filings.toolsAltria Group (MO) 10-K risk factor changes: FY2017 vs FY2016
The 2017-12-31 10-K against the 2016-12-31 one, compared heading by heading and sentence by sentence. One of these filings carries no fiscal year tag, so its year is the calendar year of the period end.
Item 1A48 rewritten11 added13 removed119 unchanged
All filing items1,395 rewritten660 added872 removed2,979 unchanged
Summary
counted, not written
- Item 1A headings could not be compared: only 0 carried over between the two years, which usually means one filing was read wrongly, so none is reported as new or removed.
- Sentence by sentence, 660 added, 872 removed, 1,395 rewritten and 2,979 unchanged across 16 items that differ.
Sentences by item
22 items, with every count and a link to each item that changed
Underlined words on a shaded ground are new in FY2017; struck-through words were in FY2016. Sentences that are wholly new or wholly gone are labelled rather than marked.
Item 1A. Risk Factors.
48 rewritten, 11 added, 13 removed, 119 unchanged
We (1) may from time to time make written or oral forward-looking statements, including earnings guidance and other statements contained in filings with the SEC, reports to security [removed: holders, press releases and investor webcasts.]
You can identify these forward-looking statements by use of words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” [removed: believes,”] [added: “believes,”] “will,” “estimates,” “forecasts,” “intends,” “projects,” “goals,” “objectives,” “guidance,” “targets” and other words of similar meaning.
We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our [removed: plans] [added: plans, estimates] and assumptions.
Should known or unknown risks or uncertainties materialize, or should underlying [added: estimates or] assumptions prove inaccurate, actual results could vary materially from those anticipated, estimated or projected.
In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that, individually or in the aggregate, could cause actual results and outcomes to differ materially from those contained [removed: in] [added: in, or implied by,] any forward-looking statements made by us; any such statement is qualified by reference to the following cautionary statements.
We elaborate on these and other risks we face throughout this document, particularly in the “Business Environment” sections preceding our discussion of the operating results of our subsidiaries’ businesses [added: below] in Item 7.
Litigation is subject to uncertainty and it is possible that there [added: could be adverse developments in pending or future cases.]
[removed: 1] [added: (1)] This section uses the terms “we,” “our” and “us” when it is not necessary to distinguish among Altria Group, Inc. and its various operating subsidiaries or when any distinction is clear from the context.
An unfavorable outcome or settlement of pending tobacco-related or [added: other litigation could encourage the commencement of additional litigation.]
[added: Damages claimed in some tobacco-related or other] litigation are significant and, in certain cases, [removed: range] [added: have ranged] in the billions of dollars.
The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrate that the monetary relief that may [removed: be specified in a lawsuit bears little relevance to the ultimate outcome.]
As discussed in Note [removed: 19.][added: 18.]
Contingencies to the consolidated financial statements in Item 8 (“Note [removed: 19”),] [added: 18”),] 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, Altria Group, Inc. and its subsidiaries may face potentially significant non-monetary [removed: remedies.][added: remedies, which may cause reputational harm.]
For example, in the lawsuit brought by the United States Department of Justice, discussed in [added: detail in] Note [removed: 19,] [added: 18,] the district court did not impose monetary penalties but ordered significant non-monetary remedies, including the issuance of “corrective statements” [added: that Altria Group, Inc. and PM USA began making] in various [removed: media.][added: media in the fourth quarter of 2017.]
[added: However,] Altria Group, Inc. and [removed: each of] its subsidiaries [removed: named as a][added: may enter into]
[added: 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.
[removed: However, Altria Group, Inc. and its subsidiaries may enter into] settlement discussions in particular cases if they believe it is in the best interests of Altria Group, Inc. to do so.
Legal Proceedings of this Annual Report on Form 10-K (“Item 3”), Note [removed: 19] [added: 18] and Exhibits 99.1 and 99.2 to this Annual Report on Form 10-K for a discussion of pending tobacco-related litigation.
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 adult tobacco consumer acceptability of or access to tobacco products (for example, through product [removed: standards including those that our tobacco companies may be unable to achieve),] [added: standards),] 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 [removed: contamination or] [added: contamination,] a determination by the FDA that one or more tobacco products do not satisfy the statutory requirements for substantial [removed: equivalence),] [added: equivalence, or because the FDA requires that a modification to a currently-marketed tobacco product proceed through the pre-market review process),] 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.
[removed: Tax increases are expected to continue to have an adverse impact on sales of the tobacco products of our tobacco] subsidiaries through lower consumption levels and the potential shift in adult consumer purchases from the premium to the non-premium or discount segments or to other low-priced or low-taxed tobacco products or to counterfeit and contraband products.
Our tobacco businesses face significant competition [added: within their categories] and their failure to compete effectively could have an adverse effect on the consolidated results of operations or cash flows of Altria Group, Inc., or the business of Altria Group, Inc.’s tobacco subsidiaries.
[removed: Our] [added: While our] tobacco and wine subsidiaries work to broaden their brand portfolios to compete effectively with lower-priced [removed: products.][added: products, the failure to do so could negatively impact our companies’ ability to compete in these circumstances.]
Altria Group, Inc.’s tobacco subsidiaries may be unsuccessful in developing and commercializing adjacent products or processes, including innovative tobacco products that may reduce the health risks associated with current tobacco products and that appeal to adult tobacco consumers, which may have an adverse effect on their ability to grow new revenue [removed: streams.][added: streams and/or put them at a competitive disadvantage.]
[removed: containing] [added: Examples include tobacco-containing and nicotine-containing] products that reduce or eliminate exposure to cigarette smoke and/or constituents identified by public health authorities as harmful.
These efforts may include arrangements with, or [removed: investments in, third parties.]
Our tobacco subsidiaries may not succeed in [removed: these efforts,] [added: their efforts to introduce such new products,] which would have an adverse effect on the ability to grow new revenue streams.
Further, we cannot predict whether regulators, including the FDA, will permit the marketing or sale of products with claims of reduced risk to [added: adult] consumers, the speed with which they may make such determinations or whether regulators will impose an unduly burdensome regulatory framework on such products.
Nor can we predict whether adult tobacco consumers’ purchasing decisions would be affected by [removed: such] [added: reduced risk] claims if permitted.
Because Altria Group, Inc.’s tobacco subsidiaries rely on a few significant facilities and a small number of [removed: significant] [added: key] suppliers, an extended disruption at a facility or in service by a supplier 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 tobacco subsidiaries.
Altria Group, Inc.’s tobacco subsidiaries face risks inherent in reliance on a few significant facilities and a small number of [removed: significant] [added: key] suppliers.
A natural or man-made disaster or other disruption that affects the manufacturing operations of any of Altria Group, Inc.’s tobacco subsidiaries or the operations of any [removed: significant] [added: key] suppliers of any of Altria Group, Inc.’s tobacco [removed: subsidiaries] [added: subsidiaries, including as a result of a key supplier’s unwillingness to supply goods or services to a tobacco company,] could adversely impact the operations of the affected subsidiaries.
An extended disruption in operations experienced by one or more of Altria Group, Inc.’s subsidiaries or [removed: significant] [added: key] suppliers 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 tobacco subsidiaries.
Altria Group, Inc.’s subsidiaries could decide or be required to recall products, which could have a material adverse effect on the business, [removed: the] [added: reputation,] consolidated results of operations, cash flows or financial position of Altria Group, Inc. and its subsidiaries.
USSTC [removed: will record] [added: recorded] a charge during the first quarter of 2017 related to this recall.
While this charge [removed: is] [added: was] not [removed: expected to be] material to Altria Group, Inc.’s financial statements, future recalls (if any) could have a material adverse effect on the business, [added: reputation,] consolidated results of operations, cash flows or financial position of Altria Group, Inc. and its subsidiaries.
Acquisitions or other events may adversely affect Altria Group, Inc.’s credit rating, and Altria Group, Inc. may not achieve its anticipated strategic or financial [removed: objectives.][added: objectives of a transaction.]
Although we seek to maintain or improve our credit ratings over time, it is possible that completing a given acquisition or the occurrence of other events could [added: negatively] impact our credit ratings or the outlook for those ratings.
Disruption and uncertainty in the credit and debt capital markets and any resulting adverse impact on credit availability, pricing, credit terms or credit rating [removed: may negatively affect the amount of credit available to us and]
may [added: negatively affect the amount of credit available to us and may] also increase our costs and adversely affect our earnings or our dividend rate.
holders, press releases and investor webcasts.
be specified in a lawsuit bears little relevance to the ultimate outcome.
Tax increases are expected to continue to have an adverse impact on sales of the tobacco products of our tobacco
investments in, third parties.
The failure of Altria Group, Inc.’s information systems or service providers’ information systems to function as intended, or cyber-attacks or security breaches, could have a material adverse effect on the business, reputation, consolidated results of operations, cash flows or financial position of Altria Group, Inc. and its subsidiaries.
adult consumers and others.
We continue to make investments in administrative, technical and physical safeguards to protect our information systems and data from cyber-threats, including human error and malicious acts.
Our safeguards include employee training, testing and auditing protocols, backup systems and business continuity plans, maintenance of security policies and procedures, monitoring of networks and systems, and third-party risk management.
However, because technology is increasingly complex and cyber-attacks are increasingly sophisticated and more frequent, there can be no assurance that such incidents will not have a material adverse effect on us in the future.
We cannot provide any assurance that AB InBev will successfully execute its business plans and strategies.
Earnings from and carrying value of our equity investment in AB InBev are also subject to fluctuations in AB InBev’s stock price, for example through mark-to-market losses on AB InBev’s derivative financial instruments used to hedge certain share commitments.
could be adverse developments in pending or future cases.
other litigation could encourage the commencement of additional litigation.
Damages claimed in some tobacco-related or other
Examples include tobacco-containing and nicotine-
Many of these information systems are managed by third-party service providers.
We have implemented administrative, technical and physical safeguards, including testing and auditing protocols,
backup systems and business continuity plans, intended to protect our systems and data.
However, because the techniques used in cyberattacks and security breaches change frequently and often are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.
Failure of our systems or service providers’ systems to function as intended or cyberattacks or security breaches by parties intent on extracting or corrupting information or otherwise disrupting business processes could result in loss of revenue, assets, personal data, intellectual property, trade secrets or other sensitive and confidential data, violation of applicable privacy and data security laws, damage to the reputation of our companies and their brands, legal challenges and significant remediation and other costs to Altria Group, Inc. and its subsidiaries.
During times of a strengthening U.S. dollar
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 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 Transaction.
Any of these outcomes could result in increased costs to AB InBev, and could adversely affect AB InBev’s financial condition, results of operations or cash flows and Altria Group, Inc.’s reported earnings from and carrying value of our equity investment in AB InBev.
An excerpt. Shown here: 40 of 48 rewritten, all 11 added and all 13 removed. The counts are complete. For every sentence, read Item 1A. Risk Factors. in the FY2017 filing and the FY2016 filing.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
321 rewritten, 162 added, 177 removed, 633 unchanged
At December 31, [removed: 2016,] [added: 2017,] Altria Group, Inc.’s wholly-owned subsidiaries included PM USA, which is engaged 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 tobacco and is a wholly-owned subsidiary of PM USA; [added: Nat Sherman, which is engaged in the manufacture] and [added: sale of super premium cigarettes and the sale of premium cigars; 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 [removed: sales, distribution] [added: sales] and [removed: consumer engagement] [added: distribution] services to certain Altria Group, Inc. operating subsidiaries, and Altria Client Services LLC, which provides various support services in areas, such as legal, regulatory, [added: consumer engagement,] finance, human resources and external [removed: affairs,] [added: affairs] to Altria Group, Inc. and its subsidiaries.
In addition, Nu [removed: Mark and] [added: Mark,] Middleton [added: and Nat Sherman] use third-party [removed: contract manufacturing] arrangements in the manufacture of their products.
At December 31, [removed: 2016,] [added: 2017,] 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.
[removed: On] [added: In] October [removed: 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 [removed: outstanding at October 10, 2016.][added: outstanding.]
[removed: Altria] Group, Inc. had an approximate 10.2% ownership of AB InBev, which [added: Altria Group, Inc. accounts for under the equity method of accounting using a one-quarter lag.]
For further discussion, see Note [removed: 7.][added: 6.]
Investment in AB InBev/SABMiller to the consolidated financial statements in Item 8 (“Note [removed: 7”).][added: 6”).]
In January 2017, Altria Group, Inc. acquired Nat Sherman, which [removed: sells super-premium cigarettes and premium cigars and joins] [added: joined] PM USA and Middleton as part of Altria Group, Inc.’s smokeable products segment.
