What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-07-30 compared with 2025-04-29 · 384 added, 316 removed, 756 unchanged (48% of the section changed)

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Financial Statements of this Form 10-Q (“Item 1”).

When used in this Form 10-Q, the terms “ Altria,” “we,” “us” and “our” refer to either (i) Altria Group, Inc.

When used in this Form 10-Q, the terms “ Altria,” “we,” “us” and “our” refer to either (i)

Altria Group, Inc.

and its consolidated subsidiaries or (ii) Altria Group, Inc.

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tobacco consumers age 21+.

Our Vision is to responsibly lead the transition of adult smokers to a smoke-free future (“Vision”).

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.

We are Moving Beyond Smoking ™, by responsibly transitioning adult smokers to a smoke-free future, competing vigorously for existing smoke-free adult nicotine consumers and exploring new growth opportunities - beyond the United States and beyond nicotine (“Vision”).

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

For further discussion of our 2028 Goals, see our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”).

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Food and Drug Administration (“FDA”).

In January 2025, the U.S.

International Trade Commission (“ITC”) issued an exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE (NJOY’s pod-based e-vapor product) in the United States, which became effective on March 31, 2025.

For further discussion, see Note 14.

Contingencies to our condensed consolidated financial statements in Item 1 (“Note 14”).

Additionally, we have a majority-owned joint venture, Horizon Innovations LLC (“Horizon”), for the U.S.

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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 businesses, including the value of our investments in equity securities, in the future.

In this section, we focus on the discretionary income pressures on adult tobacco consumers, illicit flavored disposable e-vapor products, the ITC orders on NJOY ACE , recent regulatory actions and tariffs and their effects or potential effects on our businesses.

Other trends and developments are discussed elsewhere in MD&A.

adult tobacco consumers remained under pressure throughout the first quarter of 2025 largely due to the compounding effects of high prices exceeding overall wage growth and historically high levels of consumer credit and delinquency rates, which are beginning to moderate.

Although inflation rates moderated in the first quarter of 2025, increased prices and anticipation of higher prices from increased tariffs may further pressure adult tobacco consumers.

We have not yet seen a material impact on adult tobacco consumer purchasing behavior from the impact of tariffs and tariff speculation.

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

however, we expect discretionary income pressures will continue to influence adult tobacco consumers’ purchase behaviors through 2025.

In addition, we are monitoring the effects of tariffs on our businesses, including prices and the availability and quality of raw materials and ingredient and component parts for production.

In this section, we focus on the discretionary income pressures on adult tobacco consumers, illicit flavored disposable e-vapor products, tariffs and evolving consumer preferences.

Other trends and developments are discussed elsewhere in this MD&A.

During the first half of 2025, U.S.

adult tobacco consumers continued to face pressure on discretionary income due to the cumulative effects of inflation, particularly impacting lower income consumers.

Although the inflation rate during this period saw marginal decreases in line with most economists’ forecast, it remained above the Federal Reserve’s target of 2%.

Persistent high prices for essentials such as groceries and housing continued to constrain consumer spending.

While gas prices declined compared to the prior year, the average price of gas remained above $3.00 per gallon.

Additionally, tariffs introduced in April of 2025 remained at historically high levels.

Ongoing trade negotiations, along with potential inflation and unemployment concerns, have weighed on consumer confidence creating a likelihood of continued headwinds for discretionary spending.

While we have not seen a material impact on adult tobacco consumer purchasing behavior as a result of tariffs and tariff speculation, we continue to monitor the additional pressure that tariff-related price increases may have.

In addition, we are monitoring other effects of tariffs on our businesses, including the price, availability and quality of raw materials and ingredients, and component parts for production.

While we expect higher tariffs to impact our costs in 2025, we do not expect the impact to be material based on presently available information on tariffs.

Overall discretionary income pressures on adult tobacco consumers have resulted in increased discount brand share performance and evolving adult tobacco consumer preferences, each of which have negatively impacted the sales volumes of

our companies’ premium brands.

For the second quarter of 2025, the discount share of the cigarette category reached 31.2%, an increase of 1.9 share points versus the second quarter of 2024.

Additionally, 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.

