What changed in this filing

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Item 1. Financial Statements

2024-04-25 compared with 2023-10-26 · 370 added, 591 removed, 715 unchanged (57% of the section changed)

5 unchanged sentences

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September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

Cash and cash equivalents $ 3,608 $ 3,686

Receivable from the sale of IQOS System commercialization rights

Receivables 77 71

Leaf tobacco 610 649

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Finished product 405 340

Income taxes 173 496

Other current assets 99 117

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Other intangible assets, net 13,439 13,686

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

Investments in equity securities 8,396 10,011

Other assets 873 845

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________________________________________________

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

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Accrued postretirement health care costs 1,079 1,079

Deferred gain from the sale of IQOS System commercialization rights

Other liabilities 1,656 1,621

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Cost of repurchased stock

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

( 1,088,334,893 shares at March 31, 2024 and

1,042,499,542 shares at December 31, 2023)

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

2023 2022 2023 2022

For the Three Months Ended March 31, 2024 2023

Net revenues $ 5,576 $ 5,719

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(Income) losses from investments in equity securities ( 295 ) 80

Loss on Cronos-related financial instruments — 14 — —

Earnings before income taxes 2,739 2,479

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

2023 2022 2023 2022

For the Three Months Ended March 31, 2024 2023

Net earnings $ 2,129 $ 1,787

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Currency translation adjustments and other 6 10

Other comprehensive earnings (losses), net of deferred

300 673 238 ( 6 )

Other comprehensive earnings (losses), net of deferred income taxes 407 ( 8 )

Comprehensive earnings $ 2,536 $ 1,779

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Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

for the Nine Months Ended September 30, 2023 and 2022

for the Three Months Ended March 31, 2024 and 2023

(in millions of dollars, except per share data)

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Other — — — — ( 20 ) — ( 20 )

Balances, September 30, 2023

Balances, March 31, 2024

$ 935 $ 5,521 $ 31,535 $ ( 2,266 ) $ ( 40,839 ) $ 50 $ ( 5,064 )

Stock Additional

Capital Earnings

Business Accumulated

Comprehensive

Losses Cost of

Stockholders’

Equity (Deficit)

Balances, December 31, 2022

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— — ( 1,681 ) — — — ( 1,681 )

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

Balances, September 30, 2022

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

See notes to condensed consolidated financial statements.

Altria Group, Inc.

and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

for the Three Months Ended September 30, 2023 and 2022

( in millions of dollars, except per share data)

_______________________________________

Attributable to Altria

Stock Additional

Capital Earnings

Business Accumulated

Comprehensive

Losses Cost of

Interests Total

Stockholders’

Equity (Deficit)

Balances, June 30, 2023

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

Net earnings — — 2,166 — — — 2,166

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

— — — 238 — — 238

Stock award activity

— 15 — — — — 15

Cash dividends declared ($ 0.98 per share)

— — ( 1,739 ) — — — ( 1,739 )

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

Balances, September 30, 2023

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

Stock Additional

Capital Earnings

Business Accumulated

Comprehensive

Losses Cost of

Stockholders’

Equity (Deficit)

Balances, June 30, 2022

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

Net earnings — — 224 — — 224

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

— — — ( 6 ) — ( 6 )

Stock award activity

— 12 — — — 12

Cash dividends declared ($ 0.94 per share)

— — ( 1,691 ) — — ( 1,691 )

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

Balances, September 30, 2022

Balances, March 31, 2023

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

(1) Represents the remaining 15 % of the Repurchase Price related to the ASR transactions.

Background and Basis of Presentation .

See notes to condensed consolidated financial statements.

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For the Nine Months Ended September 30, 2023 2022

For the Three Months Ended March 31, 2024 2023

Cash Provided by (Used in) Operating Activities

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(Income) losses from investments in equity securities ( 295 ) 80

Dividends from ABI 163 104

Loss on Cronos-related financial instruments — 14

Cash effects of changes:

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Capital expenditures ( 35 ) ( 55 )

Proceeds from the sale of IQOS System commercialization rights

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

Proceeds from the ABI Transaction (2)

Other, net ( 2 ) ( 1 )

Net cash provided by (used in) investing activities $ 2,316 $ ( 56 )

(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.

For further details, see Note 2.

Acquisition of NJOY .

(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, partially offset by our estimated corporate alternative minimum tax credit carryforward.

(2) For further discussion of the ABI Transaction, see Note 5.

Investments in Equity Securities .

See notes to condensed consolidated financial statements.

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For the Nine Months Ended September 30, 2023 2022

For the Three Months Ended March 31, 2024 2023

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 $ ( 1,121 ) $ ( 1,348 )

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The following table provides a reconciliation of cash, cash equivalents and restricted cash (2) to the amounts reported on our condensed consolidated balance sheets:

At September 30, 2023 At December 31, 2022

At March 31, 2024 At December 31, 2023

Cash and cash equivalents $ 3,608 $ 3,686

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Cash, cash equivalents and restricted cash $ 3,646 $ 3,721

(1) Restricted cash consisted primarily of cash deposits collateralizing appeal bonds posted by PM USA to obtain stays of judgments pending appeals.

(1) Includes $ 360 million ( 15 % of the Repurchase Price) paid in March 2024 related to the ASR transactions.

Background and Basis of Presentation .

(2) Restricted cash consisted of cash deposits collateralizing appeal bonds posted by PM USA to obtain stays of judgments pending appeals.

Contingencies .

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▪ Background:

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

At March 31, 2024, 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;

John Middleton Co.

(“Middleton”), which is engaged in the manufacture and sale of machine-made large cigars and pipe tobacco and is a wholly owned subsidiary of PM USA;

(“Middleton”), which is engaged in the manufacture and sale of machine-made large cigars and is a wholly owned subsidiary of PM USA;

UST LLC (“UST”), which through its wholly owned subsidiary U.S.

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

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

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

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

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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.

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

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

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

At 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.

At March 31, 2024, 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.

At March 31, 2024, we also owned a 75 % economic interest in Horizon Innovations LLC (“Horizon”), a joint venture with JTI (US) Holding, Inc., a subsidiary of Japan Tobacco Inc., which owned the remaining 25 % economic interest.

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

marketing and commercialization of heated tobacco stick products.

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

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

(“JUUL”) all of our beneficially owned JUUL equity securities.

In exchange, we received a non-exclusive, irrevocable global license to certain of JUUL’s heated tobacco intellectual property (“JUUL Heated Tobacco IP”).

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

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.

For further discussion of our investments in equity securities, see Note 5.

marketing and commercialization of heated tobacco stick products owned by either party.

At March 31, 2024, we had investments in Anheuser-Busch InBev SA/NV (“ABI”) and Cronos Group Inc.

In March 2024, we sold a portion of our investment in ABI (“ABI Transaction”).

For further discussion of our investments in equity securities and the ABI Transaction, see Note 5.

Investments in Equity Securities .

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

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

▪ Share Repurchases:

In January 2023, our Board of Directors (“Board of Directors” or “Board”) authorized a $ 1.0 billion share repurchase program (“January 2023 share repurchase program”), which we completed in December 2023.

In January 2024, our Board of Directors authorized a new $ 1.0 billion share repurchase program that it increased to $ 3.4 billion in March 2024 (as increased, “January 2024 share repurchase program”).

In connection with the ABI Transaction, we entered into accelerated share repurchase (“ASR”) transactions under two separate agreements with bank counterparties (collectively, “ASR Agreements”) to repurchase an aggregate $ 2.4 billion (“Repurchase Price”) of our common stock.

In March 2024, we paid the Repurchase Price and received 46.5 million shares of our common stock, which represented an aggregate value of approximately 85 % or $ 2,040 million of the Repurchase Price based on the closing price per share of our common stock on the date we entered into the ASR Agreements.

Upon final settlement of each of the ASR transactions (for the remaining 15 % or $ 360 million of the Repurchase Price), which we expect to occur by June 30, 2024, we may be entitled to receive additional shares or, under certain circumstances specified in the ASR Agreements, may be required to deliver shares of our common stock or cash, at our option, to the applicable bank counterparty.