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: 2016,] [added: 2017,] from the year ended December 31, [removed: 2015,] [added: 2016,] were due primarily to the following:
| For the [removed: year ended] [added: Year Ended] December 31, [removed: 2015] [added: 2017] | [removed: $] | [removed: 5,241] | | | [removed: $] | [removed: 2.67] | | [added: | | | |]
| [removed: 2015] [added: 2017] NPM Adjustment Items | [removed: (51] [added: (2] | | ) | | [removed: (0.03] [added: —] | | [removed: )] |
| [removed: 2015 Asset impairment, exit] [added: Corporate asset impairment] and [removed: integration] [added: exit] costs | [removed: 9] [added: —] | | | | [added: (5 | | ) | |] — | | |
| [removed: 2015] Tobacco and health litigation items | [removed: 94] [added: —] | | | | [removed: 0.05] [added: 0.03] | | |
| [removed: 2015] [added: 2016] SABMiller special items | [removed: 82] [added: (57] | | [added: )] | | [removed: 0.04] [added: (0.03] | | [added: )] |
| [removed: 2015] [added: 2016] Loss on early extinguishment of debt | [removed: 143] [added: 541] | | | | [removed: 0.07] [added: 0.28] | | |
| [removed: 2015] Gain on AB InBev/SABMiller business combination | [removed: (3] [added: —] | | [removed: )] | | [removed: —] [added: (0.15] | | [added: )] |
| [removed: 2015] [added: 2016] Tax items | [removed: (11] [added: (30] | | ) | | [removed: —] [added: (0.02] | | [added: )] |
| 2016 NPM Adjustment Items | [removed: (11] [added: 11] | | [removed: )] | | [removed: (0.01] [added: 0.01] | | [removed: )] |
| 2016 Asset impairment, exit, implementation and acquisition-related costs | [removed: (135] [added: 135] | | [removed: )] | | [removed: (0.07] [added: 0.07] | | [removed: )] |
| 2016 Tobacco and health litigation items | [removed: (71] [added: 71] | | [removed: )] | | [removed: (0.04] [added: 0.04] | | [removed: )] |
| 2016 Patent litigation settlement | [removed: (13] [added: 13] | | [removed: )] | | [removed: (0.01] [added: 0.01] | | [removed: )] |
| 2016 Gain on AB InBev/SABMiller business combination | [removed: 9,001] [added: (9,001] | | [added: )] | | [removed: 4.61] [added: (4.61] | | [added: )] |
| Subtotal 2016 special items | [removed: 8,317] [added: (8,317] | | [added: )] | | [removed: 4.25] [added: (4.25] | | [added: )] |
| Fewer shares outstanding | — | | | | [removed: 0.02] [added: 0.05] | | |
| Change in tax rate | [removed: 82] [added: 124] | | | | [removed: 0.04] [added: 0.06] | | |
| ▪ | Fewer Shares Outstanding: Fewer shares outstanding during [removed: 2016] [added: 2017] compared with [removed: 2015] [added: 2016] were due primarily to shares repurchased by Altria Group, Inc. under its share repurchase [removed: programs.] [added: program.] |
| ▪ | Operations: The increase of [removed: $336] [added: $474] million in operations shown in the table above was due primarily to [added: higher income from] the [removed: following:] [added: smokeable products and smokeless products segments.] |
| ▪ | higher [added: operating companies] income [removed: from] [added: in] the smokeable [removed: products] and smokeless products segments; |
| [removed: ▪ | lower interest] [added: Interest] and other debt expense, [removed: net; and] [added: net] | [added: 9 | | | | 6 | | | | 13 | | |]
[removed: | ▪ | lower earnings] [added: Earnings] from Altria Group, Inc.’s equity investment in [removed: SABMiller (excluding] [added: AB InBev/SABMiller, which decreased $263 million (33.1%), were negatively impacted by AB InBev/SABMiller] special [removed: items). |][added: items.]
[removed: 2017] [added: 2018] Forecasted Results
In February [removed: 2017,] [added: 2018,] Altria Group, Inc. forecasted that its [removed: 2017] [added: 2018] full-year adjusted diluted EPS growth rate is expected to be in the range of [removed: 7.5%] [added: 15%] to [removed: 9.5%] [added: 19%] over [removed: 2016] [added: 2017] full-year adjusted diluted EPS.
Altria Group, Inc. expects [removed: that] its [removed: 2017] [added: 2018] full-year [added: adjusted] effective tax rate [removed: on operations] will be [added: in a range of] approximately [removed: 36%.][added: 23% to 24%.]
Altria Group, Inc.’s full-year adjusted diluted EPS guidance and full-year forecast for its [added: adjusted] effective tax rate [removed: on operations] exclude the impact of certain income and expense items that management believes are not part of underlying operations.
These items may include, for example, loss on early extinguishment of debt, restructuring charges, gain on the Transaction, AB InBev/SABMiller special items, certain tax items, charges associated with tobacco and health litigation items, and [removed: settlements of, and determinations made in connection with, disputes with] [added: resolutions of] certain [removed: states and territories related to the Non-Participating Manufacturer] [added: non-participating manufacturer] (“NPM”) adjustment [removed: provision] [added: disputes] under the 1998 Master Settlement Agreement (such [removed: settlements and determinations] [added: dispute resolutions] are referred to [removed: collectively] as “NPM Adjustment Items” and are more fully described in Health Care Cost Recovery Litigation - NPM Adjustment Disputes in Note [removed: 19).][added: 18).]
Altria Group, Inc.’s management cannot estimate on a forward-looking basis the impact of certain income and expense items, including those items noted in the preceding paragraph, on Altria Group, Inc.’s reported diluted EPS and reported effective tax rate because these items, which could be significant, [added: may be infrequent,] are difficult to predict and may be highly variable.
As a result, Altria Group, Inc. does not provide a corresponding United States generally accepted accounting principles (“U.S. GAAP”) measure for, or reconciliation to, its adjusted diluted EPS guidance or its [added: adjusted] effective tax rate [removed: on operations] forecast.
| | 2017 | | | [removed: |] 2016 | | | [added: 2015 | |]
Subsequently, Altria Group, Inc. purchased approximately 12 million ordinary shares of AB InBev, increasing Altria Group, Inc.’s ownership to approximately 10.2% at December 31, 2016.
At December 31, 2017, Altria
| 2017 AB InBev special items | (105 | | ) | | (0.05 | | ) |
| 2017 Settlement charge for lump sum pension payments | (49 | | ) | | (0.03 | | ) |
| 2017 Tax items | 3,674 | | | | 1.91 | | |
| Subtotal 2017 special items | 3,702 | | | | 1.92 | | |
| Operations | 474 | | | | 0.25 | | |
| For the year ended December 31, 2017 | $ | 10,222 | | | $ | 5.31 | |
| ▪ | Change in Tax Rate: The change in tax rate was driven primarily by no tax being due on the dividends Altria Group, Inc. received from AB InBev during 2017 as a result of a deemed repatriation tax associated with the Tax Reform Act (as defined below). For further discussion, see Note 14. Income Taxes to the consolidated financial statements in Item 8 (“Note 14”). |
Altria Group, Inc.’s 2018 guidance reflects investments in focus areas for long-term growth, including innovative product development and launches, regulatory science, brand equity, retail fixtures and future retail concepts.
| | 2018 | | | | 2017 | | |
| AB InBev special items | — | | | | 0.05 | | |
| Settlement charge for lump sum pension payments | — | | | | 0.03 | | |
| | $ | 0.09 | | | $ | (1.92 | ) |
(1) Represents tax expense for a tax basis adjustment related to the deemed repatriation tax associated with the Tax Reform Act (as defined below).
of net revenues and expenses during the reporting periods.
For substantially all goodwill and indefinite-lived intangible assets, the fair values are determined using discounted cash flows.
| Other | — | | | | 194 | | |
| Total | $ | 5,307 | | | $ | 12,125 | |
At December 31, 2017, the fair value of the Columbia Crest trademark exceeded its book value of $54 million by approximately 9%.
Results for Columbia Crest in 2017 were negatively impacted by increased competitive activity and continued trade inventory reductions.
The analysis incorporated assumptions used in Altria Group, Inc.’s long-term financial forecast, which is used by Altria Group, Inc.’s
In 1998, PM USA and certain other U.S. tobacco product manufacturers entered into the 1998 Master Settlement
This anticipated increase is due primarily to higher amortization of unrecognized losses, driven by the impact of lower discount rates, partially offset by the expected return on postretirement assets resulting from the December 2017 $270 million contribution to fund certain postretirement benefits.
On December 22, 2017, the U.S. Government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Reform Act”).
The main provisions of the Tax Reform Act that impact Altria Group, Inc. include: (i) a reduction in the U.S. federal statutory corporate income tax rate from 35% to 21% effective January 1, 2018, and (ii) changes in the treatment of foreign-source income, commonly referred to as a modified territorial tax system.
The transition to a modified territorial tax system required Altria Group, Inc. to record a deemed repatriation tax and an associated tax basis benefit in 2017.
The tax impact related to the tax basis benefit and the deemed repatriation tax was based on provisional estimates as of January 18, 2018, substantially all of which were related to Altria Group, Inc.’s share of AB InBev’s accumulated earnings and associated taxes.
Altria Group, Inc. may be required to adjust these provisional estimates based on (i) additional guidance related to, or interpretation of, the Tax Reform Act and associated tax laws and (ii) additional information to be received from AB InBev, including information regarding AB InBev’s accumulated earnings and associated taxes for the 2016 and 2017 tax years.
This additional guidance and information could result in increases or decreases to the provisional estimates, which may be significant in relation to these estimates.
Altria Group, Inc. will record any such adjustments in 2018.
▪Gain on AB InBev/SABMiller Business Combination: For the year ended December 31, 2017, Altria Group, Inc. recorded pre-tax gains of $445 million related to the planned completion of the remaining AB InBev divestitures of certain SABMiller assets and businesses in connection with Legacy AB InBev obtaining necessary regulatory clearances for the Transaction.
| (in millions) | 2017 | | | | 2016 | | | | 2015 | | |
| (in millions) | 2017 | | | | 2016 | | | | 2015 | | |
During 2017, PM USA recorded pre-tax charges of $72 million in marketing, administration and research costs and $8 million in interest costs, substantially all of which related to 11 Engle progeny cases.
related to settlements in the Miner and Aspinall cases totaling approximately $67 million and $16 million related to a judgment in the Merino case.
▪Settlement for Lump Sum Pension Payments: In the third quarter of 2017, Altria Group, Inc. made a voluntary, limited-time offer to former employees with vested benefits in the Altria Retirement Plan who had not commenced receiving benefit payments and who met certain other conditions.
Eligible participants were offered the opportunity to make a one-time election to receive their pension benefit as a single lump sum payment or as a monthly annuity.
As a result of the 2017 lump sum distributions, a one-time pre-tax settlement charge of $81 million was recorded in 2017 in Altria Group, Inc.’s consolidated statement of earnings as follows:
| (in millions) | Cost of Sales | | | | Marketing, Administration and Research Costs | | | | Total | | |
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. accounts for under the equity method of accounting using a one-quarter lag.
| Subtotal 2015 special items | 263 | | | | 0.13 | | |
| 2016 SABMiller special items | 57 | | | | 0.03 | | |
| 2016 Loss on early extinguishment of debt | (541 | | ) | | (0.28 | | ) |
| 2016 Tax items | 30 | | | | 0.02 | | |
| 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; |
partially offset by:
| NPM Adjustment Items | $ | — | | | $ | 0.01 | |
| SABMiller special items | — | | | | (0.03 | | ) |
| Loss on early extinguishment of debt | — | | | | 0.28 | | |
| Patent litigation settlement | — | | | | 0.01 | | |
| | $ | 0.02 | | | $ | (4.25 | ) |
(1) Represents restructuring charges in connection with the facilities consolidation announced in October 2016.
If
| Total | $ | 5,285 | | | $ | 11,740 | |
relate to broader macroeconomic conditions outside of Altria Group, Inc.’s control.
year preceding that in which the payment is due.
PM USA, USSTC and Middleton were also subject to payment obligations imposed by the Fair and Equitable Tobacco Reform Act of 2004 (“FETRA”).
The FETRA payment obligations expired after the third quarter of 2014.
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.
▪Leasing: Substantially all of PMCC’s net revenues in 2016 related to income on leveraged leases and related gains on asset sales.
Income attributable to leveraged leases is initially
recorded as unearned income, which is included in the line item finance assets, net, on Altria Group, Inc.’s consolidated balance sheets and subsequently recognized as revenue over the terms of the respective leases at constant after-tax rates of return on the positive net investment balances.
PMCC lessees are affected by bankruptcy filings, credit rating changes and financial market conditions.
