What changed in this filing

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Item 1. Financial Statements

2023-10-26 compared with 2023-08-01 · 244 added, 255 removed, 1062 unchanged (32% of the section changed)

5 unchanged sentences

______________________________

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

Cash and cash equivalents $ 1,537 $ 4,030

10 unchanged sentences

Other intangible assets, net 13,727 12,384

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

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

Other assets 1,025 965

6 unchanged sentences

________________________________________________

June 30, 2023 December 31, 2022

Short-term borrowings $ 2,000 $ —

September 30, 2023 December 31, 2022

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

22 unchanged sentences

Cost of repurchased stock

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

( 1,036,080,497 shares at September 30, 2023 and

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

10 unchanged sentences

_____________________________________

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

For the Nine Months Ended September 30, For the Three Months Ended September 30,

2023 2022 2023 2022

20 unchanged sentences

_____________________

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

For the Nine Months Ended September 30, For the Three Months Ended September 30,

2023 2022 2023 2022

11 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

for the Six Months Ended June 30, 2023 and 2022

for the Nine Months Ended September 30, 2023 and 2022

(in millions of dollars, except per share data)

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Other — — — — ( 5 ) — ( 5 )

Balances, June 30, 2023

Balances, September 30, 2023

$ 935 $ 5,895 $ 30,767 $ ( 2,471 ) $ ( 38,533 ) $ 50 $ ( 3,357 )

16 unchanged sentences

Repurchases of common stock — — — — ( 1,451 ) ( 1,451 )

Balances, June 30, 2022

Balances, September 30, 2022

$ 935 $ 5,873 $ 28,785 $ ( 2,383 ) $ ( 37,442 ) $ ( 4,232 )

3 unchanged sentences

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

for the Three Months Ended June 30, 2023 and 2022

for the Three Months Ended September 30, 2023 and 2022

( in millions of dollars, except per share data)

9 unchanged sentences

Equity (Deficit)

Balances, March 31, 2023

Balances, June 30, 2023

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

7 unchanged sentences

Repurchases of common stock — — — — ( 260 ) — ( 260 )

Other — — — — ( 5 ) — ( 5 )

Balances, June 30, 2023

Balances, September 30, 2023

$ 935 $ 5,895 $ 30,767 $ ( 2,471 ) $ ( 38,533 ) $ 50 $ ( 3,357 )

6 unchanged sentences

Equity (Deficit)

Balances, March 31, 2022

Balances, June 30, 2022

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

7 unchanged sentences

Repurchases of common stock — — — — ( 368 ) ( 368 )

Balances, June 30, 2022

Balances, September 30, 2022

$ 935 $ 5,873 $ 28,785 $ ( 2,383 ) $ ( 37,442 ) $ ( 4,232 )

5 unchanged sentences

_____________________

For the Six Months Ended June 30, 2023 2022

For the Nine Months Ended September 30, 2023 2022

Cash Provided by (Used in) Operating Activities

3 unchanged sentences

Deferred income tax provision (benefit) ( 575 ) ( 550 )

Unrecognized tax benefit (1)

(Income) losses from investments in equity securities ( 105 ) 3,707

14 unchanged sentences

Capital expenditures ( 143 ) ( 147 )

Proceeds from the sale of IQOS System commercialization rights

Acquisition of NJOY, net of cash acquired ( 2,751 ) —

1 unchanged sentence

Net cash provided by (used in) investing activities $ ( 1,217 ) $ ( 215 )

(1) 2023 relates to 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.

For further discussion, see Note 12.

Income Taxes .

(2) 2023 amounts are net of the effects from the NJOY Transaction.

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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.

For further discussion, see Note 12.

Income Taxes .

See notes to condensed consolidated financial statements.

4 unchanged sentences

_____________________

For the Six Months Ended June 30, 2023 2022

For the Nine Months Ended September 30, 2023 2022

Cash Provided by (Used in) Financing Activities

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

Repayment of short-term borrowings ( 2,000 ) —

Long-term debt repaid ( 1,566 ) ( 1,105 )

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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 June 30, 2023 At December 31, 2022

At September 30, 2023 At December 31, 2022

Cash and cash equivalents $ 1,537 $ 4,030

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▪ Background:

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

At September 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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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 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.

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

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

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

At September 30, 2023, our significant 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.

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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.

At September 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.

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

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

At September 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 .

▪ Share Repurchases:

In January 2021, our Board of Directors (“Board of Directors” or “Board”) authorized a $ 2.0 billion share repurchase program that it expanded to $ 3.5 billion in October 2021 (as expanded, the “January 2021 share repurchase program”).

