What changed in this filing

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Item 1. Financial Statements

2023-08-01 compared with 2023-04-27 · 413 added, 245 removed, 904 unchanged (42% of the section changed)

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March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Cash and cash equivalents $ 874 $ 4,030

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Other intangible assets, net 13,749 12,384

Investments in equity securities ($ 0 million and $ 250 million at March 31, 2023 and December 31, 2022, respectively, measured at fair value)

Investments in equity securities ($ 0 million and $ 250 million at June 30, 2023 and December 31, 2022, respectively, measured at fair value)

Other assets 1,005 965

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________________________________________________

March 31, 2023 December 31, 2022

June 30, 2023 December 31, 2022

Short-term borrowings $ 2,000 $ —

Current portion of long-term debt 1,121 1,556

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Other 1,459 1,299

Deferred gain from the sale of IQOS System commercialization rights

Dividends payable 1,677 1,685

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Cost of repurchased stock

( 1,019,815,657 shares at March 31, 2023 and

( 1,030,214,027 shares at June 30, 2023 and

1,020,427,195 shares at December 31, 2022)

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For the Three Months Ended March 31, 2023 2022

For the Six Months Ended June 30, For the Three Months Ended June 30,

2023 2022 2023 2022

Net revenues $ 12,227 $ 12,435 $ 6,508 $ 6,543

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For the Three Months Ended March 31, 2023 2022

For the Six Months Ended June 30, For the Three Months Ended June 30,

2023 2022 2023 2022

Net earnings $ 3,904 $ 2,850 $ 2,117 $ 891

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Other comprehensive earnings (losses), net of deferred

62 679 70 585

Comprehensive earnings $ 3,966 $ 3,529 $ 2,187 $ 1,476

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Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

for the Three Months Ended March 31, 2023 and 2022

for the Six Months Ended June 30, 2023 and 2022

(in millions of dollars, except per share data)

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Other comprehensive earnings (losses), net of deferred income taxes — — — 62 — — 62

Stock award activity — ( 7 ) — — 20 — 13

Cash dividends declared ($ 1.88 per share)

— — ( 3,356 ) — — — ( 3,356 )

Repurchases of common stock — — — — ( 472 ) — ( 472 )

Other — — — — ( 5 ) — ( 5 )

Balances, June 30, 2023

$ 935 $ 5,880 $ 30,340 $ ( 2,709 ) $ ( 38,273 ) $ 50 $ ( 3,777 )

Stock Additional

Capital Earnings

Business Accumulated

Comprehensive

Losses Cost of

Stockholders’

Equity (Deficit)

Balances, December 31, 2021

$ 935 $ 5,857 $ 30,664 $ ( 3,056 ) $ ( 36,006 ) $ ( 1,606 )

Net earnings — — 2,850 — — 2,850

Other comprehensive earnings (losses), net of deferred income taxes

— — — 679 — 679

Stock award activity

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— — ( 3,262 ) — — ( 3,262 )

Balances, March 31, 2023

Repurchases of common stock — — — — ( 1,083 ) ( 1,083 )

Balances, June 30, 2022

$ 935 $ 5,861 $ 30,252 $ ( 2,377 ) $ ( 37,074 ) $ ( 2,403 )

See notes to condensed consolidated financial statements.

Altria Group, Inc.

and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

for the Three Months Ended June 30, 2023 and 2022

( in millions of dollars, except per share data)

_______________________________________

Attributable to Altria

Stock Additional

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Losses Cost of

Interests Total

Stockholders’

Equity (Deficit)

Balances, December 31, 2021

Balances, March 31, 2023

$ 935 $ 5,866 $ 29,898 $ ( 2,779 ) $ ( 37,796 ) $ 50 $ ( 3,826 )

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Repurchases of common stock — — — — ( 472 ) — ( 472 )

Other — — — — ( 5 ) — ( 5 )

Balances, June 30, 2023

$ 935 $ 5,880 $ 30,340 $ ( 2,709 ) $ ( 38,273 ) $ 50 $ ( 3,777 )

Stock Additional

Capital Earnings

Business Accumulated

Comprehensive

Losses Cost of

Stockholders’

Equity (Deficit)

Balances, March 31, 2022

$ 935 $ 5,848 $ 30,988 $ ( 2,962 ) $ ( 36,569 ) $ ( 1,760 )

Net earnings — — 891 — — 891

Other comprehensive earnings (losses), net of deferred income taxes

— — — 585 — 585

Stock award activity

— 13 — — 2 15

Cash dividends declared ($ 0.90 per share)

— — ( 1,627 ) — — ( 1,627 )

Repurchases of common stock — — — — ( 507 ) ( 507 )

Balances, June 30, 2022

$ 935 $ 5,861 $ 30,252 $ ( 2,377 ) $ ( 37,074 ) $ ( 2,403 )

See notes to condensed consolidated financial statements.

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For the Three Months Ended March 31, 2023 2022

For the Six Months Ended June 30, 2023 2022

Cash Provided by (Used in) Operating Activities

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(Income) losses from investments in equity securities ( 47 ) 1,229

Dividends from ABI 163 104

Loss on Cronos-related financial instruments — 14

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Capital expenditures ( 103 ) ( 83 )

Acquisition of NJOY, net of cash acquired ( 2,750 ) —

Other, net ( 5 ) ( 67 )

Net cash provided by (used in) investing activities $ ( 2,858 ) $ ( 150 )

(1) 2023 amounts are net of the effects from the NJOY Transaction.

For further details, see Note 2.

Acquisition of NJOY .

(2) 2023 includes $ 782 million of unrecognized tax benefit from the ordinary loss for cash tax purposes with respect to a portion of our tax basis associated with our former investment in JUUL, which is substantially offset by a corresponding change included in income taxes.

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For the Three Months Ended March 31, 2023 2022

For the Six Months Ended June 30, 2023 2022

Cash Provided by (Used in) Financing Activities

Proceeds from short-term borrowings $ 2,000 $ —

Long-term debt repaid ( 1,566 ) —

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The following table provides a reconciliation of cash, cash equivalents and restricted cash (1) to the amounts reported on our condensed consolidated balance sheets:

At March 31, 2023 At December 31, 2022

At June 30, 2023 At December 31, 2022

Cash and cash equivalents $ 874 $ 4,030

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▪ Background:

At March 31, 2023, our wholly owned subsidiaries included Philip Morris USA Inc.

At June 30, 2023, our wholly owned subsidiaries included Philip Morris USA Inc.

(“PM USA”), which is engaged in the manufacture and sale of cigarettes in the United States;

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Smokeless Tobacco Company LLC (“USSTC”), is engaged in the manufacture and sale of moist smokeless tobacco products (“MST”) and snus products;

and Helix Innovations LLC (“Helix”), which operates in the United States and Canada, and Helix Innovations GmbH and its affiliates (“Helix ROW”), which operate internationally in the rest-of-world, are engaged in the manufacture and sale of oral nicotine pouches.

Other wholly owned subsidiaries included Altria Group Distribution Company, which provides sales and distribution services to our domestic tobacco operating companies;

Helix Innovations LLC (“Helix”), which operates in the United States and Canada, and Helix Innovations GmbH and its affiliates (“Helix ROW”), which operate internationally in the rest-of-world, are engaged in the manufacture and sale of oral nicotine pouches;

and NJOY, LLC (“NJOY”), which is engaged in the manufacture and sale of e-vapor products.

Other wholly owned subsidiaries included Altria Group Distribution Company (“AGDC”), which provides sales and distribution services to our domestic tobacco operating companies;

and Altria Client Services LLC (“ALCS”), which provides various support services to our companies in areas such as legal, regulatory, consumer engagement, finance, human resources and external affairs.

Our access to the operating cash flows of our wholly owned subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany loans by our subsidiaries.

At March 31, 2023, our significant wholly owned subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests.

At March 31, 2023, we also owned a 75 % economic interest in Horizon Innovations LLC (“Horizon”), a joint venture with Japan Tobacco, Inc., which owned the remaining 25 % economic interest.

At June 30, 2023, our significant wholly owned subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests.

As discussed in Note 2.

Acquisition of NJOY , on June 1, 2023, we completed our acquisition of NJOY Holdings, Inc.

(“NJOY Holdings”), the parent of NJOY.

As a result of the acquisition, NJOY became a wholly owned subsidiary of Altria.

At June 30, 2023, we also owned a 75 % economic interest in Horizon Innovations LLC (“Horizon”), a joint venture with Japan Tobacco, Inc., which owned the remaining 25 % economic interest.

Horizon is structured to exist in perpetuity and is responsible for the U.S.

marketing and commercialization of heated tobacco stick products.

On March 3, 2023, we entered into a stock transfer agreement with JUUL Labs, Inc.

In March 2023, we entered into a stock transfer agreement with JUUL Labs, Inc.

(“Stock Transfer Agreement”) pursuant to which we transferred to JUUL Labs, Inc.

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Prior to the exchange, we accounted for our investment in JUUL at fair value.

At March 31, 2023, we had investments in Anheuser-Busch InBev SA/NV (“ABI”) and Cronos Group Inc.

At June 30, 2023, we had investments in Anheuser-Busch InBev SA/NV (“ABI”) and Cronos Group Inc.

(“Cronos”), which we account for under the equity method of accounting using a one-quarter lag.

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Investments in Equity Securities .

On March 3, 2023, we entered into a definitive agreement to acquire NJOY Holdings, Inc.

(“NJOY”), a U.S.

based e-vapor company, for approximately $ 2.75 billion in cash payable at closing (“NJOY Transaction”) plus up to an additional $ 500 million in cash payments that are contingent upon regulatory outcomes with respect to certain NJOY products.

Following completion of the NJOY Transaction, NJOY will survive as a wholly owned subsidiary of Altria.

The completion of the NJOY Transaction is subject to customary closing conditions, including clearance from the U.S.

Federal Trade Commission (“FTC”), and is not subject to any financing condition.

The parties have filed for premerger clearance with the FTC under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (“HSR Act”), which remains under FTC review.

The current waiting period under the HSR Act expires in May 2023.

▪ Share Repurchases:

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In January 2023, our Board of Directors authorized a new $ 1.0 billion share repurchase program (the “January 2023 share repurchase program”).

At June 30, 2023, we had $ 528 million remaining under the January 2023 share repurchase program.

The timing of share repurchases under this program depends upon marketplace conditions and other factors, and the program remains subject to the discretion of our Board.

For the three months ended March 31, 2023, there were no share repurchases under the January 2023 share repurchase program.

Our share repurchase activity was as follows:

For the Three Months

(in millions, except per share data) Ended March 31, 2022

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions, except per share data) 2023 2022 2023 2022

Total number of shares repurchased

10.4 21.4 10.4 10.1

Aggregate cost of shares repurchased

$ 472 $ 1,083 $ 472 $ 507

Average price per share of shares repurchased

$ 45.37 $ 50.53 $ 45.37 $ 50.35

▪ Basis of Presentation:

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These statements should be read in conjunction with our audited consolidated financial statements and related notes, which appear in our Annual Report on Form 10-K for the year ended December 31, 2022.

Certain immaterial prior year amounts have been reclassified to conform with the current year’s presentation.