PMCC’s investment in leases is included in the line item finance assets, net, on the consolidated balance sheets as of December 31, 2016 and 2015.
At December 31, 2016, PMCC’s net finance receivables of approximately $1.1 billion, which are included in finance assets, net, on Altria Group, Inc.’s consolidated balance sheet, consisted of rents receivable ($1.6 billion) and the residual value of assets under lease ($0.5 billion), reduced by third-party nonrecourse debt ($0.8 billion) and unearned income ($0.2 billion).
The repayment of the nonrecourse debt is collateralized by lease payments receivable and the leased property, and is nonrecourse to the general assets of PMCC.
As required by U.S. GAAP, the third-party nonrecourse debt has been offset against the related rents receivable and has been presented on a net basis within finance assets, net, on Altria Group, Inc.’s consolidated balance sheets.
Finance assets, net, of $1.0 billion at December 31, 2016 also included an allowance for losses.
Estimated residual values represent PMCC’s estimate at lease inception as to the fair values of assets under lease at the end of the non-cancelable lease terms.
The estimated residual values are reviewed at least annually by PMCC’s management, which includes analysis of a number of factors, including activity in the relevant industry.
An excerpt. Shown here: 40 of 321 rewritten, 40 of 162 added and 40 of 177 removed. The counts are complete. For every sentence, read Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. in the FY2017 filing and the FY2016 filing.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
5 rewritten, 0 added, 0 removed, 2 unchanged
At December 31, [removed: 2016] [added: 2017] and [removed: 2015,] [added: 2016,] the fair value of Altria Group, Inc.’s total debt was [removed: $15.1] [added: $15.3] billion and [removed: $14.5] [added: $15.1] billion, respectively.
A 1% [removed: increase] [added: decrease] in market interest rates at December 31, [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] would [removed: decrease] [added: increase] the fair value of Altria Group, Inc.’s total debt by approximately [removed: $1.2] [added: $1.3] billion and [removed: $1.1] [added: $1.4] billion, respectively.
A 1% [removed: decrease] [added: increase] in market interest rates at December 31, [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] would [removed: increase] [added: decrease] the fair value of Altria Group, Inc.’s total debt by approximately [removed: $1.4] [added: $1.2] billion [removed: and $1.3 billion, respectively.][added: for each period.]
The applicable percentage based on Altria Group, Inc.’s long-term senior unsecured debt ratings at December 31, [removed: 2016] [added: 2017] for borrowings under the Credit Agreement was 1.125%.
At December 31, [removed: 2016,] [added: 2017,] Altria Group, Inc. had no borrowings under the Credit Agreement.
Item 1. Business.
45 rewritten, 6 added, 11 removed, 112 unchanged
At December 31, [removed: 2016,] [added: 2017,] Altria Group, Inc.’s wholly-owned subsidiaries included Philip Morris USA Inc. (“PM USA”), which is engaged in the manufacture and sale of cigarettes in the United States; John Middleton Co. (“Middleton”), which is engaged in the manufacture and sale of machine-made large cigars and pipe tobacco and is a wholly-owned subsidiary of PM USA; [added: Sherman Group Holdings, LLC] and [added: its subsidiaries (“Nat Sherman”), which are engaged in the manufacture and sale of super premium cigarettes and the sale of premium cigars; 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 [removed: sales, distribution] [added: sales] and [removed: consumer engagement] [added: distribution] services to certain Altria Group, Inc. operating subsidiaries, and Altria Client Services LLC, which provides various support services in areas, such as legal, regulatory, [added: consumer engagement,] finance, human resources and external [removed: affairs,] [added: affairs] to Altria Group, Inc. and its subsidiaries.
[removed: On] [added: In] October [removed: 10,] 2016, Anheuser-Busch InBev SA/NV (“Legacy AB InBev”) completed [removed: a] [added: its] business combination with [removed: SABMiller in a] [added: SABMiller, and Altria Group, Inc. received] cash and [removed: stock transaction] [added: shares representing a 9.6% ownership in the combined company] (the “Transaction”).
[removed: A] [added: The] newly formed Belgian company, which retained the name Anheuser-Busch InBev SA/NV (“AB InBev”), became the holding company for the combined [removed: SABMiller and Legacy AB InBev] businesses.
At December 31, [removed: 2016,] [added: 2017,] 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.
For further discussion, see Note [removed: 7.][added: 6.]
[added: In January 2017, Altria Group, Inc. acquired] Nat [removed: Sherman sells super-premium cigarettes and premium cigars and joins] [added: Sherman, which joined] PM USA and Middleton as part of Altria Group, Inc.’s smokeable products segment.
At December 31, [removed: 2016,] [added: 2017,] 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.
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: 16.][added: 15.]
Segment Reporting to the consolidated financial statements in Item 8 (“Note [removed: 16”).][added: 15”).]
Segment goodwill and other intangible assets, net, are disclosed in Note [removed: 4.][added: 3.]
Goodwill and Other Intangible Assets, net to the consolidated financial statements in Item 8 (“Note [removed: 4”).][added: 3”).]
| | [removed: 2016] [added: 2017] | | [removed: 2015] [added: 2016] | | [removed: 2014] [added: 2015] | |
| Smokeable products | [removed: 86.2] [added: 85.8] | % | [removed: 87.4] [added: 86.2] | % | [removed: 87.2] [added: 87.4] | % |
| Smokeless products | [removed: 13.1] [added: 13.2] | | [removed: 12.8] [added: 13.1] | | [removed: 13.4] [added: 12.8] | |
| Wine | [removed: 1.8] [added: 1.5] | | 1.8 | | [removed: 1.7] [added: 1.8] | |
| All other | [removed: (1.1] [added: (0.5] | ) | [removed: (2.0] [added: (1.1] | ) | [removed: (2.3] [added: (2.0] | ) |
For items affecting the comparability of the relative percentages of operating companies income (loss) attributable to each reportable segment, see Note [removed: 16.][added: 15.]
Altria Group Distribution Company provides [removed: sales, distribution] [added: sales] and [removed: consumer engagement] [added: distribution] services to Altria Group, Inc.’s tobacco operating companies.
Nat Sherman sells substantially all of its [removed: super-premium] [added: super premium] cigarettes in the United States.
▪Cigars: Middleton is engaged in the manufacture and sale of machine-made large cigars and pipe [removed: tobacco to customers, substantially all of which are located in the United States.][added: tobacco.]
Total [added: smokeable products segment’s cigars] shipment volume [removed: for cigars] was approximately [removed: 1.4] [added: 1.5] billion units in [removed: 2016,] [added: 2017,] an increase of [removed: 5.9%] [added: 9.9%] from [removed: 2015.][added: 2016.]
Nat Sherman sources [added: all of] its [removed: premium] cigars from [removed: importers through] third-party [removed: contract manufacturing arrangements] [added: suppliers] and sells substantially all of its cigars [added: to customers] in the United States.
Total smokeless products [added: segment’s] shipment volume was [removed: 853.5] [added: 841.3] million units in [removed: 2016, an increase] [added: 2017, a decrease] of [removed: 4.9%] [added: 1.4%] from [removed: 2015.][added: 2016.]
[removed: Acquisition of Green Smoke] [added: Finance Assets, net] to the consolidated financial statements in Item [removed: 8 (“Note 3”).][added: 8.]
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 [removed: announced that it plans to file] [added: filed] its corresponding pre-market tobacco product application [removed: during] [added: in] the first quarter of 2017.
[added: 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.
PM [removed: USA] [added: USA, Middleton, Nat Sherman] and USSTC are subject to quarterly user fees as a result of the FSPTCA.
PM USA, [added: Nat Sherman,] USSTC and other U.S. tobacco manufacturers have agreed to other marketing restrictions in the United States as part of the settlements of state health care cost recovery actions.
In the United States, under a contract growing program, PM USA purchases [added: the majority of its] burley and flue-cured leaf tobaccos [removed: of various grades and styles] directly from tobacco growers.
USSTC purchases [removed: burley,] dark [removed: fire-cured and] [added: fire-cured, dark] air-cured [removed: tobaccos of various grades] and [removed: styles] [added: burley leaf tobaccos] from domestic tobacco growers under a contract growing program as well as from leaf merchants.
Middleton purchases burley, dark air-cured and flue-cured [added: leaf] tobaccos [removed: of various grades and styles] through leaf merchants.
Michelle’s total [removed: 2016] [added: 2017] wine shipment volume of approximately [removed: 9.3] [added: 8.5] million cases [removed: increased 5.3%] [added: decreased 8.6%] from [removed: 2015.][added: 2016.]
For further information on PMCC’s finance assets, see Note [removed: 8.][added: 7.]
▪Customers: The largest customer of PM USA, [removed: USSTC] [added: USSTC, Middleton] and [removed: Middleton,] [added: Nat Sherman,] McLane Company, Inc., accounted for approximately [removed: 25%, 26%] [added: 26%, 25%] and [removed: 27%] [added: 26%] of Altria Group, Inc.’s consolidated net revenues for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014,] [added: 2015,] respectively.
[added: In addition, Core-Mark Holding Company, Inc.] accounted for approximately [added: 14%,] 14% and 10% of Altria Group, Inc.’s consolidated net revenues for the years ended December 31, [added: 2017,] 2016 and 2015, respectively.
Sales to three distributors accounted for approximately [removed: 69%, 66%] [added: 67%, 69%] and [removed: 67%] [added: 66%] of net revenues for the wine segment for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014,] [added: 2015,] respectively.
▪Employees: At December 31, [removed: 2016,] [added: 2017,] Altria Group, Inc. and its subsidiaries employed approximately 8,300 people.
Directors, Executive Officers and Corporate Governance - Executive Officers as of February 13, [removed: 2017] [added: 2018] of this Annual Report on Form 10-K.
▪Research and Development: Research and development expense for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] is set forth in Note [removed: 18.][added: 17.]
Subsequently, Altria Group, Inc. purchased approximately 12 million ordinary shares of AB InBev, increasing Altria Group, Inc.’s ownership to approximately 10.2% at December 31, 2016.
▪Cigarettes: PM USA is the largest cigarette company in the United States.
Total smokeable products segment’s cigarettes shipment volume in the United States was 116.6 billion units in 2017, a decrease of 5.1% from 2016.
Middleton contracts with a third-party importer to supply a majority of its cigars and sells substantially all of its cigars to customers in the United States.
In 2017, Altria Group, Inc.’s subsidiaries purchased certain intellectual property related to innovative tobacco products.
In the opinion of management, however, compliance with environmental laws and regulations, including the payment of any remediation and compliance costs or damages and the making of
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%.
In January 2017, Altria Group, Inc. acquired the privately-held Sherman Group Holdings, LLC and its subsidiaries (“Nat Sherman”).
▪Cigarettes: PM USA is the largest cigarette company in the United States, with total cigarette shipment volume in the United States of approximately 122.9 billion units in 2016, a decrease of 2.5% from 2015.
Middleton sources a portion of its cigars from an importer through a third-party contract manufacturing arrangement.
For a further discussion of the acquisition of Green Smoke, see Note 3.
The FDA must determine whether to accept the applications for substantive review.
Promotional activities include, in certain instances and where
Finance Assets, net to the consolidated financial statements in Item 8 (“Note 8”).
In addition, Core-Mark Holding Company, Inc.
that subsidiaries of Altria Group, Inc. may undertake in the future.
An excerpt. Shown here: 40 of 45 rewritten, all 6 added and all 11 removed. The counts are complete. For every sentence, read Item 1. Business. in the FY2017 filing and the FY2016 filing.
Item 3. Legal Proceedings.
7 rewritten, 7 added, 15 removed, 2 unchanged
The information required by this Item is included in Note [removed: 19] [added: 18] and Exhibits 99.1 and 99.2 to this Annual Report on Form 10-K.
Altria Group, Inc.’s consolidated financial statements and accompanying notes for the year ended December 31, [removed: 2016] [added: 2017] were filed on Form 8-K on February 1, [removed: 2017] [added: 2018] (such consolidated financial statements and accompanying notes are also included in Item 8).
The following summarizes certain developments in Altria Group, Inc.’s litigation since the filing of [removed: such] [added: the] Form 8-K.
[removed: | ▪ | Engle] [added: ▪Engle] Progeny Trial Results: [removed: |]
PM USA will record a pre-tax provision of approximately [removed: $600,000] [added: $1 million for the judgment plus interest] in the first quarter of [removed: 2017.][added: 2018.]
[removed: Brown,] [added: In Gloger,] in February [removed: 2017,] [added: 2018,] a [removed: Pinellas] [added: Miami-Dade] County jury returned [added: a] verdict in favor of plaintiff and against PM USA and R.J. Reynolds [added: Tobacco Company (“R.J. Reynolds”)] awarding [removed: $5.4] [added: $7.5] million in compensatory [removed: damages and allocating 35% of the fault to PM USA.][added: damages.]
