to] [added: associated with] the dividends we [removed: receive] [added: received] from SABMiller.

_____________________________________________________

could be adverse developments in pending or future cases.

An unfavorable outcome or settlement of pending tobacco-related or

Damages claimed in some tobacco-related or other

As discussed in Note 19.

Altria Group, Inc. and each of its subsidiaries named as a

Examples include tobacco-containing and nicotine-

Altria Group, Inc.’s subsidiaries could decide or be required to recall products, which could have a material adverse effect on the business, the consolidated results of operations, cash flows or financial position of Altria Group, Inc. and its subsidiaries.

In addition to a recall required by the FDA, as referenced above, our subsidiaries could decide, or laws or regulations could require them, to recall products due to the failure to meet quality standards or specifications, suspected or confirmed and deliberate or unintentional product contamination, or other adulteration, product misbranding or product tampering.

In January 2017, USSTC announced that it was voluntarily recalling certain of its smokeless tobacco products manufactured at a USSTC facility due to product tampering.

USSTC will record a charge during the first quarter of 2017 related to this recall.

While this charge is not expected to be material to Altria Group, Inc.’s financial statements, future recalls (if any) could have a material adverse effect on the business, consolidated results of operations, cash flows or financial position of Altria Group, Inc. and its subsidiaries.

may also increase our costs and adversely affect our earnings or our dividend rate.

Certain events can also trigger an immediate review of intangible assets.

backup systems and business continuity plans, intended to protect our systems and data.

In addition, AB InBev pays dividends in euros, which we convert into U.S. dollars.

During times of a strengthening U.S. dollar

We received a substantial portion of our consideration from the Transaction in the form of restricted shares subject to a five-year lock-up.

Furthermore, if our percentage ownership in AB InBev were to be decreased below certain levels, we may be subject to additional tax liabilities, suffer a reduction in the number of directors that we can have appointed to the AB InBev Board of Directors, and be unable to account for our investment under the equity method of accounting.

Upon completion of the Transaction, we received a substantial portion of our consideration in the form of restricted shares that cannot be sold or transferred for a period of five years following the Transaction, subject to limited exceptions.

Further, in the event that our ownership percentage in AB InBev were to be decreased below certain levels, we may be subject to additional tax liabilities, the number of directors that we have the right to have appointed to the AB InBev Board of Directors could be reduced from two to one or zero, and our use of the equity method of accounting for investment in AB InBev could be challenged.

Our tax treatment of the Transaction consideration may be challenged and the tax treatment of AB InBev dividends is not expected to be as favorable as prior SABMiller dividends.

inaccurate.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K (“Item 7”).

or its subsidiaries may also be required to pay interest and attorneys’ fees.

tobacco use and efforts seeking to hold PM USA responsible for the adverse health effects associated with both smoking and exposure to environmental tobacco smoke.

Significant methods of

and could adversely affect the growth rates of other tobacco products.

do succeed, our tobacco subsidiaries may be at a competitive disadvantage.

conditions, particularly in eastern Washington.

business could be materially adversely affected by an unfavorable outcome of future investigations.

As described in more detail in Note 6, Investment in SABMiller to the consolidated financial statements in Item 8 (“Note 6”), on November 11, 2015, AB InBev announced its firm offer to effect a business combination with SABMiller.

The proposed transaction is subject to a number of closing conditions, including shareholder approvals of both SABMiller and AB InBev, and receipt of the required regulatory approvals.

These conditions may not be satisfied or may take longer than expected to be satisfied.

The transaction is also subject to other risks and uncertainties over which Altria Group, Inc. has no control.

We cannot provide any assurance that the proposed transaction will be completed or that there will not be a delay in the completion of the proposed transaction.

If the transaction is not completed or is subject to a delay, the value of our investment in SABMiller could be adversely affected.

If AB InBev’s proposed transaction to effect a business combination with SABMiller is completed, AB InBev may not achieve the intended benefits of the transaction, which could have a negative effect on our reported earnings from and carrying value of our equity investment in the combined company.

If AB InBev’s proposed transaction to effect a business combination with SABMiller is completed, we will receive a substantial portion of our transaction consideration in the form of restricted shares.

Furthermore, the number of restricted shares we expect to receive is, under certain circumstances described below, subject to proration, which if it were to occur would decrease the number of restricted shares and increase the amount of cash that we receive in connection with the transaction.

Any cash we receive will be subject to taxation and to risks associated with changes in the value of the U.S. dollar versus the British pound.

Altria Group, Inc. has committed to elect the partial share alternative (“PSA”) in the transaction.

Therefore, upon completion of the proposed transaction, we expect to receive a substantial portion of our transaction consideration in the form of shares that will be subject to certain limitations and restrictions, including a five-year restriction on sale or transfer, subject to limited exceptions.

Further, while we have committed to elect the PSA in the transaction, our election is subject to proration to the extent that other SABMiller shareholders also elect this alternative and these elections exceed the maximum number of shares that AB InBev’s firm offer makes available to those SABMiller shareholders that elect the PSA.

If we receive more cash and less equity consideration than we currently expect, we will be subject to additional tax liabilities, our percentage ownership of the combined company will be reduced and we may be unable to account for our investment under the equity method of accounting as we currently do for our investment in SABMiller.

In addition, the cash consideration we expect to receive will be denominated in British pounds.

Based on the British pound to U.S. dollar exchange rate on November 10, 2015, the trading day prior to the announcement of the proposed transaction, we anticipate receiving approximately $2.5 billion in pre-tax cash.

We entered into a derivative financial instrument in the form of a put option to hedge our exposure to foreign currency exchange rate movements.

We are exposed to the risk of default by, or failure of, our counterparty financial institution to perform under the contractual obligation of the derivative financial instrument.

In addition, as indicated above, we may receive more cash consideration than we anticipate because our election of the PSA is subject to proration and, therefore, we may not be successful in effectively mitigating our foreign currency exchange rate risk on any additional cash proceeds above the $2.5 billion in pre-tax cash that we may receive.

As a result of either of the above risks, Altria Group, Inc. could incur a decrease in the amount of the gain recorded upon the completion of the AB InBev and SABMiller transaction.

If AB InBev’s proposed transaction to effect a business combination with SABMiller is completed, our tax treatment of the transaction may be challenged.

At December 31, [removed: 2015,] [added: 2016,] Altria Group, Inc.’s wholly-owned subsidiaries included PM USA, which is engaged [removed: predominantly] in the manufacture and sale of cigarettes in the United States; Middleton, which is engaged in the manufacture and sale of machine-made large cigars and pipe [removed: tobacco,] [added: tobacco] and is a wholly-owned subsidiary of PM USA; and UST, which through its wholly-owned subsidiaries, including USSTC and Ste.

Other Altria Group, Inc. wholly-owned subsidiaries included Altria Group Distribution Company, which provides sales, distribution and consumer engagement services to certain Altria Group, Inc. operating subsidiaries, and Altria Client Services LLC, which provides various support services in [removed: areas] [added: areas,] such as legal, regulatory, finance, human resources and external affairs, to Altria Group, Inc. and its subsidiaries.

At December 31, [removed: 2015,] [added: 2016,] Altria Group, Inc.’s principal wholly-owned subsidiaries were not limited by long-term debt or other agreements in their ability to pay cash dividends or make other distributions with respect to their equity interests.

At [removed: December 31, 2015,] [added: September 30, 2016,] Altria Group, Inc. [removed: also held approximately] [added: had an approximate] 27% [removed: of the economic and voting interest] [added: ownership] of SABMiller, which Altria Group, Inc. [removed: accounts] [added: accounted] for under the equity method of accounting.

Altria Group, Inc. receives cash dividends on its interest in [removed: SABMiller] [added: AB InBev] if and when [removed: SABMiller] [added: AB InBev] pays such dividends.

For further discussion, see Note [removed: 6.][added: 5.]

The financial services and the innovative tobacco products businesses are included in an all other category due to the continued reduction of the lease portfolio of PMCC and the relative financial contribution of Altria [added: Group, Inc.’s innovative tobacco products businesses to Altria Group, Inc.’s consolidated results.]

The changes in Altria Group, Inc.’s net earnings and diluted earnings per share (“EPS”) attributable to Altria Group, Inc. for the year ended December 31, [removed: 2015,] [added: 2016,] from the year ended December 31, [removed: 2014,] [added: 2015,] were due primarily to the following:

| For the year ended December 31, [removed: 2014] [added: 2016] | $ | [removed: 5,070] [added: 14,239] | | | $ | [removed: 2.56] [added: 7.28] | |

| [removed: 2014] [added: 2015] NPM Adjustment Items | [removed: (56] [added: (51] | | ) | | (0.03 | | ) |

| [removed: 2014] [added: 2015] Asset impairment, [removed: exit, integration] [added: exit] and [removed: acquisition-related] [added: integration] costs | [removed: 14] [added: 9] | | | | [removed: 0.01] [added: —] | | |

| [removed: 2014] Tobacco and health litigation items | [removed: 28] [added: —] | | | | [removed: 0.01] [added: 0.04] | | |

| [removed: 2014] SABMiller special items | [removed: 17] [added: —] | | | | [removed: 0.01] [added: (0.03] | | [added: )] |

| [removed: 2014] Loss on early extinguishment of debt | [removed: 28] [added: —] | | | | [removed: 0.02] [added: 0.28] | | |

| [removed: 2014] [added: 2015] Tax items | [removed: (14] [added: (11] | | ) | | [removed: (0.01] [added: —] | | [removed: )] |

| [removed: 2015] NPM Adjustment Items | [removed: 51] [added: $] | [added: —] | | | [removed: 0.03] [added: $] | [added: 0.01] | |

| [removed: 2015 Asset impairment, exit] [added: Corporate asset impairment] and [removed: integration] [added: exit] costs | [removed: (9] [added: (5] | | ) | | — | | | [added: | — | | |]

| 2015 Tobacco and health litigation items | [removed: (94] [added: 94] | | [removed: )] | | [removed: (0.05] [added: 0.05] | | [removed: )] |

| 2015 SABMiller special items | [removed: (82] [added: 82] | | [removed: )] | | [removed: (0.04] [added: 0.04] | | [removed: )] |

| 2015 Loss on early extinguishment of debt | [removed: (143] [added: 143] | | [removed: )] | | [removed: (0.07] [added: 0.07] | | [removed: )] |

| [removed: 2015] Tax items | [removed: 11] [added: —] | | | | [removed: —] [added: (0.02] | | [added: )] |

| Subtotal 2015 special items | [removed: (263] [added: 263] | | [removed: )] | | [removed: (0.13] [added: 0.13] | | [removed: )] |

| Change in tax rate | [removed: (53] [added: 82] | | [removed: )] | | [removed: (0.03] [added: 0.04] | | [removed: )] |

| ▪ | Fewer Shares Outstanding: Fewer shares outstanding during [removed: 2015] [added: 2016] compared with [removed: 2014] [added: 2015] were due primarily to shares repurchased by Altria Group, Inc. under its share repurchase programs. |

| ▪ | Operations: The increase of [removed: $470] [added: $336] million in operations shown in the table above was due primarily to the following: |

| ▪ | higher income from the smokeable products and smokeless products segments; [removed: and] |

| ▪ | lower interest and other debt expense, net; [added: and] |

| ▪ | lower earnings from [removed: Altria’s] [added: Altria Group, Inc.’s] equity investment in [removed: SABMiller.] [added: SABMiller (excluding special items).] |

[removed: 2016] [added: 2017] Forecasted Results

In [removed: January 2016,] [added: February 2017,] Altria Group, Inc. forecasted that its [removed: 2016] [added: 2017] full-year adjusted diluted EPS growth rate is expected to be in the range of [removed: 7%] [added: 7.5%] to [removed: 9%] [added: 9.5%] over [removed: 2015] [added: 2016] full-year adjusted diluted EPS.