We estimate that, when adjusted for calendar differences, trade inventory movements and other factors, total estimated domestic cigarette industry volume declined by 8.5% in the second quarter of 2025 versus the second quarter of 2024.

In addition, the U.S.

nicotine pouch category continued to grow throughout the second quarter of 2025 to 52.0% of the U.S.

oral tobacco category, an increase of 10.0 share points versus the second quarter of 2024.

As innovative smoke-free products evolve to better address the preferences of adult tobacco consumers, these consumers continue to transition from cigarettes and MST products to innovative smoke-free tobacco products, which has negatively impacted the sales volumes of our companies’ cigarette and MST products.

Product assortment, regulation and enforcement continue to evolve in the e-vapor category.

For the 12 months ended March 31, 2025, we estimate the e-vapor category grew by approximately 30% versus the prior 12-month period, driven by the growth of illicit flavored disposable e-vapor products.

We estimate that illicit products now represent more than 60% of the e-vapor category.

In response to the proliferation of illicit disposable e-vapor products, states and the federal government took various regulatory and enforcement actions throughout the year in 2024, but these actions have failed to slow this trend.

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

Flavored disposable e-vapor products have continued driving growth in the e-vapor category.

We estimate that flavored disposable e-vapor products, the majority of which we believe have evaded the regulatory process, represent more than 60% of the e-vapor category.

In response to the proliferation of illicit flavored disposable e-vapor products, states and the federal government have taken various regulatory and enforcement actions.

For example, the FDA and Customs and Border Protection have made it more difficult to import properly declared illicit e-vapor products, seized unauthorized vapor products and issued warning letters to importers.

However, although the FDA, in conjunction with other federal entities, has increased enforcement activity, insufficient actions against manufacturers, distributors and retailers of tobacco products requiring FDA review for which no pre-market tobacco product applications (“PMTA”) have been submitted have allowed such products to continue to proliferate in the market.

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

Throughout 2024 and into the first quarter of 2025, various synthetic oral nicotine pouch products emerged in traditional tobacco retailers.

Throughout 2024 and the first half of 2025, various synthetic oral nicotine pouch products emerged in traditional tobacco retailers.

We continue to track the overall dynamics across multiple tobacco categories as well as competitive threats to our brands.

As discussed above in Our Business , the ITC orders related to NJOY ACE became effective March 31, 2025.

As a result, we performed an interim impairment assessment for the e-vapor reporting unit and recorded a non-cash impairment of our e-vapor reporting unit goodwill.

For further discussion, see Note 4.

Goodwill and Other Intangible Assets, net to our condensed consolidated financial statements in Item 1 (“Note 4”).

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

For example, the FDA proposed a tobacco product standard that would establish a maximum nicotine level in cigarettes and certain other combustible tobacco products significantly lower than the average concentration in these products

on the market today with the aim of making such products minimally or non-addictive.

The proposed rule, if not withdrawn, may proceed through the rulemaking process.

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

ABI’s business is exposed to foreign exchange rate fluctuations, inflation, commodity price movements and other macroeconomic factors that could impact financial performance from time to time.

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.

For additional information on our investment in ABI, see Note 6.

Investments in Equity Securities to our condensed consolidated financial statements in Item 1 (“Note 6”).

With the exception of the impact of the ITC orders on NJOY, the trends and developments above have not had a material adverse impact on our businesses.

We do not believe the trends and developments discussed above have materially impacted our ability to achieve our Vision.

As the trends and developments 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 Three Months Ended March 31, 2025

The changes in net earnings and diluted EPS for the three months ended March 31, 2025, from the three months ended March 31, 2024, were due primarily to the following:

The trends and developments above have not had a material adverse impact on our results of operations, cash flows or financial position or our ability to achieve our Vision.