The jury also awarded plaintiff [removed: $200,000] [added: $5 million] in punitive damages against [removed: PM USA.][added: each defendant.]
PM USA posted a bond in the amount of $2.5 million.
Defendants filed various post-trial motions, which remain pending, and appealed to the Florida Third District Court of Appeal.
In Wallace, in February 2018, PM USA filed an appeal to the Florida Fifth District Court of Appeal and posted a bond in the amount of approximately $3 million.
In Allen, in February 2018, the Florida Supreme Court denied PM USA’s petition to invoke the court’s discretionary jurisdiction.
PM USA will record a pre-tax provision of approximately $10 million for the judgment plus interest in the first quarter of 2018.
In Gore, in February 2018, the Florida Fourth District Court of Appeal affirmed the judgment in favor of plaintiff, withdrew the comparative fault reduction for the compensatory damages award and granted plaintiff leave to seek a new trial on punitive damages.
In Bryant, in February 2018, the trial court denied all post-trial motions and entered final judgment in favor of plaintiff.
| | |
| --- | --- |
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.
In Martin, in February 2017, PM USA and R.J. Reynolds filed a notice of appeal to the Florida Fourth District Court of Appeal.
In Allen, in February 2017, the Florida First District Court of Appeal affirmed the trial court’s verdict.
Health Care Cost Recovery Litigation
NPM Adjustment Disputes: As discussed in Note 19, in 1998, PM USA and certain other U.S. tobacco product manufacturers entered into the 1998 Master Settlement Agreement (the “MSA”).
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.
As a result of 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 (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 2017.
Cover and table of contents
27 rewritten, 4 added, 2 removed, 64 unchanged
For the fiscal year ended December 31, [removed: 2016][added: 2017]
| Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated [removed: filer or] [added: filer,] a smaller reporting [added: company, or emerging growth] company. See the definitions of “large accelerated [removed: filer”,] [added: filer,”] “accelerated [removed: filer” and] [added: filer,”] “smaller reporting company” [added: and “emerging growth company”] in Rule 12b-2 of the Exchange Act. |
As of June 30, [removed: 2016,] [added: 2017,] the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately [removed: $135] [added: $143] billion based on the closing sale price of the common stock as reported on the New York Stock Exchange.
| Class | Outstanding at February 13, [removed: 2017] [added: 2018] |
| Common Stock, $0.33 1/3 par value | [removed: 1,939,420,437] [added: 1,900,449,362] 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: 18, 2017,] [added: 17, 2018,] to be filed with the Securities and Exchange Commission on or about April [removed: 6, 2017,] [added: 5, 2018,] are incorporated by reference into Part III hereof. |
| Item 1. | [removed: [Business](#sD05889304B0254A992F3F4D5E06DED86)] [added: [Business](#s5A1854845FC95BF1B6EE787997E5C80D)] | [removed: [1](#sD05889304B0254A992F3F4D5E06DED86)] [added: [1](#s5A1854845FC95BF1B6EE787997E5C80D)] |
| Item 1A. | [Risk [removed: Factors](#sDA8AA449FBAE52C7B2A8C7414FD17381)] [added: Factors](#s161A0C8A0D6F57818F05AD7BBDF42045)] | [removed: [4](#sDA8AA449FBAE52C7B2A8C7414FD17381)] [added: [4](#s161A0C8A0D6F57818F05AD7BBDF42045)] |
| Item 1B. | [Unresolved Staff [removed: Comments](#s3A49E4573314544BAA7C48A8B61E0202)] [added: Comments](#sAE76864438C55B668E9915F99B70117E)] | [removed: [9](#s3A49E4573314544BAA7C48A8B61E0202)] [added: [9](#sAE76864438C55B668E9915F99B70117E)] |
| Item 2. | [removed: [Properties](#s8E9382C4606350DDBAE333F2BCF956DF)] [added: [Properties](#s011F63BF711350B88E0EFAF2934D58AB)] | [removed: [10](#s8E9382C4606350DDBAE333F2BCF956DF)] [added: [10](#s011F63BF711350B88E0EFAF2934D58AB)] |
| Item 3. | [Legal [removed: Proceedings](#sC33C74ED7FD752D497543D7460D4F23F)] [added: Proceedings](#sA886872240AD51CDB0A4A8606FE29AAF)] | [removed: [10](#sC33C74ED7FD752D497543D7460D4F23F)] [added: [10](#sA886872240AD51CDB0A4A8606FE29AAF)] |
| Item 4. | [Mine Safety [removed: Disclosures](#sA608FDC0E9C2539086FF28B01CAAD76C)] [added: Disclosures](#s784C3D98CE985F9EA922384D386781ED)] | [removed: [10](#sA608FDC0E9C2539086FF28B01CAAD76C)] [added: [10](#s784C3D98CE985F9EA922384D386781ED)] |
| Item 5. | [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities](#s2338A2C710445DA99526E65D1B37A7B9)] [added: Securities](#s4BDDB2C91C6A5D6BA4F88D878AACB186)] | [removed: [11](#s2338A2C710445DA99526E65D1B37A7B9)] [added: [11](#s4BDDB2C91C6A5D6BA4F88D878AACB186)] |
| Item 6. | [Selected Financial [removed: Data](#sBEF7464732085FDC94BBF8F4BB3EEA2D)] [added: Data](#sD03CB46FBC215F89B27C829C2D5B1AD1)] | [removed: [13](#sBEF7464732085FDC94BBF8F4BB3EEA2D)] [added: [13](#sD03CB46FBC215F89B27C829C2D5B1AD1)] |
| Item 7. | [Management's Discussion and Analysis of Financial Condition and Results of [removed: Operations](#s93B8EE362F845E3DAC408472484465EF)] [added: Operations](#sE4EAEE5CEC8C501A8FD3E08D8B908D84)] | [removed: [14](#s93B8EE362F845E3DAC408472484465EF)] [added: [14](#sE4EAEE5CEC8C501A8FD3E08D8B908D84)] |
| Item 7A. | [Quantitative and Qualitative Disclosures About Market [removed: Risk](#sD12DD37493EE52E58450B64710B334E0)] [added: Risk](#sF34B5F47ABDF511E9EFBA6E5390D8885)] | [removed: [37](#sD12DD37493EE52E58450B64710B334E0)] [added: [38](#sF34B5F47ABDF511E9EFBA6E5390D8885)] |
| Item 8. | [Financial Statements and Supplementary [removed: Data](#s249DA3C3F0E45594BBC089B268D40EBB)] [added: Data](#s806366F827B356A18B99C5E1B0CF44D8)] | [removed: [38](#s249DA3C3F0E45594BBC089B268D40EBB)] [added: [39](#s806366F827B356A18B99C5E1B0CF44D8)] |
| Item 9. | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosure](#s7CFE7474761E5F85B706CF0C50FEBACA)] [added: Disclosure](#sD83A8CBD4DC252E99CBAA5C5609B10B2)] | [removed: [114](#s7CFE7474761E5F85B706CF0C50FEBACA)] [added: [111](#sD83A8CBD4DC252E99CBAA5C5609B10B2)] |
| Item 9A. | [Controls and [removed: Procedures](#sD10D0D1E493E517A9CFA48BE457F7EC9)] [added: Procedures](#sDB3B734F52455A3291D33DB7F91BAD2C)] | [removed: [114](#sD10D0D1E493E517A9CFA48BE457F7EC9)] [added: [111](#sDB3B734F52455A3291D33DB7F91BAD2C)] |
| Item 9B. | [Other [removed: Information](#sDB64FF74222954D5A930D5F3F09E1FF6)] [added: Information](#sC45447E8083E5ADBACA0237429313CDD)] | [removed: [114](#sDB64FF74222954D5A930D5F3F09E1FF6)] [added: [111](#sC45447E8083E5ADBACA0237429313CDD)] |
| Item 10. | [Directors, Executive Officers and Corporate [removed: Governance](#sF1D6D2607E52584EB7636CE90A614BDB)] [added: Governance](#s16909A138FD058B2BC61A37A1EB9E777)] | [removed: [114](#sF1D6D2607E52584EB7636CE90A614BDB)] [added: [111](#s16909A138FD058B2BC61A37A1EB9E777)] |
| Item 11. | [Executive [removed: Compensation](#sD5AF2594AA635141B3487E0AAACD4A65)] [added: Compensation](#sD55ADAEABFFB55B59284CE1862AE64B9)] | [removed: [115](#sD5AF2594AA635141B3487E0AAACD4A65)] [added: [112](#sD55ADAEABFFB55B59284CE1862AE64B9)] |
| Item 12. | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters](#s47F24ACF8AF3540698E49A47C3C3046F)] [added: Matters](#sC5D93C10FB43543298D798430121B2DC)] | [removed: [115](#s47F24ACF8AF3540698E49A47C3C3046F)] [added: [112](#sC5D93C10FB43543298D798430121B2DC)] |
| Item 13. | [Certain Relationships and Related Transactions, and Director [removed: Independence](#s7A9F68D15DD25012870904588A9AB114)] [added: Independence](#s8B443DE0A64A5440B52835E302650949)] | [removed: [115](#s7A9F68D15DD25012870904588A9AB114)] [added: [113](#s8B443DE0A64A5440B52835E302650949)] |
| Item 14. | [Principal Accounting Fees and [removed: Services](#s1899F11DE3185A12B5FA5B58FEEB7D7D)] [added: Services](#s3F63B7D0462E563DA0FBAF8D4DBA65A2)] | [removed: [115](#s1899F11DE3185A12B5FA5B58FEEB7D7D)] [added: [113](#s3F63B7D0462E563DA0FBAF8D4DBA65A2)] |
| Item 15. | [Exhibits and Financial Statement [removed: Schedules](#sAE588D2CBCA255B8886477C14F93AB79)] [added: Schedules](#s99F655341B2E50BF88A440966F245E6C)] | [removed: [116](#sAE588D2CBCA255B8886477C14F93AB79)] [added: [113](#s99F655341B2E50BF88A440966F245E6C)] |
| Item 16. | [Form 10-K [removed: Summary](#saf772b661b604e768ce1a74d086de393)] [added: Summary](#s02D1F154BCE1574C96D4A320D3B2DCD9)] | [removed: [120](#saf772b661b604e768ce1a74d086de393)] [added: [117](#s02D1F154BCE1574C96D4A320D3B2DCD9)] |
10-K 1 a2017form10-kq4.htm FORM 10-K
| Emerging growth company ¨ |
| If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ |
| [Signatures](#s29113CF9554153F8BF8EFCD360E62C3E) | | [118](#s29113CF9554153F8BF8EFCD360E62C3E) |
10-K 1 a2016form10-k.htm FORM 10-K
| [Signatures](#sC57E806DBE4954048C44BB0C111972CB) | | [121](#sC57E806DBE4954048C44BB0C111972CB) |
Item 2. Properties.
12 rewritten, 4 added, 0 removed, 6 unchanged
[removed: The] [added: In 2017, Altria Client Services LLC purchased the previously leased] property in Richmond, Virginia that serves as the headquarters facility for Altria Group, Inc., PM USA, USSTC, Middleton, Nu Mark and certain other [removed: subsidiaries is under lease.][added: subsidiaries.]
At December 31, [removed: 2016,] [added: 2017,] the smokeable products segment used [removed: four] [added: five] manufacturing and processing [removed: facilities.][added: facilities, including the Richmond Manufacturing Center.]
[added: In addition to the Richmond Manufacturing Center,] PM USA owns and operates [removed: two] [added: a cigarette] tobacco [removed: manufacturing and] processing [removed: facilities] [added: facility] located in the Richmond, Virginia [removed: area that are used in the manufacturing and processing of cigarettes.][added: area.]
[removed: Middleton owns and] [added: Middleton, in addition to the Richmond Manufacturing Center,] operates two manufacturing and processing facilities - [removed: one] [added: one, which it owns,] in King of Prussia, [removed: Pennsylvania] [added: Pennsylvania,] and [removed: one] [added: one, which it leases,] in Limerick, [removed: Pennsylvania -] [added: Pennsylvania,] that are used in the manufacturing and processing of cigars and pipe tobacco.
At December 31, [removed: 2016,] [added: 2017, in addition to] the [added: Richmond Manufacturing Center, the] smokeless products segment used [removed: four] [added: five] smokeless tobacco manufacturing and processing facilities located in [added: Clarksville, Tennessee;] Franklin Park, Illinois; Nashville, Tennessee; and two facilities in Hopkinsville, Kentucky, all of which are owned and operated by [removed: USSTC.][added: USSTC, with the exception of the facility leased by USSTC in Franklin Park, Illinois.]