This forecasted growth rate excludes the [removed: net expenses] [added: income and expense items] in the table below.

Altria Group, Inc. expects that its [removed: 2016] [added: 2017] full-year effective tax rate on operations will be [removed: 35.3%.][added: approximately 36%.]

| | 2016 | | | [removed: |] 2015 | | | [added: 2014 | |]

| [added: 2016] NPM Adjustment Items | [removed: $] [added: (11] | [removed: —] | [added: )] | | [removed: $] [added: (0.01] | [removed: (0.03] | ) |

| Asset impairment, exit and implementation [removed: costs1] [added: costs] | [removed: 0.05] [added: 0.02] | | | [added: (1)] | [removed: —] [added: 0.07] | | |

| [added: 2016] Tobacco and health litigation items | [removed: —] [added: (71] | | [added: )] | | [removed: 0.05] [added: (0.04] | | [added: )] |

| [added: 2016] SABMiller special items | [removed: —] [added: 57] | | | | [removed: 0.04] [added: 0.03] | | |

| [added: 2016] Loss on early extinguishment of debt | [removed: —] [added: (541] | | [added: )] | | [removed: 0.07] [added: (0.28] | | [added: )] |

For further [removed: discussion of the productivity initiative,] [added: discussion,] see Note [removed: 21.][added: 8.]

[removed: Subsequent Event] [added: Income Taxes] to the consolidated financial statements in Item [removed: 8.][added: 8 (“Note 15”).]

On October 10, 2016, Legacy AB InBev completed the Transaction, and AB InBev became the holding company for the combined SABMiller and Legacy AB InBev businesses.

Upon completion of the Transaction, Altria Group, Inc. had a 9.6% ownership of AB InBev based on AB InBev’s shares outstanding at October 10, 2016.

Following completion of the Transaction, Altria Group, Inc. purchased 12,341,937 ordinary shares of AB InBev for a total cost of approximately $1.6 billion, thereby increasing Altria Group, Inc.’s ownership to approximately 10.2%.

At December 31, 2016.

Altria Group, Inc. had an approximate 10.2% ownership of AB InBev, which

Altria Group, Inc. accounts for under the equity method of accounting using a one-quarter lag.

As a result of the one-quarter lag and the timing of the completion of the Transaction, no earnings from Altria Group, Inc.’s equity investment in AB InBev were recorded for the year ended December 31, 2016.

In January 2017, Altria Group, Inc. acquired Nat Sherman, which sells super-premium cigarettes and premium cigars and joins PM USA and Middleton as part of Altria Group, Inc.’s smokeable products segment.

| 2015 Gain on AB InBev/SABMiller business combination | (3 | | ) | | — | | |

| 2016 Asset impairment, exit, implementation and acquisition-related costs | (135 | | ) | | (0.07 | | ) |

| 2016 Patent litigation settlement | (13 | | ) | | (0.01 | | ) |

| 2016 Gain on AB InBev/SABMiller business combination | 9,001 | | | | 4.61 | | |

| 2016 Tax items | 30 | | | | 0.02 | | |

| Subtotal 2016 special items | 8,317 | | | | 4.25 | | |

| Operations | 336 | | | | 0.17 | | |

| ▪ | Change in Tax Rate: The change in tax rate was driven by tax benefits associated with the higher cumulative dividends received from SABMiller and AB InBev in 2016. |

| ▪ | lower investment spending in the innovative tobacco products businesses; |

| ▪ | higher operating results from the financial services business; |

| | 2017 | | | | 2016 | | |

| Patent litigation settlement | — | | | | 0.01 | | |

| Gain on AB InBev/SABMiller business combination | — | | | | (4.61 | | ) |

| | $ | 0.02 | | | $ | (4.25 | ) |

(1) Represents restructuring charges in connection with the facilities consolidation announced in October 2016.

If

relate to broader macroeconomic conditions outside of Altria Group, Inc.’s control.

year preceding that in which the payment is due.

The gains or losses and prior service costs or credits recorded as

Higher expected return on plan assets due to the impact of voluntary pension contributions totaling $500 million in September 2016 is expected to be offset by the impact of higher amortization of unrecognized losses, which includes the impact of the lower discount rate.

Altria Group, Inc. may be required to change the valuation allowance with respect to foreign tax credit carryforwards, based upon additional information to be received from AB InBev in 2017.

For additional information on income taxes, see Note 15.

Income attributable to leveraged leases is initially

Impairment takes into consideration both

▪Gain on AB InBev/SABMiller Business Combination: As a result of the Transaction, during 2016, Altria Group, Inc. recorded a pre-tax gain of approximately $13.9 billion.

| (in millions) | 2016 | | | | 2015 | | | | 2014 | | |

During 2016, PM USA recorded pre-tax charges of $88 million in marketing, administration and research costs, primarily related to settlements in the Miner and Aspinall cases totaling approximately $67 million and $16 million related to a judgment in the Merino case.

In addition, during 2016, PM USA recorded $17 million in interest costs primarily related to Aspinall.

In October 2016, Altria Group, Inc. announced the consolidation of certain of its operating companies’ manufacturing facilities to streamline operations and achieve greater efficiencies.

The consolidation is expected to be completed by the first quarter of 2018 and deliver approximately $50 million in annualized cost savings by the end of 2018.

As a result of the consolidation, Altria Group, Inc. expects to record total pre-tax charges of approximately $150 million, or $0.05 per share.

Altria Group, Inc. incurred $71 million of this amount during 2016 and expects to record approximately $70 million in 2017 and the remainder in 2018.

On November 11, 2015, AB InBev announced its firm offer to effect a business combination with SABMiller in a cash and stock transaction.

Group, Inc.’s innovative tobacco products businesses to Altria Group, Inc.’s consolidated results.

| Subtotal 2014 special items | 17 | | | | 0.01 | | |

| 2015 Other income, net | 3 | | | | — | | |

| Operations | 470 | | | | 0.24 | | |

| ▪ | Change in Tax Rate: The change in tax rate was due primarily to decreased recognition of foreign tax credits associated with SABMiller dividends. |

This forecast does not include any impact from the anticipated AB InBev and SABMiller business combination, as the transaction remains subject to certain approvals and the closing date has not yet been determined.

| | $ | 0.05 | | | $ | 0.13 | |

1 Represents restructuring charges, substantially all of which are expected to be recorded in the first quarter of 2016 in connection with the productivity initiative announced in January 2016.

Altria

which is determined using discounted cash flows, the intangible asset is considered impaired and is reduced to fair value.

At December 31, 2015:

| ▪ | the estimated fair values of the indefinite-lived intangible assets within the cigars and wine reporting units substantially exceeded their carrying values; and |

| ▪ | in the smokeless products reporting unit, the estimated fair value of the Copenhagen trademark substantially exceeded its carrying value, while the estimated fair values of the Skoal trademark and certain other smokeless products trademarks (primarily Red Seal and Husky) did not substantially exceed their carrying values. |

At December 31, 2015, the estimated fair value of the Skoal trademark exceeded its carrying value of $3.9 billion by approximately 15%, and the estimated fair value of certain other smokeless products trademarks (primarily Red Seal and Husky) exceeded their collective carrying value of $921 million by approximately 10%.

The 2015 results for Skoal continue to be impacted by a lower category growth rate and increased competitive activity.

USSTC continues to implement strategies to enhance Skoal’s equity and to invest more efficiently in the brand.

USSTC expects these strategies to improve Skoal’s profitability over the long term.

Red Seal and Husky continue to be impacted by lower levels of promotional support on these brands, increased competitive activity in the discount category and sustained growth in popular priced products.

income, growth rates and discount rates.

judgment used in determining future cash flows.

USA and UST and its subsidiaries, as well as their respective indemnitees.

The 2015, 2014 and 2013 amounts included reductions to cost of sales of $97 million, $43 million and $664 million, respectively, related to the NPM Adjustment Items discussed further below and in Health Care Cost Recovery Litigation - NPM Adjustment Disputes in Note 18.

In addition, the 2015 and 2014 amounts reflected decreases in the charge to cost of sales of approximately $300 million and $100 million, respectively, for the expiration of the obligations imposed by FETRA after the third quarter of 2014.

At December 31, 2015, Altria Group, Inc. changed the approach used to estimate the service and interest cost components of net periodic benefit costs for Altria Group, Inc.’s pension and postretirement plans.

In 2015 and prior years, Altria Group, Inc. estimated the service and interest cost components using a single weighted-average discount rate derived from the yield curve used to measure the pension and postretirement plans benefit obligations.

Beginning in 2016, Altria Group, Inc. will use a spot rate approach in the estimation of these components of net periodic benefit costs by applying the specific spot rates along the yield curve to the relevant projected cash flows, as Altria Group, Inc. believes that this approach provides a more precise estimate of service and interest costs.

Altria Group, Inc. is accounting for this change prospectively as a change in accounting estimate.

This change will not affect the measurement of Altria Group, Inc.’s pension and postretirement benefit obligations as the change in the service and interest costs will be offset by a corresponding change in actuarial gains/losses.

This anticipated decrease is due primarily to the impact of the change in approach used to estimate service and interest costs ($90 million) and the impact of the higher discount rate.

decrease Altria Group, Inc.’s pension and postretirement expense by approximately $43 million.

At December 31, 2015, PMCC’s

There were no such adjustments in 2013.

| | | | | | | | | | | | |

Tax items for 2013 included the reversal of tax accruals no longer required and the recognition of previously unrecognized foreign tax credits primarily associated with SABMiller dividends.

lower interest costs on debt as a result of debt refinancing activities in 2015 and 2014.

2014 Compared with 2013

Net revenues, which include excise taxes billed to customers, were essentially unchanged, due primarily to higher net revenues in all reportable segments, offset by lower gains on asset sales in the financial services business.

Cost of sales increased $579 million (8.0%), due primarily to higher NPM Adjustment Items in 2013.

Marketing, administration and research costs increased $199 million (8.5%), due primarily to higher investment spending in the innovative tobacco products businesses, lower reductions to the allowance for losses in the financial services business and higher costs in the smokeable products segment.

At December 31, [removed: 2015] [added: 2016] and [removed: 2014,] [added: 2015,] the fair value of Altria Group, Inc.’s total debt was [removed: $14.5] [added: $15.1] billion and [removed: $17.0] [added: $14.5] billion, respectively.

A 1% increase in market interest rates at December 31, [removed: 2015] [added: 2016] and [removed: 2014] [added: 2015] would decrease the fair value of Altria Group, Inc.’s total debt by approximately [removed: $1.1] [added: $1.2] billion and [removed: $1.3] [added: $1.1] billion, respectively.

A 1% decrease in market interest rates at December 31, [removed: 2015] [added: 2016] and [removed: 2014] [added: 2015] would increase the fair value of Altria Group, Inc.’s total debt by approximately [removed: $1.3] [added: $1.4] billion and [removed: $1.5] [added: $1.3] billion, respectively.

The applicable percentage based on Altria Group, Inc.’s long-term senior unsecured debt ratings at December 31, [removed: 2015] [added: 2016] for borrowings under the Credit Agreement was [removed: 1.25%.][added: 1.125%.]

At December 31, [removed: 2015,] [added: 2016,] Altria Group, Inc. had no borrowings under the Credit Agreement.