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

Consolidated Results of Operations for the Six Months Ended June 30, 2025

The changes in net earnings and diluted EPS for the six months ended June 30, 2025, from the six months ended June 30, 2024, were due primarily to the following:

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

For the three months ended March 31, 2024

For the six months ended June 30, 2024

$ 5,932 $ 3.41

2024 NPM Adjustment Items

2024 Acquisition and disposition-related items

(1,882) (1.09)

2024 Asset impairment, exit and implementation costs 264 0.15

2024 Tobacco and health and certain other litigation items

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Subtotal 2024 special items (1)

2025 Acquisition-related items

(1,598) (0.92)

2025 Acquisition and disposition-related items

2025 Asset impairment, exit and implementation costs

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Operations 128 0.07

For the three months ended March 31, 2025

For the six months ended June 30, 2025

$ 3,455 $ 2.04

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▪ Operations:

The increase of $11 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI, partially offset by lower income from our equity investment in ABI and lower net periodic benefit income, excluding service cost.

The increase of $128 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI, partially offset by lower income from our equity investment in ABI and higher interest and other debt expense, net.

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

Consolidated Results of Operations for the Three Months Ended June 30, 2025

The changes in net earnings and diluted EPS for the three months ended June 30, 2025, from the three months ended June 30, 2024, were due primarily to the following:

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

For the three months ended June 30, 2024

$ 3,803 $ 2.21

2024 Acquisition and disposition-related items

(1,882) (1.09)

2024 Asset impairment, exit and implementation costs 264 0.15

2024 Tobacco and health and certain other litigation items

2024 Amortization of intangibles

2024 ABI-related special items

2024 Cronos-related special items

2024 Income tax items

Subtotal 2024 special items (1)

(1,515) (0.88)

2025 Acquisition and disposition-related items

$ (12) $ (0.01)

2025 Asset impairment, exit and implementation costs

2025 Tobacco and health and certain other litigation items

2025 Amortization of intangibles

2025 ABI-related special items

2025 Cronos-related special items

2025 Income tax items

Subtotal 2025 special items

Fewer shares outstanding — 0.03

Change in tax rate 28 0.01

Operations 117 0.07

For the three months ended June 30, 2025

$ 2,378 $ 1.41

2025 Reported Net Earnings and Reported Diluted EPS

$ 2,378 $ 1.41

2024 Reported Net Earnings and Reported Diluted EPS

$ 3,803 $ 2.21

% Change (37.5) % (36.2) %

2025 Adjusted Net Earnings and Adjusted Diluted EPS

$ 2,433 $ 1.44

2024 Adjusted Net Earnings and Adjusted Diluted EPS

$ 2,288 $ 1.33

% Change 6.3 % 8.3 %

(1) Prior period amounts have been recast to conform with current period presentation for amortization of intangibles, which we did not previously identify as a special item and we now exclude from our adjusted financial measures.

See Non-GAAP Financial Measures below.

For a discussion of special items and other business drivers affecting the comparability of statements of earnings amounts and reconciliations of adjusted earnings and adjusted diluted EPS, see Consolidated Operating Results below.

▪ Fewer Shares Outstanding:

Fewer shares outstanding were due to shares we repurchased under our share repurchase programs.

▪ Operations:

The increase of $117 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI, partially offset by lower income from our equity investment in ABI and higher interest and other debt expense, net.

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

Non-GAAP Financial Measures

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However, our management also reviews certain financial results, including OCI, OCI margins, net earnings and diluted EPS, on an adjusted basis, which excludes certain income and expense items that our management believes are not part of underlying operations.

These items may include, for example, loss on early extinguishment of debt, restructuring charges, asset impairment charges, acquisition, disposition and integration-related items, equity investment-related special items, certain income tax items, charges associated with tobacco and health and certain other litigation items, resolutions of certain non-participating manufacturer (“NPM”) adjustment disputes under the Master Settlement Agreement (“NPM Adjustment Items”) and amortization expense associated with definite-lived intangible assets (“amortization of intangibles”).

litigation items, resolutions of certain non-participating manufacturer (“NPM”) adjustment disputes under the Master Settlement Agreement (“NPM Adjustment Items”) and amortization expense associated with definite-lived intangible assets (“amortization of intangibles”).

In addition, our management reviews the ratio of debt-to-Consolidated EBITDA, which we use as a factor to determine our ability to access the capital markets and make investments in pursuit of our Vision.

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Beginning in the first quarter of 2025, we changed our treatment of our amortization of intangibles that we previously included in our adjusted results, including adjusted net earnings and adjusted diluted EPS, and now treat this expense as a special item and exclude it from our adjusted results.