▪ Dividends and Share Repurchases:

In August 2023, our Board of Directors (“Board of Directors” or “Board”) approved a 4.3 % increase in the quarterly dividend rate to $ 0.98 per share of our common stock versus the previous rate of $ 0.94 per share.

The current annualized dividend rate is $ 3.92 .

Future dividend payments remain subject to the discretion of our Board.

In January 2021, our Board of Directors authorized a $ 2.0 billion share repurchase program that it expanded to $ 3.5 billion in October 2021 (as expanded, the “January 2021 share repurchase program”).

We completed the January 2021 share repurchase program in December 2022.

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.

At September 30, 2023, we had $ 268 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.

Our share repurchase activity was as follows:

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

For the Nine Months Ended September 30, For the Three Months Ended September 30,

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

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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.

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

As of and for the nine months ended September 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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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.

The total consideration for the NJOY Transaction of approximately $ 2.9 billion, consisted of approximately $ 2.75 billion in cash payments (net of cash acquired) 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, at June 30, 2023 and at September 30, 2023 was approximately $ 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.

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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.

The primary areas of accounting for the NJOY Transaction that are not yet finalized relate to the fair value of certain intangible assets acquired, 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:

The following amounts represent the preliminary estimates for purchase price allocation to assets acquired and liabilities assumed in the NJOY Transaction, which will be finalized by the end of the measurement period:

(in millions)

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Total consideration 2,901

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.

The significant assumptions used in determining the preliminary fair values of the identifiable intangible assets included revenue growth rates, operating 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.

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 are classified in Level 3 of the fair value hierarchy.

We amortize the intangible assets over a weighted-average period of approximately 17 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.

1 unchanged sentence

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.

We incurred costs related to the NJOY Transaction of $ 63 million and $ 14 million for the nine and three months ended September 30, 2023, respectively.

For the nine months ended September 30, 2023, substantially all of these costs were 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 statement 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 $ 359 million and $ 252 million at June 30, 2023 and December 31, 2022, respectively.

Deferred revenue from contracts with customers was $ 284 million and $ 252 million at September 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 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.

At September 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 were $ 57 million and $ 48 million (excluding the 2022 receivable from the sale of IQOS System commercialization rights) at September 30, 2023 and December 31, 2022, respectively.

At September 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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Goodwill Other Intangible Assets, net

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

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

Smokeable products segment $ 99 $ 99 $ 2,970 $ 2,989

3 unchanged sentences

Other intangible assets consisted of the following:

June 30, 2023 December 31, 2022

September 30, 2023 December 31, 2022

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

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Total other intangible assets $ 14,284 $ 557 $ 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.

At September 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).

Pre-tax amortization expense for definite-lived intangible assets was $ 87 million and $ 54 million for the nine months ended September 30, 2023 and 2022, respectively, and $ 42 million and $ 19 million for the three months ended September 30, 2023 and 2022, respectively.

We estimate our annualized amortization expense, which includes the impact of the NJOY Transaction, for each of the next five years to be approximately $ 170 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.

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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.

For the nine and three months ended September 30, 2023, we recorded disposition-related interest income for the Remaining PMI Payment of $ 54 million and $ 3 million, respectively, in our condensed consolidated statements of earnings.

At September 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

For the Nine Months Ended For the Year Ended

September 30, 2023 December 31, 2022

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

6 unchanged sentences

Balance at end of period $ 6,791 $ 13,727 $ 5,177 $ 12,384

(1) 2023 amounts attributable to the NJOY Transaction.

(1) Substantially all of the 2023 amounts are attributable to the NJOY Transaction.

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

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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.

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

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

1 unchanged sentence

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

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

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

ABI $ 9,563 $ 8,975

2 unchanged sentences

(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,

For the Nine Months Ended September 30, For the Three Months Ended September 30,

(in millions) 2023 2022 2023 2022

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Investment in 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.

At September 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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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 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.

The fair value of our equity investment in ABI at September 30, 2023 and December 31, 2022 was $ 11.0 billion and $ 11.9 billion, respectively, which exceeded its carrying value of $ 9.6 billion and $ 9.0 billion by approximately 15 % and 33 %, respectively.

At September 30, 2022, the fair value of our equity investment in ABI had declined below its carrying value by $ 2.5 billion or approximately 22 %.

