What changed in this filing

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Item 1. Financial Statements

2024-10-31 compared with 2024-07-31 · 278 added, 252 removed, 1022 unchanged (34% of the section changed)

5 unchanged sentences

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June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Cash and cash equivalents $ 1,897 $ 3,686

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June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

Current portion of long-term debt $ 1,585 $ 1,121

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Cost of repurchased stock

( 1,095,982,189 shares at June 30, 2024 and

( 1,109,485,036 shares at September 30, 2024 and

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

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

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

2024 2023 2024 2023

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

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

2024 2023 2024 2023

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Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

for the Six Months Ended June 30, 2024 and 2023

for the Nine Months Ended September 30, 2024 and 2023

(in millions of dollars, except per share data)

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Other — — — — ( 31 ) — ( 31 )

Balances, June 30, 2024

Balances, September 30, 2024

$ 935 $ 5,890 $ 34,206 $ ( 2,617 ) $ ( 41,882 ) $ 50 $ ( 3,418 )

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Other — — — — ( 5 ) — ( 5 )

Balances, June 30, 2023

Balances, September 30, 2023

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

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Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

for the Three Months Ended June 30, 2024 and 2023

for the Three Months Ended September 30, 2024 and 2023

( in millions of dollars, except per share data)

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Equity (Deficit)

Balances, March 31, 2024

Balances, June 30, 2024

$ 935 $ 5,876 $ 33,651 $ ( 2,283 ) $ ( 41,195 ) $ 50 $ ( 2,966 )

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Other — — — — ( 7 ) — ( 7 )

Balances, June 30, 2024

Balances, September 30, 2024

$ 935 $ 5,890 $ 34,206 $ ( 2,617 ) $ ( 41,882 ) $ 50 $ ( 3,418 )

Balances, March 31, 2023

Balances, June 30, 2023

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

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

Other — — — — ( 5 ) — ( 5 )

Balances, June 30, 2023

Balances, September 30, 2023

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

(1) Represents the fair value of the shares received at final settlement of the ASR Agreements that were transferred to cost of repurchased stock.

For further discussion, see Note 1.

Background and Basis of Presentation .

See notes to condensed consolidated financial statements.

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For the Six Months Ended June 30, 2024 2023

For the Nine Months Ended September 30, 2024 2023

Cash Provided by (Used in) Operating Activities

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Unrecognized tax benefit (1)

Fair value adjustment for NJOY Transaction contingent payments 140 —

(Income) losses from investments in equity securities ( 530 ) ( 105 )

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Proceeds from the ABI Transaction (3)

Proceeds from the sale of IQOS System commercialization rights

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

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

For further details see Note 2.

Acquisition of NJOY .

(3) For further discussion of the ABI Transaction, see Note 6.

(3) See Note 6.

Investments in Equity Securities .

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For the Six Months Ended June 30, 2024 2023

For the Nine Months Ended September 30, 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 ) ( 1,566 )

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

At June 30, 2024 At December 31, 2023

At September 30, 2024 At December 31, 2023

Cash and cash equivalents $ 1,897 $ 3,686

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▪ Background:

At June 30, 2024, our wholly owned subsidiaries included Philip Morris USA Inc.

At September 30, 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;

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

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;

Helix Innovations LLC (“Helix”), which operates in the United States, and Helix Innovations GmbH and its affiliates (“Helix International”), which operate in certain other countries, 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 June 30, 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 June 30, 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.

At September 30, 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 September 30, 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 responsible for the U.S.

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

At June 30, 2024, we had investments in Anheuser-Busch InBev SA/NV (“ABI”) and Cronos Group Inc.

At September 30, 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 6.

For further discussion of our investments and the ABI Transaction, see Note 6.

Investments in Equity Securities .

▪ 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.

▪ Dividends and Share Repurchases:

In August 2024, our Board of Directors (“Board of Directors” or “Board”) approved a 4.1 % increase in the quarterly dividend rate to $ 1.02 per share of our common stock versus the previous rate of $ 0.98 per share.

The current annualized dividend rate is $ 4.08 per share.

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

In January 2023, our Board of Directors 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”).

We entered into accelerated share repurchase (“ASR”) transactions under two separate agreements with bank counterparties (collectively, “ASR Agreements”) to repurchase shares of our common stock having an aggregate value of $ 2.4 billion (“Repurchase Price”).

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

In the second quarter of 2024, we received approximately 7.4 million additional shares of our common stock upon the final settlement of the ASR Agreements.

In the first half of 2024, we paid the Repurchase Price and received 53.9 million shares of our common stock.

The total number of shares repurchased under the ASR Agreements was based on volume-weighted average prices of our common stock during the term of the ASR transactions, less a discount.

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

At June 30, 2024, we had $ 990 million remaining under the January 2024 share repurchase program.

At September 30, 2024, we had $ 310 million 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 was as follows:

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

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

(in millions, except per share data) 2024 (1)

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Average price per share of shares repurchased $ 45.68 $ 44.97 $ 50.37 $ 44.26

(1) Includes 53.9 million and 7.4 million shares repurchased under the ASR Agreements at an average price per share of $ 44.50 and $ 48.44 for the six and three months ended June 30, 2024, respectively.

(1) Includes 53.9 million shares repurchased under the ASR Agreements at an average price per share of $ 44.50 .

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▪ Basis of Presentation:

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Food and Drug Administration (“FDA”) authorizations with respect to NJOY’s menthol ($ 250 million), blueberry ($ 125 million) and watermelon ($ 125 million) pod products.

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

On June 21, 2024, the FDA issued marketing granted orders for four NJOY menthol e-vapor products.

As a result, we became obligated to make cash payments totaling $ 250 million under the acquisition agreement, which payments occurred in July 2024.

Additionally, we recorded a pre-tax charge of approximately $ 140 million for the change in the fair value of contingent payments for the six and three months ended June 30, 2024, as an acquisition-related cost in marketing, administration and research costs in our condensed consolidated statement of earnings.

At June 30, 2024, the fair value of total contingent payments was approximately $ 270 million after recording the fair value adjustment.

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

In the second quarter of 2024, the FDA issued marketing granted orders for four NJOY menthol e-vapor products.

As a result, we became obligated to make cash payments totaling $ 250 million under the acquisition agreement, which we made in July 2024.

Additionally, we recorded a pre-tax charge of approximately $ 140 million for the change in the fair value of contingent payments for the nine months ended September 30, 2024.