On January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805):

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This guidance updates how an entity recognizes and measures contract assets and contract liabilities acquired in a business combination.

As of March 31, 2023, our adoption of ASU No.

Our adoption of ASU No.

2021-08 had no impact on our condensed consolidated financial statements or related disclosures.

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This guidance requires that a buyer in a supplier finance program disclose sufficient qualitative and quantitative information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period and potential magnitude.

As of March 31, 2023, our adoption of ASU No.

At June 30, 2023, our adoption of ASU No.

2022-04 had no material impact on our condensed consolidated financial statements or related disclosures.

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New Accounting Guidance Not Yet Adopted .

Acquisition of NJOY

On June 1, 2023, we acquired NJOY Holdings (“NJOY Transaction”), which provided us with full global ownership of NJOY’s e-vapor product portfolio, including NJOY ACE , currently the only pod-based e-vapor product with market authorizations from the U.S.

Food and Drug Administration (“FDA”).

The total consideration for the NJOY Transaction of $ 2.9 billion (subject to closing adjustments), consists of $ 2.75 billion in cash payments (net of cash acquired) that we paid upon closing plus the fair value of up to $ 500 million in additional cash payments that are contingent on receipt of FDA authorizations with respect to certain NJOY products.

The fair value of these contingent payments on the acquisition date and at June 30, 2023 was $ 130 million, which is included in the total consideration.

We funded the NJOY Transaction cash payments through a combination of a $ 2.0 billion term loan facility, the issuance of commercial paper and available cash.

For further discussion regarding the term loan facility, see Note 11.

We accounted for this acquisition as a business combination.

NJOY’s financial position and results of operations beginning June 1, 2023 have been consolidated with our consolidated financial results and included in the all other category.

The fair value estimates of the assets acquired and liabilities assumed are preliminary and subject to adjustments during the measurement period (up to one year following the acquisition date).

The primary areas of accounting for the NJOY Transaction that are not yet finalized relate to the fair value of certain intangible assets acquired, certain contingent liabilities, residual goodwill and any related tax impact.

During the measurement period, we will adjust preliminary valuations assigned to assets and liabilities if new information is obtained about facts and circumstances that existed as of the NJOY Transaction date, that, if known, would have resulted in revised values for these items as of that date.

The impact of all changes, if any, that do not qualify as measurement period adjustments will be included in current period earnings.

The following amounts represent the preliminary estimates for purchase price allocation to assets acquired and liabilities assumed in the NJOY Transaction, which are expected to be finalized during 2023:

(in millions)

Cash and cash equivalents $ 22

Receivables 7

Inventories 19

Other assets 7

Property, plant and equipment 16

Other intangible assets:

Developed technology (amortizable) 1,000

Trademarks (amortizable) 230

Supplier agreements (amortizable) 180

Accounts payable ( 7 )

Accrued liabilities ( 20 )

Deferred income taxes ( 167 )

Total identifiable net assets 1,287

Total consideration 2,900

Goodwill $ 1,613

The excess of the total consideration over the identifiable net assets acquired in the NJOY Transaction primarily reflects the value of future growth opportunities in the e-vapor category.

No ne of the goodwill or other intangible assets will be deductible for tax purposes.

The significant assumptions used in determining the preliminary fair values of the identifiable intangible assets included revenue growth rates, profit margins, the assessment of acquired technology life cycles, discount rates, as well as other factors.

We determined the preliminary fair values of the identifiable intangibles assets using an income approach.

The fair value measurements were primarily based on significant inputs that are not observable in the market, such as discounted cash flow analyses, and thus represent a Level 3 measurement.

We amortize the intangible assets over their estimated lives of 13 to 18 years.

In determining the estimated fair value of contingent payments, we made certain judgments, estimates and assumptions, the most significant of which was the likelihood of certain potential regulatory outcomes.

Contingent payments are classified in Level 3 of the fair value hierarchy.

Costs incurred for the NJOY Transaction have been and will be recognized as expenses in the period in which the costs are incurred.

We incurred $ 49 million and $ 41 million for the six and three months ended June 30, 2023, respectively, for acquisition-related costs, consisting primarily of transaction costs and financing fees, which were included in corporate expense and interest and other debt expense, net, respectively, in our condensed consolidated statements of earnings.

Revenues from Contracts with Customers

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These payments are included in other accrued liabilities on our condensed consolidated balance sheets until control of such products is obtained by the customer.

Deferred revenue from contracts with customers was $ 268 million and $ 252 million at March 31, 2023 and December 31, 2022, respectively.

Deferred revenue from contracts with customers was $ 359 million and $ 252 million at June 30, 2023 and December 31, 2022, respectively.

When cash is received in advance of product shipment, our companies satisfy their performance obligations within three days of receiving payment.

At March 31, 2023 and December 31, 2022, there were no differences between amounts recorded as deferred revenue from contracts with customers and amounts subsequently recognized as revenue.

Receivables (excluding receivable from the sale of IQOS System commercialization rights) were $ 58 million and $ 48 million at March 31, 2023 and December 31, 2022, respectively.

At March 31, 2023 and December 31, 2022, there were no expected differences between amounts recorded and subsequently received, and we did no t record an allowance for credit losses against these receivables.

At June 30, 2023 and December 31, 2022, there were no differences between amounts recorded as deferred revenue from contracts with customers and amounts subsequently recognized as revenue.

Receivables (excluding receivable from the sale of IQOS System commercialization rights) were $ 63 million and $ 48 million at June 30, 2023 and December 31, 2022, respectively.

At June 30, 2023 and December 31, 2022, there were no expected differences between amounts recorded and subsequently received, and we did no t record an allowance for credit losses against these receivables.

We record an allowance for returned goods, which is included in other accrued liabilities on our condensed consolidated balance sheets.

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These differences, if any, have not had a material impact on our condensed consolidated financial statements.

Goodwill and Other Intangible Assets, net

Goodwill and other intangible assets, net, were as follows:

Goodwill Other Intangible Assets, net

(in millions) June 30, 2023 December 31, 2022 June 30, 2023 December 31, 2022

Smokeable products segment $ 99 $ 99 $ 2,977 $ 2,989

Oral tobacco products segment 5,078 5,078 9,081 9,097

Other 1,613 — 1,691 298

Total $ 6,790 $ 5,177 $ 13,749 $ 12,384

Other intangible assets consisted of the following:

June 30, 2023 December 31, 2022

(in millions) Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization

Indefinite-lived intangible assets

$ 11,443 $ — $ 11,443 $ —

Definite-lived intangible assets

2,821 515 1,411 470

Total other intangible assets $ 14,264 $ 515 $ 12,854 $ 470

At June 30, 2023, substantially all of our indefinite-lived intangible assets consisted of our trademarks from our 2009 acquisition of UST ($ 8.8 billion) and 2007 acquisition of Middleton ($ 2.6 billion).

Definite-lived intangible assets, consisting primarily of intellectual property (which includes developed technology), certain cigarette trademarks, e-vapor trademarks, customer relationships and supplier agreements are amortized over a weighted-average period of 18 years.

Pre-tax amortization expense for definite-lived intangible assets was $ 45 million and $ 35 million for the six months ended June 30, 2023 and 2022, respectively, and $ 27 million and $ 18 million for the three months ended June 30, 2023 and 2022, respectively.

Our annualized amortization expense, which includes the impact of the NJOY Transaction, for each of the next five years is estimated to be approximately $ 160 million, assuming no additional transactions occur that require the amortization of intangible assets.

In July 2023, we received the remaining payment of approximately $ 1.8 billion (including interest) from Philip Morris International Inc.

(“PMI”) as part of the agreement with PMI to, among other things, transition and ultimately conclude our relationship with respect to the IQOS Tobacco Heating System (“ IQOS System”) in the United States (“Remaining PMI Payment”).

In 2022, we received $ 1.0 billion from PMI upon entering into the agreement.

For the six and three months ended June 30, 2023, we recorded interest income related to the Remaining PMI Payment of $ 51 million and $ 26 million, respectively, in our condensed consolidated statements of earnings.

At June 30, 2023, our condensed consolidated balance sheet included a pre-tax $ 2.7 billion deferred gain, which we expect to recognize in earnings when we relinquish our rights to the IQOS System effective April 30, 2024.

The changes in goodwill and net carrying amount of intangible assets were as follows:

For the Six Months Ended

June 30, 2023 For the Year Ended

December 31, 2022

(in millions) Goodwill Other Intangible Assets, net Goodwill Other Intangible Assets, net

Balance at January 1

$ 5,177 $ 12,384 $ 5,177 $ 12,306

Changes due to:

Acquisitions (1)

1,613 1,410 — 151

— ( 45 ) — ( 73 )

Balance at end of period $ 6,790 $ 13,749 $ 5,177 $ 12,384

(1) 2023 amounts attributable to the NJOY Transaction.

For additional information regarding the NJOY Transaction, see Note 2.

Acquisition of NJOY .

2022 amounts attributable to certain intellectual property for other tobacco products.

We conduct a required annual review of goodwill and indefinite-lived intangibles for potential impairment, and more frequently if an event occurs or circumstances change that would require us to perform an interim review.

There have been no events or changes in circumstances that indicate an interim impairment review was required as of June 30, 2023.

We will perform our annual impairment testing during the fourth quarter of 2023.

Investments in Equity Securities

The carrying amount of our investments consisted of the following:

(in millions) March 31, 2023 December 31, 2022

The carrying amount of our current and former investments consisted of the following:

(in millions) June 30, 2023 December 31, 2022

ABI $ 9,302 $ 8,975

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$ 9,643 $ 9,600

(Income) losses from investments in equity securities consisted of the following:

For the Three Months Ended March 31,

(Income) losses from our current and former investments in equity securities consisted of the following:

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2023 2022 2023 2022

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(Income) losses from investments in equity securities $ ( 47 ) $ 1,229 $ ( 127 ) $ 1,263

(1) Includes our share of amounts recorded by our investees and additional adjustments, if required, related to (i) the conversion from international financial reporting standards to United States generally accepted accounting principles (“ GAAP”) and (ii) adjustments to our investment required under the equity method of accounting.

(2) Represents loss as a result of the disposition of our JUUL equity securities discussed below.

(3) Represents the estimated change in fair value.

Prior to the disposition of our JUUL equity securities on March 3, 2023, we accounted for our investment in JUUL as an investment in an equity security measured at fair value.

Prior to the disposition of our JUUL equity securities on March 3, 2023, we accounted for our former investment in JUUL as an investment in an equity security measured at fair value.

Investment in ABI

At March 31, 2023, we had an approximate 10 % ownership interest in ABI, consisting of 185 million restricted shares of ABI (the “Restricted Shares”) and 12 million ordinary shares of ABI.

At June 30, 2023, we had an approximate 10 % ownership interest in ABI, consisting of 185 million restricted shares of ABI (the “Restricted Shares”) and 12 million ordinary shares of ABI.

The Restricted Shares:

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▪ have director nomination rights with respect to ABI.

As of this filing, we have not elected to convert our Restricted Shares into ordinary shares of ABI.

We have not elected to convert our Restricted Shares into ordinary shares of ABI.