We determined the decline in fair value to be other than temporary and recorded a non-cash, pre-tax impairment charge of $ 2.5 billion for the nine and three months ended September 30, 2022, which was recorded to (income) losses from investments in equity securities in our condensed consolidated statements of earnings.

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.

At September 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.

1 unchanged sentence

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 %.

At September 30, 2023, the fair value of our equity method investment in Cronos was less than its carrying value by $ 31 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.

As part of our investment in Cronos, at September 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.

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

Former Investment in JUUL

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As a result, we did not record an asset associated with this intellectual property on our condensed consolidated balance sheet at March 31, 2023.

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 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 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.

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

At September 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) June 30, 2023 December 31, 2022

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

Carrying value $ 25,098 $ 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 $ 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.

We recognized pre-tax (gains) of our net investment hedges of $( 32 ) million and $( 664 ) million for the nine months ended September 30, 2023 and 2022, respectively, and $( 101 ) million and $( 289 ) million for the three months ended September 30, 2023 and 2022, respectively, in accumulated other comprehensive losses.

Benefit Plans

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Pension Postretirement Pension Postretirement

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

For the Nine Months Ended September 30, For the Three Months Ended September 30,

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

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Amortization:

Net loss 2 48 — 8 1 24 — 4

Net loss (gain) 3 72 ( 2 ) 14 1 24 ( 2 ) 6

Prior service cost (credit)

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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 $ 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.

We made employer contributions of $ 14 million to our pension plans and did no t make any contributions to our postretirement plans during the nine months ended September 30, 2023.

Currently, we anticipate making additional employer contributions of up to approximately $ 10 million to our pension plans and no contributions to our postretirement plans in 2023.

However, the foregoing estimates of 2023 contributions to our pension and postretirement plans are subject to change as a result of changes in tax and other benefit laws, changes in interest rates, as well as asset performance significantly above or below the assumed long-term rate of return for each respective plan.

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

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

For the Nine Months Ended September 30, For the Three Months Ended September 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 Six Months Ended June 30, 2023

For the Nine Months Ended September 30, 2023

(in millions) Benefit Plans ABI Currency

10 unchanged sentences

( 16 ) 302 (1)

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

For the Three Months Ended June 30, 2023

Balances, September 30, 2023 $ ( 1,452 ) $ ( 1,067 ) $ 48 $ ( 2,471 )

For the Three Months Ended September 30, 2023

(in millions) Benefit Plans ABI Currency

1 unchanged sentence

Comprehensive

Balances, March 31, 2023

Balances, June 30, 2023

$ ( 1,447 ) $ ( 1,303 ) $ 41 $ ( 2,709 )

2 unchanged sentences

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

— 72 ( 3 ) 69

Amounts reclassified to net earnings ( 7 ) ( 14 ) — ( 21 )

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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

( 5 ) 236 (1)

Balances, September 30, 2023 $ ( 1,452 ) $ ( 1,067 ) $ 48 $ ( 2,471 )

For the Nine Months Ended September 30, 2022

(in millions) Benefit Plans ABI Currency

3 unchanged sentences

Other comprehensive earnings (losses) before reclassifications

— 902 ( 11 ) 891

Deferred income taxes — ( 206 ) — ( 206 )

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

— 696 ( 11 ) 685

Amounts reclassified to net earnings 65 ( 74 ) ( 1 ) ( 10 )

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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

Balances, September 30, 2022 $ ( 1,564 ) $ ( 875 ) $ 56 $ ( 2,383 )

For the Three Months Ended September 30, 2022

(in millions) Benefit Plans ABI Currency

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Comprehensive

Balances, March 31, 2022

Balances, June 30, 2022

$ ( 1,581 ) $ ( 869 ) $ 73 $ ( 2,377 )

Other comprehensive earnings (losses) before reclassifications

— 18 ( 16 ) 2

Deferred income taxes — ( 11 ) — ( 11 )

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

— 7 ( 16 ) ( 9 )

Amounts reclassified to net earnings 24 ( 16 ) ( 1 ) 7

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

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

Balances, September 30, 2022 $ ( 1,564 ) $ ( 875 ) $ 56 $ ( 2,383 )

(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.

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

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

For the Nine Months Ended September 30, For the Three Months Ended September 30,

(in millions) 2023 2022 2023 2022

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( 5 ) ( 74 ) ( 14 ) ( 16 )

Currency Translation Adjustments (2)

— ( 1 ) — ( 1 )

Pre-tax amounts reclassified from accumulated other comprehensive losses to net earnings $ ( 26 ) $ ( 10 ) $ ( 21 ) $ 7

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Segment Reporting

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;

At September 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.