At December 31, 2015, the fair value of Altria Group, Inc.’s derivative financial instrument in the form of a put option (the “option”) included in other current assets was $152 million.

A 10% devaluation of the United States dollar against the British pound would decrease the fair value of the option by approximately $97 million, with a corresponding decrease to Altria Group, Inc.’s pre-tax earnings.

A 10% appreciation of the United States dollar against the British pound would increase the fair value of the option by approximately $172 million, with a corresponding increase to Altria Group, Inc.’s pre-tax earnings.

At December 31, [removed: 2015,] [added: 2016,] Altria Group, Inc.’s wholly-owned subsidiaries included Philip Morris USA Inc. (“PM USA”), which is engaged [removed: predominantly] 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 [removed: tobacco,] [added: tobacco] and is a wholly-owned subsidiary of PM USA; and UST LLC (“UST”), which through its wholly-owned subsidiaries, including U.S. Smokeless Tobacco Company LLC (“USSTC”) and Ste.

Other Altria Group, Inc. wholly-owned subsidiaries included Altria Group Distribution Company, which provides sales, distribution and consumer engagement services to certain Altria Group, Inc. operating subsidiaries, and Altria Client Services LLC, which provides various support services in [removed: areas] [added: areas,] such as legal, regulatory, finance, human resources and external affairs, to Altria Group, Inc. and its subsidiaries.

At [removed: December 31, 2015,] [added: September 30, 2016,] Altria Group, Inc. [removed: also held approximately] [added: had an approximate] 27% [removed: of the economic and voting interest] [added: ownership] of SABMiller plc (“SABMiller”), which Altria Group, Inc. [removed: accounts] [added: accounted] for under the equity method of accounting.

On [removed: November 11, 2015,] [added: October 10, 2016,] Anheuser-Busch InBev SA/NV [removed: (“AB] [added: (“Legacy AB] InBev”) [removed: announced its firm offer to effect] [added: completed] a business combination with SABMiller in a cash and stock [removed: transaction.][added: transaction (the “Transaction”).]

For further discussion, see Note [removed: 6.][added: 7.]

Investment in [removed: SABMiller] [added: AB InBev/SABMiller] to the consolidated financial statements in Item 8.

At December 31, [removed: 2015,] [added: 2016,] Altria Group, Inc.’s principal wholly-owned subsidiaries were not limited by long-term debt or other agreements in their ability to pay cash dividends or make other distributions with respect to their equity interests.

In addition, Altria Group, Inc. receives cash dividends on its interest in [removed: SABMiller] [added: AB InBev] if and when [removed: SABMiller] [added: AB InBev] pays such dividends.

The financial services and the innovative tobacco products businesses are included in an all [added: other category due to the continued reduction of the lease portfolio of PMCC and the relative financial contribution of Altria Group, Inc.’s innovative tobacco products businesses to Altria Group, Inc.’s consolidated results.]

Altria Group, Inc.’s chief operating decision maker [added: (the “CODM”)] reviews operating companies income to evaluate the performance of, and allocate resources to, the segments.

Operating companies income for the segments is defined as operating income before [removed: amortization of intangibles and] general corporate [removed: expenses.][added: expenses and amortization of intangibles.]

Interest and other debt expense, net, 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 [removed: Altria Group, Inc.’s chief operating decision maker.][added: the CODM.]

Net revenues and operating companies income (together with a reconciliation to earnings before income taxes) attributable to each such segment for each of the last three years are set forth in Note [removed: 15.][added: 16.]

Segment Reporting to the consolidated financial statements in Item 8 (“Note [removed: 15”).][added: 16”).]

Information about total assets by segment is not disclosed because such information is not reported to or used by [removed: Altria Group, Inc.’s chief operating decision maker.][added: the CODM.]

| | [removed: 2015] [added: 2016] | | [removed: 2014] [added: 2015] | | [removed: 2013] [added: 2014] | |

| Smokeable products | [removed: 87.4] [added: 86.2] | % | [removed: 87.2] [added: 87.4] | % | [removed: 84.5] [added: 87.2] | % |

| Smokeless products | [removed: 12.8] [added: 13.1] | | [removed: 13.4] [added: 12.8] | | [removed: 12.2] [added: 13.4] | |

| Wine | 1.8 | | [removed: 1.7] [added: 1.8] | | [removed: 1.4] [added: 1.7] | |

| All other | [removed: (2.0] [added: (1.1] | ) | [removed: (2.3] [added: (2.0] | ) | [removed: 1.9] [added: (2.3] | [added: )] |

For items affecting the comparability of the relative percentages of operating companies income (loss) attributable to each reportable segment, see Note [removed: 15.][added: 16.]

Portions of the information called for by this Item are included in [added: Operating Results by Business Segment in] Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations [removed: - Operating Results by Business Segment] of this Annual Report on Form [removed: 10-K.][added: 10-K (“Item 7”).]

Altria Group, Inc.’s tobacco operating companies include PM USA, USSTC and other subsidiaries of UST, [removed: Middleton and] [added: Middleton,] Nu [removed: Mark.][added: Mark and Nat Sherman.]

Altria Group Distribution Company provides sales, [added: distribution and consumer engagement services to Altria Group, Inc.’s tobacco operating companies.]

The products of Altria Group, Inc.’s tobacco subsidiaries include smokeable tobacco [removed: products comprised] [added: products, consisting] of cigarettes manufactured and sold by PM USA and [added: Nat Sherman,] machine-made large cigars and pipe tobacco manufactured and sold by [removed: Middleton;] [added: Middleton and premium cigars sold by Nat Sherman;] smokeless tobacco [removed: products, substantially all of which are] [added: products] manufactured and sold by USSTC; and innovative tobacco products, including e-vapor products manufactured and sold by Nu Mark.

▪Cigarettes: PM USA is the largest cigarette company in the United States, with total cigarette shipment volume in the United States of approximately [removed: 126.0] [added: 122.9] billion units in [removed: 2015, an increase] [added: 2016, a decrease] of [removed: 0.5%] [added: 2.5%] from [removed: 2014.][added: 2015.]

Marlboro, the principal cigarette brand of PM USA, has been the largest-selling cigarette brand in the United States for [removed: the past] [added: over] 40 years.

Total shipment volume for cigars was approximately [removed: 1.3] [added: 1.4] billion units in [removed: 2015,] [added: 2016,] an increase of [removed: 4.2%] [added: 5.9%] from [removed: 2014.][added: 2015.]

The smokeless products segment includes the premium brands, Copenhagen and Skoal, [added: and] value brands, Red Seal and [removed: Husky, and Marlboro Snus, a premium PM USA spit-free smokeless tobacco product.][added: Husky.]

Total smokeless products shipment volume was [removed: 813.5] [added: 853.5] million units in [removed: 2015,] [added: 2016,] an increase of [removed: 2.5%] [added: 4.9%] from [removed: 2014.][added: 2015.]

In April 2014, Nu Mark acquired the e-vapor business of Green Smoke, Inc. and its affiliates (“Green Smoke”), which [removed: has been] [added: began] selling e-vapor products [removed: since] [added: in] 2009.

In December 2013, Altria Group, Inc.’s subsidiaries entered into a series of agreements with Philip Morris International Inc. (“PMI”) pursuant to which Altria Group, Inc.’s subsidiaries provide an exclusive license to PMI to sell [removed: Altria Group, Inc.’s subsidiaries’] [added: Nu Mark’s] e-vapor products outside the United States, and PMI’s subsidiaries provide an exclusive license to Altria Group, Inc.’s subsidiaries to sell two of PMI’s heated tobacco product [removed: technologies] [added: platforms] in the United States.

Further, in July 2015, Altria Group, Inc. announced the expansion of its strategic framework with PMI to include a joint research, development and [added: technology-sharing agreement.]

Under this agreement, Altria Group, [removed: Inc.] [added: Inc.’s subsidiaries] and PMI will collaborate to develop e-vapor products for commercialization in the United States by Altria Group, [removed: Inc.] [added: Inc.’s subsidiaries] and in markets outside the United States by PMI.

[removed: Promotional activities include, in certain instances and where] permitted by law, allowances, the distribution of incentive items, price promotions, product promotions, coupons and other discounts.

In June 2009, the President of the United States of America signed into law the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”), which provides the [removed: United States Food and Drug Administration (“FDA”)] [added: FDA] with broad authority to regulate the design, manufacture, packaging, advertising, promotion, sale and distribution of [removed: cigarettes, cigarette] tobacco [removed: and smokeless tobacco] products; the authority to require disclosures of related information; and the authority to enforce the FSPTCA and related regulations.

PM USA also purchases a portion of its [removed: United States] tobacco requirements through leaf merchants.

Middleton purchases [removed: burley and] [added: burley,] dark air-cured [added: and flue-cured] tobaccos of various grades and styles through leaf merchants.

Risk Factors of this Annual Report on Form 10-K (“Item 1A”) and Tobacco Space - Business Environment - Price, Availability and Quality of Agricultural Products in Item [removed: 7.][added: 7 for a discussion of risks associated with tobacco supply.]

A newly formed Belgian company, which retained the name Anheuser-Busch InBev SA/NV (“AB InBev”), became the holding company for the combined SABMiller and Legacy AB InBev businesses.

Upon completion of the Transaction, Altria Group, Inc. had a 9.6% ownership of AB InBev based on AB InBev’s shares outstanding at October 10, 2016.

Following completion of the Transaction, Altria Group, Inc. purchased 12,341,937 ordinary shares of AB InBev for a total cost of approximately $1.6 billion, thereby increasing Altria Group, Inc.’s ownership to approximately 10.2%.

At December 31, 2016, Altria Group, Inc. had an approximate 10.2% ownership of AB InBev, which Altria Group, Inc. accounts for under the equity method of accounting using a one-quarter lag.

As a result of the one-quarter lag and the timing of the completion of the Transaction, no earnings from Altria Group, Inc.’s equity investment in AB InBev were recorded for the year ended December 31, 2016.

In January 2017, Altria Group, Inc. acquired the privately-held Sherman Group Holdings, LLC and its subsidiaries (“Nat Sherman”).

Nat Sherman sells super-premium cigarettes and premium cigars and joins PM USA and Middleton as part of Altria Group, Inc.’s smokeable products segment.

Nat Sherman sells substantially all of its super-premium cigarettes in the United States.

Nat Sherman sources its premium cigars from importers through third-party contract manufacturing arrangements and sells substantially all of its cigars in the United States.

In the fourth quarter of 2016, PMI submitted a Modified Risk Tobacco Product (“MRTP”) application for an electronically heated tobacco product with the United States Food and Drug Administration’s (“FDA”) Center for Tobacco Products and announced that it plans to file its corresponding pre-market tobacco product application during the first quarter of 2017.

The FDA must determine whether to accept the applications for substantive review.

Upon regulatory authorization by the FDA, Altria Group, Inc.’s subsidiaries will have an exclusive license to sell this heated tobacco product in the United States.

Promotional activities include, in certain instances and where

The FSPTCA went into effect in 2009 for cigarettes, cigarette tobacco and smokeless tobacco products and in August 2016 for all other tobacco products, including cigars, e-vapor products, pipe tobacco and oral tobacco-derived nicotine products (“Other Tobacco Products”).

Nat Sherman purchases its tobacco requirements through leaf merchants.

Michelle also sells to domestic consumers through retail and e-commerce channels and exports wines to international distributors.

Ste.