We account for our investment in ABI under the equity method of accounting because we have the ability to exercise significant influence over the operating and financial policies of ABI, including having active representation on ABI’s board of directors and certain ABI board committees.

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Therefore, the fair value of each Restricted Share is based on the value of an ordinary share.

The fair value of our equity investment in ABI at March 31, 2023 and December 31, 2022 was $ 13.1 billion and $ 11.9 billion, respectively, which exceeded its carrying value of $ 9.2 billion and $ 9.0 billion by approximately 42 % and 33 %, respectively.

Investment in JUUL

On March 3, 2023, we entered into the Stock Transfer Agreement with JUUL pursuant to which, among other things, we transferred to JUUL all of our beneficially owned JUUL equity securities.

The fair value of our equity investment in ABI at June 30, 2023 and December 31, 2022 was $ 11.2 billion and $ 11.9 billion, respectively, which exceeded its carrying value of $ 9.3 billion and $ 9.0 billion by approximately 20 % and 33 %, respectively.

Investment in Cronos

At June 30, 2023, we had a 41.1 % ownership interest in Cronos, consisting of 156.6 million shares, which we account for under the equity method of accounting.

We report our share of Cronos’s results using a one-quarter lag because Cronos’s results are not available in time for us to record them in the concurrent period.

The fair value of our equity method investment in Cronos is based on unadjusted quoted prices in active markets for Cronos’s common shares and was classified in Level 1 of the fair value hierarchy.

At December 31, 2022, the fair value of our equity method investment in Cronos exceeded its carrying value by $ 22 million or approximately 6 %.

At June 30, 2023, the fair value of our equity method investment in Cronos was less than its carrying value by $ 32 million or approximately 9 %.

Based on our evaluation of the duration and magnitude of the fair value decline, our evaluation of Cronos’s financial condition (including its strong cash position) and near-term prospects, and our intent and ability to hold our investment in Cronos until recovery, we concluded that the decline in fair value of our equity method investment in Cronos below its carrying value is temporary and, therefore, no impairment was recorded.

As part of our investment in Cronos, at June 30, 2023, we also owned anti-dilution protections to purchase Cronos common shares, exercisable each quarter upon dilution, to maintain our ownership percentage.

Certain of the anti-dilution protections provide us the ability to purchase additional Cronos common shares at a per share exercise price of Canadian dollar (“CAD”) $ 16.25 upon the occurrence of specified events (“Fixed-price Preemptive Rights”).

The Fixed-price Preemptive Rights had no value at June 30, 2023 and December 31, 2022.

Prior to December 2022, we also owned a warrant providing us the ability to purchase an additional approximate 10 % of common shares of Cronos at a per share exercise price of CAD $ 19.00 , which would have expired on March 8, 2023.

In December 2022, we irrevocably abandoned the Cronos warrant.

Former Investment in JUUL

In March 2023, we entered into the Stock Transfer Agreement with JUUL pursuant to which, among other things, we transferred to JUUL all of our beneficially owned JUUL equity securities.

Concurrently with and in connection with the execution of the Stock Transfer Agreement, JUUL entered into an agreement with us that provides us with a non-exclusive, irrevocable global license to certain of the JUUL Heated Tobacco IP.

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The primary drivers of this conclusion were (i) our rights to the JUUL Heated Tobacco IP being non-exclusive, (ii) there being no product or technology transferred to us associated with the JUUL Heated Tobacco IP and (iii) there being no connection between the JUUL Heated Tobacco IP and our current product development plans.

In April 2020, the FTC issued an administrative complaint challenging our investment in JUUL.

In February 2022, the administrative law judge dismissed the FTC’s complaint.

FTC complaint counsel appealed that decision to the FTC, which appeal remains pending.

In April 2020, the U.S.

Federal Trade Commission (“FTC”) issued an administrative complaint challenging our former investment in JUUL.

In June 2023, the FTC issued an order dismissing its complaint, which concluded the matter.

For further discussion, see Note 13.

Contingencies - Antitrust Litigation .

The following table provides a reconciliation of the beginning and ending balance of our investment in JUUL, which was classified in Level 3 of the fair value hierarchy prior to the disposition of our JUUL equity securities discussed above:

(in millions) Investment Balance

Balance at December 31, 2021 $ 1,705

Unrealized losses (1)

Balance at December 31, 2022 250

Loss on disposition of JUUL equity securities (1)

Balance at March 31, 2023

(1) Included in (income) losses from investments in equity securities.

Investment in Cronos

At March 31, 2023, we had a 41.1 % ownership interest in Cronos, consisting of 156.6 million shares, which we account for under the equity method of accounting.

We report our share of Cronos’s results using a one-quarter lag because Cronos’s results are not available in time for us to record them in the concurrent period.

The fair value of our equity method investment in Cronos is based on unadjusted quoted prices in active markets for Cronos’s common shares and was classified in Level 1 of the fair value hierarchy.

At March 31, 2023, the fair value of our equity method investment in Cronos was less than its carrying value by $ 47 million or approximately 13 %.

As part of our investment in Cronos, at March 31, 2023, we also owned anti-dilution protections to purchase Cronos common shares, exercisable each quarter upon dilution, to maintain our ownership percentage.

Certain of the anti-dilution protections provide us the ability to purchase additional Cronos common shares at a per share exercise price of CAD $ 16.25 upon the occurrence of specified events (“Fixed-price Preemptive Rights”).

The Fixed-price Preemptive Rights had no value at March 31, 2023 and December 31, 2022.

Prior to December 2022, we also owned a warrant providing us the ability to purchase an

additional approximate 10 % of common shares of Cronos at a per share exercise price of CAD $ 19.00 , which would have expired on March 8, 2023.

In December 2022, we irrevocably abandoned the Cronos warrant.

Financial Instruments

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To manage this risk, we may designate certain foreign exchange contracts, including cross-currency swap contracts and forward contracts (collectively, “foreign currency contracts”), and Euro denominated unsecured long-term notes (“foreign currency denominated debt”) as net investment hedges of our investment in ABI.

At March 31, 2023 and December 31, 2022, we had no outstanding foreign currency contracts.

At June 30, 2023 and December 31, 2022, we had no outstanding foreign currency contracts.

When we have foreign currency contracts in effect, counterparties are domestic and international financial institutions.

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The aggregate carrying value and fair value of our total long-term debt were as follows:

(in millions) March 31, 2023 December 31, 2022

(in millions) June 30, 2023 December 31, 2022

Carrying value $ 25,195 $ 26,680

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dollar exchange rate in accumulated other comprehensive losses related to ABI.

We recognized pre-tax (gains) losses of our net investment hedges of $ 48 million and $( 128 ) million for the three months ended March 31, 2023 and 2022, respectively, in accumulated other comprehensive losses.

We recognized pre-tax (gains) losses of our net investment hedges of $ 69 million and $( 375 ) million for the six months ended June 30, 2023 and 2022, respectively, and $ 21 million and $( 247 ) million for the three months ended June 30, 2023 and 2022, respectively, in accumulated other comprehensive losses.

Benefit Plans

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Net periodic benefit cost (income) consisted of the following:

Pension Postretirement

For the Three Months Ended March 31,

Pension Postretirement Pension Postretirement

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2023 2022 2023 2022 2023 2022 2023 2022

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We make contributions to our pension plans to the extent that the contributions are tax deductible and pay benefits that relate to plans for salaried employees that cannot be funded under Internal Revenue Service (“IRS”) regulations.

We made employer

contributions of $ 7 million to our pension plans and did no t make any contributions to our postretirement plans during the three months ended March 31, 2023.

We made employer contributions of $ 11 million to our pension plans and did no t make any contributions to our postretirement plans during the six

months ended June 30, 2023.

Currently, we anticipate making additional employer contributions of up to approximately $ 20 million to our pension plans and $ 30 million to our postretirement plans in 2023.

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We calculated basic and diluted earnings per share (“EPS”) using the following:

For the Three Months Ended March 31,

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2023 2022 2023 2022

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Changes in each component of accumulated other comprehensive losses, net of deferred income taxes, attributable to Altria were as follows:

For the Three Months Ended March 31, 2023

For the Six Months Ended June 30, 2023

(in millions) Benefit Plans ABI Currency

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Other comprehensive earnings (losses) before reclassifications

— ( 18 ) 10 ( 8 )

Deferred income taxes — ( 13 ) — ( 13 )

Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes

— ( 13 ) 10 ( 3 )

Amounts reclassified to net earnings ( 14 ) 9 — ( 5 )

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( 11 ) 66 (1)

Balances, June 30, 2023 $ ( 1,447 ) $ ( 1,303 ) $ 41 $ ( 2,709 )

For the Three Months Ended June 30, 2023

(in millions) Benefit Plans ABI Currency

Adjustments and Other Accumulated

Comprehensive

Balances, March 31, 2023

For the Three Months Ended March 31, 2022

$ ( 1,442 ) $ ( 1,381 ) $ 44 $ ( 2,779 )

Other comprehensive earnings (losses) before reclassifications

Deferred income taxes — ( 18 ) — ( 18 )

Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes

— 72 ( 3 ) 69

Amounts reclassified to net earnings ( 6 ) 8 — 2

Deferred income taxes 1 ( 2 ) — ( 1 )

Amounts reclassified to net earnings, net of deferred income taxes ( 5 ) 6 — 1

Other comprehensive earnings (losses), net of deferred income taxes

Balances, June 30, 2023 $ ( 1,447 ) $ ( 1,303 ) $ 41 $ ( 2,709 )

For the Six Months Ended June 30, 2022

(in millions) Benefit Plans ABI Currency

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Other comprehensive earnings (losses), net of deferred income taxes

Balances, June 30, 2022 $ ( 1,581 ) $ ( 869 ) $ 73 $ ( 2,377 )

For the Three Months Ended June 30, 2022

(in millions) Benefit Plans ABI Currency

Adjustments and Other Accumulated

Comprehensive

Balances, March 31, 2022

(1) Primarily reflects the impact of our designated net investment hedges related to our equity investment in ABI and our share of ABI’s currency translation adjustments.

$ ( 1,597 ) $ ( 1,434 ) $ 69 $ ( 2,962 )

Other comprehensive earnings (losses) before reclassifications

Deferred income taxes — ( 163 ) — ( 163 )

Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes

Amounts reclassified to net earnings 20 ( 23 ) — ( 3 )

Deferred income taxes ( 4 ) 5 — 1

Amounts reclassified to net earnings, net of deferred income taxes 16 ( 18 ) — ( 2 )

Other comprehensive earnings (losses), net of deferred income taxes

Balances, June 30, 2022 $ ( 1,581 ) $ ( 869 ) $ 73 $ ( 2,377 )

(1) Primarily reflects our share of ABI’s currency translation adjustments and the impact of our designated net investment hedges related to our equity investment in ABI.

For further discussion of designated net investment hedges, see Note 6.