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Segment data were as follows:

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

For the Nine Months Ended September 30, For the Three Months Ended September 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 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.

NPM adjustment items result from the resolutions of certain disputes with states and territories related to the NPM adjustment provision under the Master Settlement Agreement (such dispute resolutions are referred to as “NPM Adjustment Items” and are more fully described in Health Care Cost Recovery Litigation in Note 13.

We recorded pre-tax income for NPM adjustment items of $ 15 million for the nine and three months ended September 30, 2023 and $ 60 million for the nine months ended September 30, 2022 in our smokeable products segment.

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

For additional information, see Health Care Cost Recovery Litigation in Note 13.

Contingencies .

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

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

For the Nine Months Ended September 30, For the Three Months Ended September 30,

(in millions) 2023 2022 2023 2022

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Short-term Borrowings and Borrowing Arrangements

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.

At September 30, 2023 and 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.

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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 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.

We expect interest rates on borrowings under the Credit Agreement to be based on the Term Secured Overnight Financing Rate plus a percentage based on the higher of the ratings of our long-term senior unsecured debt from Moody’s Investors Service, Inc.

At September 30, 2023, we had a $ 3.0 billion senior unsecured 5-year revolving credit agreement (as amended, the “Prior Credit Agreement”), which we used for general corporate purposes and was scheduled to expire on August 1, 2025.

At September 30, 2023, we had availability under the Prior Credit Agreement for borrowings of up to an aggregate principal amount of $ 3.0 billion and the applicable percentage for borrowings under the Prior Credit Agreement at that date was 1.0 % based on our long-term senior unsecured debt ratings on that date.

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

On October 24, 2023, we entered into a new senior unsecured 5-year revolving credit agreement (the “New Credit Agreement”) and terminated the Prior Credit Agreement.

The terms of the New Credit Agreement are substantially similar to those of the Prior Credit Agreement.

The New Credit Agreement provides for borrowings up to an aggregate principal amount of $ 3.0 billion, expires on October 24, 2028 and includes an option, subject to certain conditions, for us to extend the New Credit Agreement for two additional one-year periods.

We intend to use borrowings under the New Credit Agreement for general corporate purposes.

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

We expect interest rates on borrowings under the New Credit Agreement to be based on the Term Secured Overnight Financing Rate plus a percentage based on the higher of the ratings of our long-term senior unsecured debt from Moody’s Investors Service, Inc.

and Standard & Poor’s Financial Services LLC.

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 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.

Any commercial paper issued by us and borrowings under the Credit Agreement are guaranteed by PM USA.

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

The New 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.

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

Any commercial paper issued by us and any borrowings under the New Credit Agreement are guaranteed by PM USA.

Long-term Debt

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.

The aggregate carrying value of our total long-term debt at September 30, 2023 and December 31, 2022 was $ 25.1 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.

At September 30, 2023 and December 31, 2022, accrued interest on our total debt of $ 190 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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Earnings before income taxes, provision for income taxes and income tax rates consisted of the following:

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

For the Nine Months Ended September 30, For the Three Months Ended September 30,

(in millions) 2023 2022 2023 2022

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Income tax rate 25.9 % 34.4 % 25.5 % 45.0 %

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

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

Our income tax rate for the three months ended September 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.

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

federal statutory rate of 21%, due primarily to state tax expense, including the state tax treatment of the impairment charge on our equity investment in ABI, and a valuation allowance recorded against a deferred tax asset related to the decrease in the estimated fair value of our former investment in JUUL, partially offset by the release of a valuation allowance related to our Cronos warrant and tax accruals no longer required.

We are subject to income taxation in many jurisdictions.

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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 the nine months ended September 30, 2023, we recognized a pro-rata portion of this ordinary loss, which resulted in a tax benefit of $ 1,141 million and a reduction to our current income taxes payable.

For the nine months ended September 30, 2023, we also recognized a $ 1,173 million increase in a long-term liability for unrecognized tax benefits related to this tax position, partially offset by a $ 32 million deferred federal benefit for state taxes.

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

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

Investments in Equity Securities .

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.

At September 30, 2023, our total unrecognized tax benefits were $ 1,233 million.

The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at September 30, 2023, was $ 35 million, along with $ 1,198 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.

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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 six months ended June 30, 2023:

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

(in millions)

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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 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.

For the nine months ended September 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 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.

The cumulative valuation allowance at September 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.