As disclosed in Note [removed: 5.][added: 4.]
Asset Impairment, Exit and Implementation Costs to the consolidated financial statements in Item 8 (“Note [removed: 5”),] [added: 4”),] 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 [removed: will transfer] [added: is in the process of transferring] its Limerick, Pennsylvania operations to the [removed: Manufacturing Center site in Richmond, Virginia (“Richmond] [added: Richmond] Manufacturing [removed: Center”).][added: Center.]
USSTC [removed: will transfer] [added: is in the process of transferring] its Franklin Park, Illinois operations to its Nashville, Tennessee facility and the Richmond Manufacturing Center.
The consolidation is expected to be [added: substantially] completed by the [added: end of the] first quarter of 2018.
At December 31, [removed: 2016,] [added: 2017,] the wine segment used 12 wine-making facilities - seven in Washington, four in California and one in Oregon.
The plants and properties owned or leased and operated by Altria Group, Inc. and its subsidiaries are maintained in good [removed: condition and are believed to be suitable and adequate for present needs.]
At December 31, 2017, PM USA owned and operated a manufacturing site located in Richmond, Virginia (“Richmond Manufacturing Center”), that PM USA uses in the manufacturing of cigarettes.
Portions of this facility are leased by Middleton and USSTC for use in the manufacturing of cigars and smokeless tobacco products, respectively.
Nat Sherman owns and operates a cigarette manufacturing facility in Greensboro, North Carolina.
condition and are believed to be suitable and adequate for present needs.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
12 rewritten, 19 added, 15 removed, 28 unchanged
The graph assumes the investment of $100 in common stock and each of the indices as of the market close on December 31, [removed: 2011] [added: 2012] and the reinvestment of all dividends on a quarterly basis.
[removed: ][added: ]
| December [removed: 2011] [added: 2012] | | $ | 100.00 | | | $ | 100.00 | | | $ | 100.00 | |
(1)In [removed: 2016,] [added: 2017,] 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, Conagra Brands, Inc., General Mills, Inc., The Hershey Company, Kellogg Company, Kimberly-Clark Corporation, The Kraft Heinz Company, Mondelēz International, Inc., PepsiCo, [removed: Inc. and] [added: Inc.,] Reynolds American Inc. [added: and British American Tobacco p.l.c.]
[added: Note -] On July 2, 2015, Kraft Foods Group, Inc. merged with and into a wholly owned subsidiary of H.J. Heinz Holding Corporation, which was renamed The Kraft Heinz Company (KHC).
At February 13, [removed: 2017,] [added: 2018,] there were approximately [removed: 68,000] [added: 64,000] holders of record of Altria Group, Inc.’s common stock.
Issuer Purchases of Equity Securities During the Quarter Ended December 31, [removed: 2016][added: 2017]
In July 2015, Altria Group, Inc.’s Board of Directors (the “Board of Directors”) authorized a $1.0 billion share repurchase program that it expanded to $3.0 billion in October 2016 [added: and to $4.0 billion in July 2017] (as expanded, the “July 2015 share repurchase program”).
[added: In January 2018, the Board of Directors authorized a new $1.0 billion share repurchase program, which] Altria Group, Inc. expects to complete [removed: the July 2015 share repurchase program] by the end of [removed: the second quarter of] 2018.
The timing of share repurchases under [removed: the July 2015 share repurchase] [added: this] program depends upon marketplace conditions and other factors, and the program remains subject to the discretion of the Board of Directors.
Altria Group, Inc.’s share repurchase activity for each of the three months in the period ended December 31, [removed: 2016,] [added: 2017,] was as follows:
| (1) | The total number of shares purchased includes (a) shares purchased under the July 2015 share repurchase program (which totaled [removed: 2,392,200] [added: 2,982,371] shares in October, [removed: 3,394,623] [added: 2,790,984] shares in November and [removed: 2,340,000] [added: 2,587,120] 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 [removed: restricted stock units, and forfeitures of restricted stock for which consideration was paid in connection with termination of employment of certain employees] [added: stock-based awards] (which totaled [removed: 827 shares in October, 811] [added: 1,066] shares in [removed: November] [added: October] and [removed: 3,025] [added: 7,315] shares in [removed: December).] [added: November).] |
| December 2013 | | $ | 128.56 | | | $ | 124.66 | | | $ | 132.37 | |
| December 2014 | | $ | 172.93 | | | $ | 139.49 | | | $ | 150.48 | |
| December 2015 | | $ | 212.87 | | | $ | 162.74 | | | $ | 152.55 | |
| December 2016 | | $ | 256.43 | | | $ | 177.01 | | | $ | 170.78 | |
| December 2017 | | $ | 280.65 | | | $ | 193.86 | | | $ | 208.05 | |
headquartered in London, England.
On July 24, 2017, British American Tobacco p.l.c.
(BTI) acquired RAI.
For 2017, Altria Group, Inc. Peer Group total shareholder return calculation includes RAI through July 24, 2017 and BTI American Depository Receipts for the remainder of the year.
| 2017: | | | | | | | | | | | |
| Fourth Quarter | $ | 74.38 | | | $ | 62.32 | | | $ | 0.66 | |
| Third Quarter | $ | 74.98 | | | $ | 60.01 | | | $ | 0.66 | |
| Second Quarter | $ | 77.79 | | | $ | 69.79 | | | $ | 0.61 | |
| First Quarter | $ | 76.55 | | | $ | 67.25 | | | $ | 0.61 | |
The July 2015 share repurchase program was completed in January 2018.
| October 1- October 31, 2017 | | 2,983,437 | | | $ | 64.36 | | | 2,982,371 | | | $ | 383,869,878 | |
| November 1- November 30, 2017 | | 2,798,299 | | | $ | 64.98 | | | 2,790,984 | | | $ | 202,512,372 | |
| December 1- December 31, 2017 | | 2,587,120 | | | $ | 71.16 | | | 2,587,120 | | | $ | 18,411,335 | |
| For the Quarter Ended December 31, 2017 | | 8,368,856 | | | $ | 66.67 | | | 8,360,475 | | | | | |
| 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 | |
Note - On October 1, 2012, Kraft Foods Inc. (KFT) spun off Kraft Foods Group, Inc. (KRFT) to its shareholders and then changed its name from Kraft Foods Inc. to Mondelēz International, Inc. (MDLZ).
| 2015: | | | | | | | | | | | |
| Fourth Quarter | $ | 61.74 | | | $ | 53.68 | | | $ | 0.565 | |
| Third Quarter | $ | 56.39 | | | $ | 47.41 | | | $ | 0.565 | |
| Second Quarter | $ | 52.99 | | | $ | 47.31 | | | $ | 0.52 | |
| First Quarter | $ | 56.70 | | | $ | 48.52 | | | $ | 0.52 | |
| 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 | | | | | |
Item 6. Selected Financial Data.
34 rewritten, 1 added, 1 removed, 6 unchanged
| | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | | | [removed: 2013] [added: 2014] | | | | [removed: 2012] [added: 2013] | | |
| Net revenues | $ | [removed: 25,744] [added: 25,576] | | | $ | [removed: 25,434] [added: 25,744] | | | $ | [removed: 24,522] [added: 25,434] | | | $ | [removed: 24,466] [added: 24,522] | | | $ | [removed: 24,618] [added: 24,466] | |
| Cost of sales | [removed: 7,746] [added: 7,543] | | | | [removed: 7,740] [added: 7,746] | | | | [removed: 7,785] [added: 7,740] | | | | [removed: 7,206] [added: 7,785] | | | | [removed: 7,937] [added: 7,206] | | |
| Excise taxes on products | [removed: 6,407] [added: 6,082] | | | | [removed: 6,580] [added: 6,407] | | | | [removed: 6,577] [added: 6,580] | | | | [removed: 6,803] [added: 6,577] | | | | [removed: 7,118] [added: 6,803] | | |
| Operating income | [removed: 8,762] [added: 9,556] | | | | [removed: 8,361] [added: 8,762] | | | | [removed: 7,620] [added: 8,361] | | | | [removed: 8,084] [added: 7,620] | | | | [removed: 7,253] [added: 8,084] | | |
| Interest and other debt expense, net | [removed: 747] [added: 705] | | | | [removed: 817] [added: 747] | | | | [removed: 808] [added: 817] | | | | [removed: 1,049] [added: 808] | | | | [removed: 1,126] [added: 1,049] | | |
| Earnings from equity investment in [removed: SABMiller] [added: AB InBev/SABMiller] | [removed: 795] [added: 532] | | | | [removed: 757] [added: 795] | | | | [removed: 1,006] [added: 757] | | | | [removed: 991] [added: 1,006] | | | | [removed: 1,224] [added: 991] | | |
| Gain on AB InBev/SABMiller business combination | [removed: 13,865] [added: 445] | | | | [removed: 5] [added: 13,865] | | | | [removed: —] [added: 5] | | | | — | | | | — | | |
| Earnings before income taxes [removed: (1)] [added: (2)] | [removed: 21,852] [added: 9,828] | | | | [removed: 8,078] [added: 21,852] | | | | [removed: 7,774] [added: 8,078] | | | | [removed: 6,942] [added: 7,774] | | | | [removed: 6,477] [added: 6,942] | | |
| Pre-tax profit margin [removed: (1)] [added: (2)] | [removed: 84.9] [added: 38.4] | | % | | [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: Provision] [added: (Benefit) provision] for income taxes [removed: (1)] [added: (1)(2)] | [removed: 7,608] [added: (399] | | [added: )] | | [removed: 2,835] [added: 7,608] | | | | [removed: 2,704] [added: 2,835] | | | | [removed: 2,407] [added: 2,704] | | | | [removed: 2,294] [added: 2,407] | | |
| Net earnings [removed: (1)] [added: (1)(2)] | [removed: 14,244] [added: 10,227] | | | | [removed: 5,243] [added: 14,244] | | | | [removed: 5,070] [added: 5,243] | | | | [removed: 4,535] [added: 5,070] | | | | [removed: 4,183] [added: 4,535] | | |
| Net earnings attributable to Altria Group, Inc. [removed: (1)] [added: (1)(2)] | [removed: 14,239] [added: 10,222] | | | | [removed: 5,241] [added: 14,239] | | | | [removed: 5,070] [added: 5,241] | | | | [removed: 4,535] [added: 5,070] | | | | [removed: 4,180] [added: 4,535] | | |
| Basic and Diluted EPS — net earnings attributable to Altria Group, Inc. [removed: (1)] [added: (1)(2)] | [removed: 7.28] [added: 5.31] | | | | [removed: 2.67] [added: 7.28] | | | | [removed: 2.56] [added: 2.67] | | | | [removed: 2.26] [added: 2.56] | | | | [removed: 2.06] [added: 2.26] | | |
| Dividends declared per share | [removed: 2.35] [added: 2.54] | | | | [removed: 2.17] [added: 2.35] | | | | [removed: 2.00] [added: 2.17] | | | | [removed: 1.84] [added: 2.00] | | | | [removed: 1.70] [added: 1.84] | | |
| Weighted average shares (millions) — Basic and Diluted | [removed: 1,952] [added: 1,921] | | | | [removed: 1,961] [added: 1,952] | | | | [removed: 1,978] [added: 1,961] | | | | [removed: 1,999] [added: 1,978] | | | | [removed: 2,024] [added: 1,999] | | |
| Capital expenditures | [removed: 189] [added: 199] | | | | [removed: 229] [added: 189] | | | | [removed: 163] [added: 229] | | | | [removed: 131] [added: 163] | | | | [removed: 124] [added: 131] | | |
| Depreciation | [removed: 183] [added: 188] | | | | [removed: 204] [added: 183] | | | | [removed: 188] [added: 204] | | | | [removed: 192] [added: 188] | | | | [removed: 205] [added: 192] | | |
| Property, plant and equipment, net | [removed: 1,958] [added: 1,914] | | | | [removed: 1,982] [added: 1,958] | | | | [removed: 1,983] [added: 1,982] | | | | [removed: 2,028] [added: 1,983] | | | | [removed: 2,102] [added: 2,028] | | |
| Inventories | [removed: 2,051] [added: 2,225] | | | | [removed: 2,031] [added: 2,051] | | | | [removed: 2,040] [added: 2,031] | | | | [removed: 1,879] [added: 2,040] | | | | [removed: 1,746] [added: 1,879] | | |
| Total assets [removed: (1)(2)] [added: (2)] | [removed: 45,932] [added: 43,202] | | | | [removed: 31,459] [added: 45,932] | | | | [removed: 33,440] [added: 31,459] | | | | [removed: 33,858] [added: 33,440] | | | | [removed: 34,252] [added: 33,858] | | |
| Long-term debt [removed: (2)] | [removed: 13,881] [added: 13,030] | | | | [removed: 12,843] [added: 13,881] | | | | [removed: 13,610] [added: 12,843] | | | | [removed: 13,907] [added: 13,610] | | | | [removed: 12,346] [added: 13,907] | | |
| Total debt [removed: (2)] | [removed: 13,881] [added: 13,894] | | | | [removed: 12,847] [added: 13,881] | | | | [removed: 14,610] [added: 12,847] | | | | [removed: 14,432] [added: 14,610] | | | | [removed: 13,805] [added: 14,432] | | |
| Total stockholders’ equity [removed: (1)] [added: (1)(2)] | [removed: 12,773] [added: 15,380] | | | | [removed: 2,873] [added: 12,773] | | | | [removed: 3,010] [added: 2,873] | | | | [removed: 4,118] [added: 3,010] | | | | [removed: 3,170] [added: 4,118] | | |
| Common dividends declared as a % of Basic and Diluted EPS [removed: (1)] [added: (1)(2)] | [removed: 32.3] [added: 47.8] | | % | | [removed: 81.3] [added: 32.3] | | % | | [removed: 78.1] [added: 81.3] | | % | | [removed: 81.4] [added: 78.1] | | % | | [removed: 82.5] [added: 81.4] | | % |
| Book value per common share outstanding [removed: (1)] [added: (1)(2)] | [removed: 6.57] [added: 8.09] | | | | [removed: 1.47] [added: 6.57] | | | | [removed: 1.53] [added: 1.47] | | | | [removed: 2.07] [added: 1.53] | | | | [removed: 1.58] [added: 2.07] | | |
| Market price per common share — high/low | [removed: 70.15-56.15] [added: 77.79-60.01] | | | | [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] | | |
| Closing price per common share at year end | [removed: 67.62] [added: 71.41] | | | | [removed: 58.21] [added: 67.62] | | | | [removed: 49.27] [added: 58.21] | | | | [removed: 38.39] [added: 49.27] | | | | [removed: 31.44] [added: 38.39] | | |
| Price/earnings ratio at year end — Basic and Diluted [removed: (1)] [added: (1)(2)] | [removed: 9] [added: 13] | | | | [removed: 22] [added: 9] | | | | [removed: 19] [added: 22] | | | | [removed: 17] [added: 19] | | | | [removed: 15] [added: 17] | | |
| Number of common shares outstanding at year end (millions) | [removed: 1,943] [added: 1,901] | | | | [removed: 1,960] [added: 1,943] | | | | [removed: 1,971] [added: 1,960] | | | | [removed: 1,993] [added: 1,971] | | | | [removed: 2,010] [added: 1,993] | | |
| Approximate number of employees | 8,300 | | | | [removed: 8,800] [added: 8,300] | | | | [removed: 9,000] [added: 8,800] | | | | 9,000 | | | | [removed: 9,100] [added: 9,000] | | |
[removed: (1)] [added: (2)] Certain 2016 amounts include the impact of the [removed: Gain] [added: gain] on AB InBev/SABMiller business combination.