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Pre-tax amounts by component, reclassified from accumulated other comprehensive losses to net earnings were as follows:

For the Three Months Ended March 31,

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2023 2022 2023 2022

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Prior service cost/credit ( 17 ) ( 20 ) ( 8 ) ( 10 )

( 14 ) 41 ( 6 ) 20

9 ( 58 ) 8 ( 23 )

Pre-tax amounts reclassified from accumulated other comprehensive losses to net earnings $ ( 5 ) $ ( 17 ) $ 2 $ ( 3 )

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Segment Reporting

Our operating companies’ products include (i) smokeable tobacco products, consisting of combustible cigarettes manufactured and sold by PM USA, and machine-made large cigars and pipe tobacco manufactured and sold by Middleton;

At June 30, 2023 our reportable segments were smokeable products and oral tobacco products, which include (i) smokeable tobacco products, consisting of combustible cigarettes manufactured and sold by PM USA, and machine-made large cigars and pipe tobacco manufactured and sold by Middleton;

and (ii) oral tobacco products, consisting of MST and snus products manufactured and sold by USSTC, and oral nicotine pouches manufactured and sold by Helix.

These products constituted our reportable segments of smokeable products and oral tobacco products at March 31, 2023.

Our former financial services business, which completed the wind-down of its portfolio of finance assets in 2022, the IQOS System heated tobacco business and Helix ROW were included in all other.

The all other category included (i) the financial results of NJOY (beginning June 1, 2023);

(ii) Helix ROW;

(iii) our former financial services business, which completed the wind-down of its portfolio of finance assets in 2022;

and (iv) the IQOS System heated tobacco business.

Our chief operating decision maker (“CODM”) reviews operating companies income (loss) (“OCI”) to evaluate the performance of, and allocate resources to, our segments.

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Segment data were as follows:

For the Three Months Ended March 31,

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2023 2022 2023 2022

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▪ Non-Participating Manufacturer (“NPM”) Adjustment Items:

We recorded pre-tax income for NPM adjustment items of $ 60 million for the three months ended March 31, 2022 in our smokeable products segment.

We recorded pre-tax income for NPM adjustment items of $ 60 million for the six months ended June 30, 2022 in our smokeable products segment.

We recorded these items as reductions to cost of sales in our condensed consolidated statement of earnings, which resulted in increased OCI in our smokeable products segment.

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We recorded pre-tax charges related to tobacco and health and certain other litigation items as follows:

For the Three Months Ended March 31,

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2023 2022 2023 2022

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Short-term Borrowings and Borrowing Arrangements

At March 31, 2023 and December 31, 2022, we had no short-term borrowings.

At June 30, 2023, we had $ 2.0 billion in short-term borrowings resulting from a term loan facility.

At December 31, 2022, we had no short-term borrowings.

In June 2023, we entered into a $ 2.0 billion term loan facility and borrowed the full amount available to fund a portion of the cash payments at the closing of the NJOY Transaction.

In July 2023, upon receipt of the Remaining PMI Payment, we repaid

the term loan facility in full.

For additional information regarding the NJOY Transaction and the Remaining PMI Payment, see Note 2.

Acquisition of NJOY and Note 4.

Goodwill and Other Intangible Assets, net , respectively.

We have a $ 3.0 billion senior unsecured 5-year revolving credit agreement (as amended, the “Credit Agreement”), which is used for general corporate purposes and expires on August 1, 2025.

At March 31, 2023, we had availability under the Credit Agreement for borrowings of up to an aggregate principal amount of $ 3.0 billion.

At June 30, 2023, we had availability under the Credit Agreement for borrowings of up to an aggregate principal amount of $ 3.0 billion.

Pricing for interest and fees under the Credit Agreement may be modified in the event of a change in the rating of our long-term senior unsecured debt.

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and Standard & Poor’s Financial Services LLC.

The applicable percentage for borrowings under the Credit Agreement at March 31, 2023 was 1.0 % based on our long-term senior unsecured debt ratings on that date.

The applicable percentage for borrowings under the Credit Agreement at June 30, 2023 was 1.0 % based on our long-term senior unsecured debt ratings on that date.

The Credit Agreement does not include any other rating triggers or any provisions that could require the posting of collateral.

The Credit Agreement includes various covenants, one of which requires us to maintain a ratio of consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) to Consolidated Interest Expense of not less than 4.0 to 1.0, calculated as of the end of the applicable quarter on a rolling four quarters basis.

At March 31, 2023, the ratio of Consolidated EBITDA to Consolidated Interest Expense, calculated in accordance with the Credit Agreement, was 10.9 to 1.0.

At March 31, 2023, we were in compliance with our covenants in the Credit Agreement.

At June 30, 2023, we were in compliance with our covenants in the Credit Agreement.

The terms “Consolidated EBITDA” and “Consolidated Interest Expense,” each as defined in the Credit Agreement, include certain adjustments.

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Long-term Debt

The aggregate carrying value of our total long-term debt at March 31, 2023 and December 31, 2022 was $ 25.4 billion and $ 26.7 billion, respectively.

In February 2023, we repaid in full our 1.000 % senior unsecured Euro notes in the aggregate principal amount of $ 1.3 billion (€ 1.25 billion) at maturity.

At March 31, 2023 and December 31, 2022, accrued interest on long-term debt of $ 233 million and $ 411 million, respectively, was included in other accrued liabilities on our condensed consolidated balance sheets.

The aggregate carrying value of our total long-term debt at June 30, 2023 and December 31, 2022 was $ 25.2 billion and $ 26.7 billion, respectively.

In May 2023, we repaid in full our 2.950 % senior unsecured notes in the aggregate principal amount of $ 218 million at maturity.

In addition, during the first quarter of 2023, we repaid in full our 1.000 % senior unsecured Euro notes in the aggregate principal amount of $ 1.3 billion (€ 1.25 billion) at maturity.

At June 30, 2023 and December 31, 2022, accrued interest on our total debt of $ 368 million and $ 411 million, respectively, was included in other accrued liabilities on our condensed consolidated balance sheets.

For a discussion of the fair value of our long-term debt and the designation of our Euro denominated senior unsecured notes as a net investment hedge of our investment in ABI, see Note 6.

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The main provisions of the Inflation Reduction Act that impact us are:

(i) a 15% corporate alternative minimum tax (“Corporate AMT”) and (ii) a 1% excise tax on share repurchases, which we will record in equity on our consolidated statements of stockholders’ equity (deficit).

(i) a 15% corporate alternative minimum tax (“Corporate AMT”) and (ii) a 1% excise tax on share repurchases, which is recorded in equity on our consolidated statements of stockholders’ equity (deficit).

We are considered an “applicable corporation” for purposes of Corporate AMT.

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Earnings before income taxes, provision for income taxes and income tax rates consisted of the following:

For the Three Months Ended March 31,

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2023 2022 2023 2022

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Income tax rate 26.1 % 33.4 % 24.6 % 44.5 %

Our income tax rate for the three months ended March 31, 2023 differs from the U.S.

Our income tax rate for the six months ended June 30, 2023 differs from the U.S.

federal statutory rate of 21%, due primarily to state tax expense and a valuation allowance recorded against a deferred tax asset related to the disposition of our former investment in JUUL.

Our income tax rate for the three months ended March 31, 2022 differs from the U.S.

federal statutory rate of 21%, due primarily to state tax expense and a valuation allowance recorded against a deferred tax asset related to a decrease in the estimated fair value of our investment in JUUL.

Our income tax rate for the three months ended June 30, 2023 differs from the U.S.

federal statutory rate of 21%, due primarily to state tax expense.

Our income tax rates for the six and three months ended June 30, 2022 differ from the U.S.

federal statutory rate of 21%, due primarily to a valuation allowance recorded against a deferred tax asset related to the decreases in the estimated fair value of our former investment in JUUL.

We are subject to income taxation in many jurisdictions.

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For the year ending December 31, 2023, we expect to recognize an approximate $ 6.5 billion ordinary loss for cash tax purposes with respect to a portion of our tax basis associated with our former investment in JUUL.

For financial statement purposes, we expect to fully reserve for the tax benefit associated with this ordinary loss by recording an unrecognized tax benefit of

approximately $ 1.6 billion in 2023 on a pro-rata basis, pending the IRS’s review of our tax position.

For the three months ended March 31, 2023, we recognized a pro-rata portion of this ordinary loss, which resulted in a tax benefit of $ 380 million and a reduction to our current income taxes payable.

We also recognized a $ 391 million increase in a long-term liability for unrecognized tax benefits related to this tax position, partially offset by an $ 11 million deferred federal benefit for state taxes.

There was no impact to our condensed consolidated statement of earnings for the three months ended March 31, 2023.

For financial statement purposes, we expect to fully reserve for the tax benefit associated with this ordinary loss by recording an unrecognized tax benefit of approximately $ 1.6 billion in 2023 on a pro-rata basis, pending the IRS’s review of our tax position.

For the six months ended June 30, 2023, we recognized a pro-rata portion of this ordinary loss, which resulted in a tax benefit of $ 760 million and a reduction to our current income taxes payable.

For the six months ended June 30, 2023, we also recognized a $ 782 million increase in a long-term liability for unrecognized tax benefits related to this tax position, partially offset by a $ 22 million deferred federal benefit for state taxes.

There was no impact to our condensed consolidated statement of earnings for the six and three months ended June 30, 2023.

For further discussion of our former investment in JUUL, see Note 5.

Investments in Equity Securities.

At March 31, 2023, our total unrecognized tax benefits were $ 460 million.

The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at March 31, 2023, was $ 44 million, along with $ 416 million affecting deferred taxes.

At June 30, 2023, our total unrecognized tax benefits were $ 842 million.

The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at June 30, 2023, was $ 35 million, along with $ 807 million affecting deferred taxes.

The amount of unrecognized tax benefit that, if recognized, would impact the effective tax rate at December 31, 2022, was $ 44 million, along with $ 25 million affecting deferred taxes.

Unrecognized tax benefits increased by $ 391 million from December 31, 2022 due to the tax position established with respect to the character of losses from our former investment in JUUL as discussed above.

Unrecognized tax benefits increased by $ 773 million from December 31, 2022 due primarily to the tax position established with respect to the character of losses from our former investment in JUUL as discussed above.

As a result of the recognition of the approximate $ 6.5 billion ordinary loss for cash tax purposes discussed above, we expect to be subject to Corporate AMT in 2023.

The following chart provides a reconciliation of the beginning and ending valuation allowances for the three months ended March 31, 2023:

The following chart provides a reconciliation of the beginning and ending valuation allowances for the six months ended June 30, 2023:

(in millions)

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Foreign currency translation ( 1 )

Additions to valuation allowance due to NJOY Transaction (no impact to earnings)

Reductions to valuation allowance offset to deferred tax asset (no impact to earnings)

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In reaching this determination, we consider the character of the assets and the possible sources of taxable income of the appropriate character within the available carryback and carryforward periods available under the tax law.

For the three months ended March 31, 2023, we reduced the deferred tax asset and corresponding valuation allowance for the portion of our JUUL capital losses that is now part of our tax basis in the shares of a foreign subsidiary.

For the six months ended June 30, 2023, we reduced the deferred tax asset and corresponding valuation allowance for the portion of our JUUL capital losses that is now part of our tax basis in the shares of a foreign subsidiary.

This outside basis difference of the foreign subsidiary is not recognized as a deferred tax asset since we do not expect the temporary difference to reverse in the foreseeable future.