At September 30, 2024, the fair value of the remaining contingent payments, which relate to blueberry and watermelon pod products, was approximately $ 20 million.

Contingent payments related to the NJOY Transaction were recognized at their estimated fair value as of the acquisition date.

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

Costs incurred for the NJOY Transaction are recognized as expenses in the period in which the costs are incurred.

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

Costs incurred for the NJOY Transaction are recognized as expenses in the period in which the costs are incurred and are included in our condensed consolidated statement of earnings as follows:

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

(in millions) 2024 2023 2024 2023

Marketing, administration and research costs:

Change in fair value of contingent payments $ 140 $ — $ — $ —

Other costs (1)

Interest and other debt expense, net:

Financing fees — 9 — 1

Total NJOY Transaction costs $ 187 $ 63 $ 44 $ 14

(1) For the nine and three months ended September 30, 2024, substantially all of these costs were acquisition-related costs associated with patent infringement lawsuits related to the NJOY Transaction.

For further discussion of the patent infringement lawsuits, see Note 14.

Contingencies .

For the nine months ended September 30, 2023, substantially all of these costs were acquisition-related costs, consisting primarily of transaction costs.

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

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On June 1, 2024, we finalized our purchase price allocation for the NJOY Transaction.

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

We recorded no measurement period adjustments in 2023 or during the three months ended June 30, 2024.

The amounts in the table below represent the final purchase price allocation to the assets acquired and

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liabilities assumed in the NJOY Transaction, including measurement period adjustments made during the three months ended March 31, 2024.

(in millions) Preliminary Purchase Price Allocation Measurement Period Adjustments Final Purchase Price Allocation

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

The significant assumptions used in determining the 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 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.

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 were classified in Level 3 of the fair value hierarchy.

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

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Segment Reporting .

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 .

I n 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.

Receivables and deferred revenue associated with contracts with customers were as follows:

(in millions) September 30, 2024 December 31, 2023

Receivables $ 87 $ 71

Deferred revenue 218 258

At September 30, 2024 and December 31, 2023, we did not expect differences between amounts recorded as receivables and amounts that would be subsequently received;

therefore, we did no t record an allowance for credit losses against these receivables.

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 $ 310 million and $ 258 million at June 30, 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 June 30, 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 $ 72 million and $ 71 million at June 30, 2024 and December 31, 2023, respectively.

At June 30, 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.

At September 30, 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.

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

It is USSTC’s policy to accept authorized sales returns from its customers for products that have passed the freshness date printed on product packaging due to the limited shelf life of USSTC’s MST and snus products.

It is USSTC’s policy to accept authorized sales returns from its customers for products that have passed the

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freshness date printed on product packaging due to the limited shelf life of USSTC’s MST and snus products.

We record estimated sales returns, which are based principally on historical volume and return rates, as a reduction to revenues.

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

All returned goods are

destroyed upon return and not included in inventory.

All returned goods are destroyed upon return and not included in inventory.

Consequently, we do not record an asset for USSTC’s right to recover goods from customers upon return.

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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 June 30, 2024 and December 31, 2023, confirmed outstanding obligations under the Program were $ 125 million and $ 119 million, respectively.

At September 30, 2024 and December 31, 2023, confirmed outstanding obligations under the Program were $ 115 million and $ 119 million, respectively.

Goodwill and Other Intangible Assets, net

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Goodwill Other Intangible Assets, net

(in millions) June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023

(in millions) September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023

Smokeable products segment $ 99 $ 99 $ 2,944 $ 2,963

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Total $ 6,945 $ 6,791 $ 13,010 $ 13,686

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Other intangible assets consisted of the following:

June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023

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

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Total other intangible assets $ 13,710 $ 700 $ 14,284 $ 598

At June 30, 2024, substantially all of our indefinite-lived intangible assets consisted of (i) MST and snus trademarks of $ 8.5 billion, which consists of Copenhagen , Skoal and other MST and snus trademarks of $ 4.0 billion, $ 3.6 billion and $ 0.9 billion, respectively, from our 2009 acquisition of UST, and (ii) cigar trademarks of $ 2.6 billion from our 2007 acquisition of

At September 30, 2024, substantially all of our indefinite-lived intangible assets consisted of (i) MST trademarks of $ 8.5 billion, which consists of Copenhagen , Skoal and other MST trademarks of $ 4.0 billion, $ 3.6 billion and $ 0.9 billion, respectively, from our 2009 acquisition of UST, and (ii) cigar trademarks of $ 2.6 billion from our 2007 acquisition of Middleton.

Definite-lived intangible assets, consisting primarily of intellectual property (which includes developed technology), certain cigarette trademarks, e-vapor trademarks and customer relationships, are amortized over a weighted-average period of approximately 19 years.

Pre-tax amortization expense for definite-lived intangible assets was $ 64 million and $ 45 million for the six months ended June 30, 2024 and 2023, respectively, and $ 37 million and $ 27 million for the three months ended June 30, 2024 and 2023, respectively.

Pre-tax amortization expense for definite-lived intangible assets was $ 102 million and $ 87 million for the nine months ended September 30, 2024 and 2023, respectively, and $ 38 million and $ 42 million for the three months ended September 30, 2024 and 2023, respectively.

We estimate our annualized amortization expense, which includes the impact of the NJOY Transaction and related measurement period adjustments, for each of the next five years to be approximately $ 150 million, assuming no additional transactions occur that require the amortization of intangible assets.

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commercialization rights to the IQOS Tobacco Heating System (“ IQOS System”) to Philip Morris International Inc.

(“PMI”) pursuant to the terms of a purchase agreement entered into with PMI in October 2022.

(“PMI”) pursuant to the terms of a purchase agreement entered into with PMI in October 2022 (“ IQOS Transaction”).

In exchange for the assignment of the U.S.

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Upon the assignment of the U.S.

commercialization rights to the IQOS System, we recorded a pre-tax gain of $ 2.7 billion for the six and three months ended June 30, 2024 in our condensed consolidated statements of earnings.

commercialization rights to the IQOS System, we recorded a pre-tax gain of $ 2.7 billion for the nine months ended September 30, 2024 in our condensed consolidated statements of earnings.