In addition, Core-Mark Holding Company, Inc.

that subsidiaries of Altria Group, Inc. may undertake in the future.

other category due to the continued reduction of the lease portfolio of PMCC and the relative financial contribution of Altria Group, Inc.’s innovative tobacco products businesses to Altria Group, Inc.’s consolidated results.

| | | | | | | |

distribution and consumer engagement services to Altria Group, Inc.’s tobacco operating companies.

technology-sharing agreement.

The law also grants the FDA authority to extend the FSPTCA application, by regulation, to all other tobacco products, including cigars, pipe tobacco and e-vapor products.

In April 2014, the FDA issued proposed regulations for other tobacco products, which as proposed would include machine-made large cigars, e-vapor products, pipe tobacco and oral tobacco-derived nicotine products marketed and sold by some of Altria Group, Inc.’s tobacco subsidiaries.

The proposed regulations would impose the FSPTCA regulatory framework on products manufactured, marketed and sold by Middleton and Nu Mark with potentially wide-ranging impact on their businesses.

Tobacco production in the United States was historically subject to government controls, including the production control programs administered by the United States Department of Agriculture (the “USDA”).

In October 2004, the Fair and Equitable Tobacco Reform Act of 2004 (“FETRA”), which applied to PM USA, Middleton and USSTC, was signed into law.

FETRA eliminated the federal tobacco quota and price support program through an industry-funded buy-out of tobacco growers and quota holders.

The cost of the 10-year buy-out, which expired after the third quarter of 2014, was approximately $9.5 billion and was paid by manufacturers and importers of each kind of tobacco product subject to federal excise tax (“FET”).

The cost was allocated based on the relative market shares of manufacturers and importers of each kind of tobacco product.

As a result of FETRA, Altria Group, Inc.’s subsidiaries recorded charges to cost of sales of approximately $0.3 billion for the year ended December 31, 2014 and approximately $0.4 billion for the year ended December 31, 2013.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of this Annual Report on Form 10-K for a discussion of risks associated with tobacco supply.

The information required by this Item is included in Note [removed: 18] [added: 19] and Exhibits 99.1 and 99.2 to this Annual Report on Form 10-K.

[added: Altria Group, Inc.’s consolidated financial statements and] accompanying notes for the year ended December 31, [removed: 2015] [added: 2016] were filed on Form 8-K on [removed: January 28, 2016] [added: February 1, 2017] (such consolidated financial statements and accompanying notes are also included in Item 8).

[removed: ▪Engle] [added: | ▪ | Engle] Progeny Trial Results: [added: |]

In [removed: McCoy, on January 27, 2016, plaintiff] [added: Martin, in February 2017, PM USA and R.J. Reynolds] filed a notice of [removed: cross-appeal] [added: appeal] to the Florida Fourth District Court of Appeal.

In [removed: Bowden, on] [added: Allen, in] February [removed: 2, 2016,] [added: 2017,] the Florida First District Court of Appeal affirmed the trial court’s [removed: decision in favor of plaintiff.][added: verdict.]

[removed: In the first quarter of 2016,] PM USA will record a [added: pre-tax] provision of approximately [removed: $1.6 million for] [added: $600,000 in] the [removed: judgment plus interest.][added: first quarter of 2017.]

[removed: In Ahrens, on] [added: Brown, in] February [removed: 13, 2016,] [added: 2017,] a Pinellas County jury returned [removed: a] verdict in favor of plaintiff and against PM USA and R.J. Reynolds [removed: Tobacco Company (“R.J. Reynolds”)] awarding [removed: $9] [added: $5.4] million in compensatory damages and allocating [removed: 24%] [added: 35%] of the fault to PM USA.

The jury also awarded [removed: $2.5 million] [added: plaintiff $200,000] in punitive damages against [removed: each defendant.][added: PM USA.]

[removed: ▪NPM] [added: NPM] Adjustment Disputes: [removed: On February 8, 2016,] [added: As discussed in Note 19, in 1998,] PM USA and certain other [added: U.S. tobacco product] manufacturers entered into [removed: an agreement with] the [removed: State of Missouri to settle the non-participating manufacturer (“NPM”) adjustment disputes under the] 1998 Master Settlement Agreement [removed: (“MSA”).][added: (the “MSA”).]

As a result of [removed: this denial of PM USA’s petition,] [added: the judgment reduction decision,] PM USA will be required to return approximately $12 million of the 2003 NPM Adjustment and $7 million of the interest it received [removed: (plus interest on those amounts).][added: (in each case subject to confirmation by the independent auditor), plus applicable interest.]

In addition, PM USA will record a corresponding reduction to its pre-tax earnings in the first quarter of [removed: 2016.][added: 2017.]

| | |

| --- | --- |

In McKeever, in February 2017, PM USA filed a notice to invoke the discretionary jurisdiction of the Florida Supreme Court.

In Pardue, in February 2017, the trial court granted PM USA’s and R.J. Reynolds Tobacco Company’s (“R.J. Reynolds”) motion for a remittitur, reducing the compensatory damages award from approximately $5.9 million to approximately $5.2 million.

In Varner, in February 2017, PM USA paid plaintiff approximately $600,000 to satisfy the judgment, interest and related costs.

In J.

The court ruled that it will not apply the comparative fault reduction to the compensatory damages.

PM USA is participating in proceedings regarding potential downward adjustments (the “NPM Adjustment”) to MSA payments made by manufacturers that are signatories to the MSA (the “Participating Manufacturers”) for 2003-2015.

In February 2017, the Supreme Court of Missouri denied Missouri’s motion to order the Participating Manufacturers to arbitrate the question of its diligent enforcement in a single-state arbitration for 2004, but granted Missouri’s motion to modify, with respect to Missouri, the pro rata judgment reduction related to the 2003 NPM Adjustment.

Altria Group, Inc.’s consolidated financial statements and

▪Non-Engle Progeny Litigation:

In Pooshs, on February 8, 2016, a California federal court jury returned a verdict in favor of PM USA.

In Bullock, on February 8, 2016, the district court denied plaintiff’s motion for a new trial.

In Schwarz, on February 10, 2016, PM USA filed a petition for writ of certiorari with the United States Supreme Court.

In Ewing, on January 28, 2016, an Escambia County jury returned a verdict in favor of PM USA.

In Pollari, on January 28, 2016, PM USA posted a bond in the amount of $2.5 million.

On January 29, 2016, the Florida Supreme Court upheld the trial court’s decision in favor of plaintiff in R.

Cohen.

On February 1, 2016, the Florida Supreme Court upheld the trial courts’ decisions in favor of plaintiffs in Kayton and Putney.

On February 3, 2016, defendants filed a motion for clarification in Putney.

On February 8, 2016, in Kayton and R.

Cohen, PM USA posted riders increasing the amount of its bonds to $15 million and $7.5 million, respectively.

In Buchanan, on February 2, 2016, the Florida Supreme Court declined to accept jurisdiction of PM USA’s petition for review.

On February 8, 2016, PM USA posted a rider increasing the amount of its bond to $5.5 million.

In Barbose, on February 17, 2016, PM USA posted a bond in the amount of $2.5 million and, on February 16, 2016, defendants filed a notice of appeal to the Florida Second District Court of Appeal.

In Cooper, on February 10, 2016, the trial court entered final judgment in favor of plaintiff, reducing the compensatory damages award against PM USA to approximately $300,000.

In Greene (formerly Rizzuto), on February 16, 2016, PM USA paid the judgment plus interest in the amount of approximately $6.8 million.

In Hess, on February 22, 2016, PM USA paid the judgment plus interest and associated costs in the amount of approximately $10.6 million.

In E.

Smith, on February 22, 2016, a Palm Beach County jury returned a verdict in favor of PM USA and R.J. Reynolds.

In Ledoux, on February 23, 2016, the trial court denied defendants’ post-trial motions.

Medical Monitoring Class Actions: In Donovan, on February 10, 2016, a Massachusetts jury returned a verdict in favor of PM USA.

The settlement is contingent upon Missouri’s enactment by June 3, 2016 of certain amendments to its existing escrow statute.

Similar to the settlement of these disputes with 24 other signatory states, the settlement with Missouri would resolve the disputes for the years 2003-2012 and treat 2013-2014 as “transition years.” If the settlement becomes effective, PM USA will retain approximately $36 million previously received as a result of an arbitration panel’s ruling that Missouri did not diligently enforce its escrow statue during 2003 and will receive an additional approximately $18 million in the form of a reduction to the next MSA payment following the effectiveness of the settlement.

In addition, if the settlement becomes effective, the NPM Adjustment provision will be revised and streamlined as to Missouri for the years after 2014.

The original participating manufacturers have agreed that the amounts they receive under the settlement for the years after 2014 will be allocated among them pursuant to a formula that modifies the MSA allocation formula in a manner favorable to PM USA, although the extent to which it remains favorable to PM USA will depend upon future developments.

On February 22, 2016, the Court of Appeals of Maryland denied PM USA’s petition for discretionary judicial review of the Maryland intermediate appellate court decision that had reversed the Maryland trial court’s ruling in PM USA’s favor on the pro rata judgment reduction method.

This decision leaves in effect the intermediate court’s decision applying a judgment reduction method that is more favorable to the state.

▪Federal Government’s Lawsuit: On February 8, 2016, the U.S. District Court for the District of Columbia issued an order on the content of the corrective communications and ordered the parties to submit proposed changes to the consent order on the implementation details by April 1, 2016.

“Lights/Ultra Lights” Cases

▪State Trial Court Class Certifications: In Aspinall, on February 19, 2016, the trial court issued its “Findings of Fact and Conclusions of Law.” The court found that (1) PM USA violated Massachusetts consumer protection laws in marketing Marlboro “Lights” and (2) plaintiffs proved that class members were economically injured, but did not prove a specific measure of damages.

As a result, the court awarded statutory damages of $25 per class member, for a total of $4.9 million, plus interest, attorneys’ fees and costs.

Certain Other Tobacco-Related Litigation

▪Argentine Grower Cases: In Hupan, on January 29, 2016, plaintiffs filed an amended complaint against defendants, including PM USA.

On February 12, 2016, PM USA and Philip Morris Global Brands Inc. (a subsidiary of PMI) filed a motion to strike the amended complaint.

▪UST Litigation: In Vassallo, on February 3, 2016, the trial court denied plaintiff’s motion to amend the complaint to add fraud and conspiracy claims.