The cumulative valuation allowance at March 31, 2023 was primarily attributable to deferred tax assets recorded in connection with the portion of our JUUL capital losses that is now included in our tax basis in the shares of a domestic subsidiary and our investment in Cronos.

The cumulative valuation allowance at June 30, 2023 was primarily attributable to deferred tax assets recorded in connection with the portion of our JUUL capital losses that is now included in our tax basis in the shares of a domestic subsidiary and our investment in Cronos.

Contingencies

Legal proceedings covering a wide range of matters are pending or threatened in various United States and foreign jurisdictions against Altria and certain of our subsidiaries, including PM USA and USSTC, as well as our indemnitees and investees.

Various types of claims may be raised in these proceedings, including product liability, unfair trade practices, antitrust, income tax liability, contraband shipments, patent infringement, employment matters, claims alleging violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), claims for contribution and claims of competitors, shareholders or distributors.

Various types of claims may be raised in these proceedings, including product liability, unfair trade practices, antitrust, income tax liability,

contraband shipments, patent infringement, employment matters, claims alleging violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), claims for contribution and claims of competitors, shareholders or distributors.

Legislative action, such as changes to tort law, also may expand the types of claims and remedies available to plaintiffs.

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In such cases, we may face the risk that one or more co-defendants decline or otherwise fail to participate in the bonding required for an appeal or to pay their proportionate or jury-allocated share of a judgment.

As a result, under certain circumstances, we may

have to pay more than our proportionate share of any bonding- or judgment-related amounts.

As a result, under certain circumstances, we may have to pay more than our proportionate share of any bonding- or judgment-related amounts.

Furthermore, in those cases where plaintiffs are successful, we also may be required to pay interest and attorneys’ fees.

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The changes in our accrued liability for tobacco and health and certain other litigation items, including related interest costs, for the periods specified below are as follows:

For the Three Months Ended March 31,

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2023 2022 2023 2022

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Shareholder derivative lawsuits (2)

JUUL-related settlements (3)

Related interest costs 11 1 10 1

Payments ( 91 )

( 124 ) ( 80 ) ( 21 )

Accrued liability for tobacco and health and certain other litigation items at end of period $ 381 $ 25 $ 381 $ 25

(1) Includes judgments, settlements and fee disputes associated with tobacco and health and certain other litigation.

(2) See Shareholder Class Action and Shareholder Derivative Lawsuits - Federal and State Shareholder Derivative Lawsuits below for a discussion of the pending settlement of the federal and state shareholder derivative lawsuits.

(2) See Shareholder Class Action and Shareholder Derivative Lawsuits - Federal and State Shareholder Derivative Lawsuits below for a discussion of the settlement of the federal and state shareholder derivative lawsuits.

(3) Includes the settlement of certain e-vapor product litigation relating to JUUL e-vapor products and the e-vapor product litigation brought by the Minnesota attorney general.

See E-vapor Product Litigation below for a discussion of these settlements.

The accrued liability for tobacco and health and certain other litigation items, including related interest costs, was included in accrued liabilities and other liabilities on our condensed consolidated balance sheets.

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Pre-tax charges for related interest costs were included in interest and other debt expense, net on our condensed consolidated statements of earnings.

After exhausting all appeals in those cases resulting in adverse verdicts associated with tobacco-related litigation, since October 2004, PM USA has paid judgments and settlements (including related costs and fees) totaling approximately $ 963 million and interest totaling approximately $ 231 million as of March 31, 2023.

After exhausting all appeals in those cases resulting in adverse verdicts associated with tobacco-related litigation, since October 2004, PM USA has paid judgments and settlements (including related costs and fees) totaling approximately $ 1 billion and interest totaling approximately $ 241 million as of June 30, 2023.

These amounts include payments for Engle progeny judgments (and related costs and fees) totaling approximately $ 438 million and related interest totaling approximately $ 60 million.

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To obtain stays of judgments pending appeal, PM USA has posted various forms of security.

As of March 31, 2023, PM USA has posted appeal bonds totaling approximately $ 46 million, which have been collateralized with restricted cash and are included in assets on our condensed consolidated balance sheets.

As of June 30, 2023, PM USA has posted appeal bonds totaling approximately $ 34 million, which have been collateralized with restricted cash and are included in assets on our condensed consolidated balance sheets.

Overview of Tobacco-Related Litigation

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(ii) health care cost recovery cases brought by governmental (both domestic and foreign) plaintiffs seeking reimbursement for health care expenditures allegedly caused by cigarette smoking and/or disgorgement of profits;

(iii) e-vapor cases alleging violation of RICO, fraud, failure to warn, design defect, negligence, antitrust and unfair trade practices;

(iii) e-vapor cases alleging violation of RICO, fraud, failure to warn, design defect, negligence, antitrust, patent infringement and unfair trade practices;

and (iv) other tobacco-related litigation described below.

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The table below lists the number of certain tobacco-related cases pending in the United States against us as of:

April 24, 2023 April 25, 2022 April 26, 2021

July 27, 2023 July 25, 2022 July 26, 2021

Individual Smoking and Health Cases (1)

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Other Tobacco-Related Cases (4)

(1) Includes as of April 24, 2023, 19 cases filed in Illinois, 22 cases filed in New Mexico, 43 cases filed in Massachusetts and 46 non- Engle cases filed in Florida.

Does not include individual smoking and health cases brought by or on behalf of plaintiffs in Florida state and federal courts following the decertification of the Engle case (these Engle progeny cases are discussed below in Smoking and Health Litigation - Engle Class Action ).

(1) Includes as of July 27, 2023, 18 cases filed in Illinois, 18 cases filed in New Mexico, 52 cases filed in Massachusetts and 46 non- Engle cases filed in Florida.

Does not include individual smoking and health cases brought by or on behalf of plaintiffs in Florida state and federal courts following the decertification of the Engle class (these Engle progeny cases are discussed below in Smoking and Health Litigation - Engle Class Action ).

Also does not include 1,390 cases brought by flight attendants seeking compensatory damages for personal injuries allegedly caused by exposure to environmental tobacco smoke (“ETS”).

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(2) See Health Care Cost Recovery Litigation - Federal Government’s Lawsuit below.

(3) Includes as of April 24, 2023, 57 class action lawsuits, 3,746 individual lawsuits and 1467 “third party” lawsuits relating to JUUL e-vapor products, which include school districts, state and local government, tribal and healthcare organization lawsuits.

JUUL is an additional named defendant in each of these lawsuits.

The 57 class action lawsuits include 32 cases in the Northern District of California (“Multidistrict Litigation” or “MDL”) involving plaintiffs whose claims were previously included in other class action complaints but were refiled as separate stand-alone class actions for procedural and other reasons.

(4) Includes as of April 24, 2023, one inactive smoking and health case alleging personal injury and purporting to be brought on behalf of a class of individual plaintiffs and two inactive class action lawsuits alleging that use of the terms “Lights” and “Ultra Lights” constitute deceptive and unfair trade practices, common law or statutory fraud, unjust enrichment, breach of warranty or violations of RICO.

(3) Includes as of July 27, 2023, 57 class action lawsuits, 3,736 individual lawsuits and 1,506 “third party” lawsuits relating to the Multidistrict Litigation discussed under E-vapor Product Litigation below.

The 57 class action lawsuits include 32 cases in the Northern District of California involving plaintiffs whose claims were previously included in other class action complaints but were refiled as separate stand-alone class actions for procedural and other reasons.

In May 2023, we reached agreement on terms to resolve the majority of the Multidistrict Litigation lawsuits.

Also includes three patent infringement lawsuits filed against us and certain of our affiliates.

For further discussion of the pending Multidistrict Litigation settlement and patent infringement litigation, see E-vapor Product Litigation below.

(4) Includes as of July 27, 2023, one inactive smoking and health case alleging personal injury and purporting to be brought on behalf of a class of individual plaintiffs and two inactive class action lawsuits alleging that use of the terms “Lights” and “Ultra Lights” constitute deceptive and unfair trade practices, common law or statutory fraud, unjust enrichment, breach of warranty or violations of RICO.

International Tobacco-Related Cases:

As of April 24, 2023, (i) Altria is named as a defendant in three e-vapor class action lawsuits in Canada;

As of July 27, 2023, (i) Altria is named as a defendant in three e-vapor class action lawsuits in Canada;

(ii) PM USA is a named defendant in 10 health care cost recovery actions in Canada, eight of which also name Altria as a defendant;

and (iii) PM USA and Altria are named as defendants in seven smoking and health class actions filed in various Canadian provinces.

See Guarantees and Other Similar Matters below for a discussion of the Distribution Agreement (defined below) between Altria and Philip Morris International Inc.

(“PMI”) that provides for indemnities for certain liabilities concerning tobacco products.

See Guarantees and Other Similar Matters below for a discussion of the Distribution Agreement (defined below) between Altria and PMI that provides for indemnities for certain liabilities concerning tobacco products.

Tobacco-Related Cases Set for Trial:

As of April 24, 2023, five Engle progeny cases, four individual smoking and health cases and one e-vapor case are set for trial through June 30, 2023.

As of July 27, 2023, two Engle progeny cases, three individual smoking and health cases and no e-vapor cases are set for trial through September 30, 2023.

Trial dates are subject to change.

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Of the 29 non- Engle progeny cases in which verdicts were returned in favor of plaintiffs, 25 have reached final resolution.

See Smoking and Health Liti gation - Engle Progeny Trial Results below for a discussion of verdicts in state and federal Engle progeny cases involving PM USA as of April 24, 2023.

See Smoking and Health Liti gation - Engle Progeny Trial Results below for a discussion of verdicts in state and federal Engle progeny cases involving PM USA as of July 27, 2023.

Smoking and Health Litigation

and implied warranties, breach of special duty, conspiracy, concert of action, violations of unfair trade practice laws and consumer protection statutes and claims under the federal and state anti-racketeering statutes.

Plaintiffs’ allegations of liability in smoking and health cases are based on various theories of recovery, including negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, nuisance, breach of express and implied warranties, breach of special duty, conspiracy, concert of action, violations of unfair trade practice laws and consumer protection statutes and claims under the federal and state anti-racketeering statutes.

Plaintiffs in the smoking and health cases seek various forms of relief, including compensatory and punitive damages, treble/multiple damages and other statutory damages and penalties, creation of medical monitoring and smoking cessation funds, disgorgement of profits, and injunctive and equitable relief.

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Charts listing certain verdicts for plaintiffs in the Engle progeny cases can be found in Smoking and Health Litigation - Engle Progeny Trial Results below.

In May 2023, a jury in a Pennsylvania state court returned a verdict in favor of plaintiff and against PM USA, awarding less than $ 1 million in compensatory damages and allocating 50 % of the fault to PM USA.

Despite the comparative fault, the compensatory damages award will not be reduced due to the jury’s finding of strict liability on the part of PM USA.

Plaintiff’s claim for punitive damages was dismissed prior to the trial.

In lieu of appealing the trial court’s verdict, we settled plaintiff’s claims in July 2023 and recorded a pre-tax charge of less than $ 1 million in the third quarter of 2023.

