What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-07-31 · 336 added, 302 removed, 885 unchanged (42% of the section changed)

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We are Moving Beyond Smoking ™, leading the way in moving adult smokers away from cigarettes by taking action to transition millions to potentially less harmful choices - believing it is a substantial opportunity for adult tobacco consumers, our businesses and society.

As we execute on our Vision, we established our 2028 Enterprise Goals (“2028 Goals”) to provide our investors with specific metrics to measure our progress.

Our 2028 Goals are:

▪ Deliver a mid-single digits adjusted diluted EPS compounded annual growth rate in 2028 from our base in 2022;

▪ A progressive dividend goal targeting mid-single digits dividend per share growth annually through 2028;

▪ Target a debt-to-Consolidated EBITDA ratio of approximately 2.0x;

▪ Maintain our leadership position in the U.S.

tobacco space;

▪ Maintain a total adjusted OCI margin of at least 60% in each year through 2028 while investing behind innovative smoke-free products.

Smoke-Free Portfolio

smoke-free volumes by at least 35% from our 2022 base of 800 million units by 2028;

▪ Approximately double our U.S.

smoke-free net revenues to $5 billion by 2028 from our 2022 base, with $2 billion sourced from innovative smoke-free products.

Long-Term Growth

▪ Compete internationally in the top innovative oral tobacco markets and develop a pathway to participate in heated tobacco and e-vapor markets;

▪ Enter non-nicotine categories with broad commercial distribution of at least five products by 2028.

See Operating Results by Business Segment and Liquidity and Capital Resources for additional information on total adjusted OCI margin and debt-to-Consolidated EBITDA, respectively.

Our wholly owned subsidiaries include leading manufacturers of both combustible and smoke-free products.

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(“Cronos”), a leading Canadian cannabinoid company.

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

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

We used the proceeds from the sale to fund accelerated share repurchase (“ASR”) transactions for our common stock.

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Background and Basis of Presentation to our condensed consolidated financial statements in Item 1 (“Note 1”), respectively.

Vision and 2028 Goals

As we execute on our Vision, we established our 2028 Enterprise Goals (“2028 Goals”) to provide our investors with specific metrics to measure our progress.

Our 2028 Goals are:

▪ Deliver a mid-single digits adjusted diluted EPS compounded annual growth rate in 2028 from our base in 2022;

▪ A progressive dividend goal targeting mid-single digits dividend per share growth annually through 2028;

▪ Target a debt-to-Consolidated EBITDA ratio of approximately 2.0x;

▪ Maintain our leadership position in the U.S.

tobacco space;

▪ Maintain a total adjusted OCI margin of at least 60% in each year through 2028 while investing behind innovative smoke-free products.

Smoke-Free Portfolio

smoke-free volumes by at least 35% from our 2022 base of 800 million units by 2028;

▪ Approximately double our U.S.

smoke-free net revenues to $5 billion by 2028 from our 2022 base, with $2 billion sourced from innovative smoke-free products.

Long-Term Growth

▪ Compete internationally in the top innovative oral tobacco markets and develop a pathway to participate in heated tobacco and e-vapor markets;

▪ Enter non-nicotine categories with broad commercial distribution of at least five products by 2028.

See Operating Results by Business Segment and Liquidity and Capital Resources for additional information on total adjusted OCI margin and debt-to-Consolidated EBITDA, respectively.

Optimize & Accelerate Initiative

On October 30, 2024, our Board of Directors (“Board of Directors” or “Board”) approved a multi-phase Optimize & Accelerate initiative (“Initiative”) designed to modernize our ways of working as we accelerate our progress toward our Vision and 2028 Goals.

Through the Initiative, we plan to increase our organization’s speed, efficiency and effectiveness by centralizing work, streamlining and standardizing processes, further using generative artificial intelligence and automation, and outsourcing certain transactional tasks.

We expect the design and detailed plans for all phases of the Initiative to be substantially complete in 12 to 18 months.

As part of the Initiative, we intend to establish an Accelerated Business Solutions organization within Altria Client Services LLC.

This organization will be responsible for driving efficiency and process improvement across our companies in partnership with external service providers.

We expect the initial phases of the Initiative will deliver at least $600 million in cumulative cost savings over the next five years, which we plan to reinvest in our businesses in support of our Vision and 2028 Goals.

The cumulative cost savings exclude our estimated total pre-tax charges for these initial phases of approximately $100 million to $125 million (excluding any non-cash impact that may result from pension settlement and curtailment accounting), which we intend to treat as special items and exclude from our adjusted diluted EPS.

Substantially all of these charges will result in cash expenditures and will consist of employee separations, new technology, business advisory services and other costs.

Although we are still evaluating certain aspects of the initial phases of the Initiative, for which the associated costs are not yet deemed probable and reasonably estimable, we expect to record the majority of the charges related to the initial phases of the Initiative by the end of the first half of 2025, with the initial charges being recorded beginning in the fourth quarter of 2024.

As we further develop and finalize detailed plans for the additional phases of the Initiative, we plan to update estimated related costs and cumulative cost savings as such amounts become probable and reasonably estimable.

Trends and Developments

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In addition, we are aware of and address certain trends and developments that could, individually or in the aggregate, have a material impact on our business, including the value of our investments in equity securities, in the future.

We focus in this Trends and Developments section on the cumulative effects of inflation, geopolitical events, recent regulatory actions, supply chain disruptions and illegal disposable e-vapor products and their effects or potential effects on our business, including impacts on adult tobacco consumers and their purchasing behaviors.

We continue to monitor the evolving macroeconomic landscape.

The annual rate of inflation remains above the Federal Reserve’s target of 2%, which is a key benchmark for the Federal Reserve in determining the timing and magnitude of changes to the Federal Funds Rate.

We continue to observe discretionary income pressures on adult tobacco consumers as a result of the cumulative effects of inflation and other factors.

During the first half of 2024, cigarette retail share for the industry discount segment increased year-over-year.

We will continue to monitor the effect of these dynamics on adult tobacco consumer purchasing behaviors, including overall tobacco product expenditures, mix between premium and discount brand purchases and adoption of smoke-free products.

We expect discretionary income pressures will continue to influence adult tobacco consumers’ purchase behaviors in 2024.

We focus in this Trends and Developments section on the discretionary income pressures on adult tobacco consumers, illicit disposable e-vapor products and recent regulatory actions and their effects or potential effects on our business.

We continue to monitor the discretionary income pressure adult tobacco consumers have experienced during the first three quarters of 2024 as a result of the cumulative impact of inflation.

Wage increases have failed to keep up with rising prices, and we have observed increases in debt delinquencies.

In September 2024, the annual rate of inflation softened to 2.4%.

Although inflation rates remained lower in 2024 than prior years, increased prices continued to pressure adult tobacco consumer discretionary income.

These pressures influenced the discount segment retail share growth within the cigarette industry year-over-year.

We will continue to monitor conditions that impact adult tobacco consumer discretionary income and overall purchasing behaviors, including overall tobacco product expenditures, mix between premium and discount brand purchases and adoption of smoke-free products.

We expect discretionary income pressures will continue to influence adult tobacco consumers’ purchase behaviors in the remainder of 2024.

Inflation also has a direct and adverse impact on our direct and indirect costs.

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In June 2024, the FDA issued MGOs to NJOY for four of its menthol e-vapor products.

Through the first half of 2024, we estimate the e-vapor category grew by approximately 40%, driven by illicit flavored disposable products, which we believe now represent more than 60% of the e-vapor category as of June 30, 2024.

For the 12 months ended September 30, 2024, we estimate the e-vapor category grew by approximately 30% versus the prior 12-month period, driven by the growth of illicit flavored disposable products.

We estimate the disposable segment now represents 65% of the e-vapor category.

The primary impacts of this trend have been an increase in the rate of cross-category movement among adult cigarette smokers, contributing to higher than expected domestic cigarette industry volume declines as well as declines in pod-based product volume within the e-vapor category.

In response to the proliferation of illegal disposable e-vapor products, states and the federal government took various regulatory and enforcement actions in the first half of 2024.

Select states have established e-vapor product registries based on pre-market tobacco product application (“PMTA”) submissions or approvals.

In June 2024, the federal government created a multi-agency task force in an effort to combat the marketing and sale of illegal e-vapor products in the United States.

We have also noted the emergence of products using nicotine analogues designed to imitate the effects of nicotine and evade the FDA regulatory framework for nicotine products.

Additionally, we are beginning to see increased illicit activity across multiple tobacco categories, including nicotine pouch products and cigarettes that are available to U.S.

In response to the proliferation of illicit disposable e-vapor products, states and the federal government took various regulatory and enforcement actions in the first three quarters of 2024.

Select states have established e-vapor product registries based on pre-market tobacco product application (“PMTA”) submissions or MGOs.

In June 2024, the federal government created a multi-agency task force in an effort to combat the illegal marketing and sale of e-vapor products in the United States.

We have also noted the emergence of products using nicotine analogues designed to imitate the effects of nicotine and evade the FDA regulatory framework for tobacco products.

Additionally, we continue to see increased illicit activity across multiple tobacco categories, including nicotine pouch products and cigarettes that are available to U.S.

Tobacco companies are subject to broad and evolving regulatory and legislative frameworks that could have a material impact on our business.

For example, the FDA has submitted for final review proposed product standards regarding menthol in

cigarettes and characterizing flavors in cigars, which were indefinitely delayed in April 2024.

For example, the FDA has submitted for final review proposed product standards regarding menthol in cigarettes and characterizing flavors in cigars.

The FDA has announced that it would delay a decision on the menthol ban indefinitely, and the date for any final action on either proposal is to be determined.

In addition, the Biden Administration published plans for future potential regulatory actions that include the FDA’s plans to develop a proposed product standard that would establish a maximum nicotine level for cigarettes and certain other combustible tobacco products.

In California, where a ban on flavored nicotine products went into effect in late 2022, we continue to observe indications of negative unintended consequences of the ban, such as adult tobacco consumer adoption of unregulated products and the development of illicit markets.

Volatility in domestic and global economies and disruptions in the supply and distribution chains have continued in 2024, although these factors have shown some improvement during the year.

This volatility and disruption is the result of several factors, including supply and demand imbalances across many commodity sectors, raw materials availability and geopolitical events.

We continue to work to mitigate the potential negative impacts of these macroeconomic and geopolitical dynamics on our businesses through, among other actions, proactive engagement with current and potential suppliers and distributors, the development of alternative sourcing strategies, entry into long-term supply contracts and prudent oversight of our liquidity.

In California, where a ban on flavored nicotine products went into effect in late 2022, we continue to observe indications of unintended negative consequences of the ban, such as adult tobacco consumer adoption of counterfeit and unregulated products.

See Operating Results by Business Segment - Business Environment for additional information on the trends and developments discussed above.

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We will continue to monitor these conditions and other factors as they could affect our equity earnings, our other comprehensive earnings/losses and the dividends that we receive from ABI, and the fair value of our investment in ABI.

See Note 6 for additional information on our investments in equity securities.

See Note 6 for additional information on our investment in ABI.

The trends and developments discussed above have not had a material adverse impact on our condensed consolidated financial statements, but we continue to monitor these trends and developments and potential financial impacts.

Additionally, we do not believe that these trends and developments have materially impacted our ability to achieve our Vision.

As the trends and developments discussed above evolve and new ones emerge, we will continue to evaluate the potential impacts on our business, investments and Vision.

Consolidated Results of Operations for the Six Months Ended June 30, 2024

The changes in net earnings and diluted EPS for the six months ended June 30, 2024, from the six months ended June 30, 2023, were due primarily to the following:

As the trends and developments discussed above evolve and new ones emerge, we will continue to evaluate the potential impacts on our businesses, investments and Vision.