10-K 1 [removed: a2015form10-k.htm] [added: a2016form10-k.htm] FORM 10-K

For the fiscal year ended December 31, [removed: 2015][added: 2016]

As of June 30, [removed: 2015,] [added: 2016,] the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately [removed: $96] [added: $135] billion based on the closing sale price of the common stock as reported on the New York Stock Exchange.

| Class | Outstanding at February [removed: 12, 2016] [added: 13, 2017] |

| Common Stock, $0.33 1/3 par value | [removed: 1,957,931,815] [added: 1,939,420,437] shares |

| Portions of the registrant’s definitive proxy statement for use in connection with its annual meeting of shareholders to be held on May [removed: 19, 2016,] [added: 18, 2017,] to be filed with the Securities and Exchange Commission on or about April [removed: 7, 2016,] [added: 6, 2017,] are incorporated by reference into Part III hereof. |

| Item 1. | [removed: [Business](#sE8F64EB3206A54A5BB996C4E7657AB26)] [added: [Business](#sD05889304B0254A992F3F4D5E06DED86)] | [removed: [1](#sE8F64EB3206A54A5BB996C4E7657AB26)] [added: [1](#sD05889304B0254A992F3F4D5E06DED86)] |

| Item 1A. | [Risk [removed: Factors](#sBFA2D68A55415ECA8674234608DB7B80)] [added: Factors](#sDA8AA449FBAE52C7B2A8C7414FD17381)] | [removed: [4](#sBFA2D68A55415ECA8674234608DB7B80)] [added: [4](#sDA8AA449FBAE52C7B2A8C7414FD17381)] |

| Item 1B. | [Unresolved Staff [removed: Comments](#sE5409AAACAA05B15832D42FBA824E632)] [added: Comments](#s3A49E4573314544BAA7C48A8B61E0202)] | [removed: [10](#sE5409AAACAA05B15832D42FBA824E632)] [added: [9](#s3A49E4573314544BAA7C48A8B61E0202)] |

| Item 2. | [removed: [Properties](#sE0619A51AEEE53838DA384A7E824F769)] [added: [Properties](#s8E9382C4606350DDBAE333F2BCF956DF)] | [removed: [10](#sE0619A51AEEE53838DA384A7E824F769)] [added: [10](#s8E9382C4606350DDBAE333F2BCF956DF)] |

| Item 3. | [Legal [removed: Proceedings](#s02F6500AC96450B9A106E4255EA9AC59)] [added: Proceedings](#sC33C74ED7FD752D497543D7460D4F23F)] | [removed: [10](#s02F6500AC96450B9A106E4255EA9AC59)] [added: [10](#sC33C74ED7FD752D497543D7460D4F23F)] |

| Item 4. | [Mine Safety [removed: Disclosures](#s5EFA10C754FF55409CFF607CF293C07B)] [added: Disclosures](#sA608FDC0E9C2539086FF28B01CAAD76C)] | [removed: [11](#s5EFA10C754FF55409CFF607CF293C07B)] [added: [10](#sA608FDC0E9C2539086FF28B01CAAD76C)] |

| Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s46547F0BDA36553BAEA7C32E27D127A7)] [added: Securities](#s2338A2C710445DA99526E65D1B37A7B9)] | [removed: [12](#s46547F0BDA36553BAEA7C32E27D127A7)] [added: [11](#s2338A2C710445DA99526E65D1B37A7B9)] |

| Item 6. | [Selected Financial [removed: Data](#s45D2F95AC5155A938BF57D2090D78921)] [added: Data](#sBEF7464732085FDC94BBF8F4BB3EEA2D)] | [removed: [14](#s45D2F95AC5155A938BF57D2090D78921)] [added: [13](#sBEF7464732085FDC94BBF8F4BB3EEA2D)] |

| Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#sE3DF2700987F50469B98D98D3F3F70E8)] [added: Operations](#s93B8EE362F845E3DAC408472484465EF)] | [removed: [15](#sE3DF2700987F50469B98D98D3F3F70E8)] [added: [14](#s93B8EE362F845E3DAC408472484465EF)] |

| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#s48DBDE0FA8FE5979B56340D801B2A5BD)] [added: Risk](#sD12DD37493EE52E58450B64710B334E0)] | [removed: [38](#s48DBDE0FA8FE5979B56340D801B2A5BD)] [added: [37](#sD12DD37493EE52E58450B64710B334E0)] |

| Item 8. | [Financial Statements and Supplementary [removed: Data](#s8E43DF2DFCCB5D83A3E108280DA60330)] [added: Data](#s249DA3C3F0E45594BBC089B268D40EBB)] | [removed: [39](#s8E43DF2DFCCB5D83A3E108280DA60330)] [added: [38](#s249DA3C3F0E45594BBC089B268D40EBB)] |

| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#sD6718FEAB0FE5CF0BDE47B90BC83EEF7)] [added: Disclosure](#s7CFE7474761E5F85B706CF0C50FEBACA)] | [removed: [110](#sD6718FEAB0FE5CF0BDE47B90BC83EEF7)] [added: [114](#s7CFE7474761E5F85B706CF0C50FEBACA)] |

| Item 9A. | [Controls and [removed: Procedures](#sC1EEF5E91BAB55F4B76EF7C6F23BA6FA)] [added: Procedures](#sD10D0D1E493E517A9CFA48BE457F7EC9)] | [removed: [110](#sC1EEF5E91BAB55F4B76EF7C6F23BA6FA)] [added: [114](#sD10D0D1E493E517A9CFA48BE457F7EC9)] |

| Item 9B. | [Other [removed: Information](#s3D4A78D2E2BE550BBF06965AF26DCADE)] [added: Information](#sDB64FF74222954D5A930D5F3F09E1FF6)] | [removed: [110](#s3D4A78D2E2BE550BBF06965AF26DCADE)] [added: [114](#sDB64FF74222954D5A930D5F3F09E1FF6)] |

| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#sB43F1EC839B45409B1C9AEB9B5B865B0)] [added: Governance](#sF1D6D2607E52584EB7636CE90A614BDB)] | [removed: [110](#sB43F1EC839B45409B1C9AEB9B5B865B0)] [added: [114](#sF1D6D2607E52584EB7636CE90A614BDB)] |

| Item 11. | [Executive [removed: Compensation](#s36BD1D4C80E55E0D8FD9859B7B14A327)] [added: Compensation](#sD5AF2594AA635141B3487E0AAACD4A65)] | [removed: [111](#s36BD1D4C80E55E0D8FD9859B7B14A327)] [added: [115](#sD5AF2594AA635141B3487E0AAACD4A65)] |

| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s51932CBF8BF55759A463EEFECF3798E1)] [added: Matters](#s47F24ACF8AF3540698E49A47C3C3046F)] | [removed: [111](#s51932CBF8BF55759A463EEFECF3798E1)] [added: [115](#s47F24ACF8AF3540698E49A47C3C3046F)] |

| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s681B1D3EAB4B5F4BBE786F80CB57AB8F)] [added: Independence](#s7A9F68D15DD25012870904588A9AB114)] | [removed: [111](#s681B1D3EAB4B5F4BBE786F80CB57AB8F)] [added: [115](#s7A9F68D15DD25012870904588A9AB114)] |

| Item 14. | [Principal Accounting Fees and [removed: Services](#s7AB61C9D4166574A9444C816A0E3DE32)] [added: Services](#s1899F11DE3185A12B5FA5B58FEEB7D7D)] | [removed: [111](#s7AB61C9D4166574A9444C816A0E3DE32)] [added: [115](#s1899F11DE3185A12B5FA5B58FEEB7D7D)] |

| Item 15. | [Exhibits and Financial Statement [removed: Schedules](#sC809AA50ED005B4B99DDC0C54B13B122)] [added: Schedules](#sAE588D2CBCA255B8886477C14F93AB79)] | [removed: [112](#sC809AA50ED005B4B99DDC0C54B13B122)] [added: [116](#sAE588D2CBCA255B8886477C14F93AB79)] |

| Item 16. | [Form 10-K Summary](#saf772b661b604e768ce1a74d086de393) | [120](#saf772b661b604e768ce1a74d086de393) |

| [Signatures](#sC57E806DBE4954048C44BB0C111972CB) | | [121](#sC57E806DBE4954048C44BB0C111972CB) |

| [Signatures](#s1C3308B078D1551A8CDB15DDDC2B717E) | | [117](#s1C3308B078D1551A8CDB15DDDC2B717E) |

At December 31, [removed: 2015,] [added: 2016,] the smokeable products segment used four manufacturing and processing facilities.

At December 31, [removed: 2015,] [added: 2016,] the smokeless products segment used four smokeless tobacco manufacturing and processing facilities located in Franklin Park, Illinois; [removed: Hopkinsville, Kentucky;] Nashville, Tennessee; and [removed: Richmond, Virginia,] [added: two facilities in Hopkinsville, Kentucky,] all of which are owned and operated by USSTC.

At December 31, [removed: 2015,] [added: 2016,] the wine segment used [removed: 11] [added: 12] wine-making facilities - seven in Washington, [removed: three] [added: four] in California and one in Oregon.

As disclosed in Note 5.

Asset Impairment, Exit and Implementation Costs to the consolidated financial statements in Item 8 (“Note 5”), in October 2016, Altria Group, Inc. announced the consolidation of certain of its operating companies’ manufacturing facilities to streamline operations and achieve greater efficiencies.

Middleton will transfer its Limerick, Pennsylvania operations to the Manufacturing Center site in Richmond, Virginia (“Richmond Manufacturing Center”).

USSTC will transfer its Franklin Park, Illinois operations to its Nashville, Tennessee facility and the Richmond Manufacturing Center.

The consolidation is expected to be completed by the first quarter of 2018.

In 2016, USSTC expects to complete construction of a new facility located in Hopkinsville, Kentucky and expects the facility to be operational in the second half of 2016.

The graph assumes the investment of $100 in common stock and each of the indices as of the market close on December 31, [removed: 2010] [added: 2011] and the reinvestment of all dividends on a quarterly basis.

[removed: ][added: ]

| December [removed: 2010] [added: 2011] | | $ | 100.00 | | | $ | 100.00 | | | $ | 100.00 | |

(1)In [removed: 2015,] [added: 2016,] the Altria Group, Inc. Peer Group consisted of U.S.-headquartered consumer product companies that are competitors to Altria Group, Inc.’s tobacco operating companies subsidiaries or that have been selected on the basis of revenue or market capitalization: Campbell Soup Company, The Coca-Cola Company, Colgate-Palmolive Company, [removed: ConAgra Foods,] [added: Conagra Brands,] Inc., General Mills, Inc., The Hershey Company, Kellogg Company, Kimberly-Clark Corporation, [removed: Kraft Foods Group, Inc.,] The Kraft Heinz Company, [removed: Lorillard, Inc.,] Mondelēz International, Inc., PepsiCo, Inc. and Reynolds American Inc.

At February [removed: 12, 2016,] [added: 13, 2017,] there were approximately [removed: 71,000] [added: 68,000] holders of record of Altria Group, Inc.’s common stock.

Issuer Purchases of Equity Securities During the Quarter Ended December 31, [removed: 2015][added: 2016]

[removed: The] [added: In July 2015, Altria Group, Inc.’s] Board of Directors [added: (the “Board of Directors”)] authorized a $1.0 billion share repurchase program [added: that it expanded to $3.0 billion] in [removed: July 2015 (the] [added: October 2016 (as expanded, the] “July 2015 share repurchase [removed: program”), which Altria Group, Inc. expects to complete by the end of 2016.][added: program”).]