For further information, see Note [removed: 7] [added: 6] in Item 8.
For further [removed: information,] [added: discussion,] see Note [removed: 1] [added: 14] in Item 8.
(1) Certain 2017 amounts include the impact of the enactment of the Tax Reform Act (as defined in Item 7).
(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.
Item 8. Financial Statements and Supplementary Data.
800 rewritten, 432 added, 627 removed, 1,828 unchanged
[added: | Due to] Altria Group, Inc. and [removed: Subsidiaries][added: subsidiaries | 3,040 | | | | 317 | | | | 80 | | | | (3,437 | | ) | | — | | |]
| at December 31, | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |
| Cash and cash equivalents | $ | [removed: 4,569] [added: 1,253] | | | $ | [removed: 2,369] [added: 4,569] | |
| Receivables | [removed: 151] [added: 142] | | | | [removed: 124] [added: 151] | | |
| Leaf tobacco | [removed: 892] [added: 941] | | | | [removed: 957] [added: 892] | | |
| Other raw materials | [removed: 164] [added: 170] | | | | [removed: 181] [added: 164] | | |
| Work in process | [removed: 512] [added: 560] | | | | [removed: 444] [added: 512] | | |
| Finished product | [removed: 483] [added: 554] | | | | [removed: 449] [added: 483] | | |
| Other current assets | [removed: 489] [added: 263] | | | | [removed: 387] [added: 220] | | |
| Total current assets | [removed: 7,260] [added: 4,344] | | | | [removed: 4,911] [added: 7,260] | | |
| Land and land improvements | [removed: 316] [added: 302] | | | | [removed: 295] [added: 316] | | |
| Buildings and building equipment | [removed: 1,481] [added: 1,437] | | | | [removed: 1,406] [added: 1,481] | | |
| Machinery and equipment | [removed: 2,917] [added: 2,975] | | | | [removed: 2,969] [added: 2,917] | | |
| Construction in progress | [removed: 121] [added: 165] | | | | [removed: 207] [added: 121] | | |
| Less accumulated depreciation | [removed: 2,877] [added: 2,965] | | | | [removed: 2,895] [added: 2,877] | | |
| Goodwill | [removed: 5,285] [added: 5,307] | | | | 5,285 | | |
| Other intangible assets, net | [removed: 12,036] [added: 12,400] | | | | [removed: 12,028] [added: 12,036] | | |
| Investment in AB [removed: InBev/SABMiller] [added: InBev] | [removed: 17,852] [added: 17,952] | | | | [removed: 5,483] [added: 17,852] | | |
| Finance assets, net | [removed: 1,028] [added: 899] | | | | [removed: 1,239] [added: 1,028] | | |
| Other assets | [removed: 513] [added: 386] | | | | [removed: 531] [added: 513] | | |
| Total Assets | $ | [removed: 45,932] [added: 43,202] | | | $ | [removed: 31,459] [added: 45,932] | |
| Current portion of long-term debt | $ | [removed: —] [added: 864] | | | $ | [removed: 4] [added: —] | |
| Accounts payable | [removed: 425] [added: 374] | | | | [removed: 400] [added: 425] | | |
| Marketing | [removed: 747] [added: 695] | | | | [removed: 695] [added: 747] | | |
| Employment costs | [removed: 289] [added: 188] | | | | [removed: 198] [added: 289] | | |
| Settlement charges | [removed: 3,701] [added: 2,442] | | | | [removed: 3,590] [added: 3,701] | | |
| Other | [removed: 1,025] [added: 971] | | | | [removed: 1,073] [added: 1,025] | | |
| Dividends payable | [removed: 1,188] [added: 1,258] | | | | [removed: 1,110] [added: 1,188] | | |
| Total current liabilities | [removed: 7,375] [added: 6,792] | | | | [removed: 7,070] [added: 7,375] | | |
| Long-term debt | [removed: 13,881] [added: 13,030] | | | | [removed: 12,843] [added: 13,881] | | |
| Deferred income taxes | [removed: 8,416] [added: 5,247] | | | | [removed: 4,667] [added: 8,416] | | |
| Accrued pension costs | [removed: 805] [added: 445] | | | | [removed: 1,277] [added: 805] | | |
| Accrued postretirement health care costs | [removed: 2,217] [added: 1,987] | | | | [removed: 2,245] [added: 2,217] | | |
| Other liabilities | [removed: 427] [added: 283] | | | | [removed: 447] [added: 427] | | |
| Total liabilities | [removed: 33,121] [added: 27,784] | | | | [removed: 28,549] [added: 33,121] | | |
| Contingencies (Note [removed: 19)] [added: 18)] | | | | | | | |
| Redeemable noncontrolling interest | 38 | | | | [removed: 37] [added: 38] | | |
| Additional paid-in capital | [removed: 5,893] [added: 5,952] | | | | [removed: 5,813] [added: 5,893] | | |
| Earnings reinvested in the business | [removed: 36,906] [added: 42,251] | | | | [removed: 27,257] [added: 36,906] | | |
| Accumulated other comprehensive losses | [removed: (2,052] [added: (1,897] | | ) | | [removed: (3,280] [added: (2,052] | | ) |
| | 2,225 | | | | 2,051 | | |
| Income taxes | 461 | | | | 269 | | |
| | 4,879 | | | | 4,835 | | |
| | 1,914 | | | | 1,958 | | |
| Cash effects of changes: | | | | | | | | | | | | | |
| Inventories | | | (171 | | ) | | (34 | | ) | | (33 | | ) |
| Pension and postretirement plans contributions | | | (294 | | ) | | (531 | | ) | | (28 | | ) |
| Acquisitions of businesses and assets | | | (415 | | ) | | (45 | | ) | | — | | |
| Net earnings (1) | — | | | | — | | | | 10,222 | | | | — | | | | — | | | | — | | | | 10,222 | | |
| Balances, December 31, 2017 | $ | 935 | | | $ | 5,952 | | | $ | 42,251 | | | $ | (1,897 | ) | | $ | (31,864 | ) | | $ | 3 | | | $ | 15,380 | |
Subsequently, Altria Group, Inc. purchased approximately 12 million ordinary shares of AB InBev, increasing Altria Group, Inc.’s ownership to approximately 10.2% at December 31, 2016.
In January 2017, Altria Group, Inc. acquired Nat Sherman, which joined PM USA and Middleton as part of Altria Group, Inc.’s smokeable products segment.
Stock Plans.
Group, Inc. groups assets and liabilities at the lowest level for which cash flows are separately identifiable.
▪Derivative Financial Instruments: In November 2017, Altria Group, Inc. adopted ASU No. 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which expands hedge accounting for both financial and nonfinancial risk components to better portray the economic results of an entity’s risk management activities in its financial statements.
In addition, the guidance includes certain targeted improvements to simplify the application of hedge accounting.
At adoption, Altria Group, Inc. had no derivative or nonderivative financial instruments designated in hedging relationships.
Adoption of the guidance had no impact on prior years.
Altria Group, Inc. enters into derivatives to mitigate the potential impact of certain market risks, including foreign currency exchange rate risk.
Altria Group, Inc. uses various types of derivative financial instruments, including forward contracts, options and swaps.
Derivative financial instruments that qualify for hedge accounting are designated as either fair value hedges, cash flow hedges or net investment hedges at the inception of the contracts.
For fair value hedges, changes in the fair value of the derivative, as well as the offsetting changes in the fair value of the hedged item, are recorded in the consolidated statements of earnings each period.
For net investment hedges, changes in the fair value of the derivative or foreign currency transaction gains or losses on a nonderivative hedging instrument are recorded in accumulated other comprehensive earnings (losses) to offset the change in the value
of the net investment being hedged.
Such amounts remain in accumulated other comprehensive earnings (losses) until the complete or substantially complete liquidation of the underlying foreign operations occurs or, for investments in foreign entities accounted for under the equity method of accounting, Altria Group, Inc.’s economic interest in the underlying foreign entity decreases.
To qualify for hedge accounting, the hedging relationship, both at inception of the hedge and on an ongoing basis, is expected to be highly effective at achieving the offsetting changes in the fair value of the hedged risk during the period that the hedge is designated.
Altria Group, Inc. formally designates and documents, at inception, the financial instrument as a hedge of a specific underlying exposure, the risk management objective, the strategy for undertaking the hedge transaction and method for assessing hedge effectiveness.
Additionally, for qualified hedges of forecasted transactions, if it becomes probable that a forecasted transaction will not occur, the hedge will no longer be effective and all of the derivative gains and losses would be recorded in the consolidated statement of earnings in the current period.
For financial instruments that are not designated as hedging instruments or do not qualify for hedge accounting, changes in fair value are recorded in the consolidated statements of earnings each period.