In February 2023, a jury in a Massachusetts state court returned a verdict in favor of plaintiff and against PM USA, awarding $ 5 million in compensatory damages.

There was no claim for punitive damages.

We have filed post-trial motions challenging the award and will, if necessary, appeal.

In September 2022, a jury in a Florida state court returned a verdict in favor of plaintiff and against PM USA and R.J.

Reynolds Tobacco Company awarding approximately $ 4.5 million in compensatory damages and allocating 13 % of the fault to PM USA.

After applying comparative fault, PM USA’s portion of the compensatory damages is less than $ 1 million.

There was no claim for punitive damages.

The trial court denied PM USA’s post-trial motions, and both parties appealed.

The parties subsequently reached an agreement to resolve plaintiff’s claims.

As a result, both the appeal and cross-appeal have been dismissed and the case is concluded.

Following the denial of PM USA’s post-trial motions, PM USA appealed the judgment to the Appeals Court of Massachusetts, and the appeal remains pending.

In September 2022, a jury in a Massachusetts state court returned a verdict in favor of plaintiff and against PM USA, awarding approximately $ 8 million in compensatory damages and $ 1 billion in punitive damages.

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In February 2021, the trial court awarded plaintiffs attorneys’ fees and costs in the amount of approximately $ 2.3 million.

In July 2021, following denial of PM USA’s post-trial motions, PM USA appealed the judgment to the Appeals Court of Massachusetts.

In September 2022, the Massachusetts Supreme Judicial Court issued an order taking jurisdiction over the appeal and heard oral arguments in January 2023.

The appeal remains pending.

PM USA appealed the judgment, and, in May 2023, the Massachusetts Supreme Judicial Court affirmed the trial court judgment and orders denying PM USA’s post-trial motions, concluding the case.

We recorded a pre-tax charge of approximately $ 48 million and paid the recorded amount in the second quarter of 2023.

Federal Government’s Lawsuit :

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The deadline for filing Engle progeny cases expired in January 2008, at which point a total of approximately 9,300 federal and state claims were pending.

As of April 24, 2023, approximately 551 state court cases were

pending against PM USA or Altria asserting individual claims by or on behalf of approximately 705 state court plaintiffs.

As of July 27, 2023, approximately 461 state court cases were pending against PM USA or Altria asserting individual claims by or on behalf of approximately 599 state court plaintiffs.

Because of a number of factors, including docketing delays, duplicated filings and overlapping dismissal orders, these numbers are estimates.

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Engle Progeny Trial Results:

As of April 24, 2023, 143 federal and state Engle progeny cases involving PM USA have resulted in verdicts since the Florida Supreme Court Engle decision.

Seventy-nine verdicts were returned in favor of plaintiffs, and five verdicts ( Calloway , Oshinsky-Blacker, McCoy, Mahfuz and Neff ) that were initially returned in favor of plaintiffs were reversed post-trial or on appeal and remain pending.

As of July 27, 2023, 144 federal and state Engle progeny cases involving PM USA have resulted in verdicts since the Florida Supreme Court Engle decision.

Seventy-eight verdicts were returned in favor of plaintiffs, and four verdicts ( Calloway , Oshinsky-Blacker, McCoy and Mahfuz ) that were initially returned in favor of plaintiffs were reversed post-trial or on appeal and remain pending.

In Kaplan ( McLaughlin ), the punitive damages award was vacated on appeal and remanded for a new trial.

In Sommers , the trial court entered final judgment dismissing the plaintiff’s punitive damages claim with prejudice, and plaintiff appealed.

In Sommers , plaintiff appealed a jury verdict awarding only compensatory damages.

The Third District Court of Appeal affirmed the award and remanded for a new trial on entitlement to punitive damages and amount.

On remand, the trial court granted PM USA’s motion for summary judgment and entered final judgment dismissing the plaintiff’s punitive damages claim with prejudice, and plaintiff has appealed.

Fifty-seven verdicts were returned in favor of PM USA, of which 47 were state cases.

In addition, there have been a number of mistrials, only some of which have resulted in new trials as of April 24, 2023.

remand, the trial court granted PM USA’s motion for summary judgment and entered final judgment dismissing the plaintiff’s punitive damages claim with prejudice, and plaintiff has appealed.

Fifty-nine verdicts were returned in favor of PM USA, of which 49 were state cases.

In addition, there have been a number of mistrials, only some of which have resulted in new trials as of July 27, 2023.

The jury in one case, Garcia , awarded plaintiff compensatory damages and found plaintiff was entitled to punitive damages;

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Juries in two other cases ( Weingart and Hancock ) returned verdicts against PM USA awarding no damages, but the trial court in each case decided to award plaintiffs damages.

One case, Pollari , resulted in a verdict in favor of PM USA following a retrial of an initial verdict returned in favor of plaintiff.

Plaintiff and defendants appealed the verdict and the appellate court affirmed the judgment in favor of the defendants.

Two cases, Pollari and Neff , resulted in verdicts in favor of PM USA following a retrial of initial verdicts returned in favor of plaintiff.

In Pollari , plaintiff and defendants appealed the verdict and the appellate court affirmed the judgment in favor of the defendants.

In Neff , plaintiff filed a motion for a new trial, which is pending.

Three cases, Gloger , Rintoul ( Caprio ) and Duignan , resulted in verdicts in favor of plaintiffs following retrial of initial verdicts returned in favor of plaintiffs.

A post-trial appeal is pending in Duignan .

In Duignan , plaintiff’s motion for a rehearing with respect to the appellate court’s decision reversing the judgment against defendants on certain claims, vacating the punitive damages judgment and reducing the compensatory damages judgment based on plaintiff’s comparative fault remains pending.

The verdicts in the retrials in Gloger and Rintoul ( Caprio ) were reversed upon appeal and remanded for new trials.

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The charts below list the verdicts and post-trial developments in certain Engle progeny cases in which verdicts were returned in favor of plaintiffs.

The first chart lists cases that are pending as of April 24, 2023 where PM USA has determined an unfavorable outcome is not probable and the amount of loss cannot be reasonably estimated, and the second chart lists cases that have concluded in the past 12 months.

The first chart lists cases that are pending as of July 27, 2023 where PM USA has determined an unfavorable outcome is not probable and the amount of loss cannot be reasonably estimated, and the second chart lists cases that have concluded in the past 12 months.

Unless otherwise noted for a particular case, the jury’s award for compensatory damages will not be reduced by any finding of plaintiff’s comparative fault.

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Hoffman January 2023 PM USA Miami-Dade $ 5 million ($ 3 million PM USA)

Appeal by defendant to First District Court of Appeal pending.

Appeal by defendant to Third District Court of Appeal pending.

Levine September 2022 PM USA and R.J.

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Appeal by defendant to the Third District Court of Appeal pending.

Duignan February 2020 (2)

PM USA and R.J.

Reynolds Pinellas $ 3 million ($ 1 million PM USA)

The Second District Court of Appeal vacated the final judgment entered in plaintiff’s favor following retrial, vacated the punitive damages judgment, directed the trial court to apply the jury’s comparative fault assessments to the compensatory damages verdict and ordered the trial court to set aside the jury’s findings on plaintiff’s fraud claims.

In June 2023, plaintiff filed a motion for reconsideration, which is pending.

Plaintiff Verdict Date Defendant(s) Court Compensatory Damages (1)

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(PM USA) Post-Trial Status

Duignan February 2020 (2)

PM USA and R.J.

Reynolds Pinellas $ 3 million

Florida Supreme Court quashed the Second District Court of Appeal’s affirmation of judgment against the defendants and remanded the case for reconsideration in light of Prentice (3) .

McCall March 2019 PM USA Broward <$ 1 million (<$ 1 million PM USA)

New trial on punitive damages is set for June 2023.

New trial on punitive damages is set for September 2023.

Chadwell September 2018 PM USA Miami-Dade $ 2 million

Third District Court of Appeal has ordered supplemental briefing in accordance with the decision in Prentice (3) .

Third District Court of Appeal has received supplemental briefing in accordance with the decision in Prentice (3) .

Kaplan ( McLaughlin )

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Florida Supreme Court vacated the punitive damages award in accordance with the decision in Sheffield (3) .

The Fourth District Court of Appeals affirmed the compensatory damages award and granted a new trial on punitive damages.

The Fourth District Court of Appeal affirmed the compensatory damages award and granted a new trial on punitive damages.

Cooper ( Blackwood )

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See Certain Other Tobacco-Related Litigation below for a discussion of “Lights” and “Ultra Lights” class action cases and medical monitoring class action cases pending against PM USA.

As of April 24, 2023, PM USA and Altria are named as defendants, along with other cigarette manufacturers, in seven class actions filed in the Canadian provinces of Alberta, Manitoba, Nova Scotia, Saskatchewan, British Columbia and Ontario.

As of July 27, 2023, PM USA and Altria are named as defendants, along with other cigarette manufacturers, in seven class actions filed in the Canadian provinces of Alberta, Manitoba, Nova Scotia, Saskatchewan, British Columbia and Ontario.

In Saskatchewan, British Columbia ( two separate cases) and Ontario, plaintiffs seek class certification on behalf of individuals who suffer or have suffered from various diseases, including chronic obstructive pulmonary disease, emphysema, heart disease or cancer, after smoking defendants’ cigarettes.

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Settlements of Health Care Cost Recovery Litigation:

In November 1998, PM USA and certain other tobacco product manufacturers entered into the Master Settlement Agreement (the “MSA”) with 46 states, the District of Columbia and certain

United States territories to settle asserted and unasserted health care cost recovery and other claims.

PM USA and certain other tobacco product manufacturers had previously entered into agreements to settle similar claims brought by Mississippi, Florida, Texas and Minnesota (together with the MSA, the “State Settlement Agreements”).

In November 1998, PM USA and certain other tobacco product manufacturers entered into the Master Settlement Agreement (the “MSA”) with 46 states, the District of Columbia and certain United States territories to settle asserted and unasserted health care cost recovery and other claims.

PM USA and certain other tobacco product manufacturers had previously entered into agreements to settle similar claims brought by Mississippi, Florida,

Texas and Minnesota (together with the MSA, the “State Settlement Agreements”).

The State Settlement Agreements require that the original participating manufacturers or “OPMs” (now PM USA, R.J.

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these quarterly payments are expected to end in 2024.

For the three months ended March 31, 2023 and 2022, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $ 900 million for each period.

For the three months ended June 30, 2023 and 2022, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $ 1 billion for each period.

For the six months ended June 30, 2023 and 2022, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $ 1.9 billion for each period.

These amounts include PM USA’s estimate of amounts related to NPM Adjustments discussed below.

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A tenth state, Illinois, also participated in the arbitration, but joined the multi-state settlement after the arbitration panel issued its decisions described below.

Hearings for nine of the 10 states concluded by the end of 2020.

The arbitration panels issued decisions finding that three states, Missouri, New Mexico and Washington, were not diligent in their enforcement of their escrow statutes in 2004 and, therefore, are subject to the NPM adjustment for 2004.

The arbitration panels further found that the remaining seven states were diligent in their enforcement and, therefore, are not subject to the NPM adjustment for 2004.