Altria Group, Inc.’s share repurchase activity for each of the three months in the period ended December 31, [removed: 2015,] [added: 2016,] was as follows:

| (1) | The total number of shares purchased [removed: include] [added: includes] (a) shares purchased under the July 2015 share repurchase program (which totaled [removed: 612,000] [added: 2,392,200] shares in [added: October, 3,394,623 shares in November and 2,340,000 shares in] December) and (b) shares withheld by Altria Group, Inc. in an amount equal to the statutory withholding taxes for holders who vested in restricted stock [removed: and restricted stock] units, and forfeitures of restricted stock for which consideration was paid in connection with termination of employment of certain employees (which totaled [removed: 1,811] [added: 827] shares in October, [removed: 1,977] [added: 811] shares in November and [removed: 1,973] [added: 3,025] shares in December). |

| December 2012 | | $ | 111.77 | | | $ | 108.78 | | | $ | 115.99 | |

| December 2013 | | $ | 143.69 | | | $ | 135.61 | | | $ | 153.55 | |

| December 2014 | | $ | 193.28 | | | $ | 151.74 | | | $ | 174.55 | |

| December 2015 | | $ | 237.92 | | | $ | 177.04 | | | $ | 176.94 | |

| December 2016 | | $ | 286.61 | | | $ | 192.56 | | | $ | 198.09 | |

On November 9, 2016, ConAgra Foods, Inc. (CAG) spun off Lamb Weston Holdings, Inc. (LW) to its shareholders and then changed its name from ConAgra Foods, Inc. to Conagra Brands, Inc. (CAG).

| 2016: | | | | | | | | | | | |

| Fourth Quarter | $ | 68.03 | | | $ | 60.82 | | | $ | 0.61 | |

| Third Quarter | $ | 70.15 | | | $ | 62.46 | | | $ | 0.61 | |

| Second Quarter | $ | 69.26 | | | $ | 59.48 | | | $ | 0.565 | |

| First Quarter | $ | 63.15 | | | $ | 56.15 | | | $ | 0.565 | |

Altria Group, Inc. expects to complete the July 2015 share repurchase program by the end of the second quarter of 2018.

| October 1- October 31, 2016 | | 2,393,027 | | | $ | 62.61 | | | 2,392,200 | | | $ | 2,302,733,059 | |

| November 1- November 30, 2016 | | 3,395,434 | | | $ | 63.19 | | | 3,394,623 | | | $ | 2,088,226,586 | |

| December 1- December 31, 2016 | | 2,343,025 | | | $ | 65.46 | | | 2,340,000 | | | $ | 1,935,041,770 | |

| For the Quarter Ended December 31, 2016 | | 8,131,486 | | | $ | 63.67 | | | 8,126,823 | | | | | |

| December 2011 | | $ | 127.66 | | | $ | 114.65 | | | $ | 102.11 | |

| December 2012 | | $ | 142.68 | | | $ | 124.68 | | | $ | 118.44 | |

| December 2013 | | $ | 183.42 | | | $ | 155.86 | | | $ | 156.79 | |

| December 2014 | | $ | 246.72 | | | $ | 175.31 | | | $ | 178.24 | |

| December 2015 | | $ | 303.71 | | | $ | 204.47 | | | $ | 180.68 | |

| 2014: | | | | | | | | | | | |

| Fourth Quarter | $ | 51.67 | | | $ | 44.59 | | | $ | 0.52 | |

| Third Quarter | $ | 46.20 | | | $ | 40.26 | | | $ | 0.52 | |

| Second Quarter | $ | 43.38 | | | $ | 37.13 | | | $ | 0.48 | |

| First Quarter | $ | 38.38 | | | $ | 33.80 | | | $ | 0.48 | |

| | | | | | | | | | | | | | | |

| October 1- October 31, 2015 | | 1,811 | | | $ | 61.14 | | | — | | | $ | 1,000,000,000 | |

| November 1- November 30, 2015 | | 1,977 | | | $ | 54.03 | | | — | | | $ | 1,000,000,000 | |

| December 1- December 31, 2015 | | 613,973 | | | $ | 57.65 | | | 612,000 | | | $ | 964,710,531 | |

| For the Quarter Ended December 31, 2015 | | 617,761 | | | $ | 57.65 | | | | | | | | |

| | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | | | [removed: 2011] [added: 2012] | | |

| Net revenues | $ | [removed: 25,434] [added: 25,744] | | | $ | [removed: 24,522] [added: 25,434] | | | $ | [removed: 24,466] [added: 24,522] | | | $ | [removed: 24,618] [added: 24,466] | | | $ | [removed: 23,800] [added: 24,618] | |

| Cost of sales | [removed: 7,740] [added: 7,746] | | | | [removed: 7,785] [added: 7,740] | | | | [removed: 7,206] [added: 7,785] | | | | [removed: 7,937] [added: 7,206] | | | | [removed: 7,680] [added: 7,937] | | |

| Excise taxes on products | [removed: 6,580] [added: 6,407] | | | | [removed: 6,577] [added: 6,580] | | | | [removed: 6,803] [added: 6,577] | | | | [removed: 7,118] [added: 6,803] | | | | [removed: 7,181] [added: 7,118] | | |

| Operating income | [removed: 8,361] [added: 8,762] | | | | [removed: 7,620] [added: 8,361] | | | | [removed: 8,084] [added: 7,620] | | | | [removed: 7,253] [added: 8,084] | | | | [removed: 6,068] [added: 7,253] | | |

| Interest and other debt expense, net | [removed: 817] [added: 747] | | | | [removed: 808] [added: 817] | | | | [removed: 1,049] [added: 808] | | | | [removed: 1,126] [added: 1,049] | | | | [removed: 1,216] [added: 1,126] | | |

| Earnings from equity investment in SABMiller | [removed: 757] [added: 795] | | | | [removed: 1,006] [added: 757] | | | | [removed: 991] [added: 1,006] | | | | [removed: 1,224] [added: 991] | | | | [removed: 730] [added: 1,224] | | |

| Earnings before income taxes [added: (1)] | [removed: 8,078] [added: 21,852] | | | | [removed: 7,774] [added: 8,078] | | | | [removed: 6,942] [added: 7,774] | | | | [removed: 6,477] [added: 6,942] | | | | [removed: 5,582] [added: 6,477] | | |

| Pre-tax profit margin [added: (1)] | [removed: 31.8] [added: 84.9] | | % | | [removed: 31.7] [added: 31.8] | | % | | [removed: 28.4] [added: 31.7] | | % | | [removed: 26.3] [added: 28.4] | | % | | [removed: 23.5] [added: 26.3] | | % |

| Provision for income taxes [added: (1)] | [removed: 2,835] [added: 7,608] | | | | [removed: 2,704] [added: 2,835] | | | | [removed: 2,407] [added: 2,704] | | | | [removed: 2,294] [added: 2,407] | | | | [removed: 2,189] [added: 2,294] | | |

| Net earnings [added: (1)] | [removed: 5,243] [added: 14,244] | | | | [removed: 5,070] [added: 5,243] | | | | [removed: 4,535] [added: 5,070] | | | | [removed: 4,183] [added: 4,535] | | | | [removed: 3,393] [added: 4,183] | | |

| Net earnings attributable to Altria Group, Inc. [added: (1)] | [removed: 5,241] [added: 14,239] | | | | [removed: 5,070] [added: 5,241] | | | | [removed: 4,535] [added: 5,070] | | | | [removed: 4,180] [added: 4,535] | | | | [removed: 3,390] [added: 4,180] | | |

| Basic and Diluted EPS — net earnings attributable to Altria Group, Inc. [added: (1)] | [removed: 2.67] [added: 7.28] | | | | [removed: 2.56] [added: 2.67] | | | | [removed: 2.26] [added: 2.56] | | | | [removed: 2.06] [added: 2.26] | | | | [removed: 1.64] [added: 2.06] | | |

| Dividends declared per share | [removed: 2.17] [added: 2.35] | | | | [removed: 2.00] [added: 2.17] | | | | [removed: 1.84] [added: 2.00] | | | | [removed: 1.70] [added: 1.84] | | | | [removed: 1.58] [added: 1.70] | | |

| Weighted average shares (millions) — Basic and Diluted | [removed: 1,961] [added: 1,952] | | | | [removed: 1,978] [added: 1,961] | | | | [removed: 1,999] [added: 1,978] | | | | [removed: 2,024] [added: 1,999] | | | | [removed: 2,064] [added: 2,024] | | |

| Capital expenditures | [removed: 229] [added: 189] | | | | [removed: 163] [added: 229] | | | | [removed: 131] [added: 163] | | | | [removed: 124] [added: 131] | | | | [removed: 105] [added: 124] | | |

| Depreciation | [removed: 204] [added: 183] | | | | [removed: 188] [added: 204] | | | | [removed: 192] [added: 188] | | | | [removed: 205] [added: 192] | | | | [removed: 233] [added: 205] | | |

| Property, plant and equipment, net | [removed: 1,982] [added: 1,958] | | | | [removed: 1,983] [added: 1,982] | | | | [removed: 2,028] [added: 1,983] | | | | [removed: 2,102] [added: 2,028] | | | | [removed: 2,216] [added: 2,102] | | |

| Inventories | [removed: 2,031] [added: 2,051] | | | | [removed: 2,040] [added: 2,031] | | | | [removed: 1,879] [added: 2,040] | | | | [removed: 1,746] [added: 1,879] | | | | [removed: 1,779] [added: 1,746] | | |

| Total stockholders’ equity [added: (1)] | [removed: 2,873] [added: 12,773] | | | | [removed: 3,010] [added: 2,873] | | | | [removed: 4,118] [added: 3,010] | | | | [removed: 3,170] [added: 4,118] | | | | [removed: 3,683] [added: 3,170] | | |

| Common dividends declared as a % of Basic and Diluted EPS [added: (1)] | [removed: 81.3] [added: 32.3] | | % | | [removed: 78.1] [added: 81.3] | | % | | [removed: 81.4] [added: 78.1] | | % | | [removed: 82.5] [added: 81.4] | | % | | [removed: 96.3] [added: 82.5] | | % |

| Book value per common share outstanding [added: (1)] | [removed: 1.47] [added: 6.57] | | | | [removed: 1.53] [added: 1.47] | | | | [removed: 2.07] [added: 1.53] | | | | [removed: 1.58] [added: 2.07] | | | | [removed: 1.80] [added: 1.58] | | |

| Market price per common share — high/low | [removed: 61.74-47.31] [added: 70.15-56.15] | | | | [removed: 51.67-33.80] [added: 61.74-47.31] | | | | [removed: 38.58-31.85] [added: 51.67-33.80] | | | | [removed: 36.29-28.00] [added: 38.58-31.85] | | | | [removed: 30.40-23.20] [added: 36.29-28.00] | | |

| Closing price per common share at year end | [removed: 58.21] [added: 67.62] | | | | [removed: 49.27] [added: 58.21] | | | | [removed: 38.39] [added: 49.27] | | | | [removed: 31.44] [added: 38.39] | | | | [removed: 29.65] [added: 31.44] | | |

| Price/earnings ratio at year end — Basic and Diluted [added: (1)] | [removed: 22] [added: 9] | | | | [removed: 19] [added: 22] | | | | [removed: 17] [added: 19] | | | | [removed: 15] [added: 17] | | | | [removed: 18] [added: 15] | | |

| Number of common shares outstanding at year end (millions) | [removed: 1,960] [added: 1,943] | | | | [removed: 1,971] [added: 1,960] | | | | [removed: 1,993] [added: 1,971] | | | | [removed: 2,010] [added: 1,993] | | | | [removed: 2,044] [added: 2,010] | | |

| Approximate number of employees | [removed: 8,800] [added: 8,300] | | | | [removed: 9,000] [added: 8,800] | | | | 9,000 | | | | [removed: 9,100] [added: 9,000] | | | | [removed: 9,900] [added: 9,100] | | |

| Gain on AB InBev/SABMiller business combination | 13,865 | | | | 5 | | | | — | | | | — | | | | — | | |

| Total assets (1)(2) | 45,932 | | | | 31,459 | | | | 33,440 | | | | 33,858 | | | | 34,252 | | |

| Long-term debt (2) | 13,881 | | | | 12,843 | | | | 13,610 | | | | 13,907 | | | | 12,346 | | |

| Total debt (2) | 13,881 | | | | 12,847 | | | | 14,610 | | | | 14,432 | | | | 13,805 | | |

(1) Certain 2016 amounts include the impact of the Gain on AB InBev/SABMiller business combination.

For further information, see Note 7 in Item 8.

(2) Certain prior-years’ amounts have been reclassified to conform with the current-year’s presentation due to the adoptions of certain accounting standards updates.