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

For the Six Months Ended For the Year Ended

June 30, 2024 December 31, 2023

For the Nine Months Ended For the Year Ended

September 30, 2024 December 31, 2023

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

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

The 2024 amount represents the measurement period adjustments made during the three months ended March 31, 2024 related to the NJOY Transaction.

The 2024 amounts represent the measurement period adjustments made during the three months ended March 31, 2024 related to the NJOY Transaction.

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

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

Apart from the factors leading us to perform a quantitative assessment for the Skoal intangible asset as discussed below, there have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required as of June 30, 2024.

There have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required as of September 30, 2024.

We will perform our annual impairment testing during the fourth quarter of 2024.

At December 31, 2023, the estimated fair value of the Skoal trademark exceeded its carrying value of $ 3.9 billion by approximately 6 % ($ 0.2 billion).

Sales volumes of MST products, including Skoal , have continued to be negatively impacted due in part to evolving adult tobacco consumer preferences, which has resulted in consumers increasingly moving across tobacco categories.

In connection with the preparation of our financial statements for the period ended June 30, 2024, we evaluated the accelerated growth of innovative tobacco products, including oral nicotine pouches, and the related increase in competitive activity among tobacco categories, which have continued to contribute to reductions in sales volumes for MST products, including Skoal .

Sales volumes of MST products, including Skoal , have been negatively impacted due in part to evolving adult tobacco consumer preferences, which has resulted in consumers increasingly moving across tobacco categories.

In connection with the preparation of our financial statements for the period ended June 30, 2024, we evaluated the accelerated growth of innovative tobacco products, including oral nicotine pouches, and the related increase in competitive activity among tobacco categories, which have contributed to reductions in sales volumes for MST products, including Skoal .

We concluded that the expected impact from the sales volume declines on the Skoal trademark represented a triggering event, and as a result of this conclusion, we performed an interim impairment assessment as of June 30, 2024.

As a result of (i) lower projected revenue and income due to lower volume assumptions, (ii) a decrease in the perpetual growth rate to 0 % ( 1 % at October 1, 2023 valuation) and (iii) an increase in the discount rate to 11.5 % ( 11.0 % at October 1, 2023 valuation), we determined the estimated fair value of the Skoal trademark as of June 30, 2024, was below its carrying value and recorded a non-cash, pre-tax impairment of $ 354 million for the six and three months ended June 30, 2024 in our condensed consolidated statements of earnings.

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determined the estimated fair value of the Skoal trademark as of June 30, 2024, was below its carrying value and recorded a non-cash, pre-tax impairment of $ 354 million during the second quarter of 2024 in our condensed consolidated statements of earnings.

Our estimate of the fair value and carrying value of the Skoal trademark at June 30, 2024 was $ 3.6 billion, after recording the impairment.

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Our annual impairment test of goodwill and indefinite-lived intangible assets as of October 1, 2023 resulted in no impairment charges.

At June 30, 2024 and December 31, 2023, there were no accumulated impairment losses related to goodwill.

At September 30, 2024 and December 31, 2023, there were no accumulated impairment losses related to goodwill.

Investments in Equity Securities

The carrying amount of our investments consisted of the following:

(in millions) June 30, 2024 December 31, 2023

(in millions) September 30, 2024 December 31, 2023

ABI $ 7,846 $ 9,676

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

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

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

(in millions) 2024 2023 2024 2023

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In March 2024, we completed the ABI Transaction, which consisted of the following:

▪ We sold 35 million ordinary shares of ABI in a global secondary offering 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, which the underwriters did not exercise prior to its expiration.

▪ We sold 35 million ordinary shares of ABI in a global secondary offering for gross proceeds of approximately $ 2.2 billion.

▪ We sold $ 200 million of our ABI ordinary shares (approximately 3.3 million ordinary shares) to ABI in a private transaction.

At June 30, 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.

At September 30, 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

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$ 62 million.

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

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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 Six Months Ended June 30, 2024

(in millions) For the Nine Months Ended September 30, 2024

Gain on partial sale of our investment $ 165

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▪ 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 six months ended June 30, 2024.

For further discussion, see Note 13.

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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 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 our investment in ABI is based on (i) unadjusted quoted prices in active markets for ABI’s ordinary shares and is 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.

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

The fair value of our investment in ABI at June 30, 2024 and December 31, 2023 was $ 9.2 billion and $ 12.7 billion, respectively, which exceeded its carrying value of $ 8.0 billion and $ 9.7 billion, respectively, by approximately 15 % and 32 %, respectively.

At June 30, 2024, the carrying value of our investment in ABI exceeded its share of ABI’s net assets attributable to equity holders of ABI by approximately $ 1.9 billion.

Substantially all of this difference is comprised of goodwill and other indefinite-lived intangible assets (consisting primarily of trademarks).

This difference represents a $ 0.6 billion reduction from December 31, 2023, primarily due to the ABI Transaction.

The fair value of our investment in ABI at September 30, 2024 and December 31, 2023 was $ 10.5 billion and $ 12.7 billion, respectively, which exceeded its carrying value of $ 7.8 billion and $ 9.7 billion, respectively, by approximately 34 % and 32 %, respectively.

Investment in Cronos

At June 30, 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.

At September 30, 2024, we had an approximate 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 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 June 30, 2024, the fair value of our investment in Cronos exceeded its carrying value by approximately $ 50 million or approximately 16 %.

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

At September 30, 2024, the fair value of our investment in Cronos exceeded its carrying value by approximately $ 39 million or approximately 13 %.

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

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In March 2023, we entered into a stock transfer agreement with JUUL 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 six months ended June 30, 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.

As a result of the stock transfer agreement, for the nine months ended September 30, 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.

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Financial Instruments

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

At June 30, 2024 and December 31, 2023, we had no outstanding foreign currency contracts.

At September 30, 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) June 30, 2024 December 31, 2023

(in millions) September 30, 2024 December 31, 2023

Carrying value $ 25,155 $ 26,233

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

We recognized pre-tax (gains) losses of our net investment hedges of $( 98 ) million and $ 69 million for the six months ended June 30, 2024 and 2023, respectively, and $( 23 ) million and $ 21 million for the three months ended June 30, 2024 and 2023, respectively, in accumulated other comprehensive losses.

In addition, as a result of the ABI Transaction, for the six months ended June 30, 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.