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

For the Nine Months Ended September 30, For the Three Months Ended September 30,

(in millions) 2023 2022 2023 2022

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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 $ 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 $ 439 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 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.

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

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

October 23, 2023 October 24, 2022 October 25, 2021

Individual Smoking and Health Cases (1)

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Other Tobacco-Related Cases (4)

(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.

(1) Includes as of October 23, 2023, 15 cases filed in Illinois, 17 cases filed in New Mexico, 53 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 ).

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

(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.

(3) Includes as of October 23, 2023, 57 class action lawsuits, 3,614 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.

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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.

(4) Includes as of October 23, 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 July 27, 2023, (i) Altria is named as a defendant in three e-vapor class action lawsuits in Canada;

As of October 23, 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;

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Tobacco-Related Cases Set for Trial:

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.

As of October 23, 2023, two Engle progeny cases, one individual smoking and health case and no e-vapor cases are set for trial through December 31, 2023.

Trial dates are subject to change.

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Of the 30 non- Engle progeny cases in which verdicts were returned in favor of plaintiffs, 26 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 July 27, 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 October 23, 2023.

Smoking and Health Litigation

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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.

Ricapor-Hall :

In August 2023, a jury in a Hawaii state court returned a verdict in favor of plaintiff and against PM USA, awarding $ 6 million in compensatory damages, which we expect to be reduced to $ 3 million based on the jury’s finding on comparative fault and a set-off against plaintiff’s settlements with other defendants, and $ 8 million in punitive damages.

We will file post-trial motions challenging the verdict and will, if necessary, appeal.

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.

Despite the comparative fault finding, the compensatory damages award would not have been reduced due to the jury’s finding for plaintiff on the strict liability claim.

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 lieu of appealing the trial court’s verdict, PM USA 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.

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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.

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

In September 2023, the court denied PM USA’s motion for a new trial and partially granted PM USA’s motion for remittitur, reducing the punitive damages award to $ 56 million.

PM USA will file post-trial motions for judgment notwithstanding the verdict and will, if necessary, appeal.

In September 2019, a jury in a Massachusetts state court returned a verdict in favor of plaintiffs and against PM USA, awarding approximately $ 10 million in compensatory damages.

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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 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.

As of October 23, 2023, approximately 381 state court cases were pending against PM USA or Altria asserting individual claims by or on behalf of approximately 484 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 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.

As of October 23, 2023, 144 federal and state Engle progeny cases involving PM USA have resulted in verdicts since the Florida Supreme Court Engle decision.

Eighty 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.

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

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.

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-eight verdicts were returned in favor of PM USA, of which 48 were state cases.

In addition, there have been a number of mistrials, only some of which have resulted in new trials as of October 23, 2023.

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

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The plaintiff in Garcia subsequently filed a motion to voluntarily dismiss the punitive damages claim and to enter final judgment on the compensatory damages claim, which the court granted.

Three verdicts ( Cohen , Collar and Chacon ) that were returned in favor of PM USA were subsequently reversed for new trials.

PM USA’s appeal of the final judgment is pending.

Two verdicts ( Cohen and Collar ) that were returned in favor of PM USA were subsequently reversed for new trials.

Juries in two cases ( Reider and Banks ) returned zero damages verdicts in favor of PM USA.

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.

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

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

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.

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.

In Neff , the trial court denied plaintiff’s motion for a new trial, and plaintiff filed a notice of appeal.

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

In Duignan , plaintiff’s motion for reconsideration with respect to the appellate court’s decision to vacate the punitive damages judgment, direct the trial court to apply the jury’s comparative fault assessments to the compensatory damages verdict and order the trial court to set aside the jury’s findings on plaintiff’s fraud claims was denied.

The verdict in the retrial in Rintoul ( Caprio ) was reversed upon appeal and remanded for a new trial.

Two cases, Freeman and Harris , resulted in an appellate reversal of a jury verdict in favor of plaintiff, and a judgment in favor of PM USA.

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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 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.

The first chart lists cases that are pending as of October 23, 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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(PM USA) Post-Trial Status

Chacon October 2023 PM USA Miami-Dade <$ 1 million

Defendant’s post-trial motions pending.

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

Appeal by defendant to Third District Court of Appeal pending.

Appeal by defendant to the 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.

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

Punitive Damages

(PM USA) Post-Trial Status

Garcia May 2021 PM USA Miami-Dade $ 6 million ($ 3 million PM USA)

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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)

Punitive Damages

(PM USA) Post-Trial Status

In June 2023, plaintiff filed a motion for reconsideration, which the court denied in September 2023.