Amortization of definite-lived intangibles is significantly impacted by the timing, frequency and size of acquisitions, each with unique facts and circumstances, which could result in amortization charges that could be inconsistent in size and timing.

Amortization of intangibles is significantly impacted by the timing, frequency and size of acquisitions, each with unique facts and circumstances, which could result in amortization charges that could be inconsistent in size and timing.

Net revenues generated from these definite-lived intangible assets during the periods presented, if applicable, are included in our adjusted financial measures.

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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.

Except for the factors leading us to perform a quantitative assessment for the e-vapor reporting unit as discussed below, there have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required as of March 31, 2025.

There have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required for the three months ended June 30, 2025.

We will perform our annual impairment testing during the fourth quarter of 2025.

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At December 31, 2024, the estimated fair value of the e-vapor reporting unit exceeded its carrying value by approximately 28% ($0.3 billion).

As further discussed in Note 4, we determined the estimated fair value of the e-vapor reporting unit as of March 31, 2025 was below its carrying value and recorded a non-cash goodwill impairment of $873 million for the three months ended March 31, 2025 in our condensed consolidated statements of earnings.

As further discussed in Note 4.

Goodwill and Other Intangible Assets, net to our condensed consolidated financial statements in Item 1 (“Note 4”), we determined the estimated fair value of the e-vapor reporting unit as of March 31, 2025 was below its carrying value and recorded a non-cash goodwill impairment of $873 million for the three months ended March 31, 2025 in our condensed consolidated statements of earnings.

As of March 31, 2025, after recording the goodwill impairment, the carrying value of goodwill within the e-vapor reporting unit was $895 million.

In addition, the carrying value of the e-vapor reporting unit’s net assets (including the effect of intercompany debt), which was negative, approximated its estimated fair value.

We used an income approach to estimate the fair value of the e-vapor reporting unit.

At March 31, 2025, we used an income approach to estimate the fair value of the e-vapor reporting unit.

Due to the uncertainties discussed below, our discounted cash flows are based on a range of scenarios that consider certain potential regulatory and market outcomes.

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For further discussion of these factors, see Operating Results by Business Segment - Business Environment below.

While our management believes that the estimated fair value of the e-vapor reporting unit at March 31, 2025 is reasonable, if the assumptions or judgments regarding the expectations for the future state of the e-vapor category and NJOY’s business discussed above fail to materialize as anticipated or if the discount rate used to estimate the fair value increases, we could have additional non-cash impairments of our e-vapor reporting unit goodwill in future periods, which could be material.

A hypothetical 1% increase to the discount rate used to estimate the fair value of the e-vapor reporting unit would have resulted in an additional goodwill impairment charge of approximately $275 million in the first quarter of 2025.

Our management believes that the estimated fair value of the e-vapor reporting unit at March 31, 2025 remains reasonable and no events or circumstances exist indicating an impairment for the three months ended June 30, 2025.

If the assumptions or judgments regarding the expectations for the future state of the e-vapor category and NJOY’s business discussed above fail to materialize as anticipated or if the discount rate used to estimate the fair value increases, we could have additional non-cash impairments of our e-vapor reporting unit goodwill in future periods, which could be material.

A hypothetical 1% increase to the discount rate used to estimate the fair value of the e-vapor reporting unit as of March 31, 2025 would have resulted in an additional goodwill impairment charge of approximately $275 million in the first quarter of 2025.

Skoal Trademark Indefinite-Lived Intangible Asset

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MST products, including Skoal , continued to be negatively impacted due in part to evolving adult tobacco consumer preferences, which have continued to contribute to reductions in sales volumes for MST products, including Skoal .

For further discussion, see Operating Results by Business Segment - Business Environment below.

For further discussion, see Trends and Developments above and Operating Results by Business Segment - Business Environment - Summary below.

If the decline in sales volume for Skoal is higher than currently estimated and results in material revenue declines, we believe there may be a material adverse effect on the significant assumptions used in performing our valuation.

We believe that the estimated fair value of the Skoal trademark at December 31, 2024 was reasonable and no events or circumstances existed indicating an impairment at March 31, 2025.