Compliance with environmental laws and regulations, including the payment of any remediation and compliance costs or damages and the making of related expenditures, has not had,
▪Income Taxes: Significant judgment is required in
Inventories that are measured using the FIFO and average cost methods are stated at the lower of cost and net realizable value.
customers.
| ASU No. 2017-07 Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Topic 715) | The guidance requires an employer to report the service cost component of net periodic pension cost and net periodic postretirement benefit cost in the same line item or items as other compensation costs arising from services rendered by employees during the period. The other components of net periodic pension cost and net periodic postretirement benefit cost are required to be presented in the statement of earnings separately from the service cost component and outside the subtotal of operating income. Additionally, only the service cost component is eligible for capitalization. | The guidance is effective for annual periods beginning after December 15, 2017 and interim periods within that reporting period. The guidance is required to be applied retrospectively for the presentation of the service cost component and the other components of net periodic pension cost and net periodic postretirement benefit cost in the statement of earnings, and prospectively for the capitalization of the service cost component. | Under the new guidance, the amount of non-service cost components of net periodic benefit cost (income) presented within operating income that would have been presented separately from operating income was $37 million, $(1) million and $151 million for the years ended December 31, 2017, 2016 and 2015, respectively. The prospective adoption of this guidance related to the capitalization of the service cost component will not have a material impact on Altria Group, Inc.’s consolidated financial statements. Altria Group, Inc. will adopt this guidance in the first quarter of 2018. |
| (in millions) | December 31, 2017 | | | | December 31, 2016 | | | | December 31, 2017 | | | | December 31, 2016 | | |
| | December 31, 2017 | | | | | | | | December 31, 2016 | | | | | | |
additional transactions occur that require the amortization of intangible assets.
| For the Year Ended December 31, 2017 | | | | | | | | | | | |
(1) The pre-tax implementation costs were included in cost of sales in Altria Group, Inc.’s consolidated statement of earnings.
See Note 16.
| | 2,051 | | | | 2,031 | | |
| | 4,835 | | | | 4,877 | | |
| | 1,958 | | | | 1,982 | | |
| | | | | | | | | | | | |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| Reductions of PMI and Mondelēz tax-related receivables | — | | | | 41 | | | | 2 | | |
| Cash effects of changes, net of the effects from acquisition of Green Smoke: | | | | | | | | | | | | | |
| Inventories | | | (34 | | ) | | (33 | | ) | | (184 | | ) |
| Pension plan contributions | | | (531 | | ) | | (28 | | ) | | (15 | | ) |
| Acquisition of Green Smoke, net of acquired cash | | | — | | | | — | | | | (102 | | ) |
| Balances, December 31, 2013 | $ | 935 | | | $ | 5,714 | | | $ | 25,168 | | | $ | (1,378 | ) | | $ | (26,320 | ) | | $ | (1 | ) | | $ | 4,118 | |
| Net earnings (losses) (1) | — | | | | — | | | | 5,070 | | | | — | | | | — | | | | (3 | | ) | | 5,067 | | |
Notes to Consolidated Financial Statements
_________________________
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.
Income Taxes and Note 10.
which cash flows are separately identifiable.
Gains and losses on derivative instruments reported in accumulated other comprehensive earnings (losses) are reclassified to the consolidated statements of earnings in the periods in which operating results are affected by the respective hedged item.
| | |
| --- | --- |
statements for pending litigation when it is determined that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.
The fair value of restricted stock and restricted stock units is determined based on the number of shares granted and the market value at date of grant.
Acquisition of Green Smoke
In April 2014, Nu Mark acquired the e-vapor business of Green Smoke, Inc. and its affiliates (“Green Smoke”) for a total purchase price of approximately $130 million.
The acquisition complements Nu Mark’s capabilities and enhances its competitive position by adding e-vapor experience, broadening product offerings and strengthening supply chain capabilities.
Green Smoke’s financial position and results of operations have been consolidated with Altria Group, Inc. as of April 1, 2014.
The purchase price allocation was completed in 2015.
Pro forma results, as well as net revenues and net earnings
for Green Smoke subsequent to the acquisition, have not been presented because the acquisition of Green Smoke is not material to Altria Group, Inc.’s consolidated results of operations.
Costs incurred to effect the acquisition, as well as integration costs, were recognized as expenses in the periods in which the costs were incurred.
For the years ended December 31, 2015 and 2014, Altria Group, Inc. incurred $7 million and $28 million, respectively, of pre-tax integration and acquisition-related costs, consisting primarily of contract termination costs, transaction costs and inventory adjustments, which were included in Altria Group, Inc.’s consolidated statements of earnings.
were recorded in the smokeable products segment ($25 million) and smokeless products segment ($29 million).
The initiative reduces spending on certain selling, general and administrative infrastructure and implements a leaner organizational structure.
▪Other Programs: During 2014, PM USA sold its Cabarrus, North Carolina manufacturing facility for approximately $66 million in connection with the previously completed manufacturing optimization program associated with PM USA’s closure of the manufacturing facility in 2009.
As a result, during 2014, PM USA recorded a pre-tax gain of $10 million.
| Long-term assets | $ | 38,425 | |
| Long-term liabilities | $ | 13,960 | |
The fair value of Altria Group, Inc.’s equity investment in SABMiller at December 31, 2015 was based on unadjusted quoted prices in active markets and was classified in Level 1 of the fair value hierarchy.
Pursuant to the terms and conditions of an Irrevocable Undertaking, previously delivered by Altria Group, Inc. in November 2015, Altria Group, Inc. elected the PSA.
of the PSA.
An excerpt. Shown here: 40 of 800 rewritten, 40 of 432 added and 40 of 627 removed. The counts are complete. For every sentence, read Item 8. Financial Statements and Supplementary Data. in the FY2017 filing and the FY2016 filing.
Item 9B. Other Information.
1 rewritten, 0 added, 0 removed, 2 unchanged
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: 18, 2017] [added: 17, 2018] that will be filed with the SEC on or about April [removed: 6, 2017] [added: 5, 2018] (the “proxy statement”), and, except as indicated therein, made a part hereof.
Item 10. Directors, Executive Officers and Corporate Governance.
16 rewritten, 8 added, 3 removed, 14 unchanged
Refer to “Proposals Requiring Your Vote - Proposal 1 - Election of Directors,” “Ownership of Equity Securities of Altria - Section 16(a) Beneficial Ownership Reporting Compliance” and “Board and Governance Matters - Committees of [removed: the] [added: Our] Board of Directors” sections of the proxy statement.
Executive Officers as of February 13, [removed: 2017:][added: 2018:]
| Martin J. Barrington | Chairman, Chief Executive Officer and President | [removed: 63] [added: 64] |
| Daniel J. Bryant | Vice President and Treasurer | [removed: 47] [added: 48] |
| James E. Dillard III | Senior Vice President, Research, Development and [removed: Regulatory Affairs] [added: Sciences] | [removed: 53] [added: 54] |
| Ivan S. Feldman | Vice President and Controller | [removed: 50] [added: 51] |
| [removed: Clifford B. Fleet] [added: Kevin C. Crosthwaite, Jr.] | President and Chief Executive Officer, Philip Morris USA Inc. | [removed: 46] [added: 42] |
| William F. Gifford, Jr. | Executive Vice President and Chief Financial Officer | [removed: 46] [added: 47] |
| Craig A. Johnson | President and Chief Executive Officer, Altria Group Distribution Company | [removed: 64] [added: 65] |
| [removed: Denise F. Keane] [added: Murray R. Garnick] | Executive Vice President and General Counsel | [removed: 64] [added: 58] |
| Salvatore Mancuso | Senior Vice President, Strategy, Planning and Procurement | [removed: 51] [added: 52] |
| Brian W. Quigley | President and Chief Executive Officer, U.S. Smokeless Tobacco Company LLC | [removed: 43] [added: 44] |
| W. Hildebrandt Surgner, Jr. | [added: Vice President,] Corporate Secretary and [removed: Senior Assistant] [added: Associate] General Counsel | [removed: 51] [added: 52] |
| Charles N. Whitaker | Senior Vice President, Human Resources, Compliance and Information Services and Chief Compliance Officer | [removed: 50] [added: 51] |
| Howard A. Willard III | Executive Vice President and Chief Operating Officer | [removed: 53] [added: 54] |
Any waiver granted by Altria Group, Inc. to its principal executive officer, principal financial officer or controller under the Code of Conduct, and certain amendments to the Code of [added: Conduct, will be disclosed on Altria Group, Inc.’s website at www.altria.com within the time period required by applicable rules.]
Effective April 25, 2017, Mr. Crosthwaite was appointed President and Chief Executive Officer, Philip Morris USA Inc. Mr. Crosthwaite has been continuously employed by Altria
Group, Inc. subsidiaries in positions across their businesses, including Strategy and Business Development, Brand Management and Sales since 1997.
Effective July 1, 2017, Mr. Garnick was appointed Executive Vice President and General Counsel of Altria Group, Inc. Mr. Garnick previously served as Deputy General Counsel of
Altria Client Services LLC and has been continuously employed by Altria Group, Inc. or its subsidiaries since 2008.
Effective August 24, 2017, Mr. Dillard, previously Senior Vice President, Research, Development and Regulatory Affairs of Altria Group, Inc., was appointed Senior Vice President, Research, Development and Sciences of Altria Group, Inc.
Effective January 1, 2018, Mr. Surgner, previously Corporate Secretary and Senior Assistant General Counsel of Altria Group, Inc., was appointed Vice President, Corporate Secretary and Associate General Counsel of Altria Group, Inc.
As previously announced, effective upon the conclusion of the Annual Meeting of Shareholders on May 17, 2018, Mr. Barrington will retire as Chairman, Chief Executive Officer and President and Mr. Willard will become Chairman and Chief Executive Officer.
Additionally, Mr. Gifford will become Vice Chairman and Chief Financial Officer, effective upon the conclusion of the Annual Meeting of Shareholders.
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.
Conduct, will be disclosed on Altria Group, Inc.’s website at www.altria.com within the time period required by applicable rules.
Item 11. Executive Compensation.
1 rewritten, 0 added, 0 removed, 0 unchanged
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: 2016”] [added: 2017”] and “Board and Governance Matters - Directors - Director Compensation” sections of the proxy statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
2 rewritten, 2 added, 2 removed, 13 unchanged
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: 2016,] [added: 2017,] were as follows:
| (3) | Includes [removed: 39,046,757] [added: 38,161,242] shares available under the 2015 Performance Incentive Plan and [removed: 954,574] [added: 920,942] shares available under the 2015 Stock Compensation Plan for Non-Employee Directors, and excludes shares reflected in column (a). |
| Equity compensation plans approved by shareholders (1) | 2,606,482 (2) | $— | 39,082,184 (3) |
| (2) | Represents 2,384,501shares of restricted stock units and 221,981 shares that may be issued upon vesting of performance stock units if maximum performance measures are achieved. |
| Equity compensation plans approved by shareholders (1) | 1,951,214 (2) | $— | 40,001,331 (3) |
| (2) | Represents 1,951,214 shares of restricted stock units (also referred to as deferred stock). |
Item 15. Exhibits and Financial Statement Schedules.
58 rewritten, 4 added, 6 removed, 116 unchanged
| Consolidated Balance Sheets at December 31, [removed: 2016] [added: 2017] and [removed: 2015] [added: 2016] | [removed: [38](#s4CEB450F12855C34995C6EF0E250FF24)] [added: [39](#s91DB9E2A5CD553B9B955BC1A9BF8E3B3)] |
| Consolidated Statements of Earnings for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] | [removed: [40](#sF11613A8D9CE54FDACD1868181EE7329)] [added: [41](#s0DA05F2BEAA45663815BE5DBE8B5838F)] |
| Consolidated Statements of Comprehensive Earnings for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] | [removed: [41](#s8653E1386D495F2A9A4BA30CEC101B83)] [added: [42](#sA397A2D5785E516297947A411DF54654)] |
| Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] | [removed: [42](#s2291EA2C15E3522EAA463D795F39485F)] [added: [43](#sEB37BF3C396753F2B78C93F529962F9F)] |
| Consolidated Statements of Stockholders’ Equity for the years ended December 31, [removed: 2016, 2015] [added: 2017, 2016] and [removed: 2014] [added: 2015] | [removed: [43](#s7192A47CBAF65BACACF7E6B26FDB87E4)] [added: [44](#sE7A1FB4ACC015628B969C369155DB857)] |
| Notes to Consolidated Financial Statements | [removed: [44](#s9974483CA8365BFE86E0EB676DFA6308)] [added: [45](#sEAD96F31C8EA50C59A865676529C8E72)] |
| Report of Independent Registered Public Accounting Firm | [removed: [112](#s621BA329A7D85B75A46B670C8313AEAE)] [added: [109](#s09E7F9FB15A5517389722FB8CDC79AAC)] |
| Report of Management on Internal Control Over Financial Reporting | [removed: [113](#sC0C530F6AD675F608EF0D0A15304241D)] [added: [110](#sF2E8FC186092578CA66EFA3F0CA3E984)] |
In accordance with Regulation S-X Rule 3-09, the audited financial statements of AB InBev for the year ended December 31, [removed: 2016] [added: 2017] will be filed by amendment within six months after AB InBev’s year ended December 31, [removed: 2016.][added: 2017.]