The case will be returned to the trial court for further proceedings, including a retrial of plaintiff’s punitive damages claim.

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

New trial on punitive damages is set for September 2023.

Defendant’s post-trial motions pending.

Chadwell September 2018 PM USA Miami-Dade $ 2 million

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Tuttle August 2022 PM USA Duval Third quarter of 2022 <$ 1 million

Cuddihee January 2020 PM USA Duval Second quarter of 2022 $ 2 million June 2022

Holliman February 2019 PM USA Miami-Dade Fourth quarter of 2022 $ 3 million January 2023

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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 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.

As of October 23, 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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Since the beginning of 2008, the Canadian Provinces of British Columbia, New Brunswick, Ontario, Newfoundland and Labrador, Quebec, Alberta, Manitoba, Saskatchewan, Prince Edward Island and Nova Scotia have brought health care reimbursement claims against cigarette manufacturers.

PM USA is named as a defendant in the British Columbia and Quebec cases, while both Altria and PM USA are named as defendants in the New Brunswick, Ontario, Newfoundland and Labrador, Alberta, Manitoba, Saskatchewan, Prince Edward Island and Nova Scotia cases.

PM USA is named as a defendant in the British Columbia and Quebec

cases, while both Altria and PM USA are named as defendants in the New Brunswick, Ontario, Newfoundland and Labrador, Alberta, Manitoba, Saskatchewan, Prince Edward Island and Nova Scotia cases.

The Nunavut Territory and Northwest Territory have passed legislation permitting similar claims, but lawsuits based on this legislation have not been filed.

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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”).

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 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.

For the three months ended September 30, 2023 and 2022, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $ 900 million and $ 1.1 billion, respectively.

For the nine months ended September 30, 2023 and 2022, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $ 2.8 billion and $ 3.0 billion, respectively.

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

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Of these 36 states and territories, 35 entered settlement through 2022, and one state entered settlement through 2024.

In March 2022, Illinois joined the multi-state settlement, settling the NPM Adjustment disputes through 2028 and bringing the total number of states and territories that have joined the multi-state settlement to 37 .

As a result, PM USA will receive approximately $ 80 million for 2004-2021 ($ 20 million of which relates to the 2019-2021 “transition years”).

In connection with this development for Illinois, PM USA recorded $ 80 million as a reduction in cost of sales in the first quarter of 2022.

In March 2022, Illinois joined the multi-state settlement, settling the NPM Adjustment disputes through 2028.

As a result, PM USA will receive approximately $ 80 million for 2004 through 2021, $ 20 million of which relates to the 2019 through 2021 “transition years.” In connection with this development for Illinois, PM USA recorded $ 80 million as a reduction in cost of sales in the first quarter of 2022.

In August 2023, Iowa also joined the multi-state settlement, settling the NPM Adjustment disputes through 2029 and, together with Illinois, bringing the total number of states and territories that have joined the multi-state settlement to 38 .

As a result, PM USA will receive approximately $ 19 million for 2005 through 2022, $ 4 million of which relates to the 2020 through 2022 “transition years.” As a result of Iowa joining the multi-state settlement, PM USA recorded $ 19 million as a reduction in cost of sales in the third quarter of 2023.

Pursuant to the multi-state settlement, PM USA has received $ 1.24 billion since the first group of states entered the NPM Adjustment dispute settlement in 2014 and expects to receive approximately $ 353 million in credits to offset PM USA’s MSA payments through 2039.

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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.

In September 2023, the New Mexico trial court vacated the arbitration panel’s decision finding that New Mexico was not diligent in 2004.

PM USA and other PMs have appealed that decision, and the appeals remain pending.

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.

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.

The PMs and the nine states that have not settled the NPM Adjustment disputes are currently arbitrating NPM Adjustment disputes before a single arbitration panel.

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

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

The PMs and the eight states that have not settled the NPM Adjustment disputes are currently arbitrating NPM Adjustment disputes before a single arbitration panel.

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

As of October 23, 2023, no decisions have resulted from the arbitration.

▪ Subsequent Years.

No assurance can be given as to when proceedings for 2008 and subsequent years will be scheduled or the precise form those proceedings will take.

▪ In July 2022, the State of Iowa filed a motion in Iowa state court against the PMs, including PM USA, claiming that the PMs wrongfully disputed the applicability of NPM Adjustments to Iowa and that all adjustment amounts to date should have been paid to Iowa rather than deposited into the disputed payments account.

A similar enforcement motion was filed by the State of New Mexico against the PMs, including PM USA, in November 2022.

PM USA has placed certain disputed NPM Adjustment amounts attributed to Iowa and New Mexico in the disputed payments account established pursuant to the terms of the MSA.

Iowa and New Mexico seek a total of approximately $ 133 million and $ 84 million, respectively, in disputed payments from all defendants combined, as well as treble and punitive damages, and other relief.

The PMs filed a cross motion to compel arbitration in the Iowa matter.

In February 2023, the Iowa state court granted the PM’s motion, compelling arbitration.

In March 2023, Iowa withdrew its motion.

▪ In November 2022, the State of New Mexico filed a motion in New Mexico state court against the PMs, including PM USA, claiming that the PMs wrongfully disputed the applicability of NPM Adjustments to New Mexico and that all adjustment amounts to date should have been paid to New Mexico rather than deposited into the disputed payments account.

PM USA has placed certain disputed NPM Adjustment amounts attributed to New Mexico in the disputed payments account established pursuant to the terms of the MSA.

New Mexico seeks a total of approximately $ 84 million in disputed payments from all defendants combined, as well as treble and punitive damages, and other relief.

The PMs filed a cross motion to compel arbitration in the New Mexico matter.

No decisions have resulted from these motions.

Other Disputes Under the State Settlement Agreements:

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(“S&M Brands”), under which the states released certain claims against S&M Brands in exchange for receiving a portion of the funds S&M Brands deposited into escrow accounts in those states pursuant to the states’ escrow statutes.

In consideration for waiving its most favored nation claim, PM USA received approximately $ 32 million from the escrow funds paid to those MSA states under their settlement with S&M Brands.

In consideration for waiving its most favored nation claim, PM USA received approximately $ 32 million from

the escrow funds paid to those MSA states under their settlement with S&M Brands.

These funds were received in January 2021 and were recorded in our condensed consolidated statement of earnings (losses) for the first quarter of 2021 as a reduction in cost of sales.

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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.

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 .

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

In July 2023, the district court ruled that HeatSticks are cigarettes as defined in the court ordered injunction.

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

In September 2023, PM USA appealed the district court’s ruling that HeatSticks are subject to the court’s injunction.

E-vapor Product Litigation

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.

As of October 23, 2023, we are defendants in 57 class action lawsuits, 3,614 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.

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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.

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 is conditioned on certain participation rates among plaintiffs, and the class action portion of the settlement is subject to final approval by the court.

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.

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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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In April 2023, we agreed to settle the Minnesota lawsuit for an immaterial amount.

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

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.

The trial courts in the Alaska and Hawaii lawsuits have set the

trials for October 2024 and February 2024, respectively.

As of October 23, 2023, the trial court in New Mexico has not set a trial date.

In May 2023, Fuma International LLC (“Fuma”) 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.

In August 2023, we entered into an agreement with Fuma resulting in NJOY’s acquisition of the patents that Fuma asserted in its lawsuit.

The parties separately agreed that Fuma would dismiss its patent infringement claims in exchange for $ 10 million, and such claims were dismissed in August 2023.

We recorded a pre-tax provision for $ 10 million in the third quarter of 2023 related to the agreement and paid such amount to Fuma in August 2023.

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 .

The lawsuit is currently stayed.

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

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No damages are recoverable in the proceedings before the ITC.

In August 2023, NJOY filed a complaint against JUUL in the United States District Court for the District of Delaware asserting claims of patent infringement based on the sale of certain JUUL e-vapor products, including the currently marketed JUUL device and JUULpods , in the United States.

Also in August 2023, NJOY filed a related action against JUUL with the ITC alleging patent infringement and seeking a ban on the importation and sale of the same JUUL products in the United States.

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 six and three months ended June 30, 2023.

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

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Court of Appeals for the Federal Circuit, which reversed the district court’s decision and remanded for further proceedings.

Patent Office has also issued a decision that the claims of the asserted patent are not valid, and the plaintiff has appealed that ruling.

On remand, the U.S.

District Court stayed the case pending the outcome of plaintiff’s appeal from a ruling by the

Patent and Trademark Office, which issued a decision that the claims of the asserted patent are not valid.

That appeal remains pending.

Antitrust Litigation

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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 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”).

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.

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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.

Also as of October 23, 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.

The court granted plaintiffs’ leave to replead the complaint with new direct-purchaser plaintiffs, which plaintiffs did in February 2022, substituting in four new plaintiffs.

In August 2022, the court stayed all of the cases pending any appeal to the court of appeals from the FTC’s lawsuit against Altria and JUUL.

The court granted plaintiffs’ leave to replead the complaint with new direct-purchaser plaintiffs, which plaintiffs did in February 2022, substituting four new plaintiffs.

In September 2023, the direct-purchaser plaintiffs filed a third amended consolidated class action complaint, substituting three of the four named plaintiffs.

The trial is set to commence in May 2026.

Shareholder Class Action and Shareholder Derivative Lawsuits

Shareholder Class Action :

In October and December 2019, two purported Altria shareholders filed putative class action lawsuits against Altria, Howard A.

Willard III, our former Chairman and Chief Executive Officer, and William F.

Gifford, Jr., our former Vice Chairman and Chief Financial Officer and current Chief Executive Officer, in the U.S.

District Court for the Eastern District of New York.

In December 2019, the court consolidated the two lawsuits into a single proceeding.

The consolidated lawsuit was subsequently transferred to the U.S.

District Court for the Eastern District of Virginia.

The lawsuit asserts claims under Sections 10(b) and 20(a) and under Rule 10b-5 of the Exchange Act.

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

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 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.

The trial court granted final approval of the settlement in March 2022.

In the fourth quarter of 2021, we agreed to settle a class action lawsuit brought by purported Altria shareholders against Altria and certain of our current and former executives and JUUL, its founders and certain of its current and former executives alleging false and misleading statements and omissions relating to our former investment in JUUL.

Pursuant to the settlement, which was granted final approval by the trial court in March 2022, 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 included attorneys’ fees.

We recorded pre-tax provisions totaling $ 90 million in 2021 and, in January 2022, paid $ 90 million to plaintiffs’ escrow account.

Federal and State Shareholder Derivative Lawsuits :

In August 2020, two purported Altria shareholders filed separate derivative lawsuits in the U.S.

District Court for the Northern District of California on behalf of themselves and Altria, against Mr.

Gifford, JUUL and certain of our executives and officers.

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.

District Court for the Northern District of California granted defendants’ motion to transfer both lawsuits to the U.S.

District Court for the Eastern District of Virginia.

Three additional federal derivative lawsuits were filed in October 2020, January 2021 and March 2021, respectively, in the U.S.

District Court for the Eastern District of Virginia against Mr.

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 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 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.

In October 2022, we agreed to settle a series of federal and state derivative cases brought by Altria shareholders on behalf of themselves and Altria against Altria and certain of our current and former executives and directors and JUUL, its founders and certain of its current and former executives.

The cases 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.

Under the terms of the settlement, which became effective in May 2023, 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.

In January 2023, the federal trial court conducted a final approval hearing, at which the court sustained an objection to a provision of the settlement, but granted the parties additional time to resolve the issue.

The parties subsequently executed an amendment to the settlement agreement, and the federal trial court granted final approval of the settlement in February 2023.

No appeal was taken.

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 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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“Lights/Ultra Lights” Cases and Other Smoking and Health Class Actions :

Plaintiffs have sought certification of their cases as class actions, alleging among other things, that the uses of the terms “Lights” and/or “Ultra Lights” constitute deceptive and unfair trade practices, common law or statutory fraud, unjust enrichment or breach of warranty, and have sought injunctive and equitable relief, including restitution and, in certain cases, punitive damages.

equitable relief, including restitution and, in certain cases, punitive damages.

These class actions have been brought against PM USA and, in certain instances, Altria or our other subsidiaries, on behalf of individuals who purchased and consumed various brands of cigarettes.

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

As of October 23, 2023, two “Lights/Ultra Lights” class actions are pending in U.S.

state courts.

Neither case is active.

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.

As of October 23, 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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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 July 27, 2023, there is no such case pending against UST and/or its tobacco subsidiaries.

As of October 23, 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 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.

At September 30, 2023, we (i) had $ 44 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 $ 22 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.

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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 June 30, 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 September 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.

District Court for the Northern District of Georgia.

PM USA has issued guarantees relating to our obligations under our outstanding debt securities, borrowings under our $ 3.0 billion Credit Agreement and amounts outstanding under our commercial paper program.

PM USA has issued guarantees relating to our obligations under our outstanding debt securities, any borrowings under our $ 3.0 billion New Credit Agreement and amounts outstanding under our commercial paper program.

For further discussion, see Note 11.

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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