For further information, see Note 1 in Item 8.

| Total assets | 32,535 | | | | 34,475 | | | | 34,859 | | | | 35,329 | | | | 36,751 | | |

| Long-term debt | 12,915 | | | | 13,693 | | | | 13,992 | | | | 12,419 | | | | 13,089 | | |

| Total debt | 12,919 | | | | 14,693 | | | | 14,517 | | | | 13,878 | | | | 13,689 | | |

| at December 31, | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Cash and cash equivalents | $ | [removed: 2,369] [added: 4,569] | | | $ | [removed: 3,321] [added: 2,369] | |

| Receivables | [removed: 124] [added: 151] | | | | 124 | | |

| Leaf tobacco | [removed: 957] [added: 892] | | | | [removed: 991] [added: 957] | | |

| Other raw materials | [removed: 181] [added: 164] | | | | [removed: 200] [added: 181] | | |

| Work in process | [removed: 444] [added: 512] | | | | [removed: 429] [added: 444] | | |

| Finished product | [removed: 449] [added: 483] | | | | [removed: 420] [added: 449] | | |

| Deferred income taxes | [removed: 1,175] [added: (69] | | [added: )] | | [removed: 1,143] [added: 11] | | | [added: | (7 | | ) | | (65 | | ) |]

| Other current assets | [removed: 387] [added: 489] | | | | [removed: 250] [added: 387] | | |

| [removed: Total current] [added: Current] assets | [removed: 6,086 | | |] [added: $] | [removed: 6,878] [added: 40,086] | | |

| Land and land improvements | [removed: 295] [added: 316] | | | | [removed: 293] [added: 295] | | |

| Buildings and building equipment | [removed: 1,406] [added: 1,481] | | | | [removed: 1,323] [added: 1,406] | | |

| Machinery and equipment | [removed: 2,969] [added: 2,917] | | | | [removed: 2,986] [added: 2,969] | | |

| Construction in progress | [removed: 207] [added: 121] | | | | [removed: 153] [added: 207] | | |

| Less accumulated depreciation | [removed: 2,895] [added: 2,877] | | | | [removed: 2,772] [added: 2,895] | | |

| Other intangible assets, net | [removed: 12,028] [added: 12,036] | | | | [removed: 12,049] [added: 12,028] | | |

| Investment in [removed: SABMiller] [added: AB InBev/SABMiller] | [removed: 5,483] [added: 17,852] | | | | [removed: 6,183] [added: 5,483] | | |

| Finance assets, net | [removed: 1,239] [added: 1,028] | | | | [removed: 1,614] [added: 1,239] | | |

| Current portion of long-term debt | $ | [removed: 4] [added: —] | | | $ | [removed: 1,000] [added: 4] | |

| Accounts payable | [removed: 400] [added: 425] | | | | [removed: 416] [added: 400] | | |

| Marketing | [removed: 695] [added: 747] | | | | [removed: 618] [added: 695] | | |

| Employment costs | [removed: 198] [added: 289] | | | | [removed: 186] [added: 198] | | |

| Settlement charges | [removed: 3,590] [added: 3,701] | | | | [removed: 3,500] [added: 3,590] | | |

| Dividends payable | [removed: 1,110] [added: 1,188] | | | | [removed: 1,028] [added: 1,110] | | |

| Total current liabilities | [removed: 7,078] [added: 7,375] | | | | [removed: 7,673] [added: 7,070] | | |

| Long-term debt | [removed: 12,915] [added: 13,881] | | | | [removed: 13,693] [added: —] | | | [added: | — | | | | — | | | | 13,881 | | |]

| Deferred income taxes | [removed: 5,663] [added: 92] | | | | [removed: 6,088] [added: 1] | | | [added: | 3 | | | | 96 | | |]

| Accrued pension costs | [removed: 1,277] [added: 805] | | | | [removed: 1,012] [added: 1,277] | | |

| Accrued postretirement health care costs | [removed: 2,245] [added: 2,217] | | | | [removed: 2,461] [added: 2,245] | | |

| Other liabilities | [removed: 447] [added: 427] | | | | [removed: 503] [added: 447] | | |

| Contingencies (Note [removed: 18)] [added: 19)] | | | | | | | |

| Redeemable noncontrolling interest | [removed: 37] [added: 38] | | | | [removed: 35] [added: 37] | | |

| Additional paid-in capital | [removed: 5,813] [added: 5,893] | | | | [removed: 5,735] [added: 5,813] | | |

| Earnings reinvested in the business | [removed: 27,257] [added: 36,906] | | | | [removed: 26,277] [added: 27,257] | | |

| Accumulated other comprehensive losses | [removed: (3,280] [added: (2,052] | | ) | | [removed: (2,682] [added: (3,280] | | ) |

| Cost of repurchased stock [removed: (845,901,836] [added: (862,689,093] shares at December 31, [removed: 2015] [added: 2016] and [removed: 834,486,794] [added: 845,901,836] shares at December 31, [removed: 2014)] [added: 2015)] | [removed: (27,845] [added: (28,912] | | ) | | [removed: (27,251] [added: (27,845] | | ) |

| Total stockholders’ equity attributable to Altria Group, Inc. | [removed: 2,880] [added: 12,770] | | | | [removed: 3,014] [added: 2,880] | | |

| Noncontrolling interests | [removed: (7] [added: 3] | | [removed: )] | | [removed: (4] [added: (7] | | ) |

| Total stockholders’ equity | [removed: 2,873] [added: 12,773] | | | | [removed: 3,010] [added: 2,873] | | |

| Total Liabilities and Stockholders’ Equity | $ | [removed: 32,535] [added: 45,932] | | | $ | [removed: 34,475] [added: 31,459] | |

| | 2,051 | | | | 2,031 | | |

| Total current assets | 7,260 | | | | 4,911 | | |

| | 4,835 | | | | 4,877 | | |

| | 1,958 | | | | 1,982 | | |

| Other assets | 513 | | | | 531 | | |

| Total Assets | $ | 45,932 | | | $ | 31,459 | |

| Other | 1,025 | | | | 1,073 | | |

| Total liabilities | 33,121 | | | | 28,549 | | |

| Gain on AB InBev/SABMiller business combination | (13,865 | | ) | | (5 | | ) | | — | | |

| Gain on AB InBev/SABMiller business combination | | | (13,865 | | ) | | (5 | | ) | | — | | |

| Asset impairment and exit costs, net of cash paid | | | 106 | | | | 1 | | | | (9 | | ) |

| Other | | | 120 | | | | 201 | | | | 217 | | |

| Proceeds from AB InBev/SABMiller business combination | | | 4,773 | | | | — | | | | — | | |

| Purchase of AB InBev ordinary shares | | | (1,578 | | ) | | — | | | | — | | |

| Payment for derivative financial instruments | | | (3 | | ) | | (132 | | ) | | — | | |

| Proceeds from derivative financial instruments | | | 510 | | | | — | | | | — | | |

| Net earnings (1) | — | | | | — | | | | 14,239 | | | | — | | | | — | | | | — | | | | 14,239 | | |

| Balances, December 31, 2016 | $ | 935 | | | $ | 5,893 | | | $ | 36,906 | | | $ | (2,052 | ) | | $ | (28,912 | ) | | $ | 3 | | | $ | 12,773 | |

A newly formed Belgian company, which retained the name Anheuser-Busch InBev SA/NV (“AB InBev”), became the holding company for the combined SABMiller and Legacy AB InBev businesses.

Upon completion of the Transaction, Altria Group, Inc. had a 9.6% ownership of AB InBev based on AB InBev’s shares outstanding at October 10, 2016.

Following completion of the Transaction, Altria Group, Inc. purchased 12,341,937 ordinary shares of AB InBev for a total cost of approximately $1.6 billion, thereby increasing Altria Group, Inc.’s ownership to approximately 10.2%.

At December 31, 2016, Altria Group, Inc. had an approximate 10.2% ownership of AB InBev, which Altria Group, Inc. accounts for under the equity method of accounting using a one-quarter lag.

As a result of the one-quarter lag and the timing of the completion of the Transaction, no earnings from Altria Group, Inc.’s equity investment in AB InBev were recorded for the year ended

Certain prior year amounts have been reclassified to conform with the current year’s presentation due primarily to Altria Group, Inc.’s 2016 adoptions of Accounting Standards Update (“ASU”) No. 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes (“ASU No. 2015-17”) and ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs (“ASU No. 2015-03”).

For further discussion, see Note 15.

Income Taxes and Note 10.

which cash flows are separately identifiable.

See Note 19.

▪Litigation Contingencies and Costs: Altria Group, Inc. and its subsidiaries record provisions in the consolidated financial

▪New Accounting Standards: The following table provides a description of the recently issued accounting guidance that Altria Group, Inc. has not yet adopted:

| Standards | Description | Effective Date for Public Entity | Effect on Financial Statements |

| ASU Nos. 2014-09; 2015-14; 2016-08; 2016-10; 2016-12; 2016-20 Revenue from Contracts with Customers (Topic 606) | The guidance establishes principles for reporting information about the nature, amount, timing, and uncertainty of revenue and cash flows arising from an entity’s contracts with customers. | The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. | The adoption of this guidance is not expected to have a material impact on the amount or timing of revenue recognized on Altria Group, Inc.’s financial statements based on current contracts with customers. The guidance will result in expanded footnote disclosures. Altria Group, Inc. plans to retrospectively adopt this guidance by the first quarter of 2018. |

| | | | |

| --- | --- | --- | --- |

| | | | |

| Standards | Description | Effective Date for Public Entity | Effect on Financial Statements |

| ASU No. 2016-01 Recognition and Measurement of Financial Assets and Financial Liabilities (Subtopic 825-10) | The guidance addresses certain aspects of recognition, measurement, presentation and disclosure of financial instruments. | The guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption of the guidance is not permitted, except for a certain provision of the guidance. | The adoption of this guidance is not expected to have a material impact on Altria Group, Inc.’s consolidated financial statements. |

| ASU No. 2016-02 Leases (Topic 842) | The guidance increases transparency and comparability among organizations by requiring entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements. | The guidance is effective for annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. Early adoption is permitted. | Altria Group, Inc. is in the process of evaluating the impact of this guidance on its consolidated financial statements and related disclosures, including identifying and analyzing all contracts that contain a lease. As a lessor, PMCC maintains a portfolio of finance assets, substantially all of which are leveraged leases, the accounting of which will be unchanged under the new guidance and is not expected to change unless there is a contract modification to an existing lease. As a lessee, Altria Group, Inc.’s various leases under existing guidance are classified as operating leases that are not recorded on the balance sheet but are recorded in the statement of earnings as expense is incurred. Upon adoption of the new guidance, Altria Group, Inc. will be required to record substantially all leases on the balance sheet as a right-of-use asset and a lease liability. The timing of expense recognition and classification in the statement of earnings could change based on the classification of leases as either operating or financing. |

| ASU No. 2016-09 Improvements to Employee Share-Based Payment Accounting (Topic 718) | The guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. | The guidance is effective for annual reporting periods beginning after December 15, 2016, and interim periods within that reporting period. Early adoption is permitted in any interim or annual period. | The adoption of this guidance is not expected to have a material impact on Altria Group, Inc.’s consolidated financial statements. Altria Group, Inc. expects to adopt this guidance effective January 1, 2017. |

| ASU No. 2016-13 Measurement of Credit Losses on Financial Instruments (Topic 326) | The guidance replaces the current incurred loss impairment methodology for recognizing credit losses for financial assets with a methodology that reflects the entity’s current estimate of all expected credit losses and requires consideration of a broader range of reasonable and supportable information for estimating credit losses. | The guidance is effective for annual reporting periods beginning after December 15, 2019, including interim periods within that reporting period. Early adoption is permitted only as of annual reporting periods beginning after December 15, 2018, including interim periods within that reporting period. | Altria Group, Inc. is in the process of evaluating the impact of this guidance on its consolidated financial statements and related disclosures. Altria Group, Inc.’s financial assets that are within the scope of the new guidance are approximately 3% of Altria Group, Inc.’s total assets at December 31, 2016. |

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| | 2,031 | | | | 2,040 | | |

| | 4,877 | | | | 4,755 | | |

| | 1,982 | | | | 1,983 | | |

| Other assets | 432 | | | | 483 | | |

| Total Assets | $ | 32,535 | | | $ | 34,475 | |

| Other | 1,081 | | | | 925 | | |

| Total liabilities | 29,625 | | | | 31,430 | | |

| | | | | | | | | | | | | |

| Other | | | 182 | | | | 208 | | | | (44 | | ) |

| Balances, December 31, 2012 | $ | 935 | | | $ | 5,688 | | | $ | 24,316 | | | $ | (2,040 | ) | | $ | (25,731 | ) | | $ | 2 | | | $ | 3,170 | |

| Net earnings (losses)(1) | — | | | | — | | | | 5,070 | | | | — | | | | — | | | | (3 | | ) | | 5,067 | | |

and expenses during the reporting periods.

type of derivative and whether the derivative qualifies for hedge accounting treatment.