Consolidated Results of Operations for the Nine Months Ended September 30, 2024

The changes in net earnings and diluted EPS for the nine months ended September 30, 2024, from the nine months ended September 30, 2023, were due primarily to the following:

(in millions, except per share data) Net Earnings Diluted EPS

For the six months ended June 30, 2023

For the nine months ended September 30, 2023

$ 6,070 $ 3.40

2023 Acquisition and disposition-related items

2023 NPM Adjustment Items

2023 Acquisition, disposition and integration-related items

2023 Tobacco and health and certain other litigation items

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2023 Cronos-related special items

2023 Income tax items

Subtotal 2023 special items

2024 NPM Adjustment Items

2024 Acquisition and disposition-related items

2024 Acquisition, disposition and integration-related items

2024 Asset impairment

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Operations (137) (0.08)

For the six months ended June 30, 2024

For the nine months ended September 30, 2024

$ 8,225 $ 4.75

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For further details, see the Consolidated Operating Results and Operating Results by Business Segment sections below.

Consolidated Results of Operations for the three months ended June 30, 2024

The changes in net earnings and diluted EPS for the three months ended June 30, 2024, from the three months ended June 30, 2023, were due primarily to the following:

Consolidated Results of Operations for the three months ended September 30, 2024

The changes in net earnings and diluted EPS for the three months ended September 30, 2024, from the three months ended September 30, 2023, were due primarily to the following:

(in millions, except per share data) Net Earnings Diluted EPS

For the three months ended June 30, 2023

For the three months ended September 30, 2023

$ 2,166 $ 1.22

2023 Acquisition and disposition-related items

2023 NPM Adjustment Items

2023 Acquisition, disposition and integration-related items

2023 Tobacco and health and certain other litigation items

2023 ABI-related special items

2023 Cronos-related special items

2023 Income tax items

Subtotal 2023 special items

2024 Acquisition and disposition-related items

2024 Asset impairment

2024 NPM Adjustment Items

2024 Acquisition, disposition and integration-related items

2024 Tobacco and health and certain other litigation items

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Operations 65 0.04

For the three months ended June 30, 2024

For the three months ended September 30, 2024

$ 2,293 $ 1.34

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▪ Operations:

The decrease of $99 million in operations (which excludes the impact of special items shown in the table above) was due primarily to lower OCI.

The increase of $65 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI.

For further details, see the Consolidated Operating Results and Operating Results by Business Segment sections below.

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

Skoal Impairment:

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 .

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 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 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.

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 .

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 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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For example, a hypothetical 1% increase to the discount rate or a 1% decrease in the perpetual growth rate used in our quantitative assessment as of June 30, 2024, would have resulted in an additional pre-tax impairment to the Skoal trademark of approximately $300 million and $120 million, respectively, in the second quarter of 2024.

While our management believes that the estimated fair value of the Skoal trademark at June 30, 2024 is reasonable, if Skoal ’s actual revenue and income or long-term outlook are significantly different from forecasted performance used to estimate the fair value or if the discount rate used to estimate the fair value increases, we could have an additional non-cash impairment, which could be material, to the Skoal trademark in future periods.

Our management believes that the estimated fair value of the Skoal trademark at June 30, 2024 was reasonable and no events or circumstances exist indicating an impairment at September 30, 2024.

If Skoal ’s actual revenue and income or long-term outlook are significantly different from forecasted performance used to estimate the fair value or if the discount rate used to estimate the fair value increases, we could have an additional non-cash impairment, which could be material, to the Skoal trademark in future periods.

E-vapor Reporting Unit:

On June 1, 2024, we finalized our purchase price allocation for the acquisition of NJOY Holdings (“NJOY Transaction”), resulting in a carrying value of $1.8 billion for our e-vapor reporting unit’s goodwill.

We continue to monitor several factors that could impact the carrying value of our e-vapor reporting unit’s goodwill, including the following:

▪ Altria and certain of our affiliates, including NJOY, are defendants in lawsuits alleging patent infringement based on the sale of NJOY ACE .

Remedies being sought by the plaintiffs vary and include an exclusion order that would prohibit the importation of NJOY ACE into the United States, an injunction on sales of NJOY ACE, and damages.

are vigorously defending this litigation and have developed other strategies we believe would allow NJOY ACE to remain on the market or limit sales disruption of NJOY ACE in the event of certain adverse litigation outcomes.

▪ Additionally, sales of illicit flavored disposable e-vapor products continue to increase with limited effective enforcement against these products, contributing to declines in pod-based e-vapor product volume, which has negatively impacted NJOY’s volume growth in 2024.

If we experience unfavorable outcomes with respect to the patent infringement lawsuits and our related strategies, or if continued illicit e-vapor product sales or other factors result in a significantly different long-term outlook for NJOY’s volume growth rates versus projections used to estimate the fair value at the time we finalized our purchase price allocation for the NJOY acquisition, it could result in a material non-cash impairment of our e-vapor reporting unit’s goodwill in future periods.

For further discussion of these factors, see Note 14.

Contingencies to our condensed consolidated financial statements in Item 1 (“Note 14”) and Operating Results by Business Segment - Business Environment below.

For information on the NJOY Transaction, see Note 2.

Acquisition of NJOY to our condensed consolidated financial statements in Item 1 (“Note 2”).

For further discussion of goodwill and other intangible assets, see Note 5.

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Consolidated Operating Results

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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Our management believes it is appropriate to disclose this measure to help investors analyze our business performance and trends.

The following table provides a reconciliation of adjusted net earnings and adjusted diluted EPS for the six months ended June 30:

The following table provides a reconciliation of adjusted net earnings and adjusted diluted EPS for the nine months ended September 30:

(in millions of dollars, except per share data) Earnings before Income Taxes Provision for Income Taxes Net Earnings Diluted

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NPM Adjustment Items (27) (7) (20) (0.01)

Acquisition and disposition-related items (2,557) (675) (1,882) (1.09)

Acquisition, disposition and integration-related items (2,513) (664) (1,849) (1.07)

Asset impairment 354 90 264 0.15

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$ 8,193 $ 2,123 $ 6,070 $ 3.40

Acquisition and disposition-related items 1 — 1 —

NPM Adjustment Items (15) (4) (11) —

Acquisition, disposition and integration-related items 14 4 10 —

Tobacco and health and certain other litigation items 424 106 318 0.18

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Cronos-related special items 30 — 30 0.02

Income tax items — (29) 29 0.02

2023 Adjusted for Special Items

$ 8,950 $ 2,211 $ 6,739 $ 3.78

The following table provides a reconciliation of adjusted net earnings and adjusted diluted EPS for the three months ended June 30:

The following table provides a reconciliation of adjusted net earnings and adjusted diluted EPS for the three months ended September 30:

(in millions of dollars, except per share data) Earnings before Income Taxes Provision for Income Taxes Net Earnings Diluted

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$ 3,026 $ 733 $ 2,293 $ 1.34

Acquisition and disposition-related items (2,557) (675) (1,882) (1.09)

Asset impairment 354 90 264 0.15

NPM Adjustment Items (21) (6) (15) (0.01)

Acquisition, disposition and integration-related items 44 11 33 0.02

Tobacco and health and certain other litigation items

44 11 33 0.02

ABI-related special items 23 5 18 0.01

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$ 2,908 $ 742 $ 2,166 $ 1.22

Acquisition and disposition-related items 18 5 13 —

NPM Adjustment Items (15) (4) (11) —

Acquisition, disposition and integration-related items 13 4 9 —

Tobacco and health and certain other litigation items 23 6 17 0.01

ABI-related special items 82 17 65 0.03

Cronos-related special items 4 — 4 —

Income tax items — (29) 29 0.02

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$ 3,011 $ 736 $ 2,275 $ 1.28

The following special items affected the comparability of statements of earnings amounts for the six and three months ended June 30, 2024 and 2023:

▪ Acquisition and disposition-related items:

The following special items affected the comparability of statements of earnings amounts for the nine and three months ended September 30, 2024 and 2023:

▪ NPM Adjustment Items:

For a discussion of NPM Adjustment Items and a breakdown of these items by segment, see Health Care Cost Recovery Litigation in Note 14 and NPM Adjustment Items in Note 11, respectively.

▪ Acquisition, disposition and integration-related items:

We recorded a pre-tax gain of $2.7 billion upon the assignment of the IQOS Tobacco Heating System (“ IQOS System”) commercialization rights to Philip Morris International Inc.

(“PMI”) in April 2024, for the six and three months ended June 30, 2024.

(“PMI”) in April 2024, for the nine months ended September 30, 2024.

For a discussion of the sale of the IQOS System commercialization rights, see Note 5.

Also, in connection with the June 2024 issuance by the FDA of MGOs for four NJOY menthol e-vapor products, we recorded a pre-tax charge of approximately $140 million for the six and three months ended June 30, 2024 for the change in the fair value of the contingent payments associated with the acquisition of NJOY Holdings (“NJOY Transaction”).

This charge was recorded as general corporate expenses and included in marketing, administration and research costs in our condensed consolidated statement of earnings.

For a discussion of the MGOs, see Note 2.

Acquisition of NJOY to our condensed consolidated financial statements in Item 1 (“Note 2”) .

We recorded pre-tax expenses of $187 million and $44 million for the nine and three months ended September 30, 2024, respectively, related to the NJOY Transaction.

For further information on the costs incurred for the NJOY Transaction, see Note 2.

▪ 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.

▪ Tobacco and Health and Certain Other Litigation Items:

For a discussion of tobacco and health and certain other litigation items and a breakdown of these costs by segment, see Note 14.

Contingencies to our condensed consolidated financial statements in Item 1 (“Note 14”) and Tobacco and Health and Certain Other Litigation Items in Note 11, respectively.

For a discussion of tobacco and health and certain other litigation items and a breakdown of these costs by segment, see Note 14, and Tobacco and Health and Certain Other Litigation Items in Note 11, respectively.

▪ Loss on Disposition of JUUL Equity Securities:

We recorded a non-cash, pre-tax loss of $250 million related to the disposition of our JUUL equity securities for the six months ended June 30, 2023 as (income) losses from investments in equity securities in our condensed consolidated statement of earnings.

We recorded a non-cash, pre-tax loss of $250 million related to the disposition of our JUUL equity securities for the nine months ended September 30, 2023 as (income) losses from investments in equity securities in our condensed consolidated statement of earnings.

We recorded a corresponding adjustment to the JUUL tax valuation allowance in 2023.

▪ ABI-Related Special Items:

We recorded net pre-tax income of $62 million from our investment in ABI for the six months ended June 30, 2024, which consists primarily of a gain related to the ABI Transaction.

We recorded net pre-tax income of $39 million from our investment in ABI for the nine months ended September 30, 2024, which consists primarily of a gain related to the ABI Transaction, partially offset by mark-to-market losses on certain ABI financial instruments associated with its share commitments.

For further information on the gain related to the ABI Transaction, see Note 6.

We recorded net pre-tax losses of $54 million and $82 million from our investment in ABI for the nine and three months ended September 30, 2023, respectively, consisting primarily of mark-to-market losses on certain ABI financial instruments associated with its share commitments.

The ABI-related special items include our respective share of the amounts recorded by ABI and additional adjustments related to (i) the conversion of ABI-related special items from international financial reporting standards to GAAP and (ii) adjustments to our investment required under the equity method of accounting.

▪ Cronos-Related Special Items:

We recorded pre-tax losses of $30 million, substantially all of which related to our share of special items recorded by Cronos for the six months ended June 30, 2023.

We recorded pre-tax losses of $30 million, substantially all of which related to our share of special items recorded by Cronos for the nine months ended September 30, 2023.

We recorded a corresponding adjustment to the Cronos tax valuation allowance.

▪ Income Tax Items:

We recorded income tax items of $52 million for the six months ended June 30, 2024, due primarily to an income tax benefit from the partial release of a valuation allowance on JUUL-related losses, partially offset by interest expense on tax reserves recorded in prior years.

We recorded income tax items of $41 million for the nine months ended September 30, 2024, due primarily to an income tax benefit from the partial release of a valuation allowance on JUUL-related losses, partially offset by interest expense on tax reserves recorded in prior years.

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

For further discussion, see Note 13.

Income Taxes to our condensed consolidated financial statements in Item 1 (“Note 13”).

Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Net revenues, which include excise taxes billed to customers, decreased $442 million (3.6%), due to lower net revenues in our smokeable products segment, partially offset by higher net revenues in our oral tobacco products segment and our all other category.

Income Taxes to our condensed consolidated financial statements in Item 1.

We recorded income tax items of $29 million, for the nine and three months ended September 30, 2023, due primarily to tax expense associated with a tax basis adjustment related to our investment in ABI.

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, decreased $464 million (2.5%), due primarily to lower net revenues in our smokeable products segment, partially offset by higher net revenues in our oral tobacco products segment.

Cost of sales decreased $118 million (2.5%), due primarily to lower shipment volume in our smokeable products segment, partially offset by higher per unit settlement charges and higher manufacturing costs in our smokeable products segment and higher NJOY shipment volume.

Excise taxes on products decreased $324 million (10.7%), due to lower shipment volume in our smokeable products segment.

Marketing, administration and research costs decreased $30 million (2.1%), due primarily to lower general corporate expenses, partially offset by inflation impacts and higher investment spending in support of our Vision (including 2024 NJOY costs).

Marketing, administration and research costs increased $16 million (0.8%), due primarily to higher investment spending in support of our Vision (including 2024 NJOY costs), partially offset by lower general corporate expenses.

The lower general corporate expenses were due primarily to lower charges to resolve certain JUUL-related litigation and the 2023 settlement of the shareholder derivative lawsuits, partially offset by higher acquisition-related costs primarily associated with the NJOY Transaction and transaction costs from the ABI Transaction.

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Reported basic and diluted EPS of $4.75, each increased by 39.7% due to higher reported net earnings and fewer shares outstanding.

Adjusted net earnings of $4,280 million decreased $184 million (4.1%), due primarily to lower OCI.

Adjusted diluted EPS of $2.46 decreased by 1.6%, due to lower adjusted net earnings, partially offset by fewer shares outstanding.

Three Months Ended June 30, 2024 Compared with Three Months Ended June 30, 2023

Net revenues, which include excise taxes billed to customers, decreased $299 million (4.6%), due primarily to lower net revenues in our smokeable products segment, partially offset by higher net revenues in our oral tobacco products segment.

Cost of sales decreased $79 million (4.7%), due primarily to lower shipment volume in our smokeable products segment, partially offset by higher per unit settlement charges and higher manufacturing costs in our smokeable products segment and higher NJOY shipment volume.

Adjusted net earnings of $6,637 million decreased $102 million (1.5%), due primarily to lower adjusted OCI.

Adjusted diluted EPS of $3.84 increased by 1.6%, due to fewer shares outstanding, partially offset by lower adjusted net earnings.

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, decreased $22 million (0.4%), due to lower net revenues in our smokeable products segment and in our all other category, partially offset by higher net revenues in our oral tobacco products segment.

Cost of sales decreased $42 million (2.7%), due primarily to lower shipment volume in our smokeable products segment, partially offset by higher per unit settlement charges in our smokeable products segment and higher NJOY shipment volume.

Excise taxes on products decreased $89 million (8.9%), due to lower shipment volume in our smokeable products segment.

Marketing, administration and research costs decreased $64 million (7.5%), due primarily to lower general corporate expenses, partially offset by inflation impacts and higher investment spending in support of our Vision (including 2024 NJOY costs).

The lower general corporate expenses include lower charges to resolve certain JUUL-related litigation, partially offset by higher acquisition-related costs primarily associated with the NJOY Transaction.

Operating income decreased $372 million (12.8%), due primarily to lower OCI (which includes a non-cash impairment of the Skoal trademark in our oral tobacco product segment), partially offset by lower general corporate expenses.

Provision for income taxes increased $624 million (90.6%), due primarily to higher earnings before income taxes.

Reported net earnings of $3,803 million increased $1,686 million (79.6%), due primarily to the gain on the sale of the IQOS System commercialization rights, partially offset by lower operating income.

Marketing, administration and research costs increased $46 million (7.5%), due primarily to higher general corporate expenses and higher investment spending in support of our Vision.

The higher general corporate expenses were due primarily to higher acquisition-related costs associated with the NJOY Transaction.

Operating income increased $63 million (2.0%), due primarily to higher OCI, partially offset by higher general corporate expenses.

(Income) losses from investments in equity securities, which were favorable $58 million (100%), were positively impacted by lower special items from our investment in ABI.

Reported net earnings of $2,293 million increased $127 million (5.9%), due primarily to higher operating income and favorable results from our investments in equity securities.

Reported basic and diluted EPS of $1.34, each increased by 9.8% due to higher reported net earnings and fewer shares outstanding.

Adjusted net earnings of $2,258 million decreased $88 million (3.8%), due primarily to lower OCI.

Adjusted diluted EPS of $1.31 remained unchanged as lower adjusted net earnings were offset by fewer shares outstanding.

Adjusted net earnings of $2,357 million increased $82 million (3.6%), due primarily to higher adjusted OCI.

Adjusted diluted EPS of $1.38 increased by 7.8%, due to fewer shares outstanding and higher adjusted net earnings.

Operating Results by Business Segment

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These challenges, some of which are discussed in more detail in Note 14, and in Part I, Item 1A.

Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”), include:

Risk Factors of our 2023 Form 10-K, include:

▪ pending and threatened litigation and bonding requirements;

▪ restrictions and requirements imposed by the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”) and restrictions and requirements (and related enforcement actions) that have been, and in the future will be, imposed by the FDA;

▪ the FDA’s failure to effectively address illegal e-vapor products on the market;

▪ the FDA’s failure to effectively address illicit tobacco products on the market, including illicit e-vapor and oral nicotine pouch products;

▪ illicit trade in tobacco products, including cigarettes, e-vapor products and oral nicotine pouch products;

▪ actual and proposed excise tax increases, as well as changes in tax structures and tax stamping requirements;

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▪ governmental investigations;

▪ reductions in consumption levels of cigarettes and MST products;

▪ reductions in consumption levels of cigarettes and MST products resulting in lower shipment volumes;

▪ increased efforts by tobacco control advocates and other private sector entities (including retail establishments) to further restrict the availability and use of tobacco products or the ability to communicate with consumers through third-party digital platforms;

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▪ the proliferation of products using nicotine analogues that are designed to imitate the effects of nicotine but are not subject to the FDA regulatory framework for tobacco products;

▪ illicit trade in tobacco products, including illicit e-vapor and oral nicotine pouch products;

▪ potential adverse changes in prices, availability and quality of tobacco, other raw materials and component parts, including as a result of changes in macroeconomic, geopolitical and climate and environmental conditions.

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We believe that a significant number of adult tobacco consumers switch among tobacco categories, use multiple forms of tobacco products and try innovative tobacco products, such as e-vapor products and oral nicotine pouches.

Adult tobacco consumers continue to transition from cigarettes and MST to exclusive use of smoke-free tobacco product alternatives, which aligns with our Vision.

Adult tobacco consumers continue to transition from cigarettes and MST to exclusive use of innovative smoke-free tobacco product alternatives, which aligns with our Vision.

We work to meet these evolving adult tobacco consumer preferences over time by developing, manufacturing, marketing and distributing products both within and outside the United States through innovation and other growth strategies (including, where appropriate, arrangements with, or investments in, third parties and acquisitions).

For the second quarter of 2024, we estimate that, when adjusted for trade inventory movements, calendar differences and other factors, domestic cigarette industry volume declined by 9.5% versus the second quarter of 2023.

We expect cigarette industry volume trends for the remainder of 2024 to be most influenced by (i) continued macroeconomic and discretionary income pressures on adult tobacco consumers (including inflation, interest rates, gasoline prices and unemployment levels), (ii) cross-category movement, including to illegal e-vapor products, and (iii) regulatory and legislative (including excise tax) developments.

For the third quarter of 2024, we estimate that, when adjusted for trade inventory movements and calendar differences, total estimated domestic cigarette industry volume declined by 9% versus the third quarter of 2023.

The cigarette industry volume decline for the third quarter of 2024 was primarily driven by the growth of illicit e-vapor products and continued discretionary income pressures on adult tobacco consumers.

For the 12 months ended September 30, 2024, we estimate the e-vapor category grew approximately 30% versus the prior 12-month period, driven by the growth of illicit flavored disposable products.

We estimate the disposable segment now represents 65% of the e-vapor category.

We estimate that cross-category movement to illicit disposable e-vapor products, which we discuss in more detail below, contributed to cigarette industry volume declines in a range of 2% to 3% over the last 12 months.

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We believe the FDA’s inaction, lack of enforcement and slow pace of smoke-free product authorizations enables bad actors to disregard regulation.

For example, we believe the lack of effective enforcement against illicit disposable e-vapor products has allowed for the introduction of illicit products in other categories, such as oral nicotine, where we have seen a rise in illegal nicotine pouch products.

These products are distributed primarily through e-commerce channels that are more difficult to track than traditional retail.

As of June 2024, we have identified more than 350 illicit nicotine pouch products across retail and e-commerce channels.

For example, we have observed that the lack of effective enforcement against illicit disposable e-vapor products has allowed for the introduction of illicit products in other categories, such as oral nicotine, where we have seen a rise in illicit nicotine pouch products.

These products are distributed primarily through e-commerce channels and vape stores that are more difficult to track than traditional retail.

We have also noted the emergence of products using nicotine analogues, which are designed to imitate the effects of nicotine and are not subject to the regulatory framework for tobacco products.

While illicit oral nicotine products and nicotine analogues have not had a material impact on our business to date, a lack of effective enforcement could lead to an increase in the introduction and volume activity of these products, which could have a material impact on our innovative tobacco products businesses.

Despite some improvements in macroeconomic conditions, discretionary income pressures persisted for adult tobacco consumers through the second quarter of 2024 due to the cumulative effects of inflation.

The June 2024 Consumer Price Index was 3.0%, exceeding the Federal Reserve’s target of 2%.

While illicit oral nicotine products and nicotine analogues have not had a material impact on our business to date, a lack of a regulatory framework and effective enforcement could lead to an increase in the introduction and volume activity of these products, which could have a material impact on our innovative tobacco products businesses.

Through our competitive intelligence tracking, we continue to monitor these growing trends and evaluate the impacts on the overall nicotine and tobacco categories.

Through the third quarter of 2024, U.S.

adult tobacco consumers have remained under pressure as a result of the cumulative impact of inflation.

Wage increases have failed to keep up with the rising prices of everyday expenses in recent years, and we

have observed increases in consumer debt and credit card delinquencies.

We also have observed softening in the Consumer Price Index, which was 2.4% for the month of September 2024.

Although inflation rates remained lower than prior years, increased prices on certain expenditures, such as groceries and gas, continued to pressure adult tobacco consumer discretionary income.

Furthermore, adult tobacco consumer wage increases have failed to keep up with the rising prices of everyday expenses over the past several years, and we have observed increases in consumer debt and credit card delinquencies.

Gas prices throughout the second quarter of 2024 experienced seasonal increases, reaching an average price of $3.46 per gallon for the month of June 2024.

While gas prices were lower than in the second quarter of 2023, they remained consistently above $3.00 month-over-month in the second quarter of 2024.

In addition, the Federal Funds Rate, although stable, remained above historical levels at 5.33% through the second quarter of 2024.

The macroeconomic and discretionary income pressures on adult tobacco consumers influenced discount share performance.

For the second quarter of 2024, the discount share of the cigarette category was 29.3%, an increase of 0.2 share points sequentially and an increase of 1.0 share point versus the second quarter of 2023.

Marlboro share was 42.0% in the second quarter of 2024, which is unchanged sequentially and a decrease of 0.1 share points versus the second quarter of 2023.

Marlboro share in the premium segment of the industry grew to 59.4%, an increase of 0.1 share points sequentially and an increase of 0.7 share points versus the second quarter of 2023.

Through the second quarter of 2024, NJOY distribution grew to over 100,000 stores.

During the same period, reported shipment volume of NJOY consumables (including NJOY ACE and NJOY DAILY ) was approximately 12.5 million units, and NJOY device shipment volume was approximately 1.8 million units.