Washington and Missouri have challenged those determinations in their respective state courts and with the arbitration panels, and several issues remain to be resolved by the courts that may affect the final amount of the 2004 NPM adjustment PM USA and other PMs will receive.

PM USA recorded $ 21 million and $ 3 million as a reduction in cost of sales in the third quarter of 2021 and fourth quarter of 2022, respectively, for its estimate of the minimum amount of the 2004 NPM adjustment it will receive.

PM USA estimates it is

entitled to interest of approximately $ 23 million and $ 5 million in connection with the 2004 NPM adjustment, which it recorded as interest income in the third quarter of 2021 and fourth quarter of 2022, respectively.

PM USA received approximately $ 52 million on account of the 2004 NPM Adjustment as a credit against its April 2023 MSA payment.

Washington, Missouri and New Mexico have challenged those determinations in their respective state courts and with the arbitration panels, and several issues remain to be resolved by the courts that may affect the final amount of the 2004 NPM adjustment PM USA and other PMs will receive.

PM USA had recorded $ 21 million and $ 3 million as a reduction in cost of sales in the third quarter of 2021 and fourth quarter of 2022, respectively, for its estimate of the minimum principal amount of the 2004 NPM Adjustment it received.

PM USA had recorded $ 23

million and $ 5 million as interest income in the third quarter of 2021 and fourth quarter of 2022, respectively, for its estimate of the interest amount it received in connection with the 2004 NPM Adjustment.

▪ 2005-2007 NPM Adjustments.

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The arbitration encompasses three years , 2005-2007, for eight of the nine states, and one year , 2005, for one state.

As of April 24, 2023, no decisions have resulted from the arbitration.

As of July 27, 2023, no decisions have resulted from the arbitration.

▪ Subsequent Years.

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Further proceedings remain outstanding, and a final judgment has not yet been issued.

In May 2023, PM USA and R.J.

Reynolds filed a motion in the United States District Court for the Eastern District of Texas seeking to enforce the Texas State Settlement Agreement against the State of Texas concerning the same tax rate issue raised by the State of Mississippi.

The State of Texas filed a cross-motion to enforce, and the matter remains pending in the trial court.

In January 2021, PM USA and other PMs reached an agreement with several MSA states to waive the PMs’ claim under the most favored nation provision of the MSA in connection with a settlement between those MSA states and a non-participating manufacturer, S&M Brands, Inc.

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In August 2006, the district court held that certain defendants, including Altria and PM USA, violated RICO and engaged in certain “sub-schemes” to defraud that the government had alleged.

The court did not impose monetary penalties on defendants, but ordered various types of non-monetary relief, including an injunction against conveying any express or implied health message or health descriptors on cigarette packaging or in cigarette advertising or promotional material, including “lights,” “ultra lights” and “low tar,” which the court found could cause consumers to believe one cigarette brand is less hazardous than another brand, and the issuance of “corrective statements” in various media regarding the adverse health effects of smoking, the addictiveness of smoking and nicotine, the lack of any significant health benefit from smoking “low tar” or “light” cigarettes, defendants’ manipulation of cigarette design to ensure optimum nicotine delivery and the adverse health effects of exposure to ETS.

significant health benefit from smoking “low tar” or “light” cigarettes, defendants’ manipulation of cigarette design to ensure optimum nicotine delivery and the adverse health effects of exposure to ETS.

Corrective statements began appearing in newspapers and on television in the fourth quarter of 2017 and on websites in the second quarter of 2018, and the onserts began appearing in the fourth quarter of 2018.

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In August 2020, we filed an opposition to the government’s motion and, in the alternative, a motion to modify the injunction to make clear it does not apply to HeatSticks .

The district court heard arguments on the motions in July 2022 and has not yet issued any decisions.

Regardless of the district court’s decisions on the pending motions, the government has indicated it will not oppose a modification to the injunction that permits PM USA to use the Modified Risk Tobacco Product claim authorized by the U.S.

Food and Drug Administration for HeatSticks .

In July 2023, the district court ruled that HeatSticks are cigarettes subject to the court ordered injunction.

The district court also ruled that PM USA can make FDA authorized reduced exposure claims about HeatSticks .

E-vapor Product Litigation

As of April 24, 2023, we are defendants in 57 class action lawsuits relating to JUUL e-vapor products.

JUUL is an additional named defendant in each of these lawsuits.

The theories of recovery include violation of RICO, fraud, failure to warn, design defect, negligence and unfair trade practices.

Plaintiffs seek various remedies, including compensatory and punitive damages and an injunction prohibiting product sales.

The 57 class action lawsuits include 32 cases involving plaintiffs whose claims were previously included in other class action complaints but were refiled as separate stand-alone class actions for procedural and other reasons.

As of July 27, 2023, we are defendants in 57 class action lawsuits, 3,736 individual lawsuits and 1,506 “third party” lawsuits relating to JUUL e-vapor products, which include school districts, state and local governments and tribal and healthcare organization lawsuits.

We refer to this litigation collectively as the “Multidistrict Litigation.” The 57 class action lawsuits include 32 cases involving plaintiffs whose claims were previously included in other class action complaints but were refiled as separate stand-alone class actions for procedural and other reasons.

Three of the class action lawsuits are pending in Canada.

We also have been named as defendants in other lawsuits involving JUUL e-vapor products, including 3,746 individual lawsuits and 1,467 “third party” lawsuits, which include school districts, state and local governments and tribal and healthcare organization lawsuits.

JUUL is an additional named defendant in each of these lawsuits.

In October 2019, the U.S.

Judicial Panel on Multidistrict Litigation ordered the coordination or consolidation of the federal individual and class action lawsuits mentioned above in the U.S.

District Court for the Northern District of California for pretrial purposes.

In December 2022, JUUL reached agreements to resolve the Multidistrict Litigation through settlement.

In January 2023, the court preliminarily approved the settlement.

We are not a party to any settlements concerning the Multidistrict Litigation.

The court has set trial dates for one case pending in the Multidistrict Litigation.

One trial in the Multidistrict Litigation is ongoing as of April 24, 2023.

We filed motions to dismiss certain claims in the class action and school district cases, including the federal RICO claim.

In October 2020, the U.S.

District Court for the Northern District of California granted the motion to dismiss the RICO class action claim without prejudice.

Although it otherwise denied the motion, the court found that plaintiffs had not sufficiently alleged standing or causation with respect to their claim under California law.

The court also granted the motion to dismiss the RICO claim in the cases filed by various school districts, but denied the motion in all other respects.

The court gave plaintiffs the opportunity to amend their complaints to attempt to cure the deficiencies the court identified and plaintiffs filed their amended complaints in November 2020.

In January 2021, we filed a renewed motion to dismiss the RICO claim, which the court denied in April 2021.

In June 2022, the court granted plaintiffs’ motion to certify a California state class based on state law claims against JUUL and a nationwide class based on RICO claims against Altria and other defendants.

Altria and the other defendants filed petitions with the U.S.

Court of Appeals for the Ninth Circuit seeking discretionary review of the class certification order, which the court granted in October 2022.

The theories of recovery in the Multidistrict Litigation include violation of RICO, fraud, failure to warn, design defect, negligence and unfair trade practices.

Plaintiffs seek various remedies, including compensatory and punitive damages, restitution or remediation (for plaintiffs that are government entities) and an injunction prohibiting product sales.

An additional group of cases is pending in California state courts.

In January 2020, the Judicial Council of California determined that this group of cases was appropriate for coordination and assigned the group to the Superior Court of California, Los Angeles County, for pretrial purposes.

JUUL also is named in a significant number of additional individual and class action lawsuits to which we are not currently named.

In May 2023, we reached agreement on terms to resolve the majority of the Multidistrict Litigation lawsuits as well as the group of cases pending in a consolidated California state court proceeding for $ 235 million.

The settlement applies to all of the Multidistrict Litigation except 35 “third party” cases brought by Native American tribes and the three class action lawsuits pending in Canada.

The settlement also does not apply to the cases brought by the attorneys general of Alaska, Hawaii and New Mexico, discussed below, or 17 putative class actions antitrust lawsuits.

For a description of the antitrust cases not subject to the settlement, see Antitrust Litigation below.

The settlement remains subject to the parties entering into one or more final settlement agreements approved by the relevant courts.

Four of the “third party” lawsuits noted above against us and JUUL were initiated, individually, by the attorneys general of Alaska, Hawaii, Minnesota and New Mexico alleging violations of state consumer protection and other similar laws.

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The trial courts in the Alaska and Hawaii lawsuits have set the trials for April 2024 and February 2024, respectively.

As of April 24, 2023, the trial court in New Mexico has not set a trial date.

As of July 27, 2023, the trial court in New Mexico has not set a trial date.

In May 2023, Fuma International LLC filed a lawsuit against Altria and our affiliates Nu Mark LLC (“Nu Mark”), AGDC, ALCS and NJOY in the United States District Court for the Eastern District of Virginia asserting claims of patent infringement based on the sale of various Nu Mark and NJOY products, including NJOY ACE , in the United States.

Plaintiff seeks various remedies, including permanent injunctive relief, treble damages and attorneys’ fees.

In June 2023, JUUL and VMR Products LLC filed a lawsuit against Altria and our affiliates AGDC, ALCS, NJOY Holdings and NJOY in the United States District Court for the District of Arizona asserting claims of patent infringement based on the sale of NJOY ACE in the United States.

Plaintiffs seek various remedies, including damages and an injunction on sales of NJOY ACE .

Also in June 2023, the same plaintiffs filed a related action against the same defendants with the U.S.

International Trade Commission (“ITC”).

There, the plaintiffs also allege patent infringement, but the remedies sought include a prohibition on the importation of NJOY ACE into the United States.

No damages are recoverable in the proceedings before the ITC.

IQOS Litigation

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Reynolds, filed a lawsuit against Altria, PM USA, ALCS, PMI and its affiliate, Philip Morris Products S.A., in the U.S.

District Court for the Eastern District of Virginia asserting claims of patent infringement based on the sale of the IQOS System electronic device and Marlboro HeatSticks in the United States.

District Court for the Eastern

District of Virginia asserting claims of patent infringement based on the sale of the IQOS System electronic device and Marlboro HeatSticks in the United States.

Plaintiffs seek various remedies, including preliminary and permanent injunctive relief, treble damages and attorneys’ fees.

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Reynolds has filed a notice of appeal of the judgment.

As gains related to this lawsuit have not yet been determined to be realized or realizable in accordance with GAAP, they have not been recognized in our financial statements for the three months ended March 31, 2023.

In April 2020, a related patent infringement action was filed against the same defendants by the same plaintiffs, as well as R.J.

Reynolds, with the U.S.

International Trade Commission (“ITC”), but the remedies sought included a prohibition on the importation of the IQOS System electronic device, Marlboro HeatSticks and component parts into the United States and on the sale of any such products previously imported into the United States.

Reynolds, with the ITC, but the remedies sought included a prohibition on the importation of the IQOS System electronic device, Marlboro HeatSticks and component parts into the United States and on the sale of any such products previously imported into the United States.

No damages are recoverable in the proceedings before the ITC.