We recognized pre-tax (gains) losses of our net investment hedges of $ 29 million and $( 32 ) million for the nine months ended September 30, 2024 and 2023, respectively, and $ 127 million and $( 101 ) million for the three months ended September 30, 2024 and 2023, respectively, in accumulated other comprehensive losses.

In addition, as a result of the ABI Transaction, for the nine months ended September 30, 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 6.

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Other Comprehensive Earnings/Losses.

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Benefit Plans

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Pension Postretirement Pension Postretirement

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

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

(in millions) 2024 2023 2024 2023 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 regulations.

We made employer contributions of $ 9 million to our pension plans and did no t make any contributions to our postretirement plans during the six months ended June 30, 2024.

Currently, we anticipate making additional employer contributions of up to approximately $ 20 million to our pension plans and contributions of up to approximately $ 30 million to our postretirement plans in 2024.

We made employer contributions of $ 13 million to our pension plans and did no t make any contributions to our postretirement plans during the nine months ended September 30, 2024.

Currently, we anticipate making additional employer contributions of up to approximately $ 5 million to our pension plans and no contributions 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.

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

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

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

(in millions) 2024 2023 2024 2023

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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.

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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 Six Months Ended June 30, 2024

For the Nine Months Ended September 30, 2024

(in millions) Benefit Plans ABI Currency

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Other comprehensive earnings (losses), net of deferred income taxes ( 4 ) 64 (1)

Balances, June 30, 2024 $ ( 1,495 ) $ ( 801 ) $ 13 $ ( 2,283 )

For the Three Months Ended June 30, 2024

Balances, September 30, 2024 $ ( 1,497 ) $ ( 1,131 ) $ 11 $ ( 2,617 )

For the Three Months Ended September 30, 2024

(in millions) Benefit Plans ABI Currency

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Comprehensive

Balances, March 31, 2024

Balances, June 30, 2024

$ ( 1,495 ) $ ( 801 ) $ 13 $ ( 2,283 )

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Other comprehensive earnings (losses), net of deferred income taxes ( 2 ) ( 330 ) (1)

Balances, June 30, 2024 $ ( 1,495 ) $ ( 801 ) $ 13 $ ( 2,283 )

For the Six Months Ended June 30, 2023

( 2 ) ( 334 )

Balances, September 30, 2024 $ ( 1,497 ) $ ( 1,131 ) $ 11 $ ( 2,617 )

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For the Nine Months Ended September 30, 2023

(in millions) Benefit Plans ABI Currency

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Other comprehensive earnings (losses), net of deferred income taxes ( 16 ) 302 (1)

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

For the Three Months Ended June 30, 2023

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

For the Three Months Ended September 30, 2023

(in millions) Benefit Plans ABI Currency

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Comprehensive

Balances, March 31, 2023

Balances, June 30, 2023

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

Other comprehensive earnings (losses) before reclassifications

— 90 ( 3 ) 87

Deferred income taxes — ( 69 ) — ( 69 )

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

— 72 ( 3 ) 69

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

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Other comprehensive earnings (losses), net of deferred income taxes ( 5 ) 236 (1)

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

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

(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.

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Financial Instruments.

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

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

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

(in millions) 2024 2023 2024 2023

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( 5 ) ( 21 ) ( 2 ) ( 7 )

258 ( 5 ) 1 ( 14 )

Pre-tax amounts reclassified from accumulated other comprehensive losses to net earnings $ 253 $ ( 26 ) $ ( 1 ) $ ( 21 )

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

For the six months ended June 30, 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 the nine months ended September 30, 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 6.

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Segment Reporting

At June 30, 2024, our reportable segments were (i) smokeable products, consisting of combustible cigarettes and machine-made large cigars;

At September 30, 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.

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Interest and other debt expense, net, along with net periodic benefit income, excluding service cost, and provision for income taxes are centrally managed at the corporate level and, accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by our CODM.

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Segment data were as follows:

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

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

(in millions) 2024 2023 2024 2023

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

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

We recorded net pre-tax income for NPM adjustment items as follows:

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

(in millions) 2024 2023 2024 2023

Smokeable products segment $ ( 29 ) $ ( 15 ) $ ( 23 ) $ ( 15 )

Interest and other debt expense, net 2 — 2 —

Total $ ( 27 ) $ ( 15 ) $ ( 21 ) $ ( 15 )

We recorded the amounts shown in the table above in our smokeable products segment 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 further discussion, see Health Care Cost Recovery Litigation in Note 14.

Contingencies .

▪ Asset Impairment:

We recorded a non-cash, pre-tax impairment of the Skoal trademark of $ 354 million for the six and three months ended June 30, 2024 in our oral tobacco products segment.

We recorded a non-cash, pre-tax impairment of the Skoal trademark of $ 354 million for the nine months ended September 30, 2024 in our oral tobacco products segment.

For further discussion, see Note 5.

Goodwill and Other Intangible Assets, net.

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

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

(in millions) 2024 2023 2024 2023

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Total $ 90 $ 424 $ 22 $ 23

We recorded the amounts shown in the table above for our smokeable products segment and general corporate expenses in marketing, administration and research costs in our condensed consolidated statements of earnings.

We recorded the amounts shown in the table above in our smokeable products segment and general corporate expenses in marketing, administration and research costs in our condensed consolidated statements of earnings.

For further discussion, see Note 14.

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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 six and three months ended June 30, 2024, using this approach, we recorded the majority of our pre-tax R&D expense of $ 104 million and $ 53 million, respectively, 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 six and three months ended June 30, 2023, the majority of our pre-tax R&D expense of $ 98 million and $ 55 million, respectively, was recorded in our smokeable products segment.

For the nine and three months ended September 30, 2024, using this approach, we recorded the majority of our pre-tax R&D expense of $ 165 million and $ 61 million, respectively, 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 nine and three months ended September 30, 2023, the majority of our pre-tax R&D expense of $ 149 million and $ 51 million, respectively, was recorded in our smokeable products segment.

Short-term Borrowings and Borrowing Arrangements

At June 30, 2024 and December 31, 2023, we had no short-term borrowings.

At September 30, 2024 and December 31, 2023, 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 payment of approximately $ 1.8 billion (including interest) from PMI related to the sale of the IQOS System commercialization rights, we repaid the term loan facility in full.

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 June 30, 2024, we had availability under our Credit Agreement for borrowings of up to an aggregate principal amount of $ 3.0 billion.

At September 30, 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.

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and Standard & Poor’s Financial Services LLC.