The NJOY share of the e-vapor category reached 5.5% in the second quarter of 2024, an increase of 1.3 share points sequentially.

nicotine pouch category continued to grow significantly throughout the second quarter of 2024 to 41.6% of the U.S.

oral tobacco category, an increase of 12.3 share points versus the second quarter of 2023.

maintained year-over-year share momentum through the second quarter of 2024 to achieve 8.1% of the total oral tobacco category, an increase of 1.2 share points versus the second quarter of 2023 and an increase of 1.0 share point sequentially.

For the second quarter 2024, the traditional smokeless category (including MST and Snus) share of the total oral tobacco category declined to 58.4%, down 12.3 share points versus the second quarter of 2023.

Copenhagen had an oral tobacco category share of 19.5% for the second quarter of 2024, a decrease of 4.7 share points when compared to the second quarter of 2023.

Gas prices throughout the third quarter of 2024 experienced seasonal increases, reaching an average price of $3.21 per gallon for the month of September 2024.

While gas prices were lower than in the third quarter of 2023, they remained consistently above $3.00 per gallon in the third quarter of 2024.

Discretionary income pressures on adult tobacco consumers have influenced discount brand share performance.

For the third quarter of 2024, the discount share of the cigarette category reached 29.8%, an increase of 0.5 share points sequentially and an increase of 1.5 share points versus the third quarter of 2023.

Marlboro share performance is discussed below in Operating Results - Smokeable Products Segment .

For the third quarter of 2024, reported shipment volume of NJOY consumables (including NJOY ACE and NJOY DAILY ) was approximately 10.4 million units, and NJOY device shipment volume was approximately 1.1 million units.

The NJOY share of the e-vapor category reached 6.2% in the third quarter of 2024, an increase of 0.8 share points sequentially.

nicotine pouch category continued to grow significantly throughout the third quarter of 2024 to 43.9% of the U.S.

oral tobacco category, an increase of 11.4 share points versus the third quarter of 2023.

maintained year-over-year share momentum through the third quarter of 2024 to achieve 8.9% of the total oral tobacco category, an increase of 2.0 share points versus the third quarter of 2023 and an increase of 0.8 share points sequentially.

For the third quarter 2024, the traditional smokeless category (including MST and Snus) share of the total oral tobacco category declined to 56.1%, down 11.4 share points versus the third quarter of 2023.

Copenhagen had an oral tobacco category share of 18.7% for the third quarter of 2024, a decrease of 4.3 share points when compared to the third quarter of 2023.

We continue to track the growth of nicotine pouch volumes and the related impact on the size of the MST category.

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For example, in the second quarter of 2024, we recorded a non-cash, pre-tax impairment on the value of the Skoal trademark.

For more information on this impairment, see Note 5.

We continue to monitor changing conditions within our

business environment and impacts on our businesses.

We continue to monitor changing conditions within our business environment and impacts on our businesses.

Changes in these and other conditions could have a material adverse effect on our business, results of operations, cash flows or financial position.

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The FSPTCA also bans descriptors such as “light,” “low” or “mild” when used as descriptors of modified risk, unless expressly authorized by the FDA.

In connection with a 2016 lawsuit initiated by Middleton, the U.S.

Department of Justice, on behalf of the FDA, informed Middleton that the FDA does not intend to bring an enforcement action against Middleton for the use of the term “mild” in the trademark “Black & Mild.” Consequently, Middleton dismissed its lawsuit without prejudice.

If the FDA were to change its position at some later date, Middleton would have the opportunity to bring another lawsuit.

Effective April 2022, the U.S.

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Currently, however, the statutory definition of tobacco products does not cover products containing nicotine analogues, which are designed to imitate the effects of nicotine.

As a result, products containing nicotine analogues are not subject to the FDA regulatory framework for tobacco products, including the requirements that manufacturers submit a PMTA to, and receive a MGO from, the FDA before marketing such products in the United States.

As a result, products containing nicotine analogues are not subject to the FDA regulatory framework for tobacco products, including the requirements that manufacturers submit a PMTA to, and receive an MGO from, the FDA before marketing such products in the United States.

▪ Final Tobacco Marketing Rule:

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The Final Tobacco Marketing Rule currently does not apply to products containing nicotine analogues.

(1) “Smokeless tobacco,” as used in this section of this Form 10-Q, refers to smokeless tobacco products first regulated by the FDA in 2009, including MST.

It excludes oral nicotine pouches, which were first regulated by the FDA in 2016.

▪ Rulemaking and Guidance:

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▪ FDA’s Five-Year Strategic Plan for Tobacco and Nicotine Regulation:

In December 2023, in response to the Reagan-Udall Foundation’s report of its operational evaluation of the FDA’s Center for Tobacco Products, the FDA released its five-year strategic plan to address concerns raised by the report.

In December 2023, the FDA released its five-year strategic plan to address concerns raised by the Reagan-Udall Foundation’s operational evaluation of the FDA’s Center for Tobacco Products.

The Reagan-Udall report urged the FDA to clearly define product pathways, accelerate PMTA decision making, address the need for health risk communications to tobacco consumers and take enforcement actions against manufacturers and products that violate the law.

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▪ advance operational excellence.

Although the FDA, in conjunction with other federal entities, has increased enforcement activity, insufficient actions against certain product categories that violate the law, including disposable and flavored e-vapor products and products targeted to minors, have allowed such products to proliferate on the market.

Although the FDA, in conjunction with other federal entities, has increased enforcement activity, insufficient actions against manufacturers, distributors and retailers of certain product categories that violate the law, including certain disposable and flavored e-vapor products, certain oral nicotine pouch products and products targeted to minors, have allowed such products to proliferate on the market.

In addition, the FDA’s failure to clearly define product pathways and accelerate PMTA decision making has resulted in a market with few authorized smoke-free products available to adult tobacco consumers.

▪ Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement:

The FSPTCA permits the sale of tobacco products on the market as of February 15, 2007 and not subsequently modified (“Pre-existing Tobacco Products”) and new or modified products authorized through the PMTA, Substantial Equivalence (“SE”) or SE Exemption pathways.

(1) “Smokeless tobacco,” as used in this section of this Form 10-Q, refers to smokeless tobacco products first regulated by the FDA in 2009, including MST.

It excludes oral nicotine pouches, which were first regulated by the FDA in 2016.

Exemption pathways.

Subsequent FDA rules also provide a Supplemental PMTA pathway designed to increase the efficiency of submission and review for modified versions of previously authorized products.

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Additionally, a manufacturer may be unable to maintain consistency in manufacturing processes as it increases the scale of its manufacturing operations in response to market expansion or product introduction.

These circumstances could cause a manufacturer to receive (i) a “not substantially equivalent” determination or (ii) a denial or

withdrawal of a PMTA, either of which could result in a product being removed from the market.

These circumstances could cause a manufacturer to receive (i) a “not substantially equivalent” determination or (ii) a denial or withdrawal of a PMTA, either of which could result in a product being removed from the market.

In addition, new scientific data continues to be developed relating to innovative tobacco products, which could impact the FDA’s determination as to whether a product is, or continues to be, appropriate for the protection of public health and could, therefore, result in the removal of one or more products from the market.

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Manufacturers of products first regulated by the FDA in 2016, including cigars, oral nicotine pouches and e-vapor products, that were on the market as of August 8, 2016 and not subsequently modified must have filed an SE report or PMTA by the filing deadline of September 9, 2020 in order for their products to remain on the market.

These products can remain on the market during FDA review through court-allowed, case-by-case discretion, so long as the report or application was timely filed with the FDA.

These products can remain on the market during FDA review through court-allowed, case-by-case discretion, so long as the report or

application was timely filed with the FDA.

In September 2022, the FDA represented that it had resolved more than 99% of the timely applications it had received, the vast majority of which were for e-vapor products and resulted in denials.

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PLUS oral nicotine pouches in tobacco, mint and wintergreen flavors in June 2024.

As of July 29, 2024, the FDA has not issued marketing order decisions for any on!

As of October 28, 2024, the FDA has not issued marketing order decisions for any on!

PLUS products.

As of July 29, 2024, Middleton has received market orders or exemptions that cover over 99% of its cigar product volume.

In October 2022, we agreed to assign the exclusive U.S.

commercialization rights to the IQOS System to PMI in exchange for a total cash payment of approximately $2.7 billion (plus interest).

The assignment became effective in April 2024.

government asserted that the agreement to assign those rights required district court approval and was subject to PMI becoming bound by a court-ordered injunction against engaging in certain conduct and requiring the communication of corrective statements.

In May 2024, we signed 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.

For further discussion of the agreement with the U.S government, see Note 14.

As of October 28, 2024, Middleton has received marketing orders or exemptions that cover over 99% of its cigar product volume.

In October 2021, the FDA authorized the marketing and sale of four of USSTC’s Verve oral nicotine products, including Green Mint and Blue Mint varieties, representing the first flavored product authorizations issued by the FDA for newly deemed innovative products.

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Switching completely to this product from cigarettes reduces risk of lung cancer.” USSTC’s authorization to use this claim is subject to the FDA’s post-market surveillance requirements described below.

In June 2023, we completed our acquisition of NJOY Holdings, the parent of NJOY.

As a result of the acquisition, NJOY became a wholly owned subsidiary of Altria, and we gained full global ownership of NJOY’s e-vapor product portfolio, including NJOY ACE , a pod-based e-vapor product with an MGO from the FDA, and NJOY DAILY , which also has an MGO.

As a result of our June 2023 acquisition of NJOY Holdings, we gained full global ownership of NJOY’s e-vapor product portfolio, including NJOY ACE , a pod-based e-vapor product with an MGO from the FDA, and NJOY DAILY , which also has an MGO.

In June 2024, NJOY received MGOs with respect to two NJOY ACE menthol products and two NJOY DAILY menthol products.

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Post-Market Surveillance :

Manufacturers that receive product authorizations through the PMTA process must adhere to the FDA post-market record keeping and reporting requirements, as detailed in market orders and in the final PMTA rule.

Manufacturers that receive MGOs must adhere to the FDA post-market record keeping and reporting requirements, as detailed in market orders and in the final PMTA rule.

The requirements include prior notification of marketing activities.

The FDA may amend requirements of a market order or withdraw the market order based on this information if, among other reasons, it determines that the continued marketing of the products is no longer appropriate for the protection of the public health.

The FDA may amend requirements of an MGO or withdraw the MGO based on this information if, among other reasons, it determines that the continued marketing of the products is no longer appropriate for the protection of the public health.

Effect of Adverse FDA Determinations :

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It is therefore difficult to predict the duration of FDA reviews of SE reports or PMTAs.

An unfavorable determination on an application, the withdrawal by the FDA of a prior marketing order or other changes in FDA regulatory requirements could result in the removal of products from the market.

A “not substantially equivalent” determination, a denial of a PMTA or a marketing order withdrawal by the FDA on one or more products (which would require the removal of the product or products from the market) could have a material adverse impact on our business, results of operations, cash flows or financial position.

An unfavorable determination on an application, the withdrawal by the FDA of a prior MGO or other changes in FDA regulatory requirements could result in the removal of products from the market.

A “not substantially equivalent” determination, a denial of a PMTA or an MGO withdrawal by the FDA on one or more products (which would require the removal of the product or products from the market) could have a material adverse impact on our business, results of operations, cash flows or financial position.

Also, adverse FDA determinations on innovative tobacco products could have a material adverse effect on our innovative tobacco businesses and our ability to achieve our Vision.

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Court of Appeals for the Fifth Circuit reversed the trial court and remanded the case for further proceedings.

In August 2024, the cigarette manufacturers in the suit petitioned the U.S.

Supreme Court to review the case.

In September 2024, the FDA announced in guidance that it generally would not enforce the final rule until December 2025.

However, the FDA has separately stated that parties involved in pending litigation would not be required to comply during the pendency of the case before the U.S.

Supreme Court and for an additional 15 months after the U.S.

Supreme Court’s disposition of the case.

We submitted comments in response to the September 2024 guidance asking the FDA to set the same compliance deadline for all manufacturers and, assuming the rule remains in place following the U.S.

Supreme Court’s disposition of the case, to begin enforcing the rule no sooner than 15 months following the disposition.

▪ Underage Access and Use of Certain Tobacco Products :

The FDA announced regulatory actions in September 2018 to address underage access and use of e-vapor products.

The FDA announced regulatory actions in September 2018 to address underage access to and use of e-vapor products.

We have engaged with the FDA on this topic and have reaffirmed to the FDA our ongoing and long-standing commitment to preventing underage use.

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Additionally, the FDA issued final guidance in April 2020, stating that it intended to prioritize enforcement action against certain product categories, including pod-based, flavored e-vapor products and products targeted to minors.

More recently, the FDA has taken limited enforcement action aimed at manufacturers and retailers of certain disposable flavored electronic nicotine delivery system products.

However, despite some enforcement activity, insufficient actions against certain product categories that violate the law, including disposable and flavored e-vapor products and products targeted to minors, have allowed such products to proliferate on the market.

▪ Electronic Nicotine Delivery System Products :

As of July 29, 2024, many manufacturers of menthol and other flavored e-vapor products have received MDOs for failure to provide sufficiently strong product-specific scientific evidence to demonstrate that the benefit of their products to adult smokers overcomes the risk that their products pose to youth.

More recently, the FDA has taken limited enforcement action aimed at manufacturers and retailers of certain disposable flavored e-vapor products.

However, despite some enforcement activity, insufficient actions against manufacturers, distributors and retailers of certain product categories that violate the law, including certain disposable and flavored e-vapor products, certain oral nicotine pouch products and products targeted to minors, have allowed such products to proliferate on the market.

▪ E-Vapor Products :

As of October 28, 2024, many manufacturers of menthol and other flavored e-vapor products have received MDOs for failure to provide sufficiently strong product-specific scientific evidence to demonstrate that the benefit of their products to adult smokers overcomes the risk that their products pose to youth.

The FDA has communicated in these MDOs that vapor products with non-tobacco flavors present unique questions relevant to the FDA’s “Appropriate for the Protection of Public Health” standard and that successful applications require strong, product-specific evidence.

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In October 2023, the FDA submitted the two proposed product standards to the White House Office of Management and Budget for review.

As of July 29, 2024, the FDA has not completed rulemaking with respect to either proposed product standard.

As of October 28, 2024, the FDA has not completed rulemaking with respect to either proposed product standard.

In April 2024, the FDA announced that it would delay a decision on the menthol ban indefinitely, citing the high volume of feedback received during the notice-and-comment period, and the Biden Administration’s Spring 2024 Unified Regulatory Agenda indicates that the date for any final action on these proposed product standards is to be determined.

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If any one or more of the foregoing potential product standards were to become final and was appealed and upheld in the courts, it could have a material adverse effect on our business, results of operations, cash flows or financial position, including a material adverse effect on the carrying value of certain of our assets such as our cigar trademarks.

▪ Good Manufacturing Practices:

In March 2023, the FDA, pursuant to the requirements of the FSPTCA, issued a proposed rule setting forth requirements for tobacco product manufacturers regarding the manufacture, design, packing and storage of their products.

This proposed rule establishes a framework of good manufacturing practices, including by:

▪ Tobacco Product Manufacturing Practices:

In March 2023, the FDA, pursuant to the requirements of the FSPTCA, issued a proposed rule setting forth requirements for tobacco product manufacturers regarding the manufacture, design,

packing and storage of their products.

This proposed rule establishes a framework of tobacco product manufacturing practices, including by:

▪ establishing tobacco product design and development controls;

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The Biden Administration’s Spring 2024 Unified Regulatory Agenda includes the FDA’s plans to complete rulemaking with respect to this proposed rule by April 2025.

If the proposed rule were to take effect, compliance with these requirements could result in increased costs.

If the proposed rule were to take effect, our operating companies could experience increased costs to comply with the rule.

▪ Impact on Our Business;

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Additional FDA regulatory actions under the FSPTCA could have a material adverse effect on our business, results of operations, cash flows or financial position in various ways.

For example, actions by the FDA could:

For example, actions (or inaction) by the FDA could:

▪ impact the consumer acceptability of tobacco products;

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See Liquidity and Capital Resources - Payments Under State Settlement Agreements and FDA Regulation below for a discussion of our FDA user fee payments.

In addition, compliance with the FSPTCA’s regulatory requirements has resulted, and will continue to result, in additional costs.

In addition, our operating companies’ compliance with the FSPTCA’s regulatory requirements has resulted, and will continue to result, in additional costs.

The amount of additional compliance and related costs has not been material in any given quarter or year-to-date period but could become material, either individually or in the aggregate.

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Federal, state and local cigarette excise taxes have increased substantially over the past two decades, far outpacing the rate of inflation.

Between the end of 1998 and July 29, 2024, the weighted-average state cigarette excise tax increased from $0.36 to $1.93 per pack.

As of July 29, 2024, three states (Maryland (effective in July 2024), Colorado (effective in July 2024) and Rhode Island (effective in September 2024)) have enacted excise tax increases in 2024.

Between the end of 1998 and October 28, 2024, the weighted-average state cigarette excise tax increased from $0.36 to $1.93 per pack.

As of October 28, 2024, three states (Maryland (effective in July 2024), Colorado (effective in July 2024)

and Rhode Island (effective in September 2024)) have increased excise taxes in 2024.

In addition, various increases are under consideration or have been proposed.

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We support legislation to convert ad valorem taxes on MST to a weight-based methodology because, unlike the ad valorem tax, a weight-based tax subjects cans of equal weight to the same tax.

As of July 29, 2024, the federal government, 23 states, Puerto Rico, Philadelphia, Pennsylvania and Cook County, Illinois have adopted a weight-based tax methodology for MST.

As of October 28, 2024, the federal government, 23 states, Puerto Rico, Philadelphia, Pennsylvania and Cook County, Illinois have adopted a weight-based tax methodology for MST.

North Carolina has passed legislation that will cause the state to adopt a weight-based tax methodology for MST in July 2025.

An increasing number of states and localities also are imposing excise taxes on e-vapor products and oral nicotine pouches.

As of July 29, 2024, 33 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-vapor products.

As of October 28, 2024, 33 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-vapor products.

These taxes are calculated in varying ways and may differ based on the e-vapor product form.

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The World Health Organization’s Framework Convention on Tobacco Control (the “FCTC”) entered into force in February 2005.

As of July 29, 2024, 182 countries, as well as the European Union, have become parties to the FCTC.

As of October 28, 2024, 182 countries, as well as the European Union, have become parties to the FCTC.

While the United States is a signatory of the FCTC, it is not currently a party to the agreement, as the agreement has not been submitted to, or ratified by, the U.S.

The FCTC is the first international public health treaty and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging

The treaty recommends (and in certain instances, requires) signatory nations to enact legislation that would address various tobacco-related issues.

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limit the industry’s ability to challenge certain tobacco control and underage use laws;

and provide for the dissolution of certain tobacco-related organizations and place restrictions on the establishment of any replacement organizations.

and provide for the

dissolution of certain tobacco-related organizations and place restrictions on the establishment of any replacement organizations.

In November 1998, USSTC entered into the Smokeless Tobacco Master Settlement Agreement (the “STMSA”) with the attorneys general of various states and United States territories to resolve the remaining health care cost reimbursement cases initiated against USSTC.

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For example, a number of proposals involving characterizing flavors would prohibit smokeless tobacco products with characterizing flavors without providing an exception for mint- or wintergreen-flavored products.

As of July 29, 2024, multiple states and localities are considering legislation to ban flavors in one or more tobacco products, and six states (California, Massachusetts, New Jersey, New York, Rhode Island and Utah) and the District of Columbia have passed such legislation.

Some of these states, such as New York, Utah and Illinois, exempt certain products that have received FDA market authorization through the PMTA pathway.

As of October 28, 2024, multiple states and localities are considering legislation to ban flavors in one or more tobacco products, and six states (California, Massachusetts, New Jersey, New York, Rhode Island and Utah) and the District of Columbia have passed such legislation.

Some states, such as New York, Utah and Illinois, exempt certain products that have received FDA market authorization through the PMTA pathway.

The legislation in California, which became effective in December 2022, bans the sale of most tobacco products with characterizing flavors, including menthol, mint and wintergreen.

Massachusetts and Utah passed legislation capping the amount of nicotine in e-vapor products.

Legislation relating to this issue is pending in one other state.

Indiana, Massachusetts and Utah passed legislation capping the amount of nicotine in e-vapor products.

As of October 28, 2024, legislation relating to this issue is pending in one other state.

Similar restrictions to those enacted or proposed in various U.S.

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▪ Federal, State and Local Legislation to Increase the Legal Age to Purchase Tobacco Products:

After a number of states and localities proposed and enacted legislation to increase the minimum age to purchase all tobacco products, including e-vapor products, in December 2019, the federal government passed legislation increasing the minimum age to purchase all tobacco products, including e-vapor products, to 21 nationwide.

As of July 29, 2024, 43 states, the District of Columbia and Puerto Rico have enacted laws increasing the legal age to purchase tobacco products to 21.

In December 2019, after a number of states and localities proposed and enacted legislation to increase the minimum age to purchase all tobacco products, including e-vapor products, the federal government passed legislation increasing the minimum age to purchase all tobacco products, including e-vapor products, to 21 nationwide.

As of October 28, 2024, 43 states, the District of Columbia and Puerto Rico have enacted laws increasing the legal age to purchase tobacco products to 21.

Although an increase in the minimum age to purchase tobacco products may have a negative impact on our operating companies’ sales volumes, we support raising the minimum legal age to purchase all tobacco products to 21 at the federal and state levels, as discussed above under Underage Access and Use of Certain Tobacco Products , reflecting our longstanding commitment to combat underage tobacco use.

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For example, we currently are, or recently have been, subject to a number of governmental investigations with respect to our former investment in JUUL, which we divested in March 2023, including the following:

Federal Trade Commission (“FTC”) issued a Civil Investigative Demand to us while conducting its antitrust review of our former investment

in JUUL seeking information regarding, among other things, our role in the resignation of JUUL’s former chief executive officer and the hiring by JUUL of any current or former Altria director, executive or employee (see Note 14 for a description of the FTC’s administrative complaint against us and JUUL);

Federal Trade Commission (“FTC”) issued a Civil Investigative Demand to us while conducting its antitrust review of our former investment in JUUL;

(ii) the SEC commenced an investigation relating to our acquisition, disclosures and accounting controls in connection with the JUUL investment;

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Illicit Trade in Tobacco Products

Illicit trade in tobacco products can have an adverse impact on our businesses, including the sales volumes and market shares of our companies’ innovative and smoke-free products and traditional tobacco products.

Illicit trade in tobacco products can have an adverse impact on our businesses, including the sales volumes and market shares of our operating companies’ innovative and smoke-free products and traditional tobacco products.

Illicit trade can take many forms, including the sale of counterfeit tobacco products;

the sale of tobacco products that do not comply with the FSPTCA and FDA regulations;

the sale of tobacco products in the United States that are intended for sale outside the country;

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Counterfeit versions of our products can negatively affect adult tobacco consumer experiences with and opinions of those brands.

Illegal disposable e-vapor and oral pouch products may be designed to appeal to youth and are manufactured without scientific standards, exposing consumers to undocumented risks.

Illicit disposable e-vapor and oral nicotine pouch products may be designed to appeal to youth and are manufactured without scientific standards, exposing consumers to undocumented risks.

Illicit trade in tobacco products also harms law-abiding wholesalers and retailers by depriving them of lawful sales and undermines the significant investment we have made in legitimate distribution channels.

Moreover, illicit trade in tobacco products results in federal, state and local governments losing tax revenues.

Losses in tax revenues can cause such governments to take various actions, including increasing excise taxes, imposing legislative or regulatory requirements, or asserting claims against manufacturers of tobacco products or members of the trade channels through which such tobacco products are distributed and sold, each of which could have an adverse effect on our business, results of operations, cash flows or financial position.

through which such tobacco products are distributed and sold, each of which could have an adverse effect on our business, results of operations, cash flows or financial position.