We believe that the estimated fair value of the Skoal trademark at December 31, 2024 remains reasonable and no events or circumstances exist indicating an impairment for the three months ended June 30, 2025.

If Skoal ’s actual revenue and income or long-term outlook are significantly unfavorable compared to forecasted performance used to estimate the fair value or if the discount rate used to estimate the fair value increases, we could have material non-cash impairments of the Skoal trademark in future periods.

Based on the 2024 annual impairment test, a hypothetical 1% increase to the discount rate used would have resulted in a pre-tax impairment charge to the Skoal intangible asset of approximately $85 million.

For further discussion of goodwill and other intangible assets, including the impairment of the e-vapor reporting unit goodwill in the first quarter of 2025, see Note 4.

Investment in Cronos

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

At March 31, 2025, the fair value of our investment in Cronos was less than its carrying value by approximately $25 million, or approximately 8%.

Based on our evaluation of the duration and magnitude of the fair value decline, our evaluation of Cronos’s financial condition (including its strong cash position) and near-

term prospects, and our intent and ability to hold our investment in Cronos until recovery, we concluded that the decline in fair value of our investment in Cronos below its carrying value is temporary and, therefore, no impairment was recorded.

At April 24, 2025, the fair value of our investment in Cronos was less than its carrying value by approximately $18 million or approximately 6%.

We will continue to monitor our investment in Cronos.

If we were to conclude that the decline in fair value is other than temporary, we would determine and recognize, in the period identified, the impairment of our investment.

For further discussion of goodwill and other intangible assets, including the impairments of the e-vapor reporting unit goodwill in the first quarter of 2025 and the Skoal trademark in the second quarter of 2024, see Note 4.

Consolidated Operating Results

For the Three Months Ended March 31,

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

(in millions) 2025 2024 2025 2024

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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 three months ended March 31:

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

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

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$ 4,801 $ 1,346 $ 3,455 $ 2.04

Acquisition-related items 79 14 65 0.04

Acquisition and disposition-related items 95 18 77 0.05

Asset impairment, exit and implementation costs 903 7 896 0.53

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NPM Adjustment Items (6) (1) (5) —

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

Asset impairment, exit and implementation costs 354 90 264 0.15

Tobacco and health and certain other litigation items 68 16 52 0.03

Amortization of intangibles

64 10 54 0.03

ABI-related special items (62) (14) (48) (0.02)

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See Non-GAAP Financial Measures above.

The following special items affected the comparability of statements of earnings amounts for the three months ended March 31, 2025 and 2024:

▪ Acquisition-related items:

We recorded net pre-tax charges of $54 million for the three months ended March 31, 2025, primarily due to expenses related to the ITC exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE in the United States.

These charges include insurance recoveries from insurance contracts associated with the acquisition of NJOY Holdings (“NJOY Transaction”).

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

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

2025 Reported

$ 3,118 $ 740 $ 2,378 $ 1.41

Acquisition and disposition-related items 16 4 12 0.01

Asset impairment, exit and implementation costs 15 3 12 0.01

Tobacco and health and certain other litigation items

Amortization of intangibles 37 6 31 0.02

ABI-related special items (19) (3) (16) (0.01)

Cronos-related special items 2 — 2 —

Income tax items — (10) 10 —

2025 Adjusted for Special Items

$ 3,174 $ 741 $ 2,433 $ 1.44

2024 Reported

$ 5,116 $ 1,313 $ 3,803 $ 2.21

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

Asset impairment, exit and implementation costs 354 90 264 0.15

Tobacco and health and certain other litigation items 44 11 33 0.02

Amortization of intangibles

ABI-related special items 24 5 19 0.01

Cronos-related special items 3 1 2 —

Income tax items — (19) 19 0.01

2024 Adjusted for Special Items (1)

$ 3,021 $ 733 $ 2,288 $ 1.33

See Non-GAAP Financial Measures above.

The following special items affected the comparability of statements of earnings amounts for the six and three months ended June 30, 2025 and 2024:

▪ Acquisition and disposition-related items:

We recorded net pre-tax charges of $70 million and $16 million for the six and three months ended June 30, 2025, respectively, due to expenses related to the U.S International Trade Commission (“ITC”) exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE in the United States.