▪New Accounting Standards: In May 2014, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance for recognizing revenue from contracts with customers.

The objective of this guidance is to establish principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with customers.

As a result of an August 2015 FASB

update, the new guidance will be effective for Altria Group, Inc. for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.

Early adoption is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period.

Altria Group, Inc. is in the process of evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

For Altria Group, Inc., the new guidance will be effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period.

The guidance requires all prior period balance sheets to be adjusted retrospectively and early adoption is permitted.

Altria Group, Inc. will adopt the new guidance in the first quarter of 2016.

In November 2015, the FASB issued authoritative guidance to simplify the presentation of deferred income taxes by requiring that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position.

This guidance does not change the current requirement that deferred tax liabilities and assets for each tax-paying jurisdiction be offset and presented as a single amount.

For Altria Group, Inc., the new guidance will be effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.

Early adoption is permitted.

The guidance may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented.

Altria Group, Inc. will adopt the new guidance by the first quarter of 2017.

On January 5, 2016, the FASB issued authoritative guidance to address certain aspects of recognition, measurement, presentation and disclosure of financial instruments.

For Altria Group, Inc., the new guidance will be effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.

Early adoption of the guidance is not permitted, except for a certain provision of the guidance.

The acquisition

The purchase price allocation has been completed, and there were no changes subsequent to the acquisition date.

At December 31, 2015, Altria Group, Inc. held approximately 27% of the economic and voting interest of SABMiller.

At December 31, 2015, Altria Group, Inc.’s earnings reinvested in the business on its consolidated balance sheet included approximately $3.2 billion of undistributed earnings from its equity investment in SABMiller.

▪AB InBev and SABMiller Business Combination: On November 11, 2015, AB InBev announced its firm offer to effect a business combination with SABMiller in a cash and stock transaction valued at approximately $107 billion.

Under the terms of the PSA, SABMiller shareholders may elect to receive for each SABMiller share held (i) 0.483969 restricted shares (the “Restricted Shares”) in a newly formed Belgian company (“NewCo”) that will own the combined SABMiller and AB InBev business plus (ii) 3.7788 British pounds (“GBP”) in cash.

On November 10, 2015, the Board of Directors of Altria Group, Inc. (the “Board of Directors”) authorized Altria Group, Inc. to provide an irrevocable undertaking to vote Altria Group, Inc.’s shares of SABMiller in favor of the proposed transaction and to elect the PSA (the “Irrevocable Undertaking”).

Altria Group, Inc. carried out an evaluation, with the participation of Altria Group, Inc.’s management, including Altria Group, Inc.’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of Altria Group, Inc.’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange [removed: Act, as amended)] [added: Act)] as of the end of the period covered by this Annual Report on Form 10-K.

Based upon that evaluation, Altria Group, Inc.’s Chief Executive Officer and Chief Financial Officer [added: concluded]

[removed: concluded] that Altria Group, Inc.’s disclosure controls and procedures are effective.

Except for the information relating to the executive officers set forth in Item 10, the information called for by Items 10-14 is hereby incorporated by reference to Altria Group, Inc.’s definitive proxy statement for use in connection with its Annual Meeting of Shareholders to be held on May [removed: 19, 2016] [added: 18, 2017] that will be filed with the SEC on or about April [removed: 7, 2016] [added: 6, 2017] (the “proxy statement”), and, except as indicated therein, made a part hereof.

Refer to “Proposals Requiring Your Vote - Proposal 1 - Election of Directors,” “Ownership of Equity Securities of [removed: the Company] [added: Altria] - Section 16(a) Beneficial Ownership Reporting Compliance” and “Board and Governance Matters - Committees of the Board of Directors” sections of the proxy statement.

Executive Officers as of February [removed: 12, 2016:][added: 13, 2017:]

| Martin J. Barrington | Chairman, Chief Executive Officer and President | [removed: 62] [added: 63] |

| Daniel J. Bryant | Vice President and Treasurer | [removed: 46] [added: 47] |

| James E. Dillard III | Senior Vice President, Research, Development and Regulatory Affairs | [removed: 52] [added: 53] |

| Ivan S. Feldman | Vice President and Controller | [removed: 49] [added: 50] |

| Clifford B. Fleet | President and Chief Executive Officer, Philip Morris USA Inc. | [removed: 45] [added: 46] |

| William F. Gifford, Jr. | Executive Vice President and Chief Financial Officer | [removed: 45] [added: 46] |

| Craig A. Johnson | President and Chief Executive Officer, Altria Group Distribution Company | [removed: 63] [added: 64] |

| Denise F. Keane | Executive Vice President and General Counsel | [removed: 63] [added: 64] |

| Salvatore Mancuso | Senior Vice President, Strategy, Planning and [removed: Accounting] [added: Procurement] | [removed: 50] [added: 51] |

| Brian W. Quigley | President and Chief Executive Officer, U.S. Smokeless Tobacco Company LLC | [removed: 42] [added: 43] |

| W. Hildebrandt Surgner, Jr. | Corporate Secretary and Senior Assistant General Counsel | [removed: 50] [added: 51] |

| Charles N. Whitaker | Senior Vice President, Human Resources, Compliance [removed: &] [added: and] Information Services and Chief Compliance Officer | [removed: 49] [added: 50] |

| Howard A. Willard III | Executive Vice President and Chief Operating Officer | [removed: 52] [added: 53] |

Effective February 15, 2016, Mr. Mancuso, previously Senior Vice President, Strategy, Planning and Accounting of

Altria Group, Inc., was appointed Senior Vice President, Strategy, Planning and Procurement of Altria Group, Inc.

Effective January 1, 2016, Mr. Dillard, previously Senior Vice President, Regulatory Affairs and Chief Innovation Officer, Altria Client Services LLC, was appointed Senior Vice President,

Research, Development and Regulatory Affairs, Altria Group, Inc.

Refer to “Executive Compensation,” “Compensation Committee Matters - Compensation Committee Interlocks and Insider Participation,” “Compensation Committee Matters - Compensation Committee Report for the Year Ended December 31, [removed: 2015”] [added: 2016”] and “Board and Governance Matters - Directors - Director Compensation” sections of the proxy statement.

The number of shares to be issued upon exercise or vesting and the number of shares remaining available for future issuance under Altria Group, Inc.’s equity compensation plans at December 31, [removed: 2015,] [added: 2016,] were as follows:

| (2) | Represents [removed: 1,221,985] [added: 1,951,214] shares of restricted stock units (also referred to as deferred stock). |

| (3) | Includes [removed: 39,994,482] [added: 39,046,757] shares available under the 2015 Performance Incentive Plan and [removed: 993,284] [added: 954,574] shares available under the 2015 Stock Compensation Plan for Non-Employee Directors, and excludes shares reflected in column (a). |

Refer to “Ownership of Equity Securities of [removed: the Company] [added: Altria] - Directors and Executive Officers” and “Ownership of Equity Securities of [removed: the Company] [added: Altria] - Certain Other Beneficial Owners” sections of the proxy statement.

| Equity compensation plans approved by shareholders (1) | 1,951,214 (2) | $— | 40,001,331 (3) |

| Equity compensation plans approved by shareholders (1) | 1,221,985 (2) | $— | 40,987,766 (3) |

| Consolidated Balance Sheets at December 31, [removed: 2015] [added: 2016] and [removed: 2014] [added: 2015] | [removed: [39](#sFE81A302DA5B596EA2CEC9896DE0E550)] [added: [38](#s4CEB450F12855C34995C6EF0E250FF24)] |

| Consolidated Statements of Earnings for the years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] | [removed: [41](#s8170BE2905DE5FAA8A982F8B135FDFA1)] [added: [40](#sF11613A8D9CE54FDACD1868181EE7329)] |

| Consolidated Statements of Comprehensive Earnings for the years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] | [removed: [42](#s78D34347F3D95668A7FCA59B5A1D853A)] [added: [41](#s8653E1386D495F2A9A4BA30CEC101B83)] |

| Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] | [removed: [43](#sF382E15057645AF29176711608C66FE0)] [added: [42](#s2291EA2C15E3522EAA463D795F39485F)] |

| Consolidated Statements of Stockholders’ Equity for the years ended December 31, [removed: 2015, 2014] [added: 2016, 2015] and [removed: 2013] [added: 2014] | [removed: [44](#s85C37DB85AEB541EA6FBAF3A01F7FDCE)] [added: [43](#s7192A47CBAF65BACACF7E6B26FDB87E4)] |

| Notes to Consolidated Financial Statements | [removed: [45](#sE867A79F12555587A5D00748512EFB80)] [added: [44](#s9974483CA8365BFE86E0EB676DFA6308)] |

| Report of Independent Registered Public Accounting Firm | [removed: [108](#s71E0604EC19A5F98A46125DBB7713B6B)] [added: [112](#s621BA329A7D85B75A46B670C8313AEAE)] |

| Report of Management on Internal Control Over Financial Reporting | [removed: [109](#sF5C9342A800F5BEBA9CBE9588F5A7F5C)] [added: [113](#sC0C530F6AD675F608EF0D0A15304241D)] |

| | [removed: 10.20] [added: 10.22] | | Form of Employee Grantor Trust Enrollment Agreement. Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 1-08940).* |

| | [removed: 10.21] [added: 10.23] | | Form of Supplemental Employee Grantor Trust Enrollment Agreement. Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2005 (File No. 1-08940).* |

| | [removed: 10.22] [added: 10.24] | | Automobile Policy. Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 1-08940).* |

| | [removed: 10.23] [added: 10.25] | | Supplemental Management Employees’ Retirement Plan of Altria Group, Inc., effective as of October 1, 1987, as amended and in effect as of January 1, 2012. Incorporated by reference to Altria Group, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2012 (File No. 1-08940).* |

| | [removed: 10.24] [added: 10.26] | | Grantor Trust Agreement by and between Altria Client Services Inc. and Wells Fargo Bank, National Association, dated February 23, 2011. Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2010 (File No. 1-08940).* |