The applicable percentage for borrowings under our Credit Agreement at June 30, 2024 was 1.0 % based on our long-term senior unsecured debt ratings on that date.

The applicable percentage for borrowings under our Credit Agreement at September 30, 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 June 30, 2024, we were in compliance with our covenants in our Credit Agreement.

At September 30, 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.

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Long-term Debt

The aggregate carrying value of our total long-term debt at June 30, 2024 and December 31, 2023 was $ 25.0 billion and $ 26.2 billion, respectively.

The aggregate carrying value of our total long-term debt at September 30, 2024 and December 31, 2023 was $ 25.2 billion and $ 26.2 billion, respectively.

During the first quarter of 2024, we repaid in full at maturity our 4.000 % and 3.800 % senior unsecured notes in the aggregate principal amounts of $ 776 million and $ 345 million, respectively.

At June 30, 2024 and December 31, 2023, accrued interest on long-term debt of $ 351 million and $ 410 million, respectively, was included in other accrued liabilities on our condensed consolidated balance sheets.

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At September 30, 2024 and December 31, 2023, accrued interest on long-term debt of $ 209 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 7.

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

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

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

(in millions) 2024 2023 2024 2023

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Income tax rate 24.4 % 25.9 % 24.2 % 25.5 %

Our income tax rate for the six months ended June 30, 2024 differs from the U.S.

federal statutory rate of 21%, due primarily to state tax expense and the change in the fair value of the contingent payments related to the NJOY Transaction, which is treated as an outside basis difference that we do not expect to reverse in the foreseeable future, 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.

Our income tax rate for the nine months ended September 30, 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 June 30, 2024 differs from the U.S.

do not expect to reverse in the foreseeable future.

For further discussion regarding the NJOY Transaction, see Note 2.

Acquisition of NJOY .

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

Our income tax rate for the three months ended September 30, 2024 differs from the U.S.

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

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

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

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

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

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

The following chart provides a reconciliation of the beginning and ending valuation allowances for the six months ended June 30, 2024:

The following chart provides a reconciliation of the beginning and ending valuation allowances for the nine months ended September 30, 2024:

(in millions)

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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 would be recorded.

The changes in the valuation allowances for the six months ended June 30, 2024 were due primarily to the ABI Transaction.

The cumulative valuation allowance at June 30, 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.

The changes in the valuation allowances for the nine months ended September 30, 2024 were due primarily to the ABI Transaction.

The cumulative valuation allowance at September 30, 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.

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Investments in Equity Securities .

Agreement with the IRS

In October 2024, we entered into an agreement with the IRS regarding the tax treatment of the $ 6.4 billion ordinary loss we recognized in 2023 for cash tax purposes with respect to a portion of our tax basis associated with our former investment in JUUL.

We fully reserved for the tax benefit associated with this ordinary loss by recording an unrecognized tax benefit in

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As a result of the agreement, we expect to record a tax benefit of approximately $ 0.9 billion in our consolidated statement of earnings in the fourth quarter of 2024 for the reversal of the unrecognized tax benefit, which results in the partial release of a valuation allowance against our JUUL-related losses.

Consistent with the terms of the agreement, we claimed a $ 4.0 billion ordinary loss and a $ 2.4 billion capital loss on our 2023 tax return.

After giving effect to the agreement and $ 1.7 billion of capital losses previously utilized against capital gains related to the IQOS Transaction, we have $ 5.6 billion (which includes $ 0.9 billion of capital loss carryforwards available to offset capital gains through 2028) of the $ 12.8 billion tax loss related to our former investment in JUUL remaining to offset future potential capital gains.

For financial statement purposes, none of the tax benefit for the $ 5.6 billion has been recognized .

Contingencies

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However, we may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.

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Judgments Paid and Provisions for Tobacco and Health (Including Engle Progeny Litigation) and Certain Other Litigation Items:

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

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

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

(in millions) 2024 2023 2024 2023

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JUUL-related settlements (3)

30 240 24 240

Related interest costs 1 11 1 —

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

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

(2) See 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.

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Pre-tax charges for related interest costs were included in interest and other debt expense, net in 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 $ 1.1 billion and interest totaling approximately $ 241 million as of June 30, 2024.

These amounts include payments for Engle progeny judgments (and related costs and fees) totaling approximately $ 449 million and related interest totaling approximately $ 61 million.

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

As of June 30, 2024, PM USA has posted appeal bonds totaling approximately $ 37 million, which have been collateralized with restricted cash and are included in assets on our condensed consolidated balance sheets.

As of September 30, 2024, PM USA has posted appeal bonds totaling approximately $ 31 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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Plaintiffs’ theories of recovery and the defenses raised in tobacco-related litigation are discussed below.

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

July 29, 2024 July 27, 2023 July 25, 2022

October 28, 2024 October 23, 2023 October 24, 2022

Individual Smoking and Health Cases (1)

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Other Tobacco-Related Cases (4)

(1) Includes as of July 29, 2024, 23 cases filed in Illinois, 15 cases filed in New Mexico, 73 cases filed in Massachusetts, 11 cases filed in Oregon, three cases filed in Hawaii and 29 non- Engle cases filed in Florida.

(1) Includes as of October 28, 2024, 19 cases filed in Illinois, 17 cases filed in New Mexico, 74 cases filed in Massachusetts, 11 cases filed in Oregon, two cases filed in Hawaii and 26 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 Progeny Cases ).

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(3) In May 2023, we reached agreement on terms to resolve the majority of the Multidistrict Litigation lawsuits, and, in March 2024, the court granted final approval of the settlement.

Pending final dismissal of these cases, as of July 29, 2024, the remaining cases include 21 individual cases that opted out of the settlement, 21 class action lawsuits ( three class action lawsuits pending in Canada and 18 class actions participating in the settlement but pending dismissal) and one individual state court case relating to the Multidistrict Litigation.

Also includes 38 cases brought by Native American tribes that are subject to a separate settlement.

Pending final dismissal of these cases, as of October 28, 2024, the remaining cases include 20 individual cases that opted out of the settlement, 16 class action lawsuits ( three class action lawsuits pending in Canada and 13 class actions participating in the settlement but pending dismissal) and one individual state court case relating to the Multidistrict Litigation.

Also includes 38 cases brought by Native American tribes that are subject to a separate settlement and are pending dismissal.

For further discussion of the Multidistrict Litigation settlement and the settlement of the cases brought by Native American tribes, see E-vapor Product Litigation below.

(4) Includes as of July 29, 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.

(4) Includes as of October 28, 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 July 29, 2024, (i) Altria is named as a defendant in three e-vapor class action lawsuits in Canada;

As of October 28, 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 July 29, 2024, one Engle progeny case, one individual smoking and health case and no e-vapor cases are set for trial through September 30, 2024.

As of October 28, 2024, one Engle progeny case, one individual smoking and health case and no e-vapor cases are set for trial through December 31, 2024.

Trial dates are subject to change.

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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 July 29, 2024.

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 28, 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 or concluded within the last 12 months 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 in which verdicts were returned in favor of plaintiff and against PM USA and remain outstanding or cases concluded within the last 12 months where PM USA paid a final judgment.

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.

Plaintiff has filed a notice of appeal of the judgment, and PM USA intends to appeal the judgment.

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.

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.

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

Following the verdict, the parties submitted 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.

Plaintiff has appealed the judgment, and the appeal remains pending.

PM USA filed post-trial motions, which were denied, and PM USA

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has noticed an appeal from the final judgment and the trial court’s denial of the post-trial motions.

The parties filed a motion to stay execution pending appeal, and the court has stayed execution of the final judgment pending conclusion of appellate activity.

Ricapor-Hall :

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PM USA’s appeal remains pending, and plaintiff has noticed a cross-appeal.

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

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

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

In lieu of appealing the trial court’s verdict, 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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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.

In May 2020, the court ruled on plaintiffs’ remaining claim and trebled the compensatory damages award to approximately $ 30 million.

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

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

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

Federal Government’s Lawsuit :

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(iii) that defendants’ cigarettes were defective and unreasonably dangerous;

(iv) that defendants concealed or omitted material information not otherwise known or available knowing that the material was

false or misleading or failed to disclose a material fact concerning the health effects or addictive nature of smoking;

(iv) that defendants concealed or omitted material information not otherwise known or available knowing that the material was false or misleading or failed to disclose a material fact concerning the health effects or addictive nature of smoking;

(v) that defendants agreed to conceal or omit information regarding the health effects of cigarettes or their addictive nature with the intention that smokers would rely on the information to their detriment;

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

As of July 29, 2024, approximately 252 state court cases were pending against PM USA or Altria asserting individual claims by or on behalf of approximately 287 state court plaintiffs.

As of October 28, 2024, approximately 223 state court cases were pending against PM USA or Altria asserting individual claims by or on behalf of approximately 256 state court plaintiffs.

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

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Engle Progeny Trial Results:

As of July 29, 2024, 146 federal and state Engle progeny cases involving PM USA have resulted in verdicts.

As of October 28, 2024, 146 federal and state Engle progeny cases involving PM USA have resulted in verdicts.

Eighty-eight 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 July 29, 2024.

In addition, there have been a number of mistrials, only some of which have resulted in new trials as of October 28, 2024.

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

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

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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 July 29, 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.

The first chart lists cases that are pending as of October 28, 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 14.

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Garcia June 2024 PM USA Miami-Dade $ 2 million

Post-trial motions pending.

Appeals to the Third District Court of Appeal pending.

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

Appeals to the Third District Court of Appeal pending.

Schertzer April 2022 PM USA and R.J.

Reynolds Miami-Dade $ 3 million $ 0 Appeal to the Florida Supreme Court pending.

Lipp September 2021 PM USA Miami-Dade $ 15 million $ 28 million Third District Court of Appeal reversed and remanded for a new trial.

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Appeal to the Fourth District Court of Appeal pending.

Chadwell September 2018 PM USA Miami-Dade $ 2 million

Third District Court of Appeal reversed the judgment in part and remanded for entry of a verdict reducing compensatory damages based on jury’s comparative fault finding.

Kaplan ( McLaughlin )

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

(2) Does not include a separate judgment against PM USA for $ 3 million in fees and costs.

PM USA has appealed the fees and costs judgment to the Third District Court of Appeal, which has stayed the appeal pending Florida Supreme Court disposition of the merits appeal.

Engle Cases Concluded Within Past 12 Months

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

Chadwell September 2018 PM USA Miami-Dade $ 2 million

Schertzer April 2022 PM USA and R.J.

Reynolds Miami-Dade $ 4 million

Hoffman January 2023 PM USA Miami-Dade $ 3 million

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

As of July 29, 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.

As of October 28, 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.

In the actions filed in Alberta, Manitoba and Nova Scotia, plaintiffs seek certification of classes of all individuals who smoked defendants’ cigarettes.

In March 2019, all of these class actions were stayed as a result of three Canadian tobacco manufacturers ( no ne of which is related to us) seeking protection under Canada’s Companies’ Creditors Arrangement Act (which is similar to Chapter 11 bankruptcy in the United States).

In March 2019, all of these class actions were stayed as a result of three Canadian tobacco manufacturers ( no ne of which is related to us) seeking protection under Canada’s

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Companies’ Creditors Arrangement Act (which is similar to Chapter 11 bankruptcy in the United States).

The companies entered into these proceedings following a Canadian appellate court upholding two smoking and health class action verdicts against those companies totaling approximately CAD $ 13 billion.

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

As of July 29, 2024, PM USA is named as a defendant in approximately 664 cases brought by flight attendants against United States cigarette manufacturers seeking compensatory damages for personal injuries allegedly caused by exposure to environmental tobacco smoke (“ETS”).

As of October 28, 2024, PM USA is named as a defendant in approximately 146 cases brought by flight attendants against United States cigarette manufacturers seeking compensatory damages for personal injuries allegedly caused by exposure to environmental tobacco smoke (“ETS”).

The flight attendants allege that they are members of an ETS smoking and health class action in Florida that was settled in 1997 ( Broin ).

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In July 2024, we reached agreement on terms to resolve approximately 627 individual Broin lawsuits.

Accordingly, in the second quarter of 2024, we recorded a pre-tax provision of $ 4 million related to the settlement of these cases.

Accordingly, in the second quarter of 2024, we recorded a pre-tax provision of $ 4 million related to the settlement of these cases, which we paid in the third quarter of 2024.

Health Care Cost Recovery Litigation

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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, on a pro rata basis based on market share.

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

These quarterly payments will end in the fourth quarter of 2024.

For the three months ended June 30, 2024 and 2023, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $ 900 million and $ 1.0 billion, respectively.

For the six months ended June 30, 2024 and 2023, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $ 1.8 billion and $ 1.9 billion, respectively.

For the three months ended September 30, 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.

For the nine months ended September 30, 2024 and 2023, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $ 2.7 billion and $ 2.8 billion, respectively.

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

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 “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

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

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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.

▪ Massachusetts Settlement .

In 2024, PM USA entered into a separate NPM Adjustment settlement in which PM USA settled the NPM Adjustment disputes with Massachusetts through 2011.

As a result of this settlement, PM USA will receive $ 28 million.

Accordingly, PM USA recorded $ 28 million as a reduction in costs of sales in the third quarter of 2024.

Continuing NPM Adjustment Disputes with States That Have Not Settled .

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Iowa subsequently joined the multistate settlement in August 2023.

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

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.

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▪ 2005-2007 NPM Adjustments.

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 July 29, 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 .

The PMs and the six 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 through 2007, for five of the six states, and one year , 2005, for one state.

As of October 28, 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.

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Reynolds and ITG concerning the tax rates used in the annual calculation of the net operating profit adjustment payments starting in 2018.

The Mississippi state court held a hearing in October 2021 and issued a decision in June 2022 granting the State’s motion.

PM USA appealed the court’s decision in June 2024, and the appeal remains pending.

The Mississippi state court held a hearing in October 2021 and

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issued a decision in June 2022 granting the State’s motion.

PM USA appealed the court’s decision in June 2024.

In September 2024, PM USA and Mississippi settled their dispute over the profit adjustment payments.

Pursuant to the settlement, PM USA paid $ 7 million to Mississippi for 2018 through 2023.

Accordingly, PM USA recorded $ 5 million of expense to cost of sales and $ 2 million of interest expense in the third quarter of 2024.

In May 2023, PM USA and R.J.

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

As of July 29, 2024, the court had not made a determination on damages.

As of October 28, 2024, the court had not made a determination on damages.

PM USA intends to appeal.

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The motion remains pending.

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.

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.

Federal Government’s Lawsuit:

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

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

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

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.

government filed a motion with the district court asking for clarification as to whether the court-ordered injunction that applies to cigarettes discussed above also applies to HeatSticks, a heated tobacco product used with the IQOS System.

The district court ruled that HeatSticks are cigarettes as defined in the court ordered injunction, and PM USA appealed the district court’s ruling.

In connection with our assignment of the exclusive U.S.

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

government 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 the assignment agreement.

In May 2024, we entered into an agreement with the U.S.

government resolving its concerns regarding our assignment of the exclusive U.S.

commercialization rights to the IQOS System to PMI, in which PM USA agreed to obtain district court approval for any future similar transaction and to post additional point-of-sale signage containing the corrective statements referenced above.

commercialization rights to the IQOS System to PMI and whether the court-ordered injunction that applies to cigarettes discussed above also applies to HeatSticks, a heated tobacco product used with the IQOS System.

Under the agreement, PM USA agreed to obtain district court approval for any future similar transaction and to post additional point-of-sale signage containing the corrective statements referenced above.

The cost of implementing the additional point-of-sale signage did not require an increase to the previously recorded provisions for point-of-sale signage discussed above.

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E-vapor Product Litigation

We have been named as defendants in class action lawsuits, individual lawsuits and “third party” lawsuits relating to JUUL e-vapor products, which include school districts, state and local governments and tribal and healthcare organization lawsuits.

We have been named as defendants in federal class action lawsuits, individual lawsuits and “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 in the United States collectively as the “Multidistrict Litigation.” 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.

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

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

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.

We also have been named as defendants in a group of cases pending in a consolidated California state court proceeding.

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

In March 2024, the court granted final approval of the class action settlement, and we paid the settlement amount in the second quarter of 2024.

The settlement applies to all of the Multidistrict Litigation except 38 “third party” cases brought by Native American tribes, which we separately agreed to settle in July 2024.

We recorded a pre-tax provision for $ 20 million in the second quarter of 2024 related to the settlement of these cases.

Neither settlement applies to three class action lawsuits pending in Canada, the cases brought by state attorneys general, discussed below, or 17 putative class actions antitrust lawsuits.

The settlement applies to all of the Multidistrict Litigation except 38 “third party” cases brought by Native American tribes, which we separately agreed to settle in July 2024 and are pending dismissal.

We recorded a pre-tax provision for $ 20 million in the second quarter of 2024 related to the settlement of these cases and paid the settlement amount in October 2024.

Neither settlement applies to three class action lawsuits pending in Canada, the cases brought by state attorneys general, discussed below, or 17 putative class action antitrust lawsuits.

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

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

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No damages are recoverable in the proceedings before the ITC.

A hearing before the ALJ was held in May 2024, and the ALJ must issue an initial determination and recommendation by August 9, 2024.

Once issued, the ALJ’s decision will be reviewed by the ITC, which must issue its final determination by

December 9, 2024.

If the ITC issues an exclusion order, the ITC must send that order to the President of the United States for review.

The President would then have 60 days to review the ITC’s determination.

If the President does not affirmatively reject the ITC’s determination, the determination automatically becomes final and takes effect after the 60 days have elapsed or earlier if the President notifies the ITC of approval before the 60 days elapse.

A hearing before the Administrative Law Judge (“ALJ”) was held in May 2024, and, in August 2024, the ALJ issued an initial determination supporting the plaintiffs’ allegations with respect to four patents and recommending an exclusion order.

In September 2024, NJOY petitioned the ITC to review the ALJ’s initial determination.

In October 2024, the ITC granted review of the ALJ’s initial determination with respect to aspects of two of the four patents.

The ITC must issue its final determination, including with respect to the form of remedy, if any, to be ordered, by December 23, 2024, subject to its right to grant itself an extension.

If the ITC issues an exclusion order, the ITC must send that order to the Office of the United States Trade Representative for review.

The Trade Representative would then have 60 days to review the ITC’s determination.

If the Trade Representative does not affirmatively reject the ITC’s determination, the determination automatically becomes final and takes effect after the 60 days have elapsed or earlier if the Trade Representative notifies the ITC of approval before the 60 days elapse.

A final exclusion order can be appealed to the United States Court of Appeals for the Federal Circuit, but a final exclusion order prohibiting the importation of NJOY ACE would be unlikely to be stayed during the pendency of such an appeal.