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In March 2023, we entered into a stock transfer agreement with JUUL pursuant to which, among other things, we transferred to JUUL all of our beneficially owned JUUL equity securities.

Investments in Equity Securities for a discussion of our disposition of our interest in JUUL.

In April 2020, the FTC issued an administrative complaint against Altria and JUUL alleging that our 35 % investment in JUUL and the associated agreements constitute an unreasonable restraint of trade in violation of Section 1 of the Sherman Antitrust Act of 1890 (“Sherman Act”) and Section 5 of the Federal Trade Commission Act of 1914, and substantially lessened competition in violation of Section 7 of the Clayton Antitrust Act (“Clayton Act”).

If the FTC’s challenge is successful, the FTC may order a broad range of remedies, including a requirement of FTC approval of future agreements related to the development, manufacture, distribution or sale of e-vapor products and prohibition against any officer or director of either Altria or JUUL serving on the other party’s board of directors or attending meetings of the other party’s board of directors and notice to the FTC in advance of certain corporate actions, including acquisitions, mergers or certain corporate restructurings.

Investments in Equity Securities for a discussion of our disposition of our investment in JUUL.

In April 2020, the U.S.

Federal Trade Commission (“FTC”) issued an administrative complaint against Altria and JUUL alleging that our 35 % investment in JUUL and the associated agreements constitute an unreasonable restraint of trade in violation of Section 1 of the Sherman Antitrust Act of 1890 (“Sherman Act”) and Section 5 of the Federal Trade Commission Act of 1914, and substantially lessened competition in violation of Section 7 of the Clayton Antitrust Act (“Clayton Act”).

In February 2022, the administrative law judge dismissed the FTC’s complaint and, also in February 2022, FTC complaint counsel appealed the administrative law judge’s decision to the FTC.

Oral argument with respect to the appeal occurred in September 2022.

After oral argument, the FTC asked for additional briefing, which was completed in December 2022.

In March 2023, following our disposition of our interest in JUUL, we filed a motion to dismiss, or in the alternative, to stay the litigation and a motion to withdraw the matter from adjudication to discuss settlement with the FTC.

The FTC subsequently issued an order denying our request for a stay and extending to May 5, 2023 its deadline for issuance of a final decision with respect to FTC complaint counsel’s appeal of the administrative law judge’s decision and the remainder of the pending motions.

Altria can appeal any adverse ruling the FTC issues following its review to any U.S.

Court of Appeals.

Also as of April 24, 2023, 17 putative class action lawsuits have been filed against Altria and JUUL in the U.S.

In March 2023, following our disposition of our investment in JUUL, we filed a motion to dismiss the complaint.

In June 2023, the FTC dismissed the action as no longer in the public interest.

Also as of July 27, 2023, 17 putative class action lawsuits have been filed against Altria and JUUL in the U.S.

District Court for the Northern District of California.

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District Court for the Northern District of California denied our motion to dismiss except with respect to plaintiffs’ claims for injunctive and equitable relief.

However, plaintiffs were granted the opportunity to replead such claims by the trial court, which plaintiffs did in September 2021.

However, plaintiffs were granted the opportunity to replead such claims by

the trial court, which plaintiffs did in September 2021.

In January 2022, the trial court ordered that the direct-purchaser plaintiffs’ claims against JUUL be sent to arbitration pursuant to an arbitration provision in JUUL’s online purchase agreement.

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In April 2020, JUUL, its founders and some of its current and former executives were added to the lawsuit.

The claims allege false and misleading statements and omissions relating to our former investment in JUUL.

Plaintiffs seek various remedies, including damages and attorneys’ fees.

The claims alleged false and misleading statements and omissions relating to our former investment in JUUL.

Plaintiffs sought various remedies, including damages and attorneys’ fees.

In July 2020, the defendants filed motions to dismiss plaintiffs’ claims, which the district court denied in March 2021.

In the fourth quarter of 2021, plaintiffs and defendants agreed upon a class action settlement under which, among other things, (i) all claims asserted against Altria and the other named defendants are resolved without any liability or wrongdoing attributed to them personally or to Altria and (ii) Altria will pay the class an aggregate amount of $ 90 million, which amount includes attorneys’ fees.

In the fourth quarter of 2021, plaintiffs and defendants agreed upon a class action settlement under which, among other things, (i) all claims asserted against Altria and the other named defendants were resolved without any liability or wrongdoing attributed to them personally or to Altria and (ii) Altria agreed to pay the class an aggregate amount of $ 90 million, which amount includes attorneys’ fees.

The class is defined to include persons and entities who purchased or otherwise acquired shares of Altria between October 25, 2018 through April 2, 2020, subject to certain exclusions.

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Gifford, JUUL and certain of our executives and officers.

These derivative lawsuits relate to our former investment in JUUL, and assert claims of breach of fiduciary duty by the Altria defendants and aiding and abetting in that alleged breach of fiduciary duty by the remaining defendants.

These derivative lawsuits related to our former investment in JUUL, and asserted claims of breach of fiduciary duty by the Altria defendants and aiding and abetting in that alleged breach of fiduciary duty by the remaining defendants.

In March 2021, the U.S.

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District Court for the Eastern District of Virginia against Mr.

Crosthwaite, certain members of our Board of Directors, JUUL, its founders and some of its current and former executives.

These suits assert various claims, including breach of fiduciary duty, unjust enrichment, waste of corporate assets and violations of certain federal securities laws.

The remedies sought in these lawsuits include damages, disgorgement of profits, reformation of our corporate governance and internal procedures, and attorneys’ fees.

Crosthwaite (our former Chief Growth Officer and JUUL’s current Chief Executive Officer), certain members of our Board of Directors, JUUL, its founders and some of its current and former executives.

These suits asserted various claims, including breach of fiduciary duty, unjust enrichment, waste of corporate assets and violations of certain federal securities laws.

The remedies sought in these lawsuits included damages, disgorgement of profits, reformation of our corporate governance and internal procedures, and attorneys’ fees.

In April 2021, the court consolidated the five cases pending in the Eastern District of Virginia into a single case.

Six derivative lawsuits have been filed in Virginia state courts against Mr.

Crosthwaite, certain members of our Board of Directors, JUUL, its founders and some of its current and former executives.

The lawsuits were filed in September 2020, May 2021, June 2021, July 2021, August 2021 and August 2021, respectively.

The lawsuits assert various claims, including breach of fiduciary duty, and seek remedies similar to those sought by plaintiffs in the cases pending in federal court in the Eastern District of Virginia.

The lawsuits asserted various claims, including breach of fiduciary duty, and sought remedies similar to those sought by plaintiffs in the cases pending in federal court in the Eastern District of Virginia.

In successive orders from July 2021, September 2021 and January 2022, five of the six state derivative cases were consolidated into a single case.

In October 2022, plaintiffs and defendants in all the federal and state derivative cases agreed upon a settlement of these cases.

Under the terms of the settlement, among other things, we agreed to fund underage tobacco prevention and cessation programs,

which may include positive youth development programs, led by independent third-party organizations.

Under the terms of the settlement, among other things, we agreed to provide $ 100 million in funding over a five-year period to underage tobacco prevention and cessation programs, which may include positive youth development programs, led by independent third-party organizations.

We expect to begin funding in 2024.

In 2022, we recorded pre-tax provisions totaling $ 27 million for costs associated with the independent monitoring of our funding commitments and attorneys’ fees.

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In March 2023, pursuant to the terms of the settlement agreement, plaintiffs in the state derivative cases filed motions to dismiss their lawsuits, which the state courts granted.

The settlement will become effective upon the expiration of the deadline for any appeals of the dismissal orders, which is scheduled to occur on May 1, 2023.

The settlement became effective in May 2023 upon the expiration of the deadline for any appeals of the dismissal orders.

In the first quarter of 2023, we recorded pre-tax provisions totaling approximately $ 100 million related to the settlement, and in April 2023, paid $ 15 million to plaintiffs’ escrow account for attorneys’ fees.

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Twenty-one state courts in 23 “Lights” cases have refused to certify class actions, dismissed class action allegations, reversed prior class certification decisions or have entered judgment in favor of PM USA.

As of April 24, 2023, two “Lights/Ultra Lights” class actions are pending in U.S.

As of July 27, 2023, two “Lights/Ultra Lights” class actions are pending in U.S.

state courts.

Neither case is active.

As of April 24, 2023, one smoking and health case alleging personal injury or seeking court-supervised programs or an ongoing medical monitoring program on behalf of individuals exposed to environmental tobacco smoke and purporting to be brought on behalf of a class of individual plaintiffs, is pending in a U.S.

As of July 27, 2023, one smoking and health case alleging personal injury or seeking court-supervised programs or an ongoing medical monitoring program on behalf of individuals exposed to environmental tobacco smoke and purporting to be brought on behalf of a class of individual plaintiffs, is pending in a U.S.

The case is currently inactive.

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Plaintiffs’ allegations of liability in these cases have been based on various theories of recovery, such as negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, breach of implied warranty, addiction and breach of consumer protection statutes.

Plaintiffs have typically sought various forms of relief, including compensatory and punitive damages, and certain equitable relief, including but not limited to disgorgement.

Plaintiffs have typically sought various forms of relief, including compensatory and punitive damages, and certain equitable relief, including disgorgement.

Defenses raised in these cases have included lack of causation, assumption of the risk, comparative fault and/or contributory negligence, and statutes of limitations.

As of April 24, 2023, there is no such case pending against UST and/or its tobacco subsidiaries.

As of July 27, 2023, there is no such case pending against UST and/or its tobacco subsidiaries.

Environmental Regulation

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In the ordinary course of business, we have agreed to indemnify a limited number of third parties in the event of future litigation.

At March 31, 2023, we (i) had $ 46 million of unused letters of credit obtained in the ordinary course of business and (ii) were contingently liable for guarantees related to our own performance, including $ 19 million for surety bonds recorded on our condensed consolidated balance sheet.

At June 30, 2023, we (i) had $ 46 million of unused letters of credit obtained in the ordinary course of business and (ii) were contingently liable for guarantees related to our own performance, including $ 19 million for surety bonds recorded on our condensed consolidated balance sheet.

In addition, from time to time, we issue lines of credit to affiliated entities.

These items have not had, and are not expected to have, a significant impact on our liquidity.

Under the terms of a distribution agreement between Altria and PMI (the “Distribution Agreement”), entered into as a result of our 2008 spin-off of our former subsidiary PMI, liabilities concerning tobacco products will be allocated based in substantial

part on the manufacturer.

PMI will indemnify Altria and PM USA for liabilities related to tobacco products manufactured by PMI or contract manufactured for PMI by PM USA, and PM USA will indemnify PMI for liabilities related to tobacco products manufactured by PM USA, excluding tobacco products contract manufactured for PMI.

We do not have a related liability recorded on our condensed consolidated balance sheet at March 31, 2023 as the fair value of this indemnification is insignificant.

We do not have a related liability recorded on our condensed consolidated balance sheet at June 30, 2023 as the fair value of this indemnification is insignificant.

PMI has agreed not to seek indemnification with respect to the IQOS System patent litigation discussed above under IQOS Litigation, excluding the patent infringement case filed with the U.S.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements