Altria Group (MO) 10-K risk factor changes: FY2019 vs FY2018

[removed: The] [added: *The] following risk factors should be read carefully in connection with evaluating our business and the forward-looking statements contained in this Annual Report on Form 10-K.

Any of the following risks could materially adversely affect our business, our results of operations, our cash flows, our financial position and the actual outcome of matters as to which forward-looking statements are made in this Annual Report on Form [removed: 10-K.][added: 10-K.*]

[removed: Unfavorable] [added: Unfavorable] litigation outcomes could materially adversely affect the consolidated results of operations, cash flows or financial position of Altria or the businesses of one or more of its [removed: subsidiaries.][added: subsidiaries or investees.]

Legal proceedings covering a wide range of matters are pending or threatened in various United States and foreign jurisdictions [added: against Altria and its subsidiaries, including PM USA and USSTC, as well as their respective indemnitees and Altria’s investees.]

[removed: (1) This] [added: *(1)* *This] section uses the terms “we,” “our” and “us” when it is not necessary to distinguish among Altria and its various operating subsidiaries or when any distinction is clear from the [removed: context.][added: context.*]

Various types of claims may be raised in these proceedings, including product liability, [removed: consumer protection,] [added: unfair trade practices,] antitrust, tax, contraband-related claims, patent infringement, employment matters, claims for contribution and claims of competitors, shareholders and distributors.

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

Although we cannot predict the outcome of such challenges, it is possible that the consolidated results of operations, cash flows or financial position of Altria, or the businesses of one or more of its [removed: subsidiaries,] [added: subsidiaries or investees,] could be materially adversely affected in a particular fiscal quarter or fiscal year by an unfavorable outcome of one or more such challenges.

In certain litigation, [removed: Altria and] [added: Altria,] its subsidiaries [added: and its investees] may face potentially significant non-monetary [removed: remedies, which may cause reputational harm.][added: remedies.]

It is possible that the consolidated results of operations, cash flows or financial position of Altria, or the businesses of one or more of its [removed: subsidiaries,] [added: subsidiaries or investees,] could be materially adversely affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation.

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

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

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

[removed: More broadly, 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 standards that may be proposed by the FDA for nicotine and flavors), limit adult tobacco consumer choices, delay or prevent the launch of new or modified tobacco products or products with claims of reduced risk, require the recall or other removal of tobacco products from the marketplace (for example as a result of product contamination, rulemaking that bans [removed: menthol,] [added: menthol or other flavors,] a determination by the FDA that one or more tobacco products do not satisfy the statutory requirements for substantial equivalence, because the FDA requires that a [removed: currently-marketed] [added: currently marketed] tobacco product proceed through the pre-market review process or because the FDA otherwise determines that removal is necessary for the protection of public health), 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.

[added: Continued growth in these categories could have a material adverse] impact on the business, [removed: consolidated] results of operations, cash flows or financial position of Altria and its tobacco subsidiaries.

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

[removed: Tobacco] [added: Tobacco] products are subject to substantial taxation, which could have an adverse impact on sales of the tobacco products of Altria’s tobacco [removed: subsidiaries.][added: subsidiaries.]

For further discussion, see [removed: Tobacco] [added: *Tobacco] Space - Business Environment - Excise [removed: Taxes] [added: Taxes*] in Item [removed: 7.][added: 7*.*]

[removed: Our] [added: Our] tobacco businesses face significant competition (including across categories) and their failure to compete effectively could have an adverse effect on the consolidated results of operations or cash flows of Altria, or the business of Altria’s tobacco [removed: subsidiaries.][added: subsidiaries.]

[removed: A] [added: This] highly competitive environment could negatively impact the profitability, market share and shipment volume of our tobacco subsidiaries, which could have an adverse effect on the consolidated results of operations or cash flows of Altria.

See [removed: Tobacco] [added: *Tobacco] Space - Business [removed: Environment] [added: Environment*] - [removed: Summary] [added: *Summary*] in Item 7 for additional discussion concerning evolving adult tobacco consumer preferences, including e-vapor products.

[removed: Continued growth in these categories] [added: Altria’s subsidiaries] could [added: decide or be required to recall products, which could] have a material adverse [removed: impact] [added: effect] on the business, [added: reputation, consolidated] results of operations, cash flows or financial position of [removed: PM USA] [added: Altria] and [removed: USSTC.][added: its subsidiaries.]

PM USA also faces competition from [removed: lowest priced] [added: lower-priced] brands sold by certain United States and foreign manufacturers that have cost advantages because they are not parties to settlements of certain tobacco litigation in the United States.

These manufacturers may fail to comply with related state escrow legislation or may avoid escrow deposit obligations on the majority of their sales by concentrating on certain states [added: where escrow deposits are not required or are required on fewer than all such manufacturers’ cigarettes sold in such states.]

Additional competition has resulted from diversion into the United States market of cigarettes intended for sale outside the United States, the sale of counterfeit cigarettes by third parties, the sale of cigarettes by third parties over the Internet and by other means designed to avoid collection of applicable taxes, and imports of foreign [removed: lowest priced] [added: lower-priced] brands.

[removed: Altria] [added: Altria] and its subsidiaries may be unsuccessful in anticipating changes in adult consumer preferences, responding to changes in consumer purchase behavior or managing through difficult competitive and economic conditions, which could have an adverse effect on the consolidated results of operations and cash flows of Altria or the business of Altria’s tobacco [removed: subsidiaries.][added: and wine subsidiaries.]

See [removed: Tobacco] [added: *Tobacco] Space - Business [removed: Environment] [added: Environment*] - [removed: Summary] [added: *Summary*] in Item 7 and the immediately preceding risk factor for additional discussion concerning evolving adult tobacco consumer preferences, specifically the growth of e-vapor and other innovative tobacco products and the effects on our tobacco operating companies.

[added: If parties to PMCC’s leases fail to manage through difficult economic and] competitive conditions, PMCC may have to increase its allowance for losses, which would adversely affect our earnings.

[removed: Altria’s] [added: Altria’s] tobacco subsidiaries and investees 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 streams and/or put them at a competitive [removed: disadvantage.][added: disadvantage.]

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, such as [added: electronically heated tobacco products, oral nicotine pouches such as Helix’s *on!* products, and] e-vapor products.

[removed: This] [added: Our] minority investment [added: in JUUL] subjects us to non-competition obligations restricting us from investing or engaging in the e-vapor business other than through JUUL, subject to [removed: limited] [added: certain] exceptions.

Our tobacco subsidiaries and investees may not succeed in their efforts to [removed: introduce such new] [added: develop and commercialize these adjacent] 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 [added: innovative] products [added: (including products] with claims of reduced risk to adult [removed: consumers,] [added: 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 [added: these products will appeal to] adult tobacco [added: consumers or whether adult tobacco] consumers’ purchasing decisions would be affected by [removed: reduced risk] [added: reduced-risk] claims [added: on such products] if permitted.

If our tobacco subsidiaries or investees do not succeed in their efforts to develop and commercialize innovative tobacco products or to obtain regulatory approval for the marketing or sale of [removed: products] [added: products, including] with claims of reduced risk, but one or more of their competitors [removed: do] [added: does] succeed, our tobacco subsidiaries or investees may be at a competitive disadvantage, which could have an adverse effect on their financial performance.

[removed: Significant] [added: Significant] changes in price, availability or quality of tobacco, other raw materials or component parts could have an adverse effect on the profitability and business of Altria’s tobacco [removed: subsidiaries.][added: subsidiaries.]

For further discussion, see [removed: Tobacco Space] [added: *Wine Segment] - Business [removed: Environment -][added: Environment* in Item 7.]

[added: For further discussion, see *Tobacco Space - Business Environment -] Price, Availability and [removed: Quality of] [added: Quality* *of] Tobacco, Other Raw Materials and Component [removed: Parts] [added: Parts*] in Item [removed: 7.][added: 7*.*]

[removed: Because] [added: Because] Altria’s tobacco subsidiaries rely on a few significant facilities and a small number of 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 and its tobacco [removed: subsidiaries.][added: subsidiaries.]

A natural or man-made disaster or other disruption that affects the manufacturing operations of any of Altria’s tobacco [removed: subsidiaries or] [added: subsidiaries,] the operations of any key [removed: suppliers] [added: supplier] of any of Altria’s tobacco [removed: subsidiaries, including as a result] [added: subsidiaries or any other disruption in the supply] of [added: goods or services from] a key [added: supplier (including a key] supplier’s [added: inability to comply with government regulations or] unwillingness to supply goods or services to a tobacco [removed: company,] [added: company)] could adversely impact the operations of the affected subsidiaries.

Additionally, the *on!* transaction, discussed in Note 1.

*Background and Basis of Presentation* to the consolidated financial statements in Item 8 (“Note 1”), is the subject of pending arbitration.

An unfavorable decision could adversely affect Helix’s ability to compete effectively with oral nicotine pouches.

In 2019, we determined that our investment in JUUL was impaired in part due to the increase in the number and type of legal cases pending against JUUL, especially in the fourth quarter of 2019.

This impairment and the risks associated with our JUUL investment are discussed further in *The expected benefits of the JUUL transaction may not materialize in the expected manner or timeframe or at all*.

More broadly, 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

Any one or more of these actions may have a material adverse impact on the business, consolidated results of operations, cash flows or financial position of Altria and its tobacco subsidiaries, including adversely affecting Altria’s investment in JUUL.

See *Wine Segment - Business Environment* - *Summary* in Item 7 for additional discussion concerning evolving adult alcohol consumer preferences; specifically the slowing of the premium wine category and the effects on our wine subsidiaries.

In addition to internal product development, these efforts include arrangements with, or investments in, third parties such as our exclusive arrangement with PMI to sell *IQOS* and related heatstick products in the United States, which is dependent upon our continued ability to license these products from PMI, and our minority investment in JUUL.

See *Tobacco Space - Business Environment - FSPTCA and FDA Regulation* in Item 7 for further discussion.

For example, the Richmond, Virginia manufacturing facility is the primary facility for manufacturing all PM USA cigarettes and some of our other tobacco products.

An extended disruption in operations experienced

For further discussion, see *Tobacco Space - Business Environment - Other International, Federal, State and Local Regulation and Governmental and Private Activity* in Item 7.

Although we seek to maintain or improve our credit ratings

Additionally, there can be no assurance that we will be able to dispose of our businesses or investments on favorable terms, which may result in a loss in Altria’s consolidated statements of earnings.

In the fourth quarter of 2019, in the wine segment, Altria determined that the goodwill of $74 million was fully impaired as the wine reporting unit was impacted by a slowing growth rate in the premium wine category and higher inventory levels.

(See Note 4.

Michelle’s wine business.

Ste.

Michelle’s business also is impacted by evolving adult consumer preferences.

Shifts away from the wine category to other alcohol categories or shifts to lower-priced wines have resulted, and could continue to result, in slowing growth in Ste.

Michelle’s sales and higher inventory levels and have an adverse effect on Ste.

The Federal Trade Commission (“FTC”) may challenge the investment through litigation or administrative proceedings, potentially seeking a range of resolutions, such as modifications to the investment structure or economic terms, up to divestiture of the investment.

In April 2019, Altria and JUUL received a request for additional information (commonly referred to as a “second request”) from the FTC as part of the antitrust review process.

A second request extends the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”), while the FTC conducts its review, until 30 days after the parties have substantially complied with the second request or as otherwise agreed to by the parties.

As of October 30, 2019, Altria and JUUL certified substantial compliance with the second request.

Based on the timing agreement among Altria, JUUL and the FTC staff and related extensions for the convenience of the parties, Altria believes the FTC will complete its review in the first half of 2020.

While conducting its review, on October 1, 2019, the FTC issued a Civil Investigative Demand to Altria seeking information regarding, among other things, Altria’s role in the resignation of JUUL’s former chief executive officer and the hiring by JUUL of any current or former Altria director, executive or employee.

board of directors.

The expected benefits of the JUUL transaction may not materialize in the expected manner or timeframe or at all.

As discussed in Note 19, JUUL and Altria and/or its subsidiaries, including PM USA, are named as defendants in various individual and class action lawsuits.

JUUL also is named in a significant number of additional individual and class action lawsuits to which neither Altria nor its subsidiaries is a party.

As discussed in Note 7, in 2019, as part of the preparation of our financial statements for the periods ended September 30, 2019 and December 31, 2019, we performed valuations of our investment in JUUL.

As a result, we determined that our investment in JUUL was impaired and recorded a total pre-tax impairment charge of $8.6 billion for the year ended December 31, 2019, reported as impairment of JUUL equity securities in our consolidated statements of earnings.

Of this amount, Altria recorded pre-tax charges of $4.5 billion in the third quarter of 2019 and $4.1 billion in the fourth quarter of 2019.

The third quarter impairment charge was due primarily to lower e-vapor sales volume assumptions in the U.S. and international markets and a delay in achieving operating margin performance, as compared to the assumptions at the time of the JUUL transaction.

The fourth quarter impairment charge resulted substantially from increased discount rates applied to future cash flow projections, due to the increase in the number and type of legal cases pending against JUUL during the fourth quarter of 2019.

While we believe the December 31, 2019 valuation of $4.2 billion is the appropriate current fair value of our investment, the risks identified in this paragraph, some of which are also further discussed in Note 19 and in Item 7.

*Tobacco Space - Business Environment*, are ongoing with respect to the current fair value.

If the fair value of our investment in JUUL continues to decrease, it could have a material adverse effect on Altria’s consolidated financial position or earnings.

against Altria and its subsidiaries, including PM USA and UST and its subsidiaries, as well as their respective indemnitees.

Any one or more of these actions may have a material adverse

where escrow deposits are not required or are required on fewer than all such manufacturers’ cigarettes sold in such states.

If parties to PMCC’s leases fail to manage through difficult economic and

These efforts include arrangements with, or investments in, third parties such as our minority investment in JUUL.

The failure of Altria’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 and its subsidiaries.

We continue to make investments in

it will always protect against improper actions by employees, investees or third parties.

For further discussion, see Wine Segment - Business Environment in Item 7.

the dividends that we receive from AB InBev will convert into fewer U.S. dollars.

See Item 7.

Furthermore, if our percentage ownership in JUUL were to decrease below certain levels, we would lose certain of our governance, consent, preemptive and other rights with respect to our investment in JUUL and may be unable to account for the investment under the equity method.

for at least six years, which may be extended at our election.

In addition, following receipt of antitrust clearance, our designees will comprise no more than one third of the members of the JUUL Board of Directors.

The proposed transaction is subject to a number of closing conditions, including receipt of required regulatory approval, which may take longer than expected.

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

The following discussion should be read in conjunction with the other sections of this Annual Report on Form 10-K, including the consolidated financial statements and related notes contained in Item 8, and the discussion of [removed: cautionary] [added: risk] factors that may affect future results in Item 1A.

[removed: Description] [added: Description] of the [removed: Company][added: Company]

Business, and [removed: Background] [added: *Background*] in Note 1.

[removed: Background and Basis of Presentation] [added: *Benefit Plans*] to the consolidated financial statements in Item 8 (“Note [removed: 1”).][added: 17”).]

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

[removed: Executive Summary][added: Executive Summary]

[removed: Consolidated] [added: Consolidated] Results of [removed: Operations][added: Operations]

The changes in Altria’s net earnings [added: (losses)] and diluted [removed: earnings per share (“EPS”)] [added: EPS] attributable to Altria for the year ended December 31, [removed: 2018,] [added: 2019,] from the year ended December 31, [removed: 2017,] [added: 2018,] were due primarily to the following:

| [removed: (in] [added: (in] millions, except per share [removed: data)] [added: data)] | [removed: Net Earnings] [added: Net Earnings] | | | | [removed: Diluted EPS] [added: Diluted EPS] | | |

| For the year ended December 31, [removed: 2017] [added: 2019] | [removed: $] [added: $] | [removed: 10,222] [added: (1,293] | [added: )] | | [removed: $] [added: $] | [removed: 5.31] [added: (0.70] | [added: )] |

| [removed: 2017] [added: 2018] NPM Adjustment Items | [removed: 2] [added: (109] | | [added: )] | | [removed: —] [added: (0.06] | | [added: )] |

| [removed: 2017] Asset impairment, exit, implementation and acquisition-related costs | [removed: 55 | | | | 0.03] [added: 0.15] | | |

| [removed: 2017] Tobacco and health litigation items | [removed: 50 | | | | 0.03] [added: 0.03] | | |

| 2018 Asset impairment, exit, implementation and acquisition-related costs | [removed: (432] [added: 432] | | [removed: )] | | [removed: (0.23] [added: 0.23] | | [removed: )] |

| 2018 Tobacco and health litigation items | [removed: (98] [added: 98] | | [removed: )] | | [removed: (0.05] [added: 0.05] | | [removed: )] |

| 2018 [removed: AB InBev] [added: ABI-related] special items | [removed: 68] [added: (68] | | [added: )] | | [removed: 0.03] [added: (0.03] | | [added: )] |

| 2018 [removed: Loss] [added: (Gain) loss] on [removed: AB InBev/SABMiller] [added: ABI/SABMiller] business combination | [removed: (26] [added: 26] | | [removed: )] | | [removed: (0.01] [added: 0.01] | | [removed: )] |

| 2018 Tax items | [removed: (197] [added: 197] | | [removed: )] | | [removed: (0.11] [added: 0.11] | | [removed: )] |

| Subtotal 2018 special items | [removed: (576] [added: 576] | | [removed: )] | | [removed: (0.31] [added: 0.31] | | [removed: )] |

| Fewer shares outstanding | [removed: —] [added: —] | | | | [removed: 0.07] [added: 0.04] | | |

| Change in tax rate | [removed: 1,007] [added: (65] | | [added: )] | | [removed: 0.53] [added: (0.03] | | [added: )] |

[removed: See] [added: *See] the discussion of events affecting the comparability of statement of earnings [added: (losses)] amounts in the Consolidated Operating Results section of the following Discussion and [removed: Analysis.][added: Analysis.*]

| [removed: ▪] [added: ▪] | [removed: Fewer] [added: Fewer] Shares [removed: Outstanding:] [added: Outstanding:] Fewer shares outstanding during [removed: 2018] [added: 2019] compared with [removed: 2017] [added: 2018] were due primarily to shares repurchased by Altria under its share repurchase programs. |

| [removed: ▪] [added: ▪] | [removed: Operations:] [added: Operations:] The increase of [removed: $12] [added: $421] million in operations shown in the table above was due primarily to the following: |

| ▪ | higher earnings from Altria’s equity investment in [removed: AB InBev; and] [added: ABI;] |

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

[removed: For] [added: *For] further details, see the Consolidated Operating Results and Operating Results by Business Segment sections of the following Discussion and [removed: Analysis.][added: Analysis.*]

[removed: 2019] [added: 2020] Forecasted [removed: Results][added: Results]

[removed: In January 2019,] Altria [removed: forecasted] [added: forecasts] that its [removed: 2019] [added: 2020] full-year adjusted diluted EPS growth rate is expected to be in the range of 4% to 7% over its [removed: 2018] [added: 2019] full-year adjusted diluted EPS base of [removed: $3.99.][added: $4.22, as shown in the table below.]

Altria expects its [removed: 2019] [added: 2020] full-year adjusted effective tax rate will be in a range of [removed: approximately] 23.5% to 24.5%.

| [removed: Reconciliation] [added: Reconciliation] of [removed: 2018] [added: 2019] Reported Diluted EPS to [removed: 2018] [added: 2019] Adjusted Diluted [removed: EPS] [added: EPS] | | | |

| [removed: 2018] [added: 2019] Reported diluted EPS | [removed: $] [added: $] | [removed: 3.68] [added: (0.70] | [added: )] |

| [added: 2019] Asset impairment, exit, implementation and acquisition-related costs | [removed: 0.23] [added: (269] | | [added: )] | [added: | (0.15 | | ) |]

| [added: 2019] Tobacco and health litigation items | [removed: 0.05] [added: (58] | | [added: )] | [added: | (0.03 | | ) |]

| Tax items | [removed: 0.11] [added: (0.05] | | [added: )] |

| [removed: 2018] [added: 2019] Adjusted diluted EPS | [removed: $] [added: $] | [removed: 3.99] [added: 4.22] | |

These items may include, for example, [removed: loss on early extinguishment of debt,] restructuring charges, asset impairment charges, [removed: loss/gain on AB InBev/SABMiller business combination, AB InBev] [added: acquisition-related costs, equity investment-related] special [removed: items,] [added: items (including any changes in fair value for the equity investment and any related warrants and preemptive rights),] certain tax items, charges associated with tobacco and health litigation items, and resolutions of certain non-participating manufacturer (“NPM”) adjustment disputes under the 1998 Master Settlement Agreement (such dispute resolutions are referred to as “NPM Adjustment Items” and are more fully described in [removed: Health] [added: *Health] Care Cost Recovery Litigation - NPM Adjustment [removed: Disputes] [added: Disputes*] in Note 19).

Altria’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’s reported diluted EPS and [added: its] reported effective tax rate because these items, which could be significant, may be [added: unusual or] infrequent, are difficult to predict and may be highly variable.

| [added: (in millions)] | [removed: 2019] [added: 2019] | | |

| [removed: Asset impairment, exit, implementation] [added: Corporate asset impairment] and [removed: acquisition-related] [added: exit] costs [removed: (1)] | [removed: $] [added: (1] | [removed: 0.08] | [added: )] | [added: | — | | | | — | | |]

Effective with the first quarter of 2020, Altria’s smokeless products segment will be renamed as the oral tobacco products segment.

Altria’s oral tobacco products segment will include financial results, volume and retail share performance from USSTC’s core MST and snus businesses and Helix’s *on!* oral nicotine pouches.

Prior period volume and retail share data will be updated to reflect these changes.

| 2019 Impairment of JUUL equity securities | (8,600 | | ) | | (4.60 | | ) |

| 2019 ABI-related special items | 280 | | | | 0.15 | | |

| 2019 Cronos-related special items | (640 | | ) | | (0.34 | | ) |

| Subtotal 2019 special items | (9,188 | | ) | | (4.92 | | ) |

| Operations | 421 | | | | 0.22 | | |

| ▪ | Change in Tax Rate: The change in tax rate was driven primarily by lower dividends from ABI. |

| ▪ | lower spending as a result of Altria’s decision in 2018 to refocus its innovative product efforts; and |

partially offset by higher interest and other debt expense, net, due to debt incurred in connection with the Cronos and JUUL transactions.

Altria’s 2020 guidance reflects increased investments related to PM USA’s

commercialization efforts for *IQOS*, Helix’s plans to manufacture and expand U.S. distribution of *on!* and one extra shipping day in the first quarter of 2020.

| Impairment of JUUL equity securities | 4.60 | | |

| ABI-related special items | (0.15 | | ) |

| Cronos-related special items | 0.34 | | |

Upon antitrust clearance, Altria expects to account for its equity method investment in JUUL using the fair value option.

Under the fair value option, Altria’s consolidated statements of earnings (losses) will include any cash dividends from its investment in JUUL and any changes in the fair value of its investment, which will be calculated quarterly.

Altria believes the fair value option provides quarterly transparency to investors as to the fair market value of Altria’s investment in JUUL, given the changes and volatility in the e-vapor category since Altria’s initial investment, as well as the lack of publicly available information regarding JUUL’s business or a market-derived valuation.

amount of goodwill allocated to a reporting unit.

| Total | $ | 5,177 | | | $ | 11,676 | |

In performing the 2019 quantitative annual impairment test for the wine reporting unit, Altria concluded that the fair value of the unit as a whole was approximately 25% below its carrying value of approximately $1.5 billion after the impairment charge discussed above.

Altria also evaluated all wine reporting unit assets, including current assets, property, plant and equipment, and other long-lived assets other than goodwill and concluded that these assets were fairly stated at December 31, 2019.

During 2018, Altria’s quantitative annual impairment test of goodwill and indefinite-lived intangible assets resulted in $54 million of impairment charges.

*Investments in ABI and Cronos*

Altria reviews its equity investments accounted for under the equity method of accounting (ABI and Cronos) for impairment on a quarterly basis in connection with the preparation of its financial statements by comparing the fair value of each of its investments to their carrying value.

During 2019, the fair value increased and at September 30, 2019, the fair value of Altria’s equity investment in ABI exceeded its carrying value by 4%.

The fair value of Altria’s acquired common shares in Cronos at December 31, 2019 was $1.2 billion compared with its carrying value of $1.0 billion.

Altria will continue to assess the fair value of its acquired common shares in Cronos to determine if any decline in fair value below its carrying value is other than temporary.

For further discussion of Altria’s investments in ABI and Cronos, see Note 7.

*Investment in JUUL*

If this qualitative assessment indicates that Altria’s investment in JUUL may be impaired, a quantitative assessment is performed.

As part of the preparation of its financial statements for the periods ended September 30, 2019 and December 31, 2019, Altria performed its respective qualitative assessments of impairment indicators for its investment in JUUL and determined that indicators of impairment existed.

At September 30, 2019, these indicators included recent significant adverse changes in both the e-vapor regulatory environment and the industry in which JUUL operates.

At December 31, 2019, Altria determined that a significant increase in the number and types of legal cases pending against JUUL in the fourth quarter of 2019 and the expectation that this trend will continue resulted in an additional indicator of impairment.

Given the existence of these impairment indicators, Altria performed quantitative valuations of its investment in JUUL as of September 30, 2019 and December 31, 2019 and recorded total pre-tax charges of $8.6 billion for the year ended December 31, 2019, reported as impairment of JUUL equity securities in its consolidated statement of earnings (losses).

Of this amount, Altria recorded pre-tax charges of $4.5 billion in the third quarter of 2019 and $4.1 billion in the fourth quarter of 2019.

The third-quarter impairment charge was due primarily to lower e-vapor sales volume assumptions in the U.S. and international markets and a delay in achieving operating margin performance, as compared to the assumptions at the time of the JUUL Transaction.

The fourth-quarter impairment charge results substantially from increased discount rates applied to future cash flow projections, due to the significant risk created by the increase in number and types of legal cases pending against JUUL in the fourth quarter.

Although Altria has not made any assumptions or drawn any conclusions regarding the merits or likelihood of success of any of any of these cases, litigation is subject to uncertainty, and it is possible that there could be adverse developments in pending or future cases.

The financial services and the

As discussed in Note 1, on January 1, 2018, Altria adopted several accounting standard updates (“ASU”).

In connection with the adoption of two of these ASUs (ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash and ASU No. 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost), Altria restated certain prior year amounts.

| 2017 AB InBev special items | 105 | | | | 0.05 | | |

| 2017 Gain on AB InBev/SABMiller business combination | (289 | | ) | | (0.15 | | ) |

| 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 | | ) |

| 2018 NPM Adjustment Items | 109 | | | | 0.06 | | |

| Operations | 12 | | | | — | | |

| | |

| --- | --- |

| ▪ | Change in Tax Rate: The change in tax rate was driven primarily by the Tax Reform Act, which reduced the U.S. federal statutory corporate income tax rate from 35% to 21% effective January 1, 2018. For further discussion, see Note 15. |

partially offset by:

| ▪ | lower income from the smokeable products and wine segments; and |

| ▪ | higher investment spending in the innovative tobacco products businesses. |

This forecasted growth rate excludes the 2019 forecasted expense items in the second table below.

Altria’s 2019 guidance reflects its expectation for a higher full-year adjusted effective tax rate, primarily resulting from lower dividends from AB InBev; increased interest expense from the debt incurred from the Cronos and JUUL transactions; savings from the cost reduction program announced in December 2018, which Altria expects to build over the course of the year to an annualized level of approximately $575 million; and increased investments related to PM USA’s lead market plans for launching IQOS, once authorized by the FDA.

The guidance assumes little-to-no earnings or cash contributions from the Cronos and JUUL investments.

Altria expects the adjusted diluted EPS growth to come in the last three quarters of 2019, with a mid-single digit decline in the first quarter.

In the first quarter of 2019, Altria will have the increased interest expense without the full benefits of the cost reduction program and one fewer shipping day in the smokeable products segment.

| | 2018 | | |

| NPM Adjustment Items | (0.06 | | ) |

| AB InBev special items | (0.03 | | ) |

| Loss on AB InBev/SABMiller business combination | 0.01 | | |

| Expense Excluded from 2019 Forecasted Adjusted Diluted EPS | | | |

| | $ | 0.12 | |

(1) Represents $0.04 for acquisition-related costs associated with the Cronos and JUUL transactions and $0.04 for the cost reduction program announced in December 2018.

Altria reports its financial results in accordance with U.S. GAAP.

certain income and expense items, including those items noted above.

▪Revenue Recognition: On January 1, 2018, Altria adopted ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) and all related ASU amendments.

Substantially all of the goodwill and indefinite-lived intangible assets recorded by Altria at December 31, 2018 relate to the 2017 acquisition of Nat Sherman, the 2009 acquisition of UST and the 2007 acquisition of Middleton.

For goodwill and indefinite-lived intangible assets, the fair values are determined using discounted cash flows.

| Total | $ | 5,196 | | | $ | 11,846 | |

During 2018, Altria recorded goodwill and other intangible asset impairment charges of $111 million and $44 million, respectively, related to Altria’s decision in the fourth quarter of 2018 to refocus its innovative product efforts, which includes Nu Mark’s discontinuation of production and distribution of all e-vapor products.

assets.

At December 31, 2018, the estimated fair value of the wine reporting unit did not substantially exceed its carrying value.

At December 31, 2018, the wine reporting unit exceeded its carrying value of $1.5 billion by approximately 14%.

The wine reporting unit continues to be impacted by the slowing growth rate in the premium wine category and higher trade inventories.

assumptions, some of which relate to broader macroeconomic conditions outside of Altria’s control.

[removed: Interest Rates][added: Interest Rates]

At December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the fair value of Altria’s long-term [removed: debt] [added: debt, all of which is fixed-rate debt,] was [removed: $12.5] [added: $30.7] billion and [removed: $15.3] [added: $12.5] billion, respectively.

A 1% increase in market interest rates at December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] would decrease the fair value of Altria’s long-term debt by approximately [removed: $0.8] [added: $2.4] billion and [removed: $1.2] [added: $0.8] billion, respectively.

A 1% decrease in market interest rates at December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] would increase the fair value of Altria’s long-term debt by approximately [removed: $0.9] [added: $2.7] billion and [removed: $1.3] [added: $0.9] billion, respectively.

Interest rates on borrowings under the Credit Agreement are expected to be based on the London Interbank Offered Rate [removed: (“LIBOR”)] [added: (“LIBOR”), or a mutually agreed upon benchmark rate,] plus a percentage based on the higher of the ratings of Altria’s long-term senior unsecured debt from Moody’s and Standard & Poor’s.

The applicable percentage based on Altria’s long-term senior unsecured debt ratings at December 31, [removed: 2018] [added: 2019] for borrowings under the Credit Agreement was 1.0%.

At December 31, [added: 2019 and] 2018, Altria had no borrowings under the Credit Agreement.

Equity Price Risk

The estimated fair values of the Fixed-price Preemptive Rights and the Cronos warrant are subject to equity price risk.

The Fixed-price Preemptive Rights and warrant are recorded at fair value, which is estimated using Black-Scholes option-pricing models.

The fair values of the Fixed-price Preemptive Rights and Cronos warrant are subject to fluctuations resulting from changes in the quoted market price of Cronos shares, the underlying equity security.

At December 31, 2019, the fair values of the Fixed-price Preemptive Rights and Cronos warrant were $69 million and $234 million, respectively.

A 10% increase or decrease in the quoted market price of Cronos shares at December 31, 2019 would increase or decrease the fair values of the Fixed-price Preemptive Rights and Cronos warrant by approximately $13 million and $37 million, respectively.

[removed: General] [added: General] Development of [removed: Business][added: Business]

[removed: ▪General:] [added: ▪General:] Altria Group, Inc. (“Altria”) is a holding company incorporated in the Commonwealth of Virginia in 1985.

At December 31, [removed: 2018,] [added: 2019,] Altria’s wholly-owned subsidiaries included Philip Morris USA Inc. (“PM USA”), which is engaged in the manufacture and sale of cigarettes in the United States; John Middleton Co. (“Middleton”), which is engaged in the manufacture and sale of machine-made large cigars and pipe tobacco and is a wholly-owned subsidiary of PM USA; Sherman Group Holdings, LLC and its subsidiaries (“Nat Sherman”), which are engaged in the manufacture and sale of super premium cigarettes and the sale of premium cigars; [removed: and] UST LLC (“UST”), which through its wholly-owned subsidiaries, including U.S. Smokeless Tobacco Company LLC (“USSTC”) and Ste.

[removed: Altria’s other operating companies included] [added: Michelle”), is engaged in the manufacture and sale of smokeless tobacco products and wine; and] Philip Morris Capital Corporation (“PMCC”), which maintains a portfolio of finance assets, substantially all of which are leveraged [removed: leases, and Nu Mark LLC (“Nu Mark”), both of which are wholly-owned subsidiaries.][added: leases.]

In December 2018, Altria [removed: announced the decision to refocus] [added: refocused] its innovative product efforts, which included [removed: Nu Mark’s] [added: the] discontinuation of production and distribution of all e-vapor [added: products by Nu Mark*.* Prior to that time, Nu Mark was engaged in the manufacture and sale of innovative tobacco] products.

[added: In December 2018, Altria refocused its innovative product efforts, which included the discontinuation of production and distribution of all e-vapor products by Nu Mark LLC (“Nu Mark”)*.*] Prior to that time, Nu Mark was engaged in the manufacture and sale of innovative tobacco products.

[removed: Segment Reporting] [added: *Segment Reporting*] to the consolidated financial statements in Item 8.

In October 2016, Anheuser-Busch InBev SA/NV [removed: (“Legacy AB InBev”)] completed its business combination with SABMiller, and Altria received cash and shares representing a 9.6% ownership in the combined company (the [removed: “AB InBev] [added: “ABI] Transaction”).

The newly formed Belgian company, which retained the name Anheuser-Busch InBev SA/NV [removed: (“AB InBev”),] [added: (“ABI”),] became the holding company for the combined businesses.

Subsequently, Altria purchased approximately 12 million ordinary shares of [removed: AB InBev,] [added: ABI,] increasing Altria’s ownership to approximately 10.2% at [added: December 31, 2016.]

At December 31, [removed: 2018,] [added: 2019,] Altria had [removed: an approximate] [added: a] 10.1% ownership [removed: of AB InBev,] [added: in ABI,] which Altria accounts for under the equity method of accounting using a one-quarter lag.

For further [removed: discussion,] [added: discussion of Altria’s investments in equity securities,] see Note 7.

[removed: Investment] [added: *Investments] in [removed: AB InBev/SABMiller] [added: Equity Securities*] to the consolidated financial statements in Item 8 (“Note 7”).

[removed: On] [added: In] December [removed: 20,] 2018, [removed: Altria purchased,] [added: Altria,] through a wholly-owned subsidiary, [added: purchased] shares of non-voting convertible common stock of JUUL Labs, Inc. (“JUUL”), representing a 35% economic [removed: interest for $12.8 billion.][added: interest.]

JUUL is engaged in the manufacture and sale of e-vapor products [removed: globally.][added: globally and is the U.S. leader in e-vapor.]

At December 31, [removed: 2018,] [added: 2019,] Altria [removed: accounted for its investment] [added: had a 35% economic interest] in [removed: JUUL] [added: JUUL, which it accounts for] as an investment in an equity security.

[removed: ▪Source] [added: ▪Source] of [removed: Funds:] [added: Funds:] Because Altria is a holding company, its access to the operating cash flows of its wholly-owned subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany loans by its subsidiaries.

In addition, Altria receives cash dividends on its interest in [removed: AB InBev] [added: ABI] and will continue to do so as long as [removed: AB InBev] [added: ABI] pays dividends.

[removed: Narrative] [added: Narrative] Description of [removed: Business][added: Business]

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

[removed: Tobacco Space][added: Tobacco Space]

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

The products of Altria’s tobacco subsidiaries include [added: (i)] smokeable tobacco products, consisting of combustible cigarettes manufactured and sold by PM USA and Nat Sherman, machine-made large cigars and pipe tobacco manufactured and sold by Middleton and premium cigars sold by Nat Sherman; [added: and (ii)] smokeless tobacco products, consisting of moist smokeless tobacco (“MST”) and snus products manufactured and sold by [removed: USSTC;] [added: USSTC,] and [removed: innovative tobacco products, including e-vapor products previously] [added: oral nicotine pouches] manufactured and sold by [removed: Nu Mark.][added: Helix.]

[removed: ▪Cigarettes:] [added: *▪*Cigarettes:] PM USA is the largest cigarette company in the United States.

[removed: Marlboro,] [added: *Marlboro*,] the principal cigarette brand of PM USA, has been the largest-selling cigarette brand in the United States for [removed: over 40] [added: the past 45] years.

Total smokeable products segment’s cigarettes shipment volume in the United States was [removed: 109.8] [added: 101.8] billion units in [removed: 2018,] [added: 2019,] a decrease of [removed: 5.8%] [added: 7.3%] from [removed: 2017.][added: 2018.]

[removed: ▪Cigars:] [added: *▪*Cigars:] Middleton is engaged in the manufacture and sale of machine-made large cigars and pipe tobacco.

[removed: Black] [added: *Black] & [removed: Mild] [added: Mild*] is the principal cigar brand of Middleton.

Total smokeable products segment’s cigars shipment volume was approximately [removed: 1.6] [added: 1.7] billion units in [removed: 2018,] [added: 2019,] an increase of [removed: 3.8%] [added: 3.1%] from [removed: 2017.][added: 2018.]

[removed: ▪Smokeless] [added: *▪*Smokeless] tobacco [removed: products:] [added: products:] USSTC is the leading producer and marketer of MST products.

The smokeless products segment includes the premium brands, [removed: Copenhagen] [added: *Copenhagen*] and [removed: Skoal,] [added: *Skoal*,] and value brands, [removed: Red Seal] [added: *Red Seal*] and [removed: Husky.][added: *Husky,* sold by USSTC.]

Total smokeless products segment’s shipment volume was [removed: 832.6] [added: 807.0] million units in [removed: 2018,] [added: 2019,] a decrease of [removed: 1.0%] [added: 3.1%] from [removed: 2017.][added: 2018.]

[added: ▪Innovative tobacco products:] In December 2013, Altria’s subsidiaries entered into a series of agreements with Philip Morris International Inc. (“PMI”), including an agreement that grants Altria an exclusive right to commercialize certain of PMI’s heated tobacco products in the United States, subject to the United States Food and Drug Administration’s (“FDA”) [removed: authorization.][added: authorization of the applicable products.]

PMI submitted a pre-market tobacco product application [added: (“PMTA”)] and [removed: a] modified risk tobacco product application [added: with the FDA] for its electronically heated tobacco product, [removed: IQOS, with] [added: *IQOS.* In April 2019,] the [removed: FDA’s Center] [added: FDA authorized the PMTA] for [removed: Tobacco Products] [added: *IQOS*, which PM USA currently sells] in [removed: the first quarter of 2017 and the fourth quarter of 2016, respectively.][added: limited U.S. markets.]

[removed: ▪Distribution,] [added: ▪Distribution,] Competition and Raw [removed: Materials:] [added: Materials:] Altria’s tobacco subsidiaries sell their tobacco products principally to wholesalers (including [removed: distributors),] [added: distributors) and] large retail organizations, including chain [removed: stores, and the armed services.][added: stores.]

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

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

[added: The FSPTCA imposes restrictions on the advertising,] promotion, sale and distribution of tobacco products, including at retail.

In the United States, under a contract growing program, PM USA purchases the majority of its burley and flue-cured leaf tobaccos directly from [added: domestic] tobacco growers.

Under the terms of this program, PM USA agrees to purchase the amount of tobacco specified in the grower [removed: contracts.][added: contracts that meets PM USA’s grade and quality standards.]

As discussed below, Altria also owns an 80% interest in Helix Innovations LLC (“Helix”), which is engaged in the manufacture and sale of *on!* oral nicotine pouches.

During the third quarter of 2019, Helix acquired Burger Söhne Holding and its subsidiaries as well as certain affiliated companies (the “Burger Group”) that are engaged in the manufacture and sale of *on!* oral nicotine pouches.

At closing, Altria indirectly owned an 80% interest in Helix, for which Altria paid $353 million in the third quarter of 2019.

The financial results of Helix are included in Altria’s consolidated financial statements as part of its smokeless products segment, with the 20% minority ownership interest in Helix (held by the former shareholders of the Burger Group) included as a noncontrolling interest.

In March 2019, Altria, through a subsidiary, completed its acquisition of a 45% economic and voting interest in Cronos Group Inc. (“Cronos”), a global cannabinoid company headquartered in Toronto, Canada.

At December 31, 2019, Altria had a 45% economic and voting interest in Cronos, which Altria accounts for under the equity method of accounting using a one-quarter lag.

In addition, the smokeless products segment includes *on!* oral nicotine pouches sold by Helix.

For further discussion of these restrictions, see *Tobacco Space - Business Environment* in Item 7.

Adult consumer preferences among alcohol categories and within the wine category can shift due to a variety of factors, including changes in taste preferences, demographics or social trends, and changes in leisure, dining and beverage consumption patterns.

Evolving adult consumer preferences pose challenges to the wine category, which has seen slowing volume growth in the premium wine category and increases in inventory levels.

Michelle”), is engaged in the manufacture and sale of smokeless tobacco products and wine.

December 31, 2016.

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

If and when antitrust clearance is obtained, Altria’s non-voting shares will automatically convert to voting shares (“Share Conversion”).

Upon Share Conversion, Altria expects to account for its investment in JUUL under the equity method of accounting.

For further discussion, see Note 8.

Investment in JUUL to the consolidated financial statements in Item 8 (“Note 8”).

On December 7, 2018, Altria announced that it entered into an agreement to purchase, through a subsidiary, approximately 146.2 million newly issued common shares of Cronos Group Inc. (“Cronos”), a global cannabinoid company headquartered in Toronto, Canada.