In November 2023, Altria and our affiliates filed petitions with the U.S.

In November and December 2023 and February 2024, Altria and our affiliates filed petitions with the U.S.

Patent Office Patent Trial and Appeal Board (“PTAB”) challenging the validity of the patents underlying JUUL and VMR’s patent infringement claims.

In June 2024, the PTAB denied Altria’s request to institute review as to two of the patents and granted Altria’s request as to one of the patents.

The request with respect to one patent remains pending.

The PTAB will conduct proceedings and issue its validity decisions within 12 months from the date it instituted review, after which appeals may be filed with the United States Court of Appeals for the Federal Circuit.

In May, June and August 2024, the PTAB denied Altria’s request to institute review as to four patents (including three of the patents that form the basis of the ALJ’s initial determination) and, in June 2024, granted Altria’s request to institute review as to one of the patents that forms the basis of the ALJ’s initial determination, which, as noted above, is being reviewed by the ITC.

The PTAB will conduct proceedings and issue its validity decision as to the one JUUL patent by June 2025, after which appeals may be filed with the United States Court of Appeals for the Federal Circuit.

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.

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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 was held in June 2024, and, once issued, the ALJ’s recommendation will be reviewed by the ITC.

NJOY’s action against JUUL in the ITC will proceed in the same manner as discussed above with respect to VMR and JUUL’s action against NJOY.

A hearing before the ALJ was held in June 2024, and the ALJ’s initial determination and recommendation is scheduled to be issued by December 6, 2024, subject to further extension by the ALJ.

Once the ALJ issues its initial determination and recommendation, the ITC’s review of the ALJ’s initial determination and recommendation will proceed in the same manner as discussed above with respect to VMR and JUUL’s action against NJOY.

The ITC must issue its final determination, including with respect to the form of remedy, if any, to be ordered, by April 7, 2025, subject to its right to grant itself an extension.

In November 2023, JUUL filed petitions with the PTAB challenging the validity of the patents underlying NJOY’s patent infringement claims.

In May 2024, the PTAB agreed to review JUUL’s challenge to both of the NJOY patents asserted against JUUL.

The PTAB will conduct proceedings and issue its validity decisions by May 2025, after which appeals may be filed with the United States Court of Appeals for the Federal Circuit.

We, JUUL and VMR have engaged with a mediator to attempt to negotiate a resolution of the proceedings pending before the ITC, United States District Courts and the PTAB.

Based on the preliminary status of the mediation and the status of the proceedings before the ITC, United States District Courts and the PTAB, we have determined that a loss is not probable or reasonably estimable as of the date of this filing.

Based on the status of the negotiations and the proceedings before the ITC, United States District Courts and the PTAB, we have determined that a loss is not probable or reasonably estimable as of the date of this filing.

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IQOS Litigation

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Reynolds obtained a sub-license to the asserted patents from JUUL in December 2023.

We will oppose the motion.

We have opposed the motion.

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.

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

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

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

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

Also as of July 29, 2024, 17 putative class action lawsuits have been filed against Altria and JUUL in the U.S.

As of October 28, 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.

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).

The consolidated lawsuits, as amended, cite the FTC administrative complaint and allege that Altria and JUUL violated Sections 1, 2 and/or 3 of the Sherman Act and Section 7 of the Clayton Act and various state antitrust, consumer protection and unjust enrichment laws by restraining trade and/or substantially lessening competition in the U.S.

The consolidated lawsuits, as amended, allege that Altria and JUUL violated Sections 1, 2 and/or 3 of the Sherman Antitrust Act of 1890 and Section 7 of the Clayton Antitrust Act and various state antitrust, consumer protection and unjust enrichment laws by restraining trade and/or substantially lessening competition in the U.S.

closed-system electronic cigarette market.

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

Shareholder Class Action and Shareholder Derivative Lawsuits

Shareholder Class Action :

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

Pursuant to the settlement, which was granted final approval by the trial court in March 2022, among other things, (i) all claims asserted against Altria and the other named defendants were resolved without any liability or wrongdoing attributed to them personally or to Altria and (ii) Altria agreed to pay the class an aggregate amount of $ 90 million, which amount included attorneys’ fees.

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

Federal and State Shareholder Derivative Lawsuits

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Under the terms of the settlement, which became effective in May 2023, among other things, we agreed to provide $ 100 million in funding over a five-year period to underage tobacco prevention and cessation programs, which may include positive youth development programs, led by independent third-party organizations.

We expect to begin funding in 2024.

We began providing funding in the third quarter of 2024.

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

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

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Certain Other Tobacco-Related Litigation

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Defenses raised in these cases include lack of misrepresentation, lack of causation, injury and damages, the statute of limitations, non-liability under state statutory provisions exempting conduct that complies with federal regulatory directives, and the First Amendment.

Twenty-one state courts in 23 “Lights” cases have refused to certify class actions,

dismissed class action allegations, reversed prior class certification decisions or have entered judgment in favor of PM USA.

As of July 29, 2024, two “Lights/Ultra Lights” class actions are pending in U.S.

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 28, 2024, two “Lights/Ultra Lights” class actions are pending in U.S.

state courts.

Neither case is active.

As of July 29, 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.

As of October 28, 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 July 29, 2024, there is no such case pending against UST and/or its tobacco subsidiaries.

As of October 28, 2024, there is no such case pending against UST and/or its tobacco subsidiaries.

Environmental Regulation

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

At June 30, 2024, we (i) had $ 45 million of unused letters of credit obtained in the ordinary course of business and (ii) were contingently liable for guarantees related to our own performance, including $ 19 million for surety bonds recorded on our condensed consolidated balance sheet.

At September 30, 2024, we (i) had $ 45 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.

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

We do not have a related liability recorded on our condensed consolidated balance sheet at June 30, 2024 as the fair value of this indemnification is insignificant.

We do not have a related liability recorded on our condensed consolidated balance sheet at September 30, 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.

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Supplier Financing .

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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.

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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.

The guidance will result in expanded footnote disclosures beginning in our annual consolidated financial statements for the year ending December 31, 2024.

ASU 2023-09 Income Taxes (Topic 740):

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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.

We are in the process of evaluating the impact of this guidance on our footnote disclosures.

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

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

What changed 10-Q

Item 1. Financial Statements