| | 2.1 | | [removed: Distribution] [added: [Distribution] Agreement by and between Altria Group, Inc. and Kraft Foods Inc. (now known as Mondelēz International, Inc.), dated as of January 31, 2007. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on January 31, 2007 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000119312507017014/dex21.htm)] |
| | 2.2 | | [removed: Distribution] [added: [Distribution] Agreement by and between Altria Group, Inc. and Philip Morris International Inc., dated as of January 30, 2008. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on January 30, 2008 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000119312508015121/dex21.htm)] |
| | 2.3 | | [removed: Agreement] [added: [Agreement] and Plan of Merger by and among UST Inc., Altria Group, Inc., and Armchair Merger Sub, Inc., dated as of September 7, 2008. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on September 8, 2008 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000119312508191587/dex21.htm)] |
| | 2.4 | | [removed: Amendment] [added: [Amendment] No. 1 to the Agreement and Plan of Merger, dated as of September 7, 2008, by and among UST Inc., Altria Group, Inc., and Armchair Merger Sub, Inc., dated as of October 2, 2008. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on October 3, 2008 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000119312508205684/dex21.htm)] |
| | 3.1 | | [removed: Articles] [added: [Articles] of Amendment to the Restated Articles of Incorporation of Altria Group, Inc. and Restated Articles of Incorporation of Altria Group, Inc. Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2002 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000095011703001167/ex3-1.htm)] |
| | 3.2 | | [removed: Amended] [added: [Amended] and Restated By-laws of Altria Group, Inc., effective as of October 28, 2015. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on October 29, 2015 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000076418015000093/exhibit31amendedandrestate.htm)] |
| | 4.2 | | [removed: First] [added: [First] Supplemental Indenture to Indenture, dated as of December 2, 1996, between Altria Group, Inc. and The Bank of New York (as successor in interest to JPMorgan Chase Bank, formerly known as The Chase Manhattan Bank), as Trustee, dated as of February 13, 2008. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on February 15, 2008 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000119312508032447/dex41.htm)] |
| | 4.3 | | [removed: Indenture] [added: [Indenture] among Altria Group, Inc., as Issuer, Philip Morris USA Inc., as Guarantor, and Deutsche Bank Trust Company Americas, as Trustee, dated as of November 4, 2008. Incorporated by reference to Altria Group, Inc.’s Registration Statement on Form S-3 filed on November 4, 2008 (No. [removed: 333-155009).] [added: 333-155009).](http://www.sec.gov/Archives/edgar/data/764180/000119312508224082/dex45.htm)] |
| | 4.4 | | [removed: Amended] [added: [Amended] and Restated 5-Year Revolving Credit Agreement, dated as of August 19, 2013, among Altria Group, Inc. and the Initial Lenders named therein and JPMorgan Chase Bank, N.A. and Citibank, N.A., as Administrative Agents. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on August 23, 2013 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000076418013000074/exhibit101-2013creditagree.htm)] |
| | 4.5 | | [removed: Extension] [added: [Extension] Agreement, effective August 19, 2014, among Altria Group, Inc. and the lenders thereto and JPMorgan Chase Bank, N.A. and Citibank, N.A., as Administrative Agents. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on August 21, 2014 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000076418014000066/exh101amendedandrestatedcr.htm)] |
| | 4.6 | | [removed: Extension] [added: [Extension] Agreement, effective August 19, 2015, among Altria Group, Inc. and the lenders thereto and JPMorgan Chase Bank, N.A. and Citibank, N.A., as Administrative Agents. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on August 21, 2015 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000076418015000075/exh101amendedandrestatedcr.htm)] |
| | 10.10 | | [removed: Stipulation] [added: [Stipulation] and Agreed Order Regarding Stay of Execution Pending Review and Related Matters, dated as of May 7, 2001. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on May 8, 2001 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000095013001501352/dex992.txt)] |
| | 10.11 | | [removed: Term] [added: [Term] Sheet effective December 17, 2012, between Philip Morris USA Inc., the other participating manufacturers, and various states and territories for settlement of the 2003 - 2012 Non-Participating Manufacturer Adjustment with those states. Incorporated by reference to Altria Group, Inc.’s Current Report on From 8-K filed on December 18, 2012 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000076418012000037/exhibit101termsheet.htm)] |
| | 10.12 | | [removed: Employee] [added: [Employee] Matters Agreement by and between Altria Group, Inc. and Kraft Foods Inc. (now known as Mondelēz International, Inc.), dated as of March 30, 2007. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on March 30, 2007 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000119312507070747/dex102.htm)] |
| | 10.13 | | [removed: Tax] [added: [Tax] Sharing Agreement by and between Altria Group, Inc. and Kraft Foods Inc. (now known as Mondelēz International, Inc.), dated as of March 30, 2007. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on March 30, 2007 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000119312507070747/dex103.htm)] |
| | 10.14 | | [removed: Intellectual] [added: [Intellectual] Property Agreement by and between Philip Morris International Inc. and Philip Morris USA Inc., dated as of January 1, 2008. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on March 28, 2008 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000119312508069389/dex104.htm)] |
| | 10.15 | | [removed: Employee] [added: [Employee] Matters Agreement by and between Altria Group, Inc. and Philip Morris International Inc., dated as of March 28, 2008. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on March 28, 2008 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000119312508069389/dex102.htm)] |
| | 10.16 | | [removed: Tax] [added: [Tax] Sharing Agreement by and between Altria Group, Inc. and Philip Morris International Inc., dated as of March 28, 2008. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on March 28, 2008 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000119312508069389/dex103.htm)] |
| | 10.17 | | [removed: Guarantee] [added: [Guarantee] made by Philip Morris USA Inc., in favor of the lenders party to the 5-Year Revolving Credit Agreement, dated as of June 30, 2011, among Altria Group, Inc., the lenders named therein, and JPMorgan Chase Bank, N.A. and Citibank, N.A., as Administrative Agents, dated as of June 30, 2011. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on June 30, 2011 (File No. [removed: 1-08940).] [added: 1-08940).](http://www.sec.gov/Archives/edgar/data/764180/000119312511178979/dex102.htm)] |
| | [removed: 10.18] [added: 10.23] | | [removed: Financial Counseling Program.] [added: Automobile Policy.] Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, [removed: 2009] [added: 1997] (File No. 1-08940).* |
| | [removed: 10.19] [added: 10.18] | | [removed: Benefit] [added: [Benefit] Equalization Plan, effective September 2, 1974, as amended. Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2014 (File No. [removed: 1-08940).*] [added: 1-08940).*](http://www.sec.gov/Archives/edgar/data/764180/000076418015000022/exhibit1019benefitequaliza.htm)] |
| | [removed: 10.20] [added: 10.19] | | [removed: Amendment] [added: [Amendment] to Benefit Equalization Plan, effective March 31, 2016. Incorporated by reference to Altria Group, Inc.’s Quarterly Report on Form 10-Q for the period ended March 31, 2016 (File No. [removed: 1-08940).*] [added: 1-08940).*](http://www.sec.gov/Archives/edgar/data/764180/000076418016000143/exhibit102amendmenttobenif.htm)] |
| | [removed: 10.22] [added: 10.21] | | 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: 10.23] [added: 10.22] | | [removed: Form] [added: [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. [removed: 1-08940).*] [added: 1-08940).*](http://www.sec.gov/Archives/edgar/data/764180/000119312506051165/dex104.htm)] |
| | [removed: 10.24] [added: 10.20] | | [removed: Automobile Policy.] [added: [Amendment to Benefit Equalization Plan, effective January 1, 2016 and October 1, 2016.] Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, [removed: 1997] [added: 2016] (File No. [removed: 1-08940).*] [added: 1-08940).*](http://www.sec.gov/Archives/edgar/data/764180/000076418017000028/exhibit1021actionbyplanadm.htm)] |
| | [removed: 10.26] [added: 10.24] | | [removed: Grantor] [added: [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. [removed: 1-08940).*] [added: 1-08940).*](http://www.sec.gov/Archives/edgar/data/764180/000119312511045778/dex1032.htm)] |
| | [removed: 10.27] [added: 10.25] | | [removed: Long-Term] [added: [Long-Term] Disability Benefit Equalization Plan, effective as of January 1, 1989, as amended. Incorporated by reference to Altria Group, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2009 (File No. [removed: 1-08940).*] [added: 1-08940).*](http://www.sec.gov/Archives/edgar/data/764180/000119312509160822/dex101.htm)] |
| | [removed: 10.28] [added: 10.26] | | [removed: Deferred] [added: [Deferred] Fee Plan for Non-Employee Directors, as amended and restated effective October 28, 2015. Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 (File No. [removed: 1-08940).*] [added: 1-08940).*](http://www.sec.gov/Archives/edgar/data/764180/000076418016000128/exhibit1027deferredfeeplan.htm)] |
| | [removed: 10.29] [added: 10.27] | | [removed: 2015] [added: [2015] Stock Compensation Plan for Non-Employee Directors, as amended and restated effective October 28, 2015. Incorporated by reference to Altria Group, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2015 (File No. [removed: 1-08940).*] [added: 1-08940).*](http://www.sec.gov/Archives/edgar/data/764180/000076418016000128/exhibit10282015stockcompen.htm)] |
| | [removed: 10.30] [added: 10.28] | | [removed: 2010] [added: [2010] Performance Incentive Plan, effective on May 20, 2010. Incorporated by reference to Altria Group, Inc.’s definitive proxy statement on Schedule 14A filed on April 9, 2010 (File No. [removed: 1-08940).*] [added: 1-08940).*](http://www.sec.gov/Archives/edgar/data/764180/000119312510080503/ddef14a.htm#toc10616_36)] |
| | [removed: 10.31] [added: 10.29] | | [removed: 2015] [added: [2015] Performance Incentive Plan, effective on May 1, 2015. Incorporated by reference to Altria Group, Inc.’s definitive proxy statement on Schedule 14A filed on April 9, 2015 (File No. [removed: 1-08940).*] [added: 1-08940).*](http://www.sec.gov/Archives/edgar/data/764180/000119312515123580/d871366ddef14a.htm#toc871366_72)] |
| | 10.40 | | [Agreement and General Release between Altria Group, Inc. and Denise F. Keane, dated June 29, 2017. Incorporated by reference to Altria Group, Inc.’s Quarterly Report on Form 10-Q for the period ended June 30, 2017 (File No. 1-08940).*](http://www.sec.gov/Archives/edgar/data/764180/000076418017000099/exhibit101agreementgeneral.htm) |
| | 21 | | [Subsidiaries of Altria Group, Inc.](https://www.sec.gov/Archives/edgar/data/764180/000076418018000028/exhibit21altriagroupincsub.htm) |
| | 24 | | [Powers of attorney.](https://www.sec.gov/Archives/edgar/data/764180/000076418018000028/exhibit24powersofattorney2.htm) |
| | 99.1 | | [Certain Litigation Matters.](https://www.sec.gov/Archives/edgar/data/764180/000076418018000028/exhibit991q42017.htm) |
| | | | |
| | 10.21 | | Amendment to Benefit Equalization Plan, effective January 1, 2016 and October 1, 2016.* |
| | 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).* |
| | 21 | | Subsidiaries of Altria Group, Inc. |
| | 24 | | Powers of attorney. |
| | 99.1 | | Certain Litigation Matters. |
An excerpt. Shown here: 40 of 58 rewritten, all 4 added and all 6 removed. The counts are complete. For every sentence, read Item 15. Exhibits and Financial Statement Schedules. in the FY2017 filing and the FY2016 filing.
Item 16. Form 10-K Summary.
6 rewritten, 0 added, 0 removed, 21 unchanged
Date: February 27, [removed: 2017][added: 2018]
| /s/ MARTIN J. BARRINGTON (Martin J. Barrington) | | | Director, Chairman, Chief Executive Officer and President | | February 27, [removed: 2017] [added: 2018] |
| /s/ WILLIAM F. GIFFORD, JR. (William F. Gifford, Jr.) | | | Executive Vice President and Chief Financial Officer | | February 27, [removed: 2017] [added: 2018] |
| /s/ IVAN S. FELDMAN (Ivan S. Feldman) | | | Vice President and Controller | | February 27, [removed: 2017] [added: 2018] |
| * GERALD L. BALILES, JOHN T. CASTEEN III, DINYAR S. DEVITRE, THOMAS F. FARRELL II, [removed: THOMAS W. JONES,] DEBRA J. KELLY-ENNIS, W. LEO KIELY III, KATHRYN B. MCQUADE, GEORGE MUÑOZ, [added: MARK E. NEWMAN,] NABIL Y. [removed: SAKKAB] [added: SAKKAB, VIRGINIA E. SHANKS, HOWARD A. WILLARD III] | | | Directors | | |
| *By: | /s/ MARTIN J. BARRINGTON (MARTIN J. BARRINGTON ATTORNEY-IN-FACT) | | | | February 27, [removed: 2017] [added: 2018] |