Cronos shareholders approved the transaction on February 21, 2019.

The closing of this transaction remains subject to certain customary closing conditions, including receipt of required regulatory approval.

Altria expects the transaction to close in the first half of 2019.

Upon completion of this transaction, Altria will own an approximate 45% equity interest in Cronos.

Additionally, the agreement includes a warrant to purchase up to an additional approximately 72.2 million common shares of Cronos at a per share exercise price of Canadian dollar (“CAD”) $19.00.

The purchase price for the approximate 45% equity interest and warrant is approximately CAD $2.4 billion (approximately U.S. dollar (“USD”) $1.8 billion, based on the CAD to USD exchange rate on February 22, 2019), to be paid on the date of the closing of the transaction.

Upon full exercise of the warrant, which expires four years after issuance, Altria would own approximately 55% of the outstanding common shares of Cronos.

The exercise price for the warrant is approximately CAD $1.4 billion (approximately USD $1.0 billion, based on the CAD to USD exchange rate on February 22, 2019).

As part of the agreement, upon completion of this transaction, Altria will have the right to nominate four directors, including one independent director, to serve on Cronos’ Board of Directors, which will be expanded from five to seven directors.

Altria expects to account for its investment in Cronos under the equity method of accounting.

In January and February 2019, Altria entered into derivative financial instruments in the form of forward contracts, which mature on April 15, 2019, to hedge Altria’s exposure to foreign

currency exchange rate movements in the CAD to USD, in relation to the CAD $2.4 billion purchase price for the Cronos transaction.

The aggregate notional amounts of the forward contracts were approximately USD $1.8 billion (CAD $2.4 billion).

The forward contracts do not qualify for hedge accounting; therefore, changes in the fair values of the forward contracts will be recorded as gains or losses in Altria’s consolidated statements of earnings in the periods in which the changes occur.

Altria expects to receive cash dividends from JUUL, if and when JUUL pays such dividends.

▪Innovative tobacco products: In December 2018, Altria announced the decision to refocus its innovative product efforts, which includes Nu Mark’s discontinuation of production and distribution of all e-vapor products.

Prior to that time, Nu Mark participated in the e-vapor category and developed and commercialized other innovative tobacco products.

In 2013, Nu Mark introduced MarkTen e-vapor products.

In April 2014, Nu Mark acquired the e-vapor business of Green Smoke, Inc. and its affiliates, which began selling e-vapor products in 2009.

In 2018 and 2017, Altria’s subsidiaries purchased certain intellectual property related to innovative tobacco products.

Upon regulatory authorization by the FDA and subject to certain performance obligations, Altria’s subsidiaries will have an exclusive license to commercialize IQOS in the United States.

The FSPTCA imposes restrictions on the advertising,

Wine segment competition is primarily

As a result of the cost reduction program announced in December 2018, there will be a reduction of approximately 900 employees, substantially all of which are expected to depart by February 28, 2019.

In addition, as of

Altria’s consolidated financial statements and accompanying notes for the year ended December 31, [removed: 2018] [added: 2019] were filed on Form 8-K on January [removed: 31, 2019] [added: 30, 2020] (such consolidated financial statements and accompanying notes are also included in Item 8).

[removed: Recent Developments][added: Recent Developments]

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

In [removed: Holliman,] [added: *Principe*,] in February [removed: 2019,] [added: 2020,] a Miami-Dade county jury returned a verdict in favor of plaintiff and against PM USA awarding approximately [removed: $3] [added: $11] million in compensatory [removed: damages and no punitive] damages.

In *Theis,* in February 2020, the Florida Second District Court of Appeal denied PM USA’s petition for review.

In the first quarter of 2020, PM USA recorded a pre-tax provision of approximately $17 million for the judgment plus interest and intends to pay this amount in the first quarter of 2020.

In *Duignan,* in February 2020, a Pinellas-County jury returned a verdict in favor of plaintiff and against PM USA and R.J. Reynolds Tobacco Company awarding approximately $3 million in compensatory damages.

The jury also awarded $12 million in punitive damages against each defendant.

PM USA intends to file post-trial motions.

In *Freeman*, in February 2020, the plaintiff withdrew the petition for review by the Florida Supreme Court of the verdict in favor of PM USA.

| | |

| --- | --- |

| ▪ | Non- Engle Progeny Trial Results: |

There was no claim for punitive damages.

In Chadwell, in February 2019, PM USA and plaintiff appealed to the Florida Third District Court of Appeal.

In L.

Martin, in February 2019, the Florida Third District Court of Appeal affirmed the judgment in favor of plaintiff.

In Berger, in February 2019, PM USA filed motions challenging the punitive damages award.

In February 2019, the United States Supreme Court denied PM USA’s petition for review in the McKeever, Pardue, Jordan, M.

Brown, Boatright and Searcy cases.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

| [removed: x] [added: ☒] | [removed: ANNUAL] [added: ANNUAL] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

For the fiscal year [removed: ended December] [added: endedDecember] 31, [removed: 2018][added: 2019]

| [removed: ¨] [added: ☐] | [removed: TRANSITION] [added: TRANSITION] REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF [removed: 1934] [added: 1934] |

[removed: Commission] [added: Commission] File [removed: Number 1-08940][added: Number 1-08940]

[removed: ALTRIA] [added: ALTRIA] GROUP, [removed: INC.][added: INC.]

[removed: (Exact] [added: (Exact] name of registrant as specified in its [removed: charter)][added: charter)]

| [removed: Virginia] [added: Virginia] | [removed: 13-3260245] | [added: | 13-3260245 |]

| [removed: (State] [added: (State] or other jurisdiction [removed: of incorporation] [added: of incorporation] or [removed: organization)] [added: organization)] | [removed: (I.R.S. Employer Identification No.)] | [added: | (I.R.S. Employer Identification No.) |]

| [removed: 6601] [added: 6601] West Broad [removed: Street, Richmond, Virginia] [added: Street,] | [removed: 23230] [added: Richmond,] | [added: Virginia | 23230 |]

| [removed: (Address] [added: (Address] of principal executive [removed: offices)] [added: offices)] | [removed: (Zip Code)] | [added: | (Zip Code) |]

[removed: 804-274-2200][added: 804\-274-2200]

[removed: (Registrant’s] [added: (Registrant’s] telephone number, including area [removed: code)][added: code)]

| Title of each class | [added: Trading Symbols |] Name of each exchange on which registered |

| Common Stock, $0.33 1/3 par value | [added: MO |] New York Stock Exchange |

| 1.000% Notes due 2023 | [added: MO23A |] New York Stock Exchange |

| 1.700% Notes due 2025 | [added: MO25 |] New York Stock Exchange |

| 2.200% Notes due 2027 | [added: MO27 |] New York Stock Exchange |

| 3.125% Notes due 2031 | [added: MO31 |] New York Stock Exchange |

[removed: |] Securities registered pursuant to Section 12(g) of the Act: None [removed: |]

[removed: |] Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [removed: þ Yes ¨ No |]

[removed: |] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [removed: ¨ Yes þ No |]

[removed: |] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days þ Yes ¨ No [removed: |]

[removed: |] Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files) þ Yes ¨ No [removed: |]

[removed: |] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. [removed: See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. |]

| Large accelerated filer [added: | |] þ [added: | |] Accelerated filer [removed: ¨] | [added: | ☐ |]

| Non-accelerated filer [removed: ¨ (Do not check if smaller reporting company)] [added: | | ☐ | |] Smaller [removed: operating] [added: reporting] company [removed: ¨] | [added: | ☐ |]

| [added: | | | |] Emerging growth company [removed: ¨] | [added: | ☐ |]

[removed: |] 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. [removed: ¨ |]

[removed: |] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). [removed: ¨Yes þ No |]

As of June 30, [removed: 2018,] [added: 2019,] the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately [removed: $107] [added: $88] billion based on the closing sale price of the common stock as reported on the New York Stock Exchange.

| Class | Outstanding at February [removed: 12, 2019] [added: 14, 2020] | [added: | |]

| Common Stock, $0.33 1/3 par value | [removed: 1,874,430,847] [added: 1,858,366,804 | |] shares |

[removed: DOCUMENTS] [added: DOCUMENTS] INCORPORATED BY [removed: REFERENCE][added: REFERENCE]

| Portions of the registrant’s definitive proxy statement for use in connection with its annual meeting of shareholders to be held on May [removed: 16, 2019,] [added: 14, 2020,] to be filed with the Securities and Exchange Commission on or about April [removed: 4, 2019,] [added: 2, 2020,] are incorporated by reference into Part III hereof. |

| Item 1. | [removed: [Business](#s7EC21A0926795834A5B79853F2202488)] [added: [Business](#s824750B73DCC518AAEF2C3DC378AF354)] | [removed: [1](#s7EC21A0926795834A5B79853F2202488)] [added: [1](#s824750B73DCC518AAEF2C3DC378AF354)] |

| Item 1A. | [Risk [removed: Factors](#s84AAB8F96E8056F9B0662BA5581703B8)] [added: Factors](#s72E718E0DE1C5344AE87FC6242E19956)] | [removed: [4](#s84AAB8F96E8056F9B0662BA5581703B8)] [added: [4](#s72E718E0DE1C5344AE87FC6242E19956)] |

OR

| | | | |

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

| | | | |

| | | | |

þ Yes ¨ No

¨ Yes þ No

See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

| | | | | | | |

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

| | | | | | | |

☐Yes þ No

| | | | |

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

| | | | |

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

| | | |

| [Signatures](#sFC2664251B9C5E50A39A4E4509283967) | | [118](#sFC2664251B9C5E50A39A4E4509283967) |

| | | |

10-K 1 a2018form10-kq4.htm FORM 10-K

| | |

| --- | --- |

OR

| |

| --- |

| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K þ |

| [Signatures](#sA18DC75D4DD75B1EB00E642F1179077B) | | [105](#sA18DC75D4DD75B1EB00E642F1179077B) |

[removed: At December 31, 2018, ALCS owned property in Richmond, Virginia that serves] [added: These properties serve] as the headquarters [removed: facility] [added: facilities] for Altria, PM USA, USSTC, [removed: Middleton,] [added: Middleton] and certain other subsidiaries.

At December 31, [removed: 2018,] [added: 2019,] PM USA owned and operated a manufacturing [removed: site] [added: facility] located in Richmond, Virginia [removed: (“Richmond Manufacturing Center”)] that PM USA uses in the manufacturing of [removed: cigarettes.][added: cigarettes (smokeable products segment).]

PM USA leases portions of this facility to Middleton and USSTC for use in the manufacturing of cigars [added: (smokeable products segment)] and smokeless tobacco products, respectively.

In addition, PM USA [removed: owns] [added: owned] a research and technology center in Richmond, Virginia that is leased to ALCS.

At December 31, [removed: 2018,] [added: 2019,] the wine segment [removed: used 12] [added: owned and operated various] wine-making facilities [removed: - seven] in Washington, [removed: four in] California and [removed: one in] Oregon.

At December 31, 2019, ALCS owned one property and leased a second in Richmond, Virginia.

At December 31, 2019, the smokeless products segment had various manufacturing and processing facilities, the most significant of which are located in in Nashville, Tennessee.

At December 31, 2018, the smokeable products segment used four manufacturing and processing facilities, including the

Richmond Manufacturing Center.

In addition to the Richmond Manufacturing Center, PM USA owns and operates a cigarette tobacco processing facility located in the Richmond, Virginia area.

Nat Sherman owns and operates a cigarette manufacturing facility in Greensboro, North Carolina.

Middleton, in addition to leasing space at the Richmond Manufacturing Center, owns and operates a manufacturing and processing facility in King of Prussia, Pennsylvania that is used in the manufacturing and processing of cigars and pipe tobacco.

At December 31, 2018, in addition to the Richmond Manufacturing Center, the smokeless products segment used four smokeless tobacco manufacturing and processing facilities, one located in Clarksville, Tennessee; one in Nashville, Tennessee; and two facilities in Hopkinsville, Kentucky, all of which are owned and operated by USSTC.

All of these facilities are owned and operated by Ste.

Michelle, with the exception of a facility that is leased by Ste.

Michelle in Washington.

In addition, in order to support the production of its wines, the wine segment used vineyards in Washington, California and Oregon that are leased or owned by Ste.

Michelle.

[removed: Part II][added: Part II]

[removed: Performance Graph][added: Performance Graph]

The graph below compares the cumulative total shareholder return of Altria’s common stock for the last five years with the cumulative total return for the same period of the S&P 500 [removed: Index] [added: Index, the S&P Food, Beverage] and [added: Tobacco Industry Group Total Return Index(1) and] the Altria Peer [removed: Group (1).][added: Group.(2) The graph assumes the investment of $100 in common stock and each of the indices as of the market close on December 31, 2014 and the reinvestment of all dividends on a quarterly basis.]

[removed: ][added: ]

| [removed: Date] [added: Date] | | [removed: Altria] [added: Altria] | | | | [removed: Altria] [added: S&P Food, Beverage & Tobacco | | | | Altria] Peer [removed: Group] [added: Group] | | | | [removed: S&P 500] [added: S&P 500] | | |

| December [removed: 2013] [added: 2014] | | [added: $ | 100.00 | | |] $ | 100.00 | | | $ | 100.00 | | | $ | 100.00 | |

[removed: (1)In 2018,] [added: (2) In 2019,] the Altria Peer Group consisted of U.S.-headquartered consumer product companies that are competitors to Altria’s 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, Keurig Dr Pepper Inc., Kimberly-Clark Corporation, The Kraft Heinz Company, Molson Coors Brewing Company, Mondelēz International, Inc. and PepsiCo, Inc.

[removed: 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).

[removed: Market] [added: Market] and Dividend [removed: Information][added: Information]

At February [removed: 12, 2019,] [added: 14, 2020,] there were approximately [removed: 61,000] [added: 59,000] holders of record of Altria’s common stock.

[removed: Issuer] [added: Issuer] Purchases of Equity Securities During the Quarter [removed: Ended December] [added: Ended December] 31, [removed: 2018][added: 2019]

In [removed: January 2018, Altria’s] [added: July 2019, the] Board of Directors [removed: (the “Board of Directors”)] authorized a [added: new] $1.0 billion share repurchase program [removed: that it expanded to $2.0 billion in May 2018 (as expanded, the “January 2018] [added: (the “July 2019] share repurchase program”), which Altria expects to complete by the end of [removed: the second quarter of 2019.][added: 2020.]

[removed: The timing of share] [added: Share] repurchases under this program [removed: depends] [added: depend] upon marketplace conditions and other factors, and the program remains subject to the discretion of the Board of Directors.

Altria’s share repurchase activity for each of the three months in the period ended December 31, [removed: 2018,] [added: 2019,] was as follows:

| [removed: Period] [added: Period] | | [removed: Total] [added: Total] Number of Shares [removed: Purchased (1)] [added: Purchased (1)] | | | [removed: Average] [added: Average] Price Paid Per [removed: Share] [added: Share] | | | | [removed: Total] [added: Total] Number of Shares Purchased as Part of Publicly Announced Plans or [removed: Programs] [added: Programs] | | | [removed: Approximate] [added: Approximate] Dollar Value of Shares that May Yet be Purchased Under the Plans or [removed: Programs] [added: Programs] | | |

[removed: |] (1) [removed: |] The total number of shares purchased includes (a) shares purchased under the [removed: January 2018] [added: July 2019] share repurchase program (which totaled [removed: 2,136,091 shares in October, 1,909,568] [added: 5,085,064] shares in November and [removed: 2,075,590] [added: 5,059,892] shares in December) and (b) shares withheld by Altria in an amount equal to the statutory withholding taxes for holders who vested in stock-based awards (which totaled 51 shares in [removed: October, 91,158 shares in November] [added: October] and [removed: 182] [added: 29] shares in December). [removed: |]

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

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

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

| December 2015 | | $ | 123.10 | | | $ | 114.74 | | | $ | 114.52 | | | $ | 101.37 | |

| December 2016 | | $ | 148.29 | | | $ | 124.79 | | | $ | 122.19 | | | $ | 113.49 | |

| December 2017 | | $ | 162.29 | | | $ | 140.20 | | | $ | 132.03 | | | $ | 138.26 | |

| December 2018 | | $ | 118.33 | | | $ | 119.28 | | | $ | 125.88 | | | $ | 132.19 | |

| December 2019 | | $ | 127.75 | | | $ | 149.03 | | | $ | 157.27 | | | $ | 173.80 | |

(1) To better align with comparable investment opportunities, Altria changed from the self-selected Altria Peer Group to the S&P Food, Beverage & Tobacco Industry Group Total Return Index for the year ended December 31, 2019.

Both indices are presented, in accordance with SEC rules, which require that if a company selects a different index from that used in the immediately preceding fiscal year, the company’s stock performance must be compared against both the newly selected index and previous index in the year of change.

Altria expects to continue to maintain a dividend payout ratio target of approximately 80% of its adjusted diluted earnings per share.

Future dividend payments remain subject to the discretion of Altria’s Board of Directors (the “Board of Directors”).

| October 1- October 31, 2019 | | 51 | | | $ | 42.02 | | | — | | | $ | 1,000,000,000 | |

| November 1- November 30, 2019 | | 5,085,064 | | | $ | 48.03 | | | 5,085,064 | | | $ | 755,740,364 | |

| December 1- December 31, 2019 | | 5,059,921 | | | $ | 50.54 | | | 5,059,892 | | | $ | 500,000,064 | |

| For the Quarter Ended December 31, 2019 | | 10,145,036 | | | $ | 49.29 | | | 10,144,956 | | | | | |

The graph assumes the investment of $100 in common stock and each of the indices as of the market close on December 31, 2013 and the reinvestment of all dividends on a quarterly basis.

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

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

| December 2014 | | $ | 134.51 | | | $ | 112.06 | | | $ | 113.68 | |

| December 2015 | | $ | 165.58 | | | $ | 128.34 | | | $ | 115.24 | |

| December 2016 | | $ | 199.46 | | | $ | 136.93 | | | $ | 129.02 | |

| December 2017 | | $ | 218.30 | | | $ | 147.96 | | | $ | 157.17 | |

| December 2018 | | $ | 159.17 | | | $ | 141.06 | | | $ | 150.27 | |

On June 12, 2015, Reynolds American Inc. (RAI) acquired Lorillard, Inc. (LO).

On July 24, 2017, British American Tobacco p.l.c.

(BTI) acquired RAI.

For 2018, Altria removed BTI from the Altria Peer Group as BTI no longer meets the pre-defined Altria Peer Group criteria as a U.S.-headquartered company.

In addition, Altria has added U.S.-headquartered consumer product companies Keurig Dr Pepper Inc. and Molson Coors Brewing Company to the Altria Peer Group.

| October 1- October 31, 2018 | | 2,136,142 | | | $ | 61.78 | | | 2,136,091 | | | $ | 569,444,104 | |

| November 1- November 30, 2018 | | 2,000,726 | | | $ | 59.80 | | | 1,909,568 | | | $ | 454,690,573 | |

| December 1- December 31, 2018 | | 2,075,772 | | | $ | 52.52 | | | 2,075,590 | | | $ | 345,671,297 | |

| For the Quarter Ended December 31, 2018 | | 6,212,640 | | | $ | 58.05 | | | 6,121,249 | | | | | |

| | |

| --- | --- |

[removed: (in] [added: | (in] millions of dollars, except per share [removed: data)][added: data) | 2019 | | | | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | |]

| Net revenues | [removed: $] [added: $] | [removed: 25,364] [added: 25,110] | | | $ | [removed: 25,576] [added: 25,364] | | | $ | [removed: 25,744] [added: 25,576] | | | $ | [removed: 25,434] [added: 25,744] | | | $ | [removed: 24,522] [added: 25,434] | |

| Net earnings [removed: (1)(2)] [added: (losses) (1)(2)(3)] | [removed: 6,967] [added: (1,298] | | [added: )] | | [removed: 10,227] [added: 6,967] | | | | [removed: 14,244] [added: 10,227] | | | | [removed: 5,243] [added: 14,244] | | | | [removed: 5,070] [added: 5,243] | | |

| Net earnings [added: (losses)] attributable to Altria [removed: (1)(2)] [added: (1)(2)(3)] | [removed: 6,963] [added: (1,293] | | [added: )] | | [removed: 10,222] [added: 6,963] | | | | [removed: 14,239] [added: 10,222] | | | | [removed: 5,241] [added: 14,239] | | | | [removed: 5,070] [added: 5,241] | | |

| Basic EPS — net earnings [added: (losses)] attributable to Altria [removed: (1)(2)] [added: (1)(2)(3)(4)] | [removed: 3.69] [added: (0.70] | | [added: )] | | [removed: 5.31] [added: 3.69] | | | | [removed: 7.28] [added: 5.31] | | | | [removed: 2.67] [added: 7.28] | | | | [removed: 2.56] [added: 2.67] | | |

| Diluted [removed: EPS—] [added: EPS —] net earnings [added: (losses)] attributable to Altria [removed: (1)(2)] [added: (1)(2)(3)(4)] | [removed: 3.68] [added: (0.70] | | [added: )] | | [removed: 5.31] [added: 3.68] | | | | [removed: 7.28] [added: 5.31] | | | | [removed: 2.67] [added: 7.28] | | | | [removed: 2.56] [added: 2.67] | | |

| Dividends declared per share | [removed: 3.00] [added: 3.28] | | | | [removed: 2.54] [added: 3.00] | | | | [removed: 2.35] [added: 2.54] | | | | [removed: 2.17] [added: 2.35] | | | | [removed: 2.00] [added: 2.17] | | |

| Long-term debt [added: (5)] | [removed: 11,898] [added: 27,042] | | | | [removed: 13,030] [added: 11,898] | | | | [removed: 13,881] [added: 13,030] | | | | [removed: 12,843] [added: 13,881] | | | | [removed: 13,610] [added: 12,843] | | |

| Total debt [removed: (3)] [added: (5)] | [removed: 25,746] [added: 28,042] | | | | [removed: 13,894] [added: 25,746] | | | | [removed: 13,881] [added: 13,894] | | | | [removed: 12,847] [added: 13,881] | | | | [removed: 14,610] [added: 12,847] | | |

[removed: (1)] [added: (2)] Certain [added: 2019,] 2018 and 2017 amounts include the impact of the enactment of the Tax Reform Act.

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

[removed: (2)] [added: (3)] Certain 2016 amounts include the impact of the gain on the [removed: AB InBev/SABMiller] [added: ABI/SABMiller] business combination.

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

[removed: (3)] [added: (5)] Certain [added: 2019 and] 2018 amounts include the impact of [removed: the investment] [added: Altria’s investments] in [removed: JUUL.][added: JUUL and Cronos.]

For further discussion, see Note [removed: 8 and Note 9.][added: 7.]

[removed: Short-Term] [added: For further discussion, see Note 7, Note 9. *Short-Term] Borrowings and Borrowing [removed: Arrangements] [added: Arrangements*] to the consolidated financial statements in Item 8 (“Note [removed: 9”).][added: 9”) and Note 10.]

| Total assets (1)(3)(5)(6) | 49,271 | | | | 55,459 | | | | 43,034 | | | | 45,764 | | | | 31,296 | | |

(1) Certain 2019 amounts include the impact of Altria’s impairment of its JUUL equity securities and the loss on Cronos-related financial instruments.

(4) “EPS” is defined as basic and diluted earnings (losses) per share.

*Long-Term Debt* to the consolidated financial statements in Item 8 (“Note 10”)*.*

(6) Certain immaterial prior year amounts have been adjusted to conform with the current year’s presentation.

| | 2018 | | | | 2017 | | | | 2016 | | | | 2015 | | | | 2014 | | |

| Total assets (2)(3) | 55,638 | | | | 43,202 | | | | 45,932 | | | | 31,459 | | | | 33,440 | | |

[removed: Altria] [added: Altria] Group, Inc. and [removed: Subsidiaries][added: Subsidiaries]

[removed: Consolidated] [added: Consolidated] Balance [removed: Sheets][added: Sheets]

[removed: (in millions of dollars)][added: | (dollars in millions) | | $ | | | | % | | | $ | | | | % | | | $ | | | | % | |]

| [removed: at] [added: at] December [removed: 31,] [added: 31,] | [added: | | 2019 | | | |] 2018 | | | | 2017 | | |

| [removed: Assets] [added: Assets] | | | | | | | |

| Cash and cash equivalents | [added: | | $ | 2,117 | | |] $ | 1,333 | | | $ | 1,253 | |

| Receivables | [removed: 142] [added: 152] | | | | 142 | | |

| Leaf tobacco | [removed: 940] [added: 874] | | | | [removed: 941] [added: 940] | | |

| Other raw materials | [removed: 186] [added: 192] | | | | [removed: 170] [added: 186] | | |

| Work in process | [removed: 647] [added: 696] | | | | [removed: 560] [added: 647] | | |

| Finished product | [removed: 558] [added: 531] | | | | [removed: 554] [added: 558] | | |

| Income taxes | [removed: 167] [added: 116] | | | | [removed: 461] [added: 167] | | |

| Other current assets | [removed: 326] [added: 146] | | | | [removed: 263] [added: 326] | | |

| Total current assets | [removed: 4,299] [added: 4,824] | | | | [removed: 4,344] [added: 4,299] | | |

| Land and land improvements | [removed: 309] [added: 353] | | | | [removed: 302] [added: 309] | | |

| Buildings and building equipment | [removed: 1,442] [added: 1,461] | | | | [removed: 1,437] [added: 1,442] | | |

| Machinery and equipment | [removed: 2,981] [added: 2,998] | | | | [removed: 2,975] [added: 2,981] | | |

| Construction in progress | [removed: 218] [added: 262] | | | | [removed: 165] [added: 218] | | |

| Less accumulated depreciation | [removed: 3,012] [added: 3,075] | | | | [removed: 2,965] [added: 3,012] | | |

| Goodwill | [removed: 5,196] [added: 5,177] | | | | [removed: 5,307] [added: 5,196] | | |

| Other intangible assets, net | [removed: 12,279] [added: 12,687] | | | | [removed: 12,400] [added: 12,279] | | |

| Investment in JUUL | [removed: 12,800] | | [added: (5] | | [added: ) | | (12,800 | | ) | |] — | | |

[removed: Consolidated] [added: Consolidated] Balance Sheets [removed: (Continued)][added: (Continued)]

| [removed: Liabilities] [added: Liabilities] | | | | | | | |

| Short-term borrowings | [removed: $] [added: $] | [removed: 12,704] [added: —] | | | $ | [removed: —] [added: 12,704] | |

| Current portion of long-term debt | [added: $ |] 1,144 | | | [added: $] | [removed: 864] [added: —] | | | [added: $ | — | | | $ | — | | | $ | 1,144 | |]

| Accounts payable | [removed: 399] [added: 325] | | | | [removed: 374] [added: 399] | | |

| Marketing | [removed: 586] [added: 393] | | | | [removed: 695] [added: 586] | | |

| Settlement charges | [removed: 3,454] [added: 3,346] | | | | [removed: 2,442] [added: 3,454] | | |

| Dividends payable | [removed: 1,503] [added: 1,565] | | | | [removed: 1,258] [added: 1,503] | | |

| Total current liabilities | [removed: 21,193] [added: 8,174] | | | | [removed: 6,792] [added: 21,193] | | |

| Long-term debt | [removed: 11,898] [added: 27,042] | | | | [removed: 13,030] [added: 11,898] | | |

| Deferred income taxes | [removed: 5,172] | [added: (21] | | [added: )] | [removed: 5,247] | [added: 32] | | [added: | | — | | | | 11 | | |]

| Accrued pension costs | [removed: 544] [added: 473] | | | | [removed: 445] [added: 544] | | |

| Accrued postretirement health care costs | [removed: 1,749] [added: 1,797] | | | | [removed: 1,987] [added: 1,749] | | |

| Other liabilities | [removed: 254] [added: 345] | | | | [removed: 283] [added: 254] | | |

| Redeemable noncontrolling interest | [removed: 39] [added: 38] | | | | [removed: 38] [added: 39] | | |

| [removed: Stockholders’ Equity] [added: Stockholders’ Equity] | | | | | | | |

| Common stock, par value $0.33 1/3 per share (2,805,961,317 shares issued) | [removed: 935] [added: 935] | | | | 935 | | |

| Additional paid-in capital | [removed: 5,961] [added: 5,970] | | | | [removed: 5,952] [added: 5,961] | | |

| | 2,293 | | | | 2,331 | | |

| | 5,074 | | | | 4,950 | | |

| | 1,999 | | | | 1,938 | | |

| Investments in equity securities | 23,581 | | | | 30,496 | | |

| Total Assets | $ | 49,271 | | | $ | 55,459 | |

| Other | 1,545 | | | | 1,403 | | |

| Total liabilities | 42,914 | | | | 40,631 | | |

Altria Group, Inc. and Subsidiaries

| Impairment of JUUL equity securities | 8,600 | | | | — | | | | — | | |

| Loss on Cronos-related financial instruments | 1,442 | | | | — | | | | — | | |

Altria Group, Inc. and Subsidiaries

| ABI | | (319 | | ) | | (309 | | ) | | (54 | | ) |

Altria Group, Inc. and Subsidiaries

| Loss on Cronos-related financial instruments | | | 1,442 | | | | — | | | | — | | |

| Impairment of JUUL equity securities | | | 8,600 | | | | — | | | | — | | |

| Investment in Cronos | | | (1,899 | | ) | | — | | | | — | | |

Altria Group, Inc. and Subsidiaries

| for the years ended December 31, | | | 2019 | | | | 2018 | | | | 2017 | | |

| Repayment of short-term borrowings | | | (12,800 | | ) | | — | | | | — | | |

Altria Group, Inc. and Subsidiaries

| Net earnings (losses) (1) | — | | | | — | | | | (1,293 | | ) | | — | | | | — | | | | (7 | | ) | | (1,300 | | ) |

| Balances, December 31, 2019 | $ | 935 | | | $ | 5,970 | | | $ | 36,539 | | | $ | (2,864 | ) | | $ | (34,358 | ) | | $ | 97 | | | $ | 6,319 | |

See notes to consolidated financial statements.

In addition, Altria owns an 80% interest in Helix Innovations LLC (“Helix”), which is engaged in the manufacture and sale of *on!* oral nicotine pouches.

During the third quarter of 2019, Helix acquired Burger Söhne Holding and its subsidiaries as well as certain affiliated companies (the “Burger Group”) that are engaged in the manufacture and sale of *on!* oral nicotine pouches.

At closing, Altria indirectly owned an 80% interest in Helix, for which Altria paid $353 million in the third quarter of 2019.

The financial results of Helix are included in Altria’s consolidated financial statements as part of its smokeless products segment, with the 20% minority ownership interest in Helix (held by the former shareholders of the Burger Group) included as a noncontrolling interest.

The final purchase price allocation, which is subject to post-closing adjustments, will be completed by the third quarter of 2020.

In March 2019, Altria, through a subsidiary, completed its acquisition of a 45% economic and voting interest in Cronos Group Inc. (“Cronos”), a global cannabinoid company headquartered in Toronto, Canada.

At December 31, 2019, Altria had a 45% economic and voting interest in Cronos, which Altria accounts for under the equity method of accounting using a one-quarter lag.

*Investments in Equity Securities*.

On January 1, 2019, Altria adopted ASU No. 2016-02, *Leases (Topic 842)* and all related ASU amendments (collectively “ASU No. 2016-02”), which requires entities to recognize lease assets and lease liabilities on the balance sheet and disclose key information about leasing arrangements.

Altria has elected to apply the guidance retrospectively at the beginning of the period of adoption.

As a result, comparative periods prior to adoption will continue to be presented in accordance with prior lease guidance, including disclosures.

The impact of the adoption was not material to Altria’s consolidated financial statements.

As a result of the adoption, Altria and its subsidiaries,

as lessees, recorded right-of-use assets and lease liabilities of $179 million at January 1, 2019 for its leases, which were all operating leases.

There was no cumulative effect adjustment to the opening balance of earnings reinvested in the business.

Right-of-use assets and lease liabilities on Altria’s consolidated balance sheet at December 31, 2019 were not materially different than the amounts recorded upon adoption of ASU No. 2016-02.

Additionally, in accordance with ASU No. 2016-02, lessor accounting for leveraged leases that commenced before the January 1, 2019 adoption date of ASU No. 2016-02 is unchanged unless there is a change in the scope of, or the consideration for, such leases.

| | | | | | | | |

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

| | 2,331 | | | | 2,225 | | |

| | 4,950 | | | | 4,879 | | |

| | 1,938 | | | | 1,914 | | |

| Investment in AB InBev | 17,696 | | | | 17,952 | | |

| Other assets | 1,430 | | | | 1,285 | | |

| Total Assets | $ | 55,638 | | | $ | 43,202 | |

| Employment costs | 189 | | | | 188 | | |

| Other | 1,214 | | | | 971 | | |

| Total liabilities | 40,810 | | | | 27,784 | | |

| Loss on early extinguishment of debt | — | | | | — | | | | 823 | | |

| AB InBev/SABMiller | | (309 | | ) | | (54 | | ) | | 1,265 | | |

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

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

| Loss on early extinguishment of debt | | | — | | | | — | | | | 823 | | |

| Proceeds from finance assets | | | 37 | | | | 133 | | | | 231 | | |

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

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

| Proceeds from derivative financial instruments | | | 35 | | | | — | | | | 510 | | |

| Premiums and fees related to early extinguishment of debt | | | — | | | | — | | | | (809 | | ) |

Contingencies.

| Balances, December 31, 2015 | $ | 935 | | | $ | 5,813 | | | $ | 27,257 | | | $ | (3,280 | ) | | $ | (27,845 | ) | | $ | (7 | ) | | $ | 2,873 | |

Income Taxes.

Michelle”), is engaged in the manufacture and sale of smokeless tobacco products and wine.

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

Subsequently, Altria purchased approximately 12 million ordinary shares of AB InBev, increasing Altria’s ownership to approximately 10.2% at December 31, 2016.

As a result of the one-quarter lag and the timing of

the completion of the AB InBev Transaction, no earnings from Altria’s equity investment in AB InBev were recorded for the year ended December 31, 2016.

Investment in AB InBev/SABMiller.

If and when antitrust clearance is obtained, Altria’s non-voting shares will automatically convert to voting shares (“Share Conversion”).

Altria will receive cash dividends on its interest in JUUL if and when JUUL pays such dividends.

Investment in JUUL.

On December 7, 2018, Altria announced that it entered into an agreement to purchase, through a subsidiary, approximately 146.2 million newly issued common shares of Cronos Group Inc. (“Cronos”), a global cannabinoid company headquartered in Toronto, Canada.

Altria expects the transaction to close in the first half of 2019.

Upon completion of this transaction, Altria will own an approximate 45% equity interest in Cronos.

The purchase price for the approximate 45% equity interest and warrant is approximately CAD $2.4 billion (approximately U.S. dollar (“USD”) $1.8 billion, based on the CAD to USD exchange rate on January 25, 2019), to be paid on the date of the closing of the transaction.

Altria expects to account for its investment in Cronos under the equity method of accounting.

The closing of this transaction is subject to certain customary closing conditions, including approval of Cronos shareholders and receipt of regulatory approvals.

$1.5 billion).

[removed: Disclosure] [added: Disclosure] Controls and [removed: Procedures][added: Procedures]

Based upon that evaluation, Altria’s Chief Executive [added: Officer and Chief Financial Officer concluded that Altria’s disclosure controls and procedures are effective.]

Officer and Chief Financial Officer concluded that Altria’s disclosure controls and procedures are effective.

[removed: Part III][added: Part III]

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’s definitive proxy statement for use in connection with its Annual Meeting of Shareholders to be held on May [removed: 16, 2019] [added: 14, 2020] that is expected to be filed with the SEC on or about April [removed: 4, 2019] [added: 2, 2020] (the “proxy statement”), and, except as indicated therein, made a part hereof.

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

| [removed: Name] [added: Name] | [removed: Office] [added: Office] | [removed: Age] [added: Age] |

| Jody L. Begley | Senior Vice President, Tobacco Products | [removed: 47] [added: 48] |

| Daniel J. Bryant | Vice President and Treasurer | [removed: 49] [added: 50] |

| [removed: Ivan S. Feldman] [added: Steven D’Ambrosia] | Vice President and Controller | [removed: 52] [added: 53] |

| Murray R. Garnick | Executive Vice President and General Counsel | [removed: 59] [added: 60] |

| William F. Gifford, Jr. | Vice Chairman and Chief Financial Officer | [removed: 48] [added: 49] |

| Salvatore Mancuso | Senior Vice President, Finance and Procurement | [removed: 53] [added: 54] |

| W. Hildebrandt Surgner, Jr. | Vice President, Corporate Secretary and Associate General Counsel | [removed: 53] [added: 54] |

| Charles N. Whitaker | Senior Vice President, Chief Human Resources Officer and Chief Compliance Officer | [removed: 52] [added: 53] |

| Howard A. Willard III | Chairman and Chief Executive Officer | [removed: 55] [added: 56] |

All of the above-mentioned [added: executive] officers have been employed by Altria or its subsidiaries in various capacities during the past five years.

[removed: Mr. Begley] [added: Ms. Newman] has been [removed: continuously] employed by Altria subsidiaries in positions across their businesses, including [removed: Innovative Tobacco Products, Brand Management,] [added: as President] and [removed: Strategy] [added: Chief Executive Officer of PM USA] and [removed: Business Development,] [added: in various Brand Management and Sales roles,] since [removed: 1995.][added: 1998.]

[removed: Codes] [added: Codes] of Conduct and Corporate [removed: Governance][added: Governance]

Altria has [added: also] adopted [removed: the Altria Code] [added: a code] of [removed: Conduct for Compliance][added: business conduct]

[added: Altria has adopted the Altria Code of Conduct for Compliance] and Integrity, which complies with requirements set forth in Item 406 of Regulation S-K.

[removed: Altria has also adopted a code of business conduct] and ethics that applies to the members of its Board of Directors.

Information about Our Executive Officers as of February 14, 2020:

| Heather A. Newman | Senior Vice President, Corporate Strategy | 42 |

Effective January 1, 2020, Ms. Newman was elected Senior Vice President, Corporate Strategy of Altria.

Executive Officers as of February 12, 2019:

| Kevin C. Crosthwaite, Jr. | Senior Vice President, Chief Strategy and Growth Officer | 43 |

| Craig A. Johnson | President and Chief Executive Officer, Altria Group Distribution Company | 66 |

Effective June 1, 2018, Mr. Begley was elected Senior Vice President, Tobacco Products of Altria.

As previously announced, Mr. Feldman will retire as Vice President and Controller, effective April 30, 2019.

Steven D’Ambrosia was elected to replace Mr. Feldman upon his retirement.

Mr. D’Ambrosia currently serves as Senior Director,

Accounting and Reporting, a position he has held since August 2014.

Prior to this role, he served as Director, Reporting and Analysis from 2008 through July 2014.

Mr. D’Ambrosia has been continuously employed by Altria subsidiaries in various accounting, financial reporting, planning and analysis positions since 1995.

In addition, as previously announced, Mr. Johnson will retire as President and Chief Executive Officer, Altria Group Distribution Company, effective March 1, 2019.

The number of shares to be issued upon exercise or vesting and the number of shares remaining available for future issuance under Altria’s equity compensation plans at December 31, [removed: 2018,] [added: 2019,] were as follows:

| | [removed: Number] [added: Number] of [removed: Shares to] [added: Shares to] be Issued [removed: upon Exercise of Outstanding Options] [added: upon Exercise of Outstanding Options] and Vesting [removed: of Deferred Stock] [added: of Deferred Stock] (a) | [removed: Weighted Average Exercise] [added: Weighted Average Exercise] Price [removed: of Outstanding Options] [added: of Outstanding Options] (b) | [removed: Number] [added: Number] of [removed: Shares Remaining] [added: Shares Remaining] Available [removed: for Future] [added: for Future] Issuance Under [removed: Equity Compensation Plans] [added: Equity Compensation Plans] (c) |

| (2) | Represents [removed: 2,129,626] [added: 1,909,642] shares of restricted stock units and [removed: 356,620] [added: 468,889] shares that may be issued upon vesting of performance stock units if maximum performance measures are achieved. |

| (3) | Includes [removed: 37,033,741] [added: 36,078,232] shares available under the 2015 Performance Incentive Plan and [removed: 880,291] [added: 831,560] 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) | 2,378,531 (2) | $— | 36,909,792 (3) |

| Equity compensation plans approved by shareholders (1) | 2,486,246 | $— | 37,914,032 |

[removed: Part IV][added: Part IV]

| | [removed: Page] [added: Page] |

| Consolidated Balance Sheets at December 31, [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] | [removed: [38](#sBB9E41B3D1BB53E6BD2784BCF6519574)] [added: [44](#s4AACED228CC35D63AC1D5B5DE10CFAD3)] |

| Consolidated Statements of Earnings [added: (Losses)] for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [40](#s1A7AFED43CE356CBB850B83604969B82)] [added: [46](#s9924836F6492548489F34DDC5E1C039D)] |

| Consolidated Statements of Comprehensive Earnings [added: (Losses)] for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [41](#s981D04E0BCDA50B8BBA840CCD2957B05)] [added: [47](#sFA39B4DB18545358B6D6A20231C53F20)] |

| Consolidated Statements of Cash Flows for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [42](#sEF1F8F6647DA53A7881ABFA0626F4633)] [added: [48](#s6714E85C5EBB5A8082880053C502ABCD)] |

| Consolidated Statements of Stockholders’ Equity for the years ended December 31, [removed: 2018, 2017] [added: 2019, 2018] and [removed: 2016] [added: 2017] | [removed: [44](#s4B0D7E35B9DE53B18496B2425DBF5A54)] [added: [50](#s0489B9C5232A5016984303B6BC9D8507)] |