We communicate with wholesale and retail trade members regarding illicit trade in tobacco products and how we can help prevent such activities, enforce wholesale and retail trade programs and policies that address illicit trade in tobacco products and, when necessary, litigate to protect our trademarks.

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We actively engage with regulators, state and federal lawmakers, our trade partners and other stakeholders to bring awareness to these issues.

When appropriate, we also take legal action to protect our lawful e-vapor product business, such as the lawsuit we filed in federal court in California against manufacturers of illegal e-vapor products in October 2023.

All but one defendant was dismissed from this suit without prejudice on procedural grounds in January 2024, and we voluntarily dismissed the remaining defendant in February 2024.

We filed a new lawsuit against five manufacturers, four brick-and-mortar retailers and three online retailers of illicit “Elf Bar” e-vapor products in February 2024 in federal court in California.

When appropriate, we also take legal action to protect our lawful e-vapor product business, such as the lawsuit we have filed in federal court in California against manufacturers of illicit e-vapor products.

In June 2024, the U.S.

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Price, Availability and Quality of Tobacco, Other Raw Materials, Ingredients and Component Parts

Shifts in crops (such as those driven by economic conditions and adverse weather patterns), government restrictions and mandated prices, production control programs, economic trade sanctions, import duties and tariffs, international trade disruptions, inflation, geopolitical instability, climate and environmental changes and disruptions due to man-made or natural disasters may increase the cost or reduce the supply or quality of tobacco, other raw materials, ingredients or component parts used to manufacture our operating companies’ products.

Any significant change in such factors could negatively impact our ability to continue manufacturing and marketing existing products, increase our costs or negatively impact adult tobacco consumer product acceptability and have a material adverse effect on our business and profitability.

As with other agricultural commodities, tobacco price, quality and availability can be influenced by variations in weather patterns, including those caused by climate change, and macroeconomic conditions and imbalances in supply and demand, among other factors.

Shifts in crops (such as those driven by economic conditions, adverse weather patterns and natural disasters), government restrictions and mandated prices, production control programs, economic trade sanctions, import duties and tariffs, international trade disruptions, inflation, geopolitical instability, labor disruptions, climate and environmental changes and disruptions due to man-made or natural disasters may increase the cost or reduce the supply or quality of tobacco, other raw materials, ingredients or component parts used to manufacture our operating companies’ products.

Any significant change in the nature or consequences of these factors could negatively impact our ability to continue manufacturing and marketing existing products, increase our costs or negatively impact adult tobacco consumer product acceptability and have a material adverse effect on our business and profitability.

As with other agricultural commodities, tobacco price, quality and availability can be influenced by variations in weather patterns and natural disasters, including those caused by climate change, and macroeconomic conditions and imbalances in supply and demand, among other factors.

For varieties of tobacco only available in limited geographies, government-mandated prices and production control programs, political instability or government prohibitions on the import or export of tobacco in certain countries pose additional risks to price, availability and quality.

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In addition, the nicotine used in our operating companies’ innovative smoke-free products is extracted from tobacco produced in one country.

If we are unable to identify alternate sources of nicotine for our companies’ innovative products, we could be exposed to supply risk.

Current macroeconomic conditions and geopolitical instability (including inflation, high interest rates, labor shortages, supply and demand imbalances and geopolitical instability and international armed conflict) have caused and continue to cause worldwide disruptions and delays to supply chains and commercial markets, which limit access to, and increase the cost of, raw materials, ingredients and component parts (for example, tobacco leaf and resins and aluminum used in our packaging).

We have implemented and continue to implement various strategies to help secure sufficient supplies of raw materials, ingredients and component parts for production.

In addition, government taxes, restrictions and prohibitions on the sale and use of certain products may limit access to, and increase the costs of, raw materials and component parts and, potentially, impede our ability to sell certain of our products.

If we are unable to identify alternate sources of nicotine for our operating companies’ innovative products, we could be exposed to supply risk.

Current macroeconomic conditions, geopolitical instability (including inflation, high interest rates, labor shortages, supply and demand imbalances and geopolitical instability and international armed conflict) and adverse weather events have caused and continue to cause worldwide disruptions and delays to supply chains and commercial markets, which limit access to, and increase the cost of, raw materials, ingredients and component parts (for example, tobacco leaf and resins and aluminum used in our packaging).

We have implemented and continue to implement various strategies to help secure sufficient supplies of raw materials, ingredients and component parts for production, including maintaining inventory levels of certain tobacco varieties that cover several years, purchasing raw materials, ingredients and component parts from disperse geographic regions throughout the world and entering into long-term contracts with some of our tobacco growers and direct material suppliers.

To date, the impact on us of changes in the price, availability and quality of tobacco, other raw materials, ingredients and component parts has not been material.

However, the effects of the current macroeconomic and geopolitical conditions on prices, availability and quality of such items may continue, which could have a material adverse effect on our business, results of operations, cash flows or financial position.

In addition, government taxes and restrictions and prohibitions on the sale and use of certain materials used in our operating companies’ products may limit access to, and increase the costs of, raw materials and component parts and, potentially, impede our ability to sell certain of our products.

For example, certain states have passed extended producer responsibility legislation concerning packaging.

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These existing and potential future laws and regulations could increase the costs of, and impair our ability to, source certain materials used in the packaging for our products.

We work to mitigate these risks by maintaining inventory levels of certain tobacco varieties that cover several years, purchasing raw materials, ingredients and component parts from disperse geographic regions throughout the world and entering into long-term contracts with some of our tobacco growers and direct material suppliers.

To date, the impact on us of changes in the price, availability and quality of tobacco, other raw materials, ingredients and component parts has not been material.

Timing of Sales

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The following table provides reconciliations of reported OCI to adjusted OCI for our reportable segments, all other category and total OCI and provides the related OCI margins:

For the Six Months Ended June 30, 2024

For the Nine Months Ended September 30, 2024

(in millions) Smokeable Products Oral Tobacco Products All Other Total

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Operating Results

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 Change 2024 2023 Change

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(1) Reported and adjusted OCI margins are calculated as reported and adjusted OCI, respectively, divided by revenues net of excise taxes.

Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, decreased $541 million (3.3%), due primarily to lower shipment volume ($1,991 million), partially offset by higher pricing ($1,444 million), which includes higher promotional investments.

Reported OCI decreased $103 million (1.9%), due primarily to lower shipment volume ($930 million) and higher per unit settlement charges and manufacturing costs ($155 million), partially offset by higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($47 million), which include lower tobacco and health and certain other litigation items .

Adjusted OCI decreased $123 million (2.3%), due primarily to lower shipment volume and higher per unit settlement charges and manufacturing costs, partially offset by higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($33 million).

Three Months Ended June 30, 2024 Compared with Three Months Ended June 30, 2023

Reported OCI increased $91 million (1.1%), due primarily to higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($131 million), partially offset by lower shipment volume ($1,293 million) and higher per unit settlement charges and manufacturing costs ($206 million).

Adjusted OCI increased $71 million (0.9%), due primarily to higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($125 million), partially offset by lower shipment volume and higher per unit settlement charges and manufacturing costs.

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, decreased $32 million (0.6%), due primarily to lower shipment volume ($556 million), partially offset by higher pricing ($517 million), which includes higher promotional investments.

Reported OCI decreased $39 million (1.4%), due primarily to lower shipment volume ($550 million) and higher per unit settlement charges and manufacturing costs ($50 million), partially offset by higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($38 million), which include lower tobacco and health and certain other litigation items.

Adjusted OCI decreased $59 million (2.0%), due primarily to lower shipment volume and higher per unit settlement charges and manufacturing costs, partially offset by higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($18 million).

Reported OCI increased $194 million (7.1%), due primarily to higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($84 million), partially offset by lower shipment volume ($363 million) and higher per unit settlement charges.

Adjusted OCI increased $194 million (7.1%), due primarily to higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($92 million), partially offset by lower shipment volume and higher per unit settlement charges.

Shipment Volume and Retail Share Results

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Shipment Volume

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,

(sticks in millions) 2024 2023 Change 2024 2023 Change

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The following table summarizes our cigarettes retail share performance:

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 Percentage Point Change 2024 2023 Percentage Point Change

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For a discussion of volume trends and factors that impact volume and retail share performance, see Operating Results by Business Segment - Business Environment - Summary above.

Six Months Ended June 30, 2024 Compared with the Six Months Ended June 30, 2023

Our smokeable products segment’s reported and estimated adjusted domestic cigarettes shipment volume decreased 11.5%, driven primarily by the industry’s decline rate (impacted by macroeconomic pressures on adult tobacco consumers’ discretionary income and the growth of illicit e-vapor products), retail share losses and trade inventory movements.

When adjusted for trade inventory movements, our smokeable products segment domestic cigarette shipment volume decreased by an estimated 10.5%.

When adjusted for trade inventory movements and other factors, total estimated domestic cigarette industry volume decreased by an estimated 9%.

Shipments of premium cigarettes accounted for 95.7% and 94.5% of our smokeable products segment’s reported domestic cigarettes shipment volume for the six months ended June 30, 2024 and 2023, respectively.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 10.6%, driven primarily by the industry’s decline rate (impacted by the growth of illicit e-vapor products and continued discretionary income pressures on adult tobacco consumers), retail share losses and trade inventory movements, partially offset by calendar differences.

When adjusted for calendar differences and trade inventory movements, our smokeable products segment domestic cigarette shipment volume decreased by an estimated 11%.

When adjusted for calendar differences, trade inventory movements and other factors, total estimated domestic cigarette industry volume decreased by an estimated 9%.

Shipments of premium cigarettes accounted for 95.8% and 94.6% of our smokeable products segment’s reported domestic cigarettes shipment volume for the nine months ended September 30, 2024 and 2023, respectively.

Marlboro share of the premium segment was 59.3%, an increase of 0.5 share points.

Total cigarettes industry discount category retail share was 29.2%, an increase of 0.9 share points, primarily due to increased macroeconomic pressures on adult tobacco consumers’ discretionary income.

For a discussion regarding discount category dynamics in 2024 and the economic conditions, including a high inflationary environment, that impact adult tobacco consumer purchasing behavior, see Operating Results by Business Segment - Business Environment - Summary above.

Three Months Ended June 30, 2024 Compared with the Three Months Ended June 30, 2023

Our smokeable products segment’s reported and estimated adjusted domestic cigarettes shipment volume decreased 13.0%, driven primarily by the industry’s decline rate (impacted by macroeconomic pressures on adult tobacco consumers’ discretionary income and the growth of illicit e-vapor products), trade inventory movements and retail share losses.

When adjusted for trade inventory movements, our smokeable products segment domestic cigarette shipment volume decreased by an estimated 11%.

When adjusted for trade inventory movements, total estimated domestic cigarette industry volume decreased by an estimated 9.5%.

Shipments of premium cigarettes accounted for 95.8% and 94.6% of our smokeable products segment’s reported domestic cigarettes shipment volume for the three months ended June 30, 2024 and 2023, respectively.

Marlboro retail share of the total cigarette category was 42.0%, a decrease of 0.1 share point versus the prior year and unchanged sequentially.

Additionally, Marlboro share of the premium segment was 59.4%, an increase of 0.7 share points versus the prior year and 0.1 share point sequentially.

Total cigarettes industry discount category retail share was 29.3%, an increase of 1.0 share point versus the prior year and 0.2 share points sequentially, primarily due to increased macroeconomic pressures on adult tobacco consumers’ discretionary income.

Total cigarettes industry discount category retail share was 29.4%, an increase of 1.1 share points, primarily due to continued discretionary income pressures on adult tobacco consumers.

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 8.6%, driven primarily by the industry’s decline rate (impacted by the growth of illicit e-vapor products and continued discretionary income pressures on adult tobacco consumers) and retail share losses, partially offset by trade inventory movements and calendar differences.

When adjusted for trade inventory movements and calendar differences, our smokeable products segment domestic cigarette shipment volume decreased by an estimated 11.5%.

When adjusted for trade inventory movements and calendar differences, total estimated domestic cigarette industry volume decreased by an estimated 9%.

Shipments of premium cigarettes accounted for 96.1% and 95.0% of our smokeable products segment’s reported domestic cigarettes shipment volume for the three months ended September 30, 2024 and 2023, respectively.

Marlboro retail share of the total cigarette category was 41.7%, a decrease of 0.6 share points versus the prior year and 0.3 share points sequentially.

Additionally, Marlboro share of the premium segment was 59.3%, an increase of 0.3 share points versus the prior year and a decrease of 0.1 share point sequentially.

Total cigarettes industry discount category retail share was 29.8%, an increase of 1.5 share points versus the prior year and 0.5 share points sequentially, primarily due to continued discretionary income pressures on adult tobacco consumers.

For a discussion regarding discount category dynamics in 2024, the growth of illicit e-vapor products and the economic conditions, including the cumulative impact of inflation, that impact adult tobacco consumer purchasing behavior, see Operating Results by Business Segment - Business Environment - Summary above.

Pricing Actions

PM USA and Middleton executed the following pricing actions during 2024 and 2023:

▪ Effective July 14, 2024, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) , L&M and Basic by $0.17 per pack.

PM USA also increased the list price of all its other cigarette brands by $0.22 per pack.

▪ Effective April 21, 2024, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.16 per five-pack.

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PM USA also increased the list price of all its other cigarette brands by $0.20 per pack.

▪ Effective July 14, 2024, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) , L&M and Basic by $0.17 per pack.

▪ Effective October 20, 2024, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) , L&M and Basic by $0.17 per pack.

PM USA also increased the list price of all its other cigarette brands by $0.22 per pack.

▪ Effective October 6, 2024, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.13 per five-pack.

Oral Tobacco Products Segment

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Operating Results

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 Change 2024 2023 Change

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(1) Reported and adjusted OCI margins are calculated as reported and adjusted OCI, respectively, divided by revenues net of excise taxes.

Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Net revenues, which include excise taxes billed to customers, increased $54 million (4.1%), due primarily to higher pricing ($119 million), which includes lower promotional investments, partially offset by lower MST shipment volume and a higher percentage of on!

shipment volume relative to MST (“volume/mix”) ($64 million).

Reported OCI decreased $327 million (38.1%), due primarily to a non-cash impairment of the Skoal trademark ($354 million), lower volume/mix ($69 million) and higher costs ($22 million), partially offset by higher pricing, which includes lower promotional investments.

Adjusted OCI increased $27 million (3.1%), due primarily to higher pricing, which includes lower promotional investments, partially offset by lower volume/mix and higher costs.

Three Months Ended June 30, 2024 Compared with Three Months Ended June 30, 2023

Net revenues, which include excise taxes billed to customers, increased $31 million (4.6%), due primarily to higher pricing ($59 million), which includes lower promotional investments, partially offset by lower volume/mix ($29 million).

Reported OCI decreased $346 million (78.1%), due primarily to a non-cash impairment of the Skoal trademark ($354 million), lower volume/mix ($30 million) and higher costs ($22 million), partially offset by higher pricing, which includes lower promotional investments.

Adjusted OCI increased $8 million (1.8%), due primarily to higher pricing, which includes lower promotional investments, partially offset by lower volume/mix and higher costs.

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, increased $91 million (4.6%), due to higher pricing ($170 million), partially offset by lower shipment volume and a higher percentage of on!

shipment volume relative to MST ($79 million).

Reported OCI decreased $318 million (24.2%), due primarily to a non-cash impairment of the Skoal trademark ($354 million), lower shipment volume and a higher percentage of on!

shipment volume relative to MST ($82 million) and higher marketing, administration and research costs ($44 million), partially offset by higher pricing.

Adjusted OCI increased $36 million (2.7%), due primarily to higher pricing, partially offset by lower shipment volume and a higher percentage of on!

shipment volume relative to MST and higher marketing, administration and research costs.

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, increased $37 million (5.4%), due primarily to higher pricing ($51 million), which includes higher promotional investments, partially offset by a higher percentage of on!

shipment volume relative to MST (net of higher shipment volume) ($15 million).

Reported and adjusted OCI increased $9 million (2.0%), due primarily to higher pricing, which includes higher promotional investments, partially offset by higher marketing, administration and research costs ($27 million) and a higher percentage of on!

shipment volume relative to MST (net of higher shipment volume) ($13 million).

Shipment Volume and Retail Share Results

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Shipment Volume

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,

(cans and packs in millions) 2024 2023 Change 2024 2023 Change

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The following table summarizes our oral tobacco products segment’s retail share performance (excluding international volume):

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 Percentage Point Change 2024 2023 Percentage Point Change

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For a discussion of volume trends and factors that impact volume and retail share performance, see Operating Results by Business Segment - Business Environment - Summary above.

Six Months Ended June 30, 2024 Compared with Six Months Ended June 30, 2023

Our oral tobacco products segment’s reported domestic shipment volume decreased 2.5%, driven primarily by retail share losses, partially offset by the industry’s growth rate, calendar differences and other factors.

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Our oral tobacco products segment’s reported domestic shipment volume decreased 1.3%, primarily driven by retail share losses and trade inventory movements, partially offset by the industry’s growth rate, calendar differences and other factors.

When adjusted for calendar differences and trade inventory movements, our oral tobacco products segment’s reported domestic shipment volume decreased by an estimated 2.5%.

Total oral tobacco products category industry volume increased by an estimated 9% for the six months ended June 30, 2024, primarily driven by growth in oral nicotine pouches, partially offset by declines in MST volumes.

Our oral tobacco products segment’s retail share was 37.9%, as share declines for MST products were primarily driven by oral nicotine pouch segment share growth.

Total oral tobacco products category industry volume increased by an estimated 7.5% over the six months ended September 30, 2024, primarily driven by growth in oral nicotine pouches, partially offset by declines in MST volumes.

Our oral tobacco products segment’s retail share was 37.8%, as share declines for MST products were partially offset by oral nicotine pouch segment share growth.

nicotine pouch category grew to 41.9% of the U.S.

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’s share of the nicotine pouch category was 19.1%, a decrease of 3.8 share points versus the prior year.

Three Months Ended June 30, 2024 Compared with Three Months Ended June 30, 2023

Our oral tobacco products segment’s reported domestic shipment volume decreased 1.8%, driven primarily by retail share losses, partially offset by the industry’s growth rate, trade inventory movements, calendar differences and other factors.

When adjusted for trade inventory movements and calendar differences, our oral tobacco products segment’s reported domestic shipment volume decreased by an estimated 3%.

Our oral tobacco products segment’s retail share was 37.9%, as share declines for MST products were primarily driven by oral nicotine pouch segment share growth.

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Our oral tobacco products segment’s reported domestic shipment volume increased 1.2%, driven primarily by industry’s growth rate, calendar differences and other factors, partially offset by retail share losses and trade inventory movements.

When adjusted for calendar differences and trade inventory movements, our oral tobacco products segment’s reported domestic shipment volume decreased by an estimated 1%.

Our oral tobacco products segment’s retail share was 37.6%, as share declines for MST products were partially offset by oral nicotine pouch segment share growth.

oral tobacco category share for on!

nicotine pouches was 8.1%, an increase of 1.2 share points versus the prior year and 1.0 share point sequentially.

nicotine pouches was 8.9%, an increase of 2.0 share points versus the prior year and 0.8 share points sequentially.

nicotine pouch category grew to 43.9% of the U.S.

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Pricing Actions

USSTC executed the following pricing actions during 2024 and 2023:

USSTC and Helix executed the following pricing actions during 2024 and 2023:

▪ Effective August 25, 2024, Helix increased the list price on its on!

brand by $0.10 per can.

▪ Effective July 23, 2024, USSTC increased the list price on its Copenhagen , Skoal and Red Seal brands by $0.10 per can.

▪ Effective April 23, 2024, USSTC increased the list price on its Copenhagen , Skoal and Red Seal brands by $0.10 per can.

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▪ Effective January 24, 2023, USSTC increased the list price on its Copenhagen, Skoal, Red Seal and Husky brands by $0.09 per can.

▪ Effective July 23, 2024, USSTC increased the list price on its Copenhagen , Skoal and Red Seal brands by $0.10 per can.

Our NJOY e-vapor business is reported in our all other category.

Six Months Ended June 30, 2024

Reported domestic shipment volumes for the six months ended June 30, 2024 for NJOY consumables (1) and devices were 23.4 million units and 2.8 million units, respectively.

For the six months ended June 30, 2024 NJOY retail share in the U.S.

Nine Months Ended September 30, 2024

Reported domestic shipment volumes for the nine months ended September 30, 2024 for NJOY consumables (1) and devices were 33.8 million units and 3.9 million units, respectively.

For the nine months ended September 30, 2024 NJOY retail share of consumables in the U.S.

multi-outlet and convenience channel was 5.3%.

Three Months Ended June 30, 2024

Reported domestic shipment volumes for the three months ended June 30, 2024 for NJOY consumables (1) increased 14.7% sequentially to 12.5 million units.

Reported domestic shipment volume for the three months ended June 30, 2024 for NJOY devices increased 80.0% sequentially to 1.8 million units.

In the second quarter of 2024, NJOY retail share in the U.S.

multi-outlet and convenience channel increased 1.3 share points sequentially to 5.5%.

(1) E-vapor shipment volume includes NJOY ACE pods and DAILY disposables.

Three Months Ended September 30, 2024

Reported domestic shipment volumes for the three months ended September 30, 2024 for NJOY consumables (1) increased 15.6% versus the prior year to 10.4 million units.

Reported domestic shipment volume for the three months ended September 30, 2024 for NJOY devices increased 100+% versus the prior year to 1.1 million units.

In the third quarter of 2024, NJOY retail share of consumables in the U.S.

multi-outlet and convenience channel increased 2.8 share points versus the prior year to 6.2%.

(1) E-vapor shipment volume includes NJOY ACE pods and NJOY DAILY disposables.

Liquidity and Capital Resources

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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.

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 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.

In addition, we receive cash dividends on our interest in ABI and will continue to do so as long as we hold shares in ABI and ABI pays dividends.

At June 30, 2024, we had $1.8 billion of cash and cash equivalents.

At September 30, 2024, we had $1.9 billion of cash and cash equivalents.

In addition to having access to the operating cash flows of our subsidiaries, our capital resources include access to credit markets in the form of commercial paper, availability under our $3.0 billion senior unsecured 5-year revolving credit agreement (“Credit Agreement”), which we use for general corporate purposes, and access to credit markets through the issuance of long-term senior unsecured notes.

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Debt to our condensed consolidated financial statements in Item 1 (“Note 12”).

At June 30, 2024, the credit ratings and outlook for our indebtedness by major credit rating agencies were:

At September 30, 2024, the credit ratings and outlook for our indebtedness by major credit rating agencies were:

Short-term Debt Long-term Debt Outlook

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F2 BBB Stable

(1) On May 6, 2024, Moody’s changed its outlook for our indebtedness to Negative from Stable.

Credit Lines - From time to time, we have short-term borrowing needs to meet our working capital requirements arising from the timing of payments under State Settlement Agreements, quarterly income tax payments and quarterly dividend payments, and generally use our commercial paper program to meet those needs.

At June 30, 2024, we had availability under our Credit Agreement for borrowings of up to an aggregate principal amount of $3.0 billion, and we were in compliance with the covenants in our Credit Agreement.

At September 30, 2024, we had availability under our Credit Agreement for borrowings of up to an aggregate principal amount of $3.0 billion, and we were in compliance with the covenants in our Credit Agreement.

We monitor the credit quality of our bank group and do not know of any potential non-performing credit provider in that group.

For further discussion on short-term borrowings, see Note 12.

Long-Term Debt - At June 30, 2024 and December 31, 2023, our total long-term debt was $25.0 billion and $26.2 billion, respectively.

Long-Term Debt - At September 30, 2024 and December 31, 2023, our total long-term debt 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.

For further details on long-term debt, see Note 12.

At June 30, 2024, our debt-to-Consolidated net earnings and debt-to-Consolidated EBITDA ratios were calculated as follows:

For the Twelve Months Ended June 30, 2024 (1)

At September 30, 2024, our debt-to-Consolidated net earnings and debt-to-Consolidated EBITDA ratios were calculated as follows:

For the Twelve Months Ended September 30, 2024 (1)

(in millions)

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Asset impairment 354

Fair value adjustment for NJOY Transaction contingent payments 140

Consolidated EBITDA $ 12,045

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(1) Calculated as of the end of the applicable quarter on a rolling four quarters basis.

(2) Balance at June 30, 2024.

(2) Balance at September 30, 2024.

ABI Transaction - As discussed in Note 6, in March 2024, we received pre-tax cash proceeds from the ABI Transaction of approximately $2.4 billion and paid transaction costs of approximately $62 million.

We used the proceeds from the ABI Transaction to fund the ASR transactions discussed below.

NJOY Contingent Payments - On June 21, 2024, the FDA issued MGOs for four NJOY e-vapor menthol products.

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

NJOY Contingent Payments - In the second quarter of 2024, the FDA issued MGOs for four NJOY e-vapor menthol products.

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

For further discussion on the NJOY contingent payments, see Note 2 .

Guarantees and Other Similar Matters - As discussed in Note 14, we had unused letters of credit obtained in the ordinary course of business and guarantees (including third-party guarantees) outstanding at June 30, 2024.

From time to time, we also issue lines of credit to affiliated entities.

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The amounts charged to cost of sales for FDA user fees are generally paid in the quarter in which the fees are incurred.

We paid approximately $3.1 billion and $3.4 billion for the six months ended June 30, 2024 and 2023, respectively, in connection with the State Settlement Agreements and FDA user fees, primarily all of which was paid in the

second quarter of each period.

We recorded $1.9 billion and $2.0 billion of charges to cost of sales for the six months ended June 30, 2024 and 2023, respectively, and $1.0 billion of charges to cost of sales for both the three months ended June 30, 2024 and 2023, in connection with the State Settlement Agreements and FDA user fees.

As previously stated, the payments due under the terms of the State Settlement Agreements and FDA user fees are subject to adjustment for several factors, including volume, operating income, inflation and certain contingent events and, in general, are allocated based on each manufacturer’s market share.

We paid approximately $3.3 billion and $3.5 billion for the nine months ended September 30, 2024 and 2023, respectively, in connection with the State Settlement Agreements and FDA user fees, primarily all of which was paid in

the second quarter of each period.

We recorded $2.9 billion and $3.0 billion of charges to cost of sales for the nine months ended September 30, 2024 and 2023, respectively, and $0.9 billion and $1.0 billion of charges to cost of sales for the three months ended September 30, 2024 and 2023, respectively, in connection with the State Settlement Agreements and FDA user fees.

The payments due under the terms of the State Settlement Agreements and FDA user fees are subject to adjustment for several factors, including volume, operating income, inflation and certain contingent events and, in general, are allocated based on each manufacturer’s market share.

The future payment amounts discussed above are estimates, and actual payment amounts will differ to the extent underlying assumptions differ from actual future results.

For further discussion on the potential impact of inflation on future payments, see Operating Results by Business Segment - Business Environment - State Settlement Agreements above.

Litigation-Related Deposits and Payments - With respect to certain adverse verdicts currently on appeal, to obtain stays of judgments pending appeals, as of June 30, 2024, PM USA had posted appeal bonds totaling $37 million, which have been collateralized with restricted cash that is included in assets on our condensed consolidated balance sheet.

Litigation-Related Deposits and Payments - With respect to certain adverse verdicts currently on appeal, to obtain stays of judgments pending appeals, as of September 30, 2024, PM USA had posted appeal bonds totaling $31 million, which have been collateralized with restricted cash that is included in assets on our condensed consolidated balance sheet.

Litigation is subject to uncertainty, and an adverse outcome or settlement of litigation could have a material adverse effect on our results of operations, cash flows or financial position in a particular fiscal quarter or fiscal year, as more fully disclosed in Note 14.

Equity and Dividends

During the first six months of 2024 and 2023, we paid dividends of $3,420 million and $3,365 million, respectively, an increase of 1.6%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase programs.

During the first nine months of 2024 and 2023, we paid dividends of $5,108 million and $5,040 million, respectively, an increase of 1.3%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase programs.

In August 2024, our Board of Directors 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.

Our current annualized dividend rate is $4.08 per share.

We have a progressive dividend goal targeting mid-single digits dividend growth annually.

Future dividend payments remain subject to the discretion of our Board of Directors (“Board of Directors” or “Board”).

We have a progressive dividend goal targeting mid-single digits dividend growth annually through 2028.

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

ASR - In March 2024, we increased our $1.0 billion share repurchase program to $3.4 billion and entered into the ASR transactions.

We paid $2.4 billion for the repurchase of our common stock in the ASR transactions in the first quarter of 2024, and the final settlement of the ASR transactions occurred in the second quarter of 2024.

In the first half of 2024, we paid $2.4 billion for the repurchase of our common stock in the ASR transactions.

We funded the ASR transactions with proceeds from the ABI Transaction.

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Cash Provided by/Used in Operating Activities

During the first six months of 2024, net cash provided by operating activities was $2,802 million compared with $3,108 million during the first six months of 2023.

This decrease was due primarily to lower net revenues and higher litigation payments, partially offset by lower State Settlement Agreements and federal excise tax payments.

We had a working capital deficit at June 30, 2024 and December 31, 2023, and believe we have the ability to fund working capital deficits with cash provided by operating activities, borrowings under our Credit Agreement and access to the credit and capital markets.

During the first nine months of 2024, net cash provided by operating activities was $5,413 million compared with $6,060 million during the first nine months of 2023.

This decrease was due primarily to payments for certain transferable income tax credits, higher litigation payments and a portion of the NJOY contingent payments ($140 million).

We had a working capital deficit at September 30, 2024 and December 31, 2023, and believe we have the ability to fund working capital deficits with cash provided by operating activities, borrowings under our Credit Agreement and access to the credit and capital markets.

Cash Provided by/Used in Investing Activities

During the first six months of 2024, net cash provided by investing activities was $2,279 million compared with net cash used in investing activities of $2,858 million during the first six months of 2023.

This change was due primarily to proceeds from the ABI Transaction in 2024 and the NJOY Transaction in 2023.

During the first nine months of 2024, net cash provided by investing activities was $2,238 million compared with net cash used in investing activities of $1,217 million during the first nine months of 2023.

This change was due primarily to proceeds from the ABI Transaction in 2024 and the NJOY Transaction in 2023, partially offset by proceeds from the sale of IQOS System commercialization rights in 2023.

Capital expenditures for 2024 are expected to be in the range of $125 million to $175 million, a reduction from the previous range of $175 million to $225 million, and are expected to be funded from operating cash flows.

Cash Provided by/Used in Financing Activities

During the first six months of 2024, net cash used in financing activities was $6,966 million compared with $3,418 million during the first six months of 2023.

This increase was due to proceeds from short-term borrowings in 2023 and higher share repurchases and dividends paid in 2024, partially offset by lower repayments of long-term debt in 2024.

During the first nine months of 2024, net cash used in financing activities was $9,444 million compared with $7,353 million during the first nine months of 2023.

This increase was due to higher share repurchases in 2024 and a portion of the NJOY contingent payments ($110 million), partially offset by lower repayments of long-term debt in 2024.

New Accounting Guidance Not Yet Adopted

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

Neither the Guarantor nor other 100% owned subsidiaries of the Parent that are not guarantors of the debt (“Non-Guarantor Subsidiaries”) are limited by contractual obligations on their ability to pay cash dividends or make other distributions with respect to their equity interests.

Neither the Guarantor nor other 100% owned subsidiaries of the Parent that are not guarantors of the debt (“Non-

Guarantor Subsidiaries”) are limited by contractual obligations on their ability to pay cash dividends or make other distributions with respect to their equity interests.

The following tables include summarized financial information for the Parent and the Guarantor.

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Parent Guarantor

June 30, 2024 December 31, 2023 June 30, 2024 December 31, 2023

September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023

Due from Non-Guarantor Subsidiaries

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(in millions of dollars)

For the Six Months Ended June 30, 2024

For the Nine Months Ended September 30, 2024

Guarantor (2)

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Net earnings (losses) (350) 5,803

(1) For the six months ended June 30, 2024, net earnings (losses) include $184 million of intercompany interest income from non-guarantor subsidiaries and $232 million of interest expense from non-guarantor subsidiaries.

(2) For the six months ended June 30, 2024, net earnings (losses) include $154 million of intercompany interest income from non-guarantor subsidiaries.

(1) For the nine months ended September 30, 2024, net earnings (losses) include $276 million of intercompany interest income from non-guarantor subsidiaries and $333 million of interest expense from non-guarantor subsidiaries.

(2) For the nine months ended September 30, 2024, net earnings (losses) include $218 million of intercompany interest income from non-guarantor subsidiaries.

Cautionary Factors That May Affect Future Results

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Achievement of future results is subject to risks, uncertainties and assumptions that may prove to be inaccurate.

Should known or unknown risks or uncertainties materialize, or should underlying estimates or

assumptions prove inaccurate, actual results could differ materially from those anticipated, estimated or projected.

Should known or unknown risks or uncertainties materialize, or should underlying estimates or assumptions prove inaccurate, actual results could differ materially from those anticipated, estimated or projected.

You should bear this in mind as you consider our forward-looking statements and whether to invest in or remain invested in our securities.

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▪ our inability to compete effectively;

▪ the growth of the e-vapor category, including illegal disposable e-vapor products, which contributes to reductions in domestic cigarette consumption levels and shipment volume;

▪ the risks associated with illicit trade in tobacco products, including counterfeit products, illegally imported products, illegal disposable e-vapor products, illicit oral nicotine products, and products designed to avoid the regulatory framework for tobacco products, such as products using nicotine analogues, each of which contribute to reductions in the consumption levels and shipment volumes of our businesses’ products;

▪ our failure to commercialize innovative products, including tobacco products that may reduce health risks relative to other tobacco products and appeal to adult tobacco consumers;

▪ the growth of the e-vapor category, including illicit disposable e-vapor products, which contributes to reductions in domestic cigarette consumption levels and shipment volume;

▪ the risks associated with illicit trade in tobacco products (including counterfeit products, illegally imported products, illicit disposable e-vapor products and oral nicotine pouch products) and the sale of products designed to avoid the regulatory framework for tobacco products, such as products using nicotine analogues, each of which contribute to reductions in the consumption levels and shipment volumes of our businesses’ products;

▪ our failure to develop and commercialize innovative products, including tobacco products that may reduce health risks relative to other tobacco products and appeal to adult tobacco consumers;

▪ changes, including in macroeconomic and geopolitical conditions (including inflation), that result in shifts in adult tobacco consumer disposable income and purchasing behavior, including choosing lower-priced and discount brands or products, and reductions in shipment volumes;

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▪ our failure, or the failure of our key service providers or key suppliers, to comply with laws related to personal data protection, privacy, artificial intelligence and information security;

▪ our ability to recognize the expected cost savings in connection with the Initiative or successfully reinvest those savings in our businesses in support of our Vision and 2028 Enterprise Goals, in each case, in the expected manner or time frame or at all;

▪ the risk that the expected benefits of our investment in ABI may not materialize in the expected manner or timeframe or at all, including due to macroeconomic and geopolitical conditions;

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and reductions in the number of directors that we can have appointed to the ABI board of directors;

▪ the risks associated with our investment in Cronos, including legal, regulatory and reputational risks and the risk that the expected benefits of the transaction may not materialize in the expected timeframe or at all.

You should understand that it is not possible to predict or identify all factors and risks.

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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 2. Management’s Discussion and Analysis