The total number of shares to be repurchased under the ASR Agreements will be based on volume-weighted average prices of our common stock during the term of the ASR transactions, less a discount and subject to certain adjustments pursuant to the terms of the ASR Agreements.

The ASR transactions are accounted for as equity transactions and included in cost of repurchased stock on our condensed consolidated balance sheet when the shares are received.

At March 31, 2024, the remaining $ 360 million was recorded as a reduction in additional paid in capital on our condensed consolidated balance sheet, and we had $ 1.0 billion remaining under the January 2024 share repurchase program.

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

Our share repurchase activity, which consisted only of shares purchased under the ASR Agreements, was as follows:

(in millions, except per share data) For the Three Months Ended March 31, 2024

Total number of shares repurchased

16.3 29.9 5.9 8.5

Aggregate cost of shares repurchased (1)

$ 732 $ 1,451 $ 260 $ 368

Average price per share of shares repurchased (2)

$ 44.97 $ 48.60 $ 44.26 $ 43.68

(1) Subject to final settlement of each of the ASR transactions, which we expect to occur by June 30, 2024, but may occur earlier in certain circumstances.

Until final settlement, $ 360 million ( 15 % of the Repurchase Price) will remain in additional paid in capital on our condensed consolidated statement of stockholders’ equity (deficit).

(2) The final price per share of shares repurchased under each ASR Agreement will be determined at the end of the applicable purchase period, which is scheduled to occur by June 30, 2024, but may occur earlier in certain circumstances.

For the three months ended March 31, 2023, there were no share repurchases.

▪ Basis of Presentation:

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

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

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU No.

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

Our adoption of ASU No.

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

Additionally, on January 1, 2023, we adopted ASU 2022-04, Liabilities- Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations (“ASU No.

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

As of 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.

On January 1, 2024, we adopted Accounting Standards Update (“ASU”) 2022-03, Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU No.

This guidance clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

This guidance also specifies required disclosures for equity securities subject to contractual sale restrictions.

We applied ASU No.

2022-03 for the fair value disclosure of our investment in ABI.

For further discussion, see Note 5.

Investments in Equity Securities.

For a description of issued accounting guidance applicable to, but not yet adopted by, us, see Note 14.

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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.

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

The fair value of these contingent payments at March 31, 2024, December 31, 2023 and on the acquisition date was approximately $ 130 million, which is included in the total consideration.

We accounted for this acquisition as a business combination.

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

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

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

(in millions)

The primary area of accounting for the NJOY Transaction that is not yet finalized is the assessment of contingent liabilities, which could impact the fair value of certain intangible assets acquired and residual goodwill, including any related tax impact.

The amounts in the table below represent the preliminary estimates for purchase price allocation to assets acquired and liabilities assumed in the NJOY Transaction, including measurement period adjustments made for the three months ended March 31, 2024.

We recorded no measurement period adjustments in 2023.

The preliminary purchase price allocation will be finalized by the end of the measurement period.

(in millions) Preliminary Purchase Price Allocation Measurement period adjustments recognized at March 31, 2024 Updated Preliminary Purchase Price Allocation

Cash and cash equivalents $ 22 $ — $ 22

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Supplier agreements (amortizable)

180 ( 180 ) —

Accounts payable ( 7 ) — ( 7 )

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Total consideration 2,901 — 2,901

$ 1,614 $ 154 $ 1,768

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, 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.

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

The significant assumptions used in determining the preliminary fair values of the identifiable intangible assets included volume 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 intangible 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 are classified in Level 3 of the fair value hierarchy.

We amortize the intangible assets over a weighted-average period of approximately 18 years.

Following the measurement period adjustments made in the first quarter of 2024, we estimate our total annual pre-tax amortization expense for all of our definite-lived intangible assets, which includes the impact of the NJOY Transaction, to be approximately $ 150 million for each of the next five years, assuming no additional transactions occur that require the amortization of intangible assets and no impacts of any additional measurement period adjustments related to the NJOY Transaction.

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

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

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

We incurred 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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Segment Reporting .

We calculate substantially all cash discounts, offered to customers for prompt payment, as a flat rate per unit based on agreed-upon payment terms and record receivables net of the cash discounts on our condensed consolidated balance sheets.

In 2023, substantially all cash discounts, offered in contracts with our customers for prompt payment, were based on a flat rate per unit based on agreed-upon payment terms .

Beginning in the first quarter of 2024 for PM USA and USSTC, cash discounts in contracts with our customers were based on a percentage of the list price based on agreed-upon payment terms.

We record receivables net of the cash discounts on our condensed consolidated balance sheets.

We record payments received by our businesses in advance of product shipment as deferred revenue.

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 $ 284 million and $ 252 million at September 30, 2023 and December 31, 2022, respectively.

Deferred revenue from contracts with customers was $ 234 million and $ 258 million at March 31, 2024 and December 31, 2023, respectively.

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

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.

At March 31, 2024 and December 31, 2023, there were no

differences between amounts recorded as deferred revenue from contracts with customers and amounts subsequently recognized as revenue.

Receivables were $ 77 million and $ 71 million at March 31, 2024 and December 31, 2023, respectively.

At March 31, 2024 and December 31, 2023, there were no expected differences between amounts recorded and subsequently received, and we did no t record an allowance for credit losses against these receivables.

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

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

Goodwill and Other Intangible Assets, net

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

Goodwill Other Intangible Assets, net

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

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

Oral tobacco products segment 5,078 5,078 9,073 9,097

Other 1,614 — 1,684 298

Total $ 6,791 $ 5,177 $ 13,727 $ 12,384

Other intangible assets consisted of the following:

September 30, 2023 December 31, 2022

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

Indefinite-lived intangible assets

$ 11,443 $ — $ 11,443 $ —

Definite-lived intangible assets

2,841 557 1,411 470

Total other intangible assets $ 14,284 $ 557 $ 12,854 $ 470

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).

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 approximately 18 years.

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.

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

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

For the 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 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

Balance at January 1

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

Changes due to:

Acquisitions (1)

1,614 1,430 — 151

— ( 87 ) — ( 73 )

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

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

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

Acquisition of NJOY .

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

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

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

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

Supplier Financing

We facilitate a voluntary supplier financing program through a third-party intermediary under which participating suppliers may elect to sell receivables due from us to participating third-party financial institutions at the sole discretion of both the suppliers and the financial institutions (“Program”) .

Our responsibility is limited to making payment on the terms originally negotiated with our supplier, regardless of whether our supplier sells its receivable to a financial institution.

We pay the third-party intermediary a nominal fee to administer the Program.

Under the terms of the agreement with our third-party intermediary, ALCS has a direct obligation to pay the participating financial institutions or the participating suppliers when payment obligations are due, unless such obligations are satisfied by the applicable ALCS affiliate.

Additionally, Altria guarantees the obligations of ALCS to those parties.

We do not enter into agreements with any of the participating financial institutions in connection with the Program.

The range of payment terms we negotiate with our suppliers, up to 120 days, is consistent, irrespective of whether a supplier participates in the Program.

We have no economic interest in a supplier’s sale of a receivable.

Once a qualifying supplier elects to participate in the Program and reaches an agreement with a participating third-party financial institution, the qualifying supplier elects which individual invoices they sell to the financial institution.

All outstanding balances under the Program are recorded in accounts payable on our condensed consolidated balance sheets, and the associated payments are included in operating activities within our condensed consolidated statements of cash flows.

At March 31, 2024 and December 31, 2023, confirmed outstanding obligations under the Program were $ 120 million and $ 119 million, respectively.

Investments in Equity Securities

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

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

The carrying amount of our investments consisted of the following:

(in millions) March 31, 2024 December 31, 2023

ABI $ 8,070 $ 9,676

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

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

For the Three Months Ended March 31,

(in millions) 2024 2023

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

(2) Includes $ 165 million of the total pre-tax gain on the ABI Transaction discussed below.

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

(3) Represents the estimated change in fair value.

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

Investment in 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:

Prior to March 14, 2024, we had an approximate 10 % ownership interest in ABI, consisting of approximately 185 million restricted shares of ABI (“Restricted Shares”) and approximately 12 million ordinary shares of ABI.

On March 14, 2024, we converted 60 million shares of our Restricted Shares to ordinary shares of ABI.

Our Restricted Shares:

▪ are unlisted and not admitted to trading on any stock exchange;

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▪ have director nomination rights with respect to ABI.

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

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

Through this representation, we participate in ABI’s policy making processes.

In the ABI Transaction:

▪ On March 14, 2024, we entered into an underwriting agreement in connection with a global secondary offering that closed on March 19, 2024, in which we sold 35 million ordinary shares of ABI for gross proceeds of approximately $ 2.2 billion (“Secondary Offering”).

In connection with the Secondary Offering, we (i) agreed to a 180-day lockup with the lead underwriter with respect to our remaining approximately 159 million ABI shares (ending September 10, 2024) and (ii) granted the underwriters an option to purchase up to an additional 5.25 million ordinary shares of ABI, exercisable within 30 days following the date of the underwriting agreement, which the underwriters did not exercise prior to expiration.

▪ On March 13, 2024, we entered into a share repurchase agreement with ABI, conditioned upon the closing of the Secondary Offering and certain other customary conditions, to sell $ 200 million of our ABI ordinary shares to ABI in a private transaction.

We completed the sale of approximately 3.3 million ordinary shares to ABI on March 19, 2024.

At March 31, 2024, we had an approximate 8.1 % ownership interest in ABI, consisting of approximately 125 million Restricted Shares and approximately 34 million ordinary shares of ABI.

As a result of the ABI Transaction, in the first quarter of 2024, we received pre-tax cash proceeds totaling approximately $ 2.4 billion and incurred transaction costs of approximately $ 62 million.

In conjunction with the ABI Transaction, we entered into the ASR Agreements.

For further discussion of the ASR Agreements, see Note 1.

Background and Basis of Presentation .

As a result of the ABI Transaction, we recorded the following pre-tax amounts in our condensed consolidated statement of earnings:

(in millions) For the Three Months Ended March 31, 2024

Gain on partial sale of our investment $ 165

Transaction costs ( 62 )

Total pre-tax gain on ABI Transaction $ 103

▪ The pre-tax gain on the partial sale of our investment was recorded in (income) losses from investments in equity securities and includes a $ 408 million gain representing the excess of the selling price of the ABI shares sold over the carrying value of those shares, partially offset by a $ 243 million reclassification of the proportionate share of our pre-tax accumulated other comprehensive losses directly attributable to ABI and our designated net investment hedges related to our investment in ABI (see Note 6.

Financial Instruments and Note 9.

Other Comprehensive Earnings/Losses ).

▪ The pre-tax transaction costs were approximately $ 62 million ($ 59 million in marketing, administration and research costs and $ 3 million in interest and other debt expense, net), substantially all of which were underwriter fees.

In addition, in conjunction with the ABI Transaction, we recorded an income tax benefit from the partial release of a valuation allowance of approximately $ 94 million in provision for income taxes in our condensed consolidated statement of earnings for the three months ended March 31, 2024.

For further discussion, see Note 12.

Income Taxes .

We expect to maintain two seats on ABI’s board of directors through ABI’s 2025 annual general meeting.

Following that meeting, as a result of our reduced ownership interest in ABI following the ABI Transaction, we expect to have one seat on ABI’s board of directors, in accordance with our rights as a holder of Restricted Shares.

We will continue to account for our investment in ABI under the equity method of accounting because we have active representation on ABI’s board of directors and certain ABI board committees.

Through this representation, we have the ability to exercise significant influence over the operating and financial policies of ABI and participate in ABI’s policy making processes.

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

The fair value of our equity investment in ABI is based on (i) unadjusted quoted prices in active markets for ABI’s ordinary shares and was classified in Level 1 of the fair value hierarchy and (ii) observable inputs other than Level 1 prices, such as quoted prices for similar assets for the Restricted Shares and was classified in Level 2 of the fair value hierarchy.

We can convert our Restricted Shares to ordinary shares at our discretion.

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 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.

The fair value of our investment in ABI was based on (i) unadjusted quoted prices in active markets for ABI’s ordinary shares and was classified in Level 1 of the fair value hierarchy and (ii) observable inputs other than Level 1 prices, such as quoted prices for similar assets for the Restricted Shares and was classified in Level 2 of the fair value hierarchy.

We can convert our Restricted Shares to ordinary shares at our discretion after the expiration of the 180-day lockup period.

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

The fair value of our equity investment in ABI at March 31, 2024 and December 31, 2023 was $ 9.7 billion and $ 12.7 billion, respectively, which exceeded its carrying value of $ 8.1 billion and $ 9.7 billion, respectively, by approximately 20 % and 32 %, respectively.

Investment in Cronos

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.

At March 31, 2024, we had a 41.0 % ownership interest in Cronos, consisting of approximately 157 million shares, which we account for under the equity method of accounting.

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

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

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

At 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 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 September 30, 2023 and December 31, 2022.

Former Investment in JUUL

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

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

In addition, all other agreements between us, on the one hand, and JUUL, on the other hand, were terminated or we were removed as parties thereto, other than certain litigation-related agreements and a license agreement relating to our non-trademark licensable intellectual property rights in the e-vapor field, which remain in force solely with respect to our e-vapor intellectual property as of or prior to March 3, 2023.

As a result of transferring to JUUL all of our beneficially owned JUUL equity securities pursuant to the Stock Transfer Agreement, for the three months ended March 31, 2023, we recorded a non-cash, pre-tax loss on the disposition of our JUUL equity securities of $ 250 million.

Additionally, we considered specific facts and circumstances around the nature of the JUUL Heated Tobacco IP and determined that the fair value of such intellectual property was not material to our consolidated financial statements as of the date of the transaction.

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.

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

At March 31, 2024, the fair value of our investment in Cronos exceeded its carrying value by approximately $ 85 million or approximately 26 %.

At December 31, 2023, the fair value of our investment in Cronos was less than its carrying value by $ 8 million or approximately 2 %.

Former Investment in JUUL Labs, Inc.

In March 2023, we entered into a stock transfer agreement with JUUL (“Stock Transfer Agreement”) under which we transferred to JUUL all of our beneficially owned JUUL equity securities and, in exchange, received a non-exclusive, irrevocable global license to certain of JUUL’s heated tobacco intellectual property.

In addition, all other agreements between us and JUUL were terminated or we were removed as parties thereto, other than certain litigation-related agreements and a license agreement relating to our non-trademark licensable intellectual property rights in the e-vapor field, which remain in force solely with respect to our e-vapor intellectual property as of or prior to March 3, 2023.

As a result of the Stock Transfer Agreement, for the three months ended March 31, 2023, we recorded a non-cash, pre-tax loss of $ 250 million on the disposition of our JUUL equity securities in (income) losses from investments in equity securities in our condensed consolidated statement of earnings.

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

At March 31, 2024 and December 31, 2023, 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) September 30, 2023 December 31, 2022

(in millions) March 31, 2024 December 31, 2023

Carrying value $ 25,042 $ 26,233

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Net Investment Hedging

We recognized changes in the carrying value of the foreign currency denominated debt due to changes in the Euro to U.S.

We recognize changes in the carrying value of the foreign currency denominated debt due to changes in the Euro to U.S.

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

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.

We recognized pre-tax (gains) losses of our net investment hedges of $( 75 ) million and $ 48 million for the three months ended March 31, 2024 and 2023, respectively, in accumulated other comprehensive losses.

In addition, as a result of the ABI Transaction, for the three months ended March 31, 2024, we reclassified $ 42 million of pre-tax gains from our designated net investments hedges included in accumulated other comprehensive losses to (income) losses from investments in equity securities in our condensed consolidated statement of earnings.

For further discussion of the ABI Transaction and reclassification of accumulated other comprehensive losses, see Note 5.

Investments in Equity Securities and Note 9.

Other Comprehensive Earnings/Losses.

Benefit Plans

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

Pension Postretirement Pension Postretirement

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

Pension Postretirement

For the Three Months Ended March 31,

(in millions) 2024 2023 2024 2023

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Employer Contributions

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 $ 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.

We made employer contributions of $ 4 million to our pension plans and did no t make any contributions to our postretirement plans during the three months ended March 31, 2024.

Currently, we anticipate making additional employer contributions of up to approximately $ 25 million to our pension plans and contributions of up to approximately $ 30 million to our postretirement plans in 2024.

However, the foregoing estimates of 2024 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 and asset performance significantly above or below the assumed long-term rate of return for each respective plan.

Earnings per Share

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

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

For the Three Months Ended March 31,

(in millions) 2024 2023

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Weighted-average shares for basic and diluted EPS 1,758 1,786

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in our EPS calculation pursuant to the two-class method.

Other Comprehensive Earnings/Losses

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

For the Nine Months Ended September 30, 2023

For the Three Months Ended March 31, 2024

(in millions) Benefit Plans ABI Currency

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Other comprehensive earnings (losses), net of deferred income taxes ( 1 ) 402 (1)

( 16 ) 302 (1)

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

Adjustments and Other Accumulated

Comprehensive

Balances, June 30, 2023

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

Other comprehensive earnings (losses) before reclassifications

Deferred income taxes — ( 69 ) — ( 69 )

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

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

Deferred income taxes 2 3 — 5

Amounts reclassified to net earnings, net of deferred income taxes ( 5 ) ( 11 ) — ( 16 )

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

( 5 ) 236 (1)

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

For the Nine Months Ended September 30, 2022

Balances, March 31, 2024 $ ( 1,494 ) $ ( 793 ) $ 21 $ ( 2,266 )

For the Three Months Ended March 31, 2023

(in millions) Benefit Plans ABI Currency

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Other comprehensive earnings (losses), net of deferred income taxes ( 6 ) ( 12 ) (1)

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

For the Three Months Ended September 30, 2022

(in millions) Benefit Plans ABI Currency

Adjustments and Other Accumulated

Comprehensive

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

Deferred income taxes ( 7 ) 3 — ( 4 )

Amounts reclassified to net earnings, net of deferred income taxes 17 ( 13 ) ( 1 ) 3

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

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.

Balances, March 31, 2023 $ ( 1,442 ) $ ( 1,381 ) $ 44 $ ( 2,779 )

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

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

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

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

For the Three Months Ended March 31,

(in millions) 2024 2023

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Prior service cost/credit ( 9 ) ( 9 )

( 21 ) 65 ( 7 ) 24

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

Currency Translation Adjustments (2)

— ( 1 ) — ( 1 )

Pre-tax amounts reclassified from accumulated other comprehensive losses to net earnings $ 253 $ ( 7 )

(1) Amounts are included in net defined benefit plan costs.

(1) Amounts are included in net periodic benefit income, excluding service cost.

For further details, see Note 7.

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(2) Amounts are included in (income) losses from investments in equity securities.

For the three months ended March 31, 2024, as a result of the ABI Transaction, we reclassified $ 243 million from our accumulated other comprehensive losses of which $ 285 million is directly attributable to ABI, partially offset by $ 42 million from our designated net investment hedges related to our investment in ABI.

For further information, see Note 5.

Investments in Equity Securities.

Investments in Equity Securities and Note 6.

Financial Instruments .

Segment Reporting

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.

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

(ii) Helix ROW;

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

and (iv) the IQOS System heated tobacco business.

At March 31, 2024, our reportable segments were (i) smokeable products, consisting of combustible cigarettes and machine-made large cigars;

and (ii) oral tobacco products, consisting of MST, snus and oral nicotine pouches.

Our all other category included (i) NJOY (beginning June 1, 2023);

(ii) Horizon;

(iii) Helix International;

and (iv) other business activities, substantially all of which consists of research and development (“R&D”) expense related to certain new product platforms and technologies.

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

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Segment data were as follows:

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

For the Three Months Ended March 31,

(in millions) 2024 2023

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(Income) losses from investments in equity securities ( 295 ) 80

Loss on Cronos-related financial instruments — 14 — —

Earnings before income taxes $ 2,739 $ 2,479

The comparability of OCI for our reportable segments was affected by the following:

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

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.

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 (“NPM Adjustment Items”).

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

Contingencies .

▪ Tobacco and Health and Certain Other Litigation Items:

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

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

For the Three Months Ended March 31,

(in millions) 2024 2023

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Contingencies .

▪ Other Business Activities:

Our R&D investments have evolved and shifted from our traditional tobacco businesses to new product platforms and technologies.

Beginning January 1, 2024, our R&D expense is aligned with how our CODM now evaluates performance results and allocates resources for segment reporting.

For the three months ended March 31, 2024, using this approach, we recorded substantially all of our pre-tax R&D expense of $ 51 million in our all other category, which now includes other business activities related to R&D expense for certain new product platforms and technologies.

For the three months ended March 31, 2023, the majority of our pre-tax R&D expense of $ 43 million was recorded in our smokeable products segment.

Short-term Borrowings and Borrowing Arrangements

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.

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

the term loan facility in full.

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

Acquisition of NJOY and Note 4.

Goodwill and Other Intangible Assets, net , respectively.

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.

At March 31, 2024 and December 31, 2023, we had no short-term borrowings.

We have a $ 3.0 billion senior unsecured 5-year revolving credit agreement (“Credit Agreement”) that expires on October 24, 2028 and includes an option, subject to certain conditions, for us to extend the term of our Credit Agreement for two additional one-year periods.

We intend to use any borrowings under our Credit Agreement for general corporate purposes.

At March 31, 2024, we had availability under our Credit Agreement for borrowings of up to an aggregate principal amount of $ 3.0 billion.

Pricing for interest and fees under our 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 our 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 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.

The applicable percentage for borrowings under our Credit Agreement at March 31, 2024 was 1.0 % based on our long-term senior unsecured debt ratings on that date.

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

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

At March 31, 2024, we were in compliance with our covenants in our Credit Agreement.

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

PM USA guarantees any borrowings under our Credit Agreement and any amounts outstanding under our commercial paper program.

Long-term Debt

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 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.

The aggregate carrying value of our total long-term debt at March 31, 2024 and December 31, 2023 was $ 25.0 billion and $ 26.2 billion, respectively.

In January and February 2024, we repaid in full at maturity our 4.000 % and 3.800 % senior unsecured notes, respectively, in the aggregate principal amount of $ 776 million and $ 345 million, respectively.

At March 31, 2024 and December 31, 2023, accrued interest on long-term debt of $ 248 million and $ 410 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.

Financial Instruments .

In August 2022, the U.S.

Government enacted legislation commonly referred to as the Inflation Reduction Act that became effective January 1, 2023.

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

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

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

We expect our regular federal income tax liability will generally exceed our Corporate AMT liability;

however, certain unique circumstances may result in our Corporate AMT liability exceeding our regular federal income tax liability, including when tax losses are reported in a different year than book losses.

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

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

For the Three Months Ended March 31,

(in millions) 2024 2023

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Income tax rate 22.3 % 27.9 %

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

Our income tax rate for the three months ended March 31, 2024 differs from the U.S.

federal statutory rate of 21%, due primarily to state tax expense, partially offset by an income tax benefit from the partial release of a valuation allowance recorded against a deferred tax asset associated with our JUUL-related losses.

The valuation allowance release was due to our capital gain on the ABI Transaction.

Our income tax rate for the three months ended March 31, 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 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 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.

Unrecognized tax benefits reflect the differences between tax positions we have taken or expect to take on income tax returns and the amounts recognized in the financial statements.

Resolution of the related tax positions with the relevant tax authorities may take many years to complete, and such timing is not entirely within our control.

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

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

For the 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 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.

Unrecognized tax benefits increased by $ 1,164 million from December 31, 2022 due primarily to the tax position established with respect to the character of losses from our former investment in JUUL as discussed above.

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

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

The following chart provides a reconciliation of the beginning and ending valuation allowances for the three months ended March 31, 2024:

(in millions)

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Additions to valuation allowance charged to income tax expense 7

Releases to valuation allowance credited to income tax benefit ( 6 )

Releases of valuation allowance credited to income tax benefit ( 94 )

Foreign currency translation ( 1 )

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

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

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

Balance at end of period $ 2,164

We determine deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse.

We record a valuation allowance when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

valuation allowance when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

We determine the realizability of deferred tax assets based on the weight of all available positive and negative evidence.

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 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 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.

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

There is a potential that sufficient positive evidence may be available in future periods to cause us to further reduce or eliminate the valuation allowance on certain deferred tax assets.

That change to the valuation allowance would result in the recognition of previously unrecognized deferred tax assets and a decrease in income tax expense in the period the release is recorded.

The changes in the valuation allowances for the three months ended March 31, 2024 were due primarily to the ABI Transaction.

The cumulative valuation allowance at March 31, 2024 was primarily attributable to deferred tax assets recorded in connection with the unrealized capital losses related to our former investment in JUUL and our investment in Cronos.

As we continue to evaluate all sources of potential income that may become available to utilize these losses, our valuation allowance position may change.

For further discussion of our ABI Transaction, see Note 5.

Investments in Equity Securities .

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.

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

Although PM USA has historically been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from seeking to collect judgments while adverse verdicts have been appealed, there remains a risk that such relief may not be obtainable in all cases.

Although PM USA historically has been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from seeking to collect judgments while adverse verdicts have been appealed, there remains a risk that such relief may not be obtainable in all cases.

This risk has been substantially reduced given that 47 states and Puerto Rico limit the dollar amount of bonds or require no bond at all.

As discussed below, however, tobacco litigation plaintiffs have challenged the constitutionality of Florida’s bond cap statute in several cases and plaintiffs may challenge state bond cap statutes in other jurisdictions as well.

However, tobacco litigation plaintiffs have challenged the constitutionality of Florida’s bond cap statute in several cases, and plaintiffs may challenge state bond cap statutes in other jurisdictions as well.

Such challenges may include the applicability of state bond caps in federal court.

States, including Florida, also may seek to repeal or alter bond cap statutes through legislation.

Although we cannot predict the outcome of such challenges, it is possible that our condensed consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome of one or more such challenges.

Although we cannot predict the outcome of such challenges, it is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome of one or more such challenges.

We record provisions in our condensed consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.

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Nevertheless, litigation is subject to uncertainty and significant challenges remain.

It is possible that our condensed consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation.

It is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation.

We believe, and have been so advised by counsel handling the respective cases, that we have valid defenses to the litigation pending against us, as well as valid bases for appeal of adverse verdicts.

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

For the Three Months Ended March 31,

(in millions) 2024 2023

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Payments ( 6 )

( 137 ) ( 31 ) ( 13 )

Accrued liability for tobacco and health and certain other litigation items at end of period $ 364 $ 171

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

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

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

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

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

Pre-tax charges for tobacco and health and certain other litigation were included in marketing, administration and research costs on our condensed consolidated statements of earnings.

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 September 30, 2023.

Pre-tax charges for tobacco and health and certain other litigation were included in marketing, administration and research costs in our condensed consolidated statements of earnings.

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

These amounts include payments for Engle progeny judgments (and related costs and fees) totaling approximately $ 440 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 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.

As of March 31, 2024, PM USA has posted appeal bonds totaling approximately $ 38 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:

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

April 22, 2024 April 24, 2023 April 25, 2022

Individual Smoking and Health Cases (1)

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Other Tobacco-Related Cases (4)

(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 ).

(1) Includes as of April 22, 2024, 20 cases filed in Illinois, 14 cases filed in New Mexico, 63 cases filed in Massachusetts and 41 non- Engle cases filed in Florida.

Also does not include 1,113 cases brought by flight attendants seeking compensatory damages for personal injuries allegedly caused by exposure to environmental tobacco smoke (“ETS”).

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

(3) Includes as of 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.

(3) Includes as of April 22, 2024, 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 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.

(4) Includes as of April 22, 2024, 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 October 23, 2023, (i) Altria is named as a defendant in three e-vapor class action lawsuits in Canada;

As of April 22, 2024, (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 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.

As of April 22, 2024, one Engle progeny case, two individual smoking and health cases and no e-vapor cases are set for trial through June 30, 2024.

Trial dates are subject to change.

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Verdicts in favor of PM USA and other defendants were returned in 51 of the 82 cases.

These 48 cases were tried in Alaska ( 1 ), California ( 7 ), Connecticut ( 1 ), Florida ( 10 ), Louisiana ( 1 ), Massachusetts ( 6 ), Mississippi ( 1 ), Missouri ( 4 ), New Hampshire ( 1 ), New Mexico ( 2 ), New Jersey ( 1 ), New York ( 5 ), Ohio ( 2 ), Pennsylvania ( 2 ), Rhode Island ( 1 ), Tennessee ( 2 ) and West Virginia ( 2 ).

One case in Massachusetts, Main , where the verdict was initially returned in favor of PM USA, was reversed on appeal and remanded for a new trial.

Of the 31 non- Engle progeny cases in which verdicts were returned in favor of plaintiffs, 27 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 October 23, 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 April 22, 2024.

Smoking and Health Litigation

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Non- Engle Progeny Litigation:

Summarized below are the non- Engle progeny smoking and health cases pending during 2023 (or recently concluded) in which a verdict was returned in favor of plaintiff and against PM USA.

Summarized below are the non- Engle progeny smoking and health cases pending or concluded within the last 12 months in which a verdict was returned in favor of plaintiff and against PM USA.

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

In April 2024, a jury in an Oregon state court returned a verdict in favor of plaintiff and against PM USA, awarding less than $ 1 million in compensatory damages and allocating 51 % of the fault to PM USA.

The jury found that plaintiff was not entitled to punitive damages.

In December 2023, a jury in a Hawaii state court returned a verdict in favor of plaintiff and against PM USA, awarding less than $ 1 million in compensatory damages and allocating 39 % of the fault to PM USA.

The jury found that plaintiff was not entitled to punitive damages.

Following the verdict, the parties agreed to submit a stipulation of dismissal with prejudice to the court.

Pursuant to the agreement, PM USA was not required to pay the damages awarded by the jury, the parties agreed to bear their own costs and the parties agreed not to pursue appeals.

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 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 and $ 8 million in punitive damages.

In October 2023, the court entered judgment against PM USA for $ 11 million, having reduced the compensatory damages award to $ 3 million based on the jury’s finding on comparative fault and a set-off against plaintiff’s settlements with other defendants.

We filed post-trial motions challenging the verdict, which were denied in March 2024.

In April 2024, we filed a notice of appeal and a motion to stay execution pending appeal.

Plaintiff has agreed not to oppose the motion to stay and not to attempt to execute on the final judgment until 30 days after all appeals have been exhausted.

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.

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

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 lieu of appealing the trial court’s verdict, PM USA settled plaintiff’s claims in July 2023 for an immaterial amount.

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 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 December 2023, the court entered a final judgment awarding plaintiff $ 8 million in compensatory damages, $ 56 million in punitive damages and prejudgment interest.

PM USA has noticed an appeal to the Appeals Court of Massachusetts, and the appeal remains pending.

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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See Health Care Cost Recovery Litigation - Federal Government’s Lawsuit below for a discussion of the verdict and post-trial developments in the United States of America health care cost recovery case.

Engle Class Action:

In July 2000, in the second phase of the Engle smoking and health class action in Florida, a jury returned a verdict assessing punitive damages totaling approximately $ 145 billion against various defendants, including $ 74 billion against PM USA.

Following entry of judgment, PM USA appealed.

In May 2003, the Florida Third District Court of Appeal reversed the judgment entered by the trial court and instructed the trial court to order the decertification of the class.

Plaintiffs petitioned the Florida Supreme Court for further review.

In July 2006, the Florida Supreme Court ordered that the punitive damages award be vacated, that the class approved by the trial court be decertified and that members of the decertified class could file individual actions against defendants within one year of issuance of the mandate.

The court further declared the following Phase I findings are entitled to res judicata effect in such individual actions brought within one year of the issuance of the mandate:

Engle Progeny Cases:

Engle progeny cases are individual smoking and health lawsuits filed by Florida resident plaintiffs against one or more cigarette manufacturer defendants.

The lawsuits arose following the Florida Supreme Court’s decertification of the class in Engle, et.

Reynolds Tobacco Co., et.

, a smoking and health class action lawsuit filed in Florida state court against multiple defendants, including PM USA, in which the jury returned a verdict in favor of the plaintiff class and the trial court assessed punitive damages against the defendants.

In July 2006, the Florida Supreme Court mandated that the trial court’s punitive damages award be vacated, that the class approved by the trial court be decertified and that members of the decertified class could file individual actions against defendants within one year of issuance of the mandate.

Plaintiffs in Engle progeny lawsuits are entitled to rely on certain liability findings from the class action lawsuit, substantially reducing each plaintiff’s burden of proof.

These liability findings stipulate:

(i) that smoking causes various diseases;

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and (viii) that defendants were negligent.

In August 2006, PM USA and plaintiffs sought rehearing from the Florida Supreme Court on parts of its July 2006 opinion.

In December 2006, the Florida Supreme Court refused to revise its July 2006 ruling, except that it revised the set of Phase I findings entitled to res judicata effect by excluding finding (v) listed above (relating to agreement to misrepresent information), and added the finding that defendants sold or supplied cigarettes that, at the time of sale or supply, did not conform to the representations of fact made by defendants.

In February 2008, the trial court decertified the class.

Pending Engl e Progeny Cases:

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 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.

As of April 22, 2024, approximately 288 state court cases were pending against PM USA or Altria asserting individual claims by or on behalf of approximately 357 state court plaintiffs.

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

The 2015 federal Engle agreement resolved nearly all Engle progeny cases pending in federal court as of the date of the agreement, and each case excluded from that agreement subsequently has been resolved.

Each federal Engle progeny case has been resolved.

Engle Progeny Trial Results:

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.

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

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

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

Fifty-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;

however, the court declared a mistrial in the second phase of the trial regarding punitive damages because the jury was unable to determine the amount of the punitive damages.

Following appeals by the plaintiff and PM USA, the appellate court in Garcia affirmed the compensatory damages judgment against PM USA and granted a new trial with respect to punitive damages.

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.

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 plaintiffs.

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

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.

Douglas , was dismissed with prejudice following a verdict in favor of plaintiff.

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 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.

As of April 22, 2024, 145 federal and state Engle progeny cases involving PM USA have resulted in verdicts.

Eighty-seven were returned in favor of plaintiffs, five of which have been reversed post-trial or on appeal and remain pending.

Fifty-eight verdicts were returned in favor of PM USA, two of which have been reversed post-trial or on appeal and remain pending.

In addition, there have been a number of mistrials, only some of which have resulted in new trials as of April 22, 2024.

Post-trial activity in a case can result in final resolution that differs from the initial verdict.

In many cases, parties have appealed either compensatory or punitive damages awards or both.

Courts also have increased and decreased the amounts of punitive damages juries have awarded, declared mistrials and vacated judgments, in whole or in part, with respect to compensatory and punitive damages awards.

Initial verdicts have been reversed in whole or in part on appeal or following retrial.

Juries have returned verdicts in favor of or against PM USA awarding no damages.

In cases where juries returned verdicts against PM USA awarding no damages, some trial courts have decided to award plaintiff damages notwithstanding the verdict.

Cases also have been dismissed with or without prejudice before or after a verdict.

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

The first chart lists cases that are pending as of April 22, 2024 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.

In this Note 13.

Contingencies , references to “R.J.

Reynolds” are to R.J.

Reynolds Tobacco Company.

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.

Further, the damages noted reflect adjustments based on post-trial or appellate rulings.

References below to “R.J.

Reynolds,” “Lorillard” and “Liggett Group” are to R.J.

Reynolds Tobacco Company, Lorillard Tobacco Company and Liggett Group, LLC, respectively.

Currently Pending Engle Cases with Verdicts Against PM USA

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

Defendant’s post-trial motions pending.

Appeals to the Third District Court of Appeal pending.

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

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

Appeal to the Third District Court of Appeal pending.

Levine September 2022 PM USA and R.J.

Reynolds Miami-Dade $ 1 million

Appeals by defendants and plaintiff to the Third District Court of Appeal pending.

Third District Court of Appeal affirmed compensatory damages award.

Schertzer April 2022 PM USA and R.J.

Reynolds Miami-Dade $ 3 million

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

Reynolds Miami-Dade $ 3 million $ 0 PM USA intends to appeal to the Florida Supreme Court.

Lipp September 2021 PM USA Miami-Dade $ 15 million

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)

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

Duignan February 2020 (2)

PM USA and R.J.

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

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

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

Third District Court of Appeal reversed and remanded for a new trial.

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

Defendant’s post-trial motions pending.

Appeal to the Fourth District Court of Appeal pending.

Chadwell September 2018 PM USA Miami-Dade $ 2 million

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

Appeal to the Third District Court of Appeal pending.

Kaplan ( McLaughlin )

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Reynolds Broward $ 2 million

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

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

Appeal to the Fourth District Court of Appeal pending.

Cooper ( Blackwood )

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(<$ 1 million PM USA)

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

Retrial of punitive damages claim pending.

(1) PM USA’s portion of the compensatory damages award is noted parenthetically where the court has ruled that comparative fault applies.

(2) Plaintiff’s verdict following a retrial of an initial verdict in favor of plaintiff.

(3) PM USA is not a defendant in Prentice or Sheffield , which are discussed below in Engle Progeny Appellate Issues .

Engle Cases Concluded Within Past 12 Months

(rounded to nearest $ million)

Plaintiff Verdict Date Defendant(s) Court Accrual Date Payment Amount for Damages (if any) Payment Date

Miller September 2022 PM USA and R.J.

Reynolds Miami-Dade Third quarter of 2022 <$ 1 million

December 2022

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

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

Brown January 2015 PM USA Federal Court - Middle District of Florida Third quarter of 2022 $ 5 million August 2022

Engle Progeny Appellate Issues:

Appellate decisions in the following Engle progeny cases may have wide application to other Engle progeny cases:

In Mary Sheffield v.

Reynolds Tobacco Company , an Engle progeny case against R.J.

Reynolds only, the Florida Supreme Court resolved a conflict among Florida’s District Courts of Appeal finding that the 1999 amendments to Florida’s punitive damages statute (including its caps and bar on multiple punitive damages awards for the same course of conduct) apply in wrongful death cases where the decedent was injured prior to the October 1, 1999 effective date of the amendments but died from his or her injuries after such effective date.

In Linda Prentice v.

Reynolds Tobacco Company , an Engle progeny case against R.J.

Reynolds only, the Florida Supreme Court resolved a conflict among Florida’s District Courts of Appeal finding that in order for an Engle plaintiff to prevail on fraudulent concealment and conspiracy claims, plaintiff must prove that the smoker relied to his or her detriment on a statement that concealed or omitted material information about the health risks or addictiveness of smoking.

The Florida Supreme Court declined to revisit its prior decisions giving preclusive effect to the Engle Phase I findings, described above in Engle Class Action .

Florida Bond Statute:

In June 2009, Florida amended its existing bond cap statute by adding a $ 200 million bond cap that applies to all state Engle progeny lawsuits in the aggregate and establishes individual bond caps for individual Engle progeny cases in amounts that vary depending on the number of judgments in effect at a given time.

Plaintiffs have been unsuccessful in various challenges to the bond cap statute in Florida state court.

No federal court has yet addressed the constitutionality of the bond cap statute or the applicability of the bond cap to Engle progeny cases tried in federal court.

From time to time, legislation has been presented to the Florida legislature that would repeal the bond cap statute;

however to date, no legislation repealing the statute has passed.

Plaintiff Verdict Date Defendant(s) Court Payment Amount for Damages (if any)

Duignan February 2020 PM USA and R.J.

Reynolds Pinellas $ 1 million

Ferraiuolo November 2023 PM USA and R.J.

Reynolds Duval <$ 1 million

Garcia May 2021 PM USA Miami-Dade $ 3 million

Holliman February 2019 PM USA Miami-Dade $ 3 million

Other Smoking and Health Class Actions:

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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 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.

As of April 22, 2024, 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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Supreme Court has refused to consider plaintiffs’ appeals from the cases decided by five federal circuit courts of appeal.

In addition to the cases brought in the United States, health care cost recovery actions have also been brought against tobacco industry participants, including PM USA and Altria, in Canada ( 10 cases), and other entities have stated that they are considering filing such actions.

In addition to the cases brought in the United States, health care cost recovery actions have been brought against tobacco industry participants, including PM USA and Altria, in Canada ( 10 cases), and other entities have stated that they are considering filing such actions.

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.

All of these cases have been stayed pending resolution of proceedings in Canada involving three tobacco manufacturers (none of which are affiliated with us) under the Companies’ Creditors Arrangement Act discussed above.

See Smoking and Health Litigation - Other Smoking and Health Class Actions above for a discussion of these proceedings.

See Smoking and Health

Litigation - Other Smoking and Health Class Actions above for a discussion of these proceedings.

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

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Reynolds and, with respect to certain brands, ITG Brands, LLC (“ITG”)) make annual payments of approximately $ 10.4 billion, subject to adjustments for several factors, including inflation, market share and industry volume.

In addition, the OPMs are required to pay settling plaintiffs’ attorneys’ fees, subject to an annual cap of $ 500 million;

these quarterly payments are expected to end in 2024.

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.

In addition, the OPMs are required to pay settling plaintiffs’ attorneys’ fees, subject to an annual cap of $ 500 million, on a pro rata basis based on market share.

These quarterly payments are expected to end in the fourth quarter of 2024.

For the three months ended March 31, 2024 and 2023, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $ 900 million for each period.

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

NPM Adjustment Disputes:

Non-Participating Manufacturer (“NPM”) Adjustment Disputes:

The “NPM Adjustment” is a reduction in MSA payments made by the OPMs and those manufacturers that are subsequent signatories to the MSA (collectively, the “participating manufacturers” or “PMs”) that applies if the PMs collectively lose at least a specified level of market share to non-participating manufacturers since 1997, subject to certain conditions and defenses.

The independent auditor (“IA”) appointed under the MSA has calculated that PM USA’s share of the maximum potential NPM Adjustments for 2004-2022 is (exclusive of interest or earnings):

$ 388 million for 2004;

$ 181 million for 2005;

$ 154 million for 2006;

$ 185 million for 2007;

$ 250 million for 2008;

$ 211 million for 2009;

$ 218 million for 2010;

$ 166 million for 2011;

$ 214 million for 2012;

$ 224 million for 2013;

$ 258 million for 2014;

$ 313 million for 2015;

$ 292 million for 2016;

$ 285 million for 2017;

$ 318 million for 2018;

$ 415 million for 2019;

$ 572 million for 2020;

$ 675 million for 2021;

and $ 571 million for 2022.

These maximum amounts will be substantially reduced to reflect the NPM Adjustment settlements discussed below, and potentially for current and future calculation disputes and other developments.

PM USA’s recovery for 2004 is addressed below.

In addition, PM USA’s recovery of such reduced amounts for all subsequent years will be dependent upon subsequent determinations regarding state-specific defenses and disputes with other PMs.

The applicability of this reduction has been subject to certain disputes, some of which have been resolved via settlement, as discussed below.

Settlements of NPM Adjustment Disputes .

▪ Multi-State Settlement .

By the end of 2018, a total of 36 MSA states and territories had entered the multi-state settlement of NPM Adjustment disputes to which PM USA is a party.

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.

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.

As of January 2022, a total of 36 states and territories had settled NPM Adjustment disputes relating to varying periods of time.

In March 2022, August 2023 and February 2024, Illinois, Iowa and Idaho, respectively, joined the multi-state settlement, bringing the total number of states and territories that have joined the multi-state settlement to 39 .

In the first quarter of 2022, PM USA recorded $ 80 million, $ 20 million of which related to the 2019 through 2021 “transition years,” as a reduction in cost of sales as a result of Illinois joining the multi-state settlement.

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

As a result of Idaho joining the multi-state settlement, PM USA will receive approximately $ 8 million for 2005 through 2023, $ 2 million of which relates to the 2021 through 2023 “transition years.” In connection with this development, PM USA recorded $ 8 million as a reduction in cost of sales in the first quarter of 2024.

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.

▪ New York Settlement.

In 2015, PM USA entered into a separate NPM Adjustment settlement with New York in which PM USA settled the NPM Adjustment disputes with New York in perpetuity.

In 2015, PM USA entered into a separate NPM Adjustment settlement in which PM USA settled the NPM Adjustment disputes with New York in perpetuity.

PM USA has received $ 503 million pursuant to the New York settlement and expects to receive annual credits applied against the MSA payments due to New York going forward.

▪ Montana Settlement .

In 2020, PM USA entered into a separate NPM Adjustment settlement with Montana in which PM USA settled the NPM Adjustment disputes with Montana through 2030.

This settlement resulted in a payment by PM USA of $ 4 million.

In 2020, PM USA entered into a separate NPM Adjustment settlement in which PM USA settled the NPM Adjustment disputes with Montana through 2030, resulting in a payment from PM USA to Montana for an immaterial amount.

Continuing NPM Adjustment Disputes with States That Have Not Settled .

▪ 2004 NPM Adjustment.

The PMs and the nine states that have not settled the NPM Adjustment disputes participated in a multi-state arbitration of NPM Adjustment disputes for 2004.

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

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

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

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

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

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.

The PMs and the nine states that had not settled the NPM Adjustment disputes for 2004 participated in a multi-state arbitration.

Iowa subsequently joined the multistate settlement in August 2023.

The arbitration panel found three of the remaining eight states that have not settled the NPM Adjustment disputes, Washington, Missouri and New Mexico, were not diligent in the enforcement of their escrow statutes in 2004, and PM USA received approximately $ 52 million on account of the 2004 NPM Adjustment as a credit against its April 2023 MSA payment.

PM USA recorded $ 44 million and $ 8 million in third quarter of 2021 and fourth quarter of 2022, respectively.

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

▪ 2005-2007 NPM Adjustments.

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.

The PMs and the seven 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 six of the seven states, and one year , 2005, for one state.

As of April 22, 2024, the arbitration panel had issued decisions for Maryland, Washington and Wisconsin, finding Maryland and Wisconsin diligent for all three years and Washington not diligent for all three years .

PM USA recorded $ 14 million as a reduction of costs of sales and $ 21 million

as interest income in the fourth quarter of 2023 for its estimate of the minimum amount of the 2005 through 2007 NPM Adjustment it will receive.

▪ 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 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:

The payment obligations of the tobacco product manufacturers that are parties to the State Settlement Agreements, as well as the allocations of any NPM Adjustments and related settlements, have been and may continue to be affected by R.J.

Reynolds’s acquisition of Lorillard in 2015 and its related sale of certain cigarette brands to ITG (the “ITG transferred brands”).

PM USA filed motions to enforce the State Settlement Agreements in Florida, Minnesota, Texas and Mississippi in connection with various positions that R.J.

Reynolds and ITG took with regard to the ITG transferred brands.

After various court decisions in each of those states that were favorable to PM USA, those motions to enforce have now been resolved either through settlement or exhaustion of appeals, although further proceedings may occur based on the resolution of certain outstanding litigation between R.J.

Reynolds and ITG.

In May 2022, PM USA filed a motion to compel arbitration under the MSA regarding certain positions that R.J.

Reynolds and ITG took with regard to the ITG transferred brands.

In June 2022, the matter was resolved through mutual agreement of the parties.

PM USA continues to dispute how the ITG transferred brands are treated in allocating the NPM Adjustments under the MSA and related settlements and may pursue such claims.

Reynolds’s acquisition of Lorillard Tobacco Company in 2015 and its related sale of certain cigarette brands to ITG (the “ITG transferred brands”).

PM USA continues to dispute how the ITG transferred brands are treated in allocating the NPM Adjustments and profit adjustments under the State Settlement Agreements.

In December 2019, the State of Mississippi filed a motion in Mississippi state court seeking to enforce the Mississippi State Settlement Agreement against PM USA, R.J.

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

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

The State of Texas filed a cross-motion to enforce, and the court found in favor of the State of Texas.

As of April 22, 2024, the court had not made a determination on damages.

PM USA intends to appeal.

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

(“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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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.

Corrective statements appeared in newspapers and on television for four months and one year , respectively, beginning in the fourth quarter of 2017, and the onserts appeared for two weeks at a time for a total of twelve weeks over two years beginning in the fourth quarter of 2018.

Corrective statements have appeared on websites since the second quarter of 2018.

In December 2022, the district court entered a consent order approving a settlement with respect to corrective statements on point-of-sale signage.

In 2022, we recorded provisions totaling approximately $ 28 million for the estimated costs of implementing the corrective statements on point-of-sale signage remedy.

In addition to the $ 28 million of provisions recorded in 2022, we recorded in the first quarter of 2024 provisions of $ 15 million for estimated costs of implementing the corrective statements on point-of-sale signage remedy.

In June 2020, the U.S.

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

In connection with our assignment of exclusive U.S.

commercialization rights to the IQOS System to PMI, the U.S.

government has asserted that the assignment of those rights required district court approval and was subject to PMI becoming bound by the court-ordered injunction and, in January 2024, requested that we petition the district court for approval of that agreement.

E-vapor Product Litigation

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.

As of April 22, 2024, 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.

Three of the class action lawsuits are pending in Canada.

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

We refer to this litigation in the United States 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.

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

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

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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, for which amount we recorded a pre-tax provision in the second quarter of 2023.

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.

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

In March 2024, the court granted final approval of the class action settlement.

The settlement is conditioned on certain participation rates among plaintiffs, and certain plaintiffs may opt out of the settlement and attempt to continue litigating their individual cases.

The settlement applies to all of the Multidistrict Litigation except 35 “third party” cases brought by Native American tribes.

The settlement does not apply to the three class action lawsuits pending in Canada, the cases brought by state attorneys general, discussed below, or 17 putative class actions antitrust lawsuits.

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

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We filed motions to dismiss the lawsuits.

In Alaska, Hawaii and Minnesota, the motions were denied in February 2022, May 2021 and June 2021, respectively.

Our motion to dismiss remains pending in New Mexico.

In the Alaska lawsuit, although the trial court declined to dismiss most of the plaintiff’s claims, the trial court did dismiss plaintiff’s public nuisance claim.

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 October 2024 and February 2024, respectively.

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

In Alaska, Hawaii, Minnesota and New Mexico, the motions were denied in February 2022, May 2021, June 2021 and December 2023, respectively.

In April 2023, January 2024, February 2024 and April 2024, we agreed to settle the Minnesota, Alaska, Hawaii and New Mexico lawsuits, respectively, for immaterial amounts.

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.

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No damages are recoverable in the proceedings before the ITC.

A hearing before the ALJ is scheduled for May 2024, and the ALJ’s recommendation will be reviewed by 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.

The lawsuit is currently stayed.

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.

A hearing before the ALJ is scheduled for June 2024, and the ALJ’s recommendation will be reviewed by the ITC.

IQOS Litigation

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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 nine and three months ended September 30, 2023.

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.

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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In September 2021, the ITC issued a limited exclusion order barring the importation of the IQOS System electronic device, Marlboro HeatSticks and the infringing components into the United States and a cease and desist order barring domestic sales, marketing and distribution of these imported products.

The orders became effective on November 29, 2021.

The orders became effective in November 2021.

Consequently, PM USA removed the IQOS System electronic device and Marlboro HeatSticks from the marketplace.

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Court of Appeals for the Federal Circuit issued its decision affirming the ITC exclusion order in full.

In February 2024, PMI and British American Tobacco p.l.c.

agreed to settle multiple ongoing patent infringement disputes, including the patent infringement action pending before the ITC.

Under the terms of the settlement agreement, the parties agreed, among other things, to request rescission of the limited exclusion order barring the importation of the IQOS System electronic device, Marlboro HeatSticks and component parts into the United States and the cease and desist order barring domestic sales, marketing and distribution of these imported products.

In November 2020, Healthier Choices Management Corp.

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On remand, the U.S.

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

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

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

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

Also as of October 23, 2023, 17 putative class action lawsuits have been filed against Altria and JUUL in the U.S.

Also as of April 22, 2024, 17 putative class action lawsuits have been filed against Altria and JUUL in the U.S.

District Court for the Northern District of California.

The lawsuits initially named, in addition to the two companies, certain senior executives and certain members of the board of directors of both companies as defendants;

however, those individuals currently or formerly affiliated with Altria were later dismissed.

In November 2020, these lawsuits were consolidated into three complaints (one on behalf of direct purchasers, one on behalf of indirect purchasers and one on behalf of indirect resellers).

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Plaintiffs seek various remedies, including treble damages, attorneys’ fees, a declaration that the agreements between Altria and JUUL are invalid and rescission of the transaction.

We filed a motion to dismiss these lawsuits in January 2021.

In August 2021, the U.S.

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.

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 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.

In February 2024, the court ordered that certain of the direct-purchaser plaintiffs’ claims against JUUL be sent to arbitration pursuant to an arbitration provision in JUUL’s online purchase agreement and dismissed without prejudice the direct-purchaser plaintiffs’ claims for injunctive relief.

The trial with respect to the consolidated lawsuits is set to commence in May 2026.

Shareholder Class Action and Shareholder Derivative Lawsuits

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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.

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

As of April 22, 2024, two “Lights/Ultra Lights” class actions are pending in U.S.

state courts.

Neither case is active.

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.

As of April 22, 2024, 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 ETS 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 October 23, 2023, there is no such case pending against UST and/or its tobacco subsidiaries.

As of April 22, 2024, there is no such case pending against UST and/or its tobacco subsidiaries.

Environmental Regulation

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Other than those amounts, it is not possible to reasonably estimate the cost of any environmental remediation and compliance efforts that we may undertake in the future.

In the opinion of our management, however, compliance with environmental laws and regulations, including the payment of any remediation costs or damages and the making of related expenditures, has not had, and is not expected to have, a material adverse effect on our condensed consolidated results of operations, capital expenditures, financial position or cash flows.

In the opinion of our management, however, compliance with environmental laws and regulations, including the payment of any remediation costs or damages and the making of related

expenditures, has not had a material adverse effect on our condensed consolidated results of operations, capital expenditures, financial position or cash flows.

Guarantees and Other Similar Matters

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

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.

At March 31, 2024, we (i) had $ 48 million of unused letters of credit obtained in the ordinary course of business and (ii) were contingently liable for guarantees related to our own performance, including $ 19 million for surety bonds recorded on our condensed consolidated balance sheet.

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

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

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

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

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

We do not have a related liability recorded on our condensed consolidated balance sheet at September 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 March 31, 2024 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, any borrowings under our $ 3.0 billion New Credit Agreement and amounts outstanding under our commercial paper program.

For further discussion, see Note 11.

As part of the supplier financing program, Altria guarantees the financial obligations of ALCS under the financing program agreement.

For further discussion of the supplier financing program, see Note 4.

Supplier Financing .

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

New Accounting Guidance Not Yet Adopted

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Standards Description Effective Date for Public Entity Effect on Financial Statements

ASU 2022-03 Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions

The guidance clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

The amendments also specify required disclosures for equity securities subject to contractual sale restrictions.

The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023.

We do not expect our adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

ASU 2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

The guidance will require disclosure of incremental segment information on an annual and interim basis.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

We are in the process of evaluating the impact of this guidance on our consolidated financial statements and related disclosures.

ASU 2023-09 Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

The guidance will require additional income tax disclosures, primarily related to the rate reconciliation and income taxes paid information.

The guidance is effective for fiscal years beginning after December 15, 2024.

We are in the process of evaluating the impact of this guidance on our consolidated financial statements and related disclosures.

ASU 2024-01 Compensation-Stock Compensation (Topic 718):

Scope Application of Profits Interest and Similar Awards

The guidance seeks to reduce ambiguity in the treatment of profits interest awards and provides specific guidance on whether a profits interest award should be accounted for as a share-based payment arrangement, or in a manner similar to a cash bonus or profit-sharing arrangement.

The guidance is effective for fiscal years beginning after December 15, 2024, and interim periods within those annual periods.

We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

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