These charges are net of insurance recoveries from insurance contracts associated with the acquisition of NJOY Holdings, Inc.

(“NJOY Transaction”).

For further information on the ITC’s determination, see E-vapor Product Litigation in Note 14 .

We recorded these items for the three months ended March 31, 2025 as follows:

(in millions)

Contingencies to our condensed consolidated financial statements in Item 1 (“Note 14”).

We recorded these items as follows:

(in millions) For the Six Months Ended June 30, 2025 For the Three Months Ended June 30, 2025

Net revenues (1)

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Marketing, administration and research costs (2)

Total $ 70 $ 16

(1) Included in our all other category.

(2) Recorded as general corporate expense, net of $25 million in insurance recoveries.

Total costs incurred to date associated with the ITC determination and patent infringement lawsuits related to the NJOY Transaction were $137 million, which were offset by insurance recoveries of $47 million.

In 2024 and 2025, we incurred total costs of $156 million associated with the ITC determination and patent infringement lawsuits related to the NJOY Transaction, which were offset by insurance recoveries of $50 million.

These total amounts include $61 million of costs offset by $25 million of insurance recoveries recorded in 2024.

Additionally, we recorded a non-cash, pre-tax charge of $25 million for the three months ended March 31, 2025 for the increase in the fair value of the contingent payments associated with the NJOY Transaction.

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

Additionally, we recorded a non-cash, pre-tax charge of $25 million for the six months ended June 30, 2025 for the change in the fair value of the contingent payments associated with the NJOY Transaction.

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 NJOY Transaction.

These charges were recorded as general corporate expense and included in

marketing, administration and research costs in our condensed consolidated statements of earnings.

For further information, see Contingent Payments in Note 7.

Financial Instruments .

▪ Amortization of Intangibles:

We recorded pre-tax amortization expense of definite-lived intangible assets of $37 million and $27 million for the three months ended March 31, 2025 and 2024, respectively, in marketing, administration and research costs in our condensed consolidated statements of earnings.

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.

in April 2024, for the six and three months ended June 30, 2024.

▪ Asset Impairment, Exit and Implementation Costs:

We recorded a non-cash impairment charge of $873 million to reduce the carrying value of the e-vapor reporting unit goodwill to its estimated fair value for the three months ended March 31, 2025 in our all other category.

There is no income tax benefit associated with the impairment of the e-vapor reporting unit goodwill as the impairment is non-deductible for tax purposes.

We recorded pre-tax charges of $903 million, which consisted primarily of a non-cash impairment charge of $873 million to reduce the carrying value of the e-vapor reporting unit goodwill to its estimated fair value for the six months ended June 30, 2025 in our all other category.

There was no income tax benefit associated with the impairment of the e-vapor reporting unit goodwill as the impairment is non-deductible for tax purposes.

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.

For further discussion, see Note 4.

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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.

▪ Amortization of Intangibles:

We recorded pre-tax amortization expense of definite-lived intangible assets of $74 million and $64 million for the six months ended June 30, 2025 and 2024, respectively, and $37 million for the three months ended June 30, 2025 and 2024, respectively, in marketing, administration and research costs in our condensed consolidated statements of earnings.

▪ ABI-Related Special Items:

We recorded net pre-tax income of $86 million from our investment in ABI for the three months ended March 31, 2024, which consists primarily of a gain related to our sale of a portion of our investment in ABI (“ABI Transaction”), net of transaction costs.

We recorded net pre-tax income of $62 million from our investment in ABI for the six months ended June 30, 2024, which consisted primarily of a gain related to our sale of a portion of our investment in ABI (“ABI Transaction”), net of transaction costs.

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

Investments in Equity Securities to our condensed consolidated financial statements in Item 1.

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.

▪ Income Tax Items:

We recorded income tax items of $71 million, for the three months ended March 31, 2024, due primarily to an income tax benefit from the partial release of a valuation allowance on our losses related to our former investment in JUUL Labs, Inc.

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 associated with our losses related to our former investment in JUUL Labs, Inc.

(“JUUL”), 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.

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024

Net revenues, which include excise taxes billed to customers, decreased $424 million (3.6%), due primarily to lower net revenues in our smokeable products segment.

Cost of sales decreased $329 million (10.8%), due primarily to lower shipment volume and lower per unit settlement charges in our smokeable products segment, partially offset by higher NJOY costs.

Excise taxes on products decreased $119 million (13.9%), due to lower shipment volume in our smokeable products segment.

Marketing, administration and research costs decreased $18 million (3.0%), due primarily to lower general corporate expenses, partially offset by higher tobacco and health and certain other litigation items.

The lower general corporate expenses were due primarily to transaction costs associated with the ABI Transaction in 2024, partially offset by acquisition-related items in 2025 discussed above.

Operating income decreased $886 million (33.1%), due primarily to lower OCI (which includes a non-cash impairment of the e-vapor reporting unit goodwill and acquisition-related items in 2025 in our all other category), partially offset by lower general corporate expenses.

Excise taxes on products decreased $239 million (13.3%), due primarily to lower shipment volume in our smokeable products segment.

Marketing, administration and research costs decreased $187 million (13.4%), due primarily to lower acquisition-related items discussed above and transaction costs associated with the ABI Transaction in 2024, both of which are included in general corporate expenses.

Operating income decreased $189 million (3.6%), due primarily to lower OCI (which includes the net impact of a non-cash impairment of the e-vapor reporting unit goodwill in 2025 and a non-cash impairment of the Skoal trademark in our oral tobacco product segment in 2024), partially offset by lower general corporate expenses.

(Income) losses from investments in equity securities were unfavorable $123 million (29.7%), due primarily to lower income from our equity investment in ABI (due primarily to our gain on the ABI Transaction in 2024 and lower ownership interest), partially offset by favorable Cronos-related special items.

Reported net earnings of $1,077 million decreased $1,052 million (49.4%), due primarily to lower operating income, unfavorable results from our investments in equity securities and unfavorable income tax items, partially offset by lower state income tax expense.

Provision for income taxes decreased $577 million (30.0%), due primarily to lower earnings before income taxes, partially offset by unfavorable tax items as discussed above.

Reported net earnings of $3,455 million decreased $2,477 million (41.8%), due primarily to the gain on the sale of the IQOS System commercialization rights in 2024, lower operating income, unfavorable results from our equity investment in ABI and unfavorable income tax items.

Reported basic and diluted EPS of $2.04, each decreased by 40.2% due to lower reported net earnings, partially offset by fewer shares outstanding.

Adjusted net earnings of $2,089 million increased $43 million (2.1%), due primarily to higher OCI and a lower adjusted tax rate, partially offset by lower income from our equity investment in ABI and lower net periodic benefit income, excluding service cost.

Adjusted diluted EPS of $1.23 increased by 6.0%, due to fewer shares outstanding and higher adjusted net earnings.

Adjusted net earnings of $4,522 million increased $188 million (4.3%), due primarily to higher OCI and a lower adjusted tax rate, partially offset by lower income from our equity investment in ABI and higher interest and other debt expense, net.

Adjusted diluted EPS of $2.67 increased by 7.2%, due to higher adjusted net earnings and fewer shares outstanding.

Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024

Net revenues, which include excise taxes billed to customers, decreased $107 million (1.7%), due primarily to lower net revenues in our smokeable products segment, partially offset by higher net revenues in our oral tobacco segment.

Cost of sales decreased $162 million (10.1%), due primarily to lower shipment volume and lower per unit settlement charges in our smokeable products segment.

Excise taxes on products decreased $120 million (12.9%), due primarily to lower shipment volume in our smokeable products segment.

Marketing, administration and research costs decreased $169 million (21.4%), due primarily to lower acquisition-related items discussed above.

Operating income increased $697 million (27.5%), due primarily to higher OCI (which includes the non-cash impairment of the Skoal trademark in 2024 in our oral tobacco product segment) and lower general corporate expenses.

(Income) losses from investments in equity securities were favorable $29 million (24.4%), due primarily to higher income from our equity investment in ABI (due primarily to favorable special items, partially offset by lower ownership interest).

Provision for income taxes decreased $573 million (43.6%), due primarily to lower earnings before income taxes.

Reported net earnings of $2,378 million decreased $1,425 million (37.5%), due primarily to the gain on the sale of the IQOS System commercialization rights in 2024, partially offset by higher operating income.

Reported basic and diluted EPS of $1.41, each decreased by 36.2% due to lower reported net earnings, partially offset by fewer shares outstanding.

Adjusted net earnings of $2,433 million increased $145 million (6.3%), due primarily to higher OCI, partially offset by lower income from our equity investment in ABI and higher interest and other debt expense, net.

Adjusted diluted EPS of $1.44 increased by 8.3%, due to higher adjusted net earnings and fewer shares outstanding.

Operating Results by Business Segment

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tobacco industry faces a number of business and legal challenges that have materially adversely affected and may continue to materially adversely affect our business, results of operations, cash flows or financial position or our ability to achieve our Vision.

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

Risk Factors in our 2024 Form 10-K, include:

These challenges, which we discuss below and in more detail in Note 14, and in Part I, Item 1A.

Risk Factors in our 2024 Form 10-K and in Part II, Item 1A.

Risk Factors of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 (“First Quarter Form 10-Q”), include:

▪ pending and threatened litigation and bonding requirements;

▪ restrictions and requirements imposed by the FSPTCA and restrictions and requirements (and related enforcement actions) that have been, and in the future will be, imposed by the FDA;

▪ 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 illicit tobacco products on the market, including illicit e-vapor and oral nicotine pouch products;

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▪ changes in adult tobacco consumer purchase behavior, which is influenced by various factors such as macroeconomic conditions (including inflation and tariffs), the proliferation of illicit disposable e-vapor products, excise taxes and product price gap relationships, each of which has resulted and may in the future result in adult tobacco consumers switching to lower-priced tobacco products and lower shipment volumes;

▪ the highly competitive nature of all tobacco categories, including competitive disadvantages related to the impact on cigarette prices due to the settlement of certain healthcare cost recovery litigation and the proliferation of innovative tobacco products, such as e-vapor and oral nicotine pouch products;

▪ 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;

▪ 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.

In addition to and in connection with the foregoing, evolving adult tobacco consumer preferences continue to impact the tobacco industry, including negatively impacting cigarette and MST shipment volumes.

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.

As innovative smoke-free products evolve to better address the preferences of adult tobacco consumers, these consumers continue to transition from cigarettes and MST products 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).

We estimate that, when adjusted for calendar differences and trade inventory movements, total estimated domestic cigarette industry volume declined by 9% in the first quarter of 2025.

PM USA reported domestic cigarette volumes declined by 13.7% in the first quarter of 2025 versus the first quarter of 2024.

When adjusted for calendar differences and trade inventory movements, PM USA volumes for the first quarter of 2025 declined by an estimated 12% versus the first quarter of 2024.

In the first quarter, Marlboro share of the total cigarette category was 41.0%, a decrease of 1.0 share point versus the first quarter

of 2024 and 0.3 share points sequentially.

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

For the 12 months ended March 31, 2025, we estimate the e-vapor category grew approximately 30% versus the prior 12-month period, driven by the growth of illicit flavored disposable e-vapor products.

We estimate that illicit products now represent more than 60% of the e-vapor category.

These illicit disposable e-vapor products are largely distributed through non-traditional retail channels (including e-commerce and vape retail channels), making them more difficult to track.

We believe the FDA’s inadequate enforcement and slow pace of smoke-free product authorizations enables bad actors to disregard regulation and illicit products to proliferate.

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

nicotine pouch category continued to grow significantly throughout the first quarter of 2025 to 49.1% of the U.S.

oral tobacco category, an increase of 8.7 share points versus the first quarter of 2024.

maintained year-over-year share momentum through the first quarter of 2025 to achieve 8.8% of the total oral tobacco category, an increase of 1.8 share points versus the first quarter of 2024 and an increase of 0.1 share point sequentially.

For the first quarter 2025, the traditional smokeless category (including MST) share of the total oral tobacco category declined to 50.9%, down 8.7 share points versus the first quarter of 2024.

Copenhagen had an oral tobacco category share of 16.9% for the first quarter of 2025, a decrease of 3.2 share points when compared to the first quarter of 2024.

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

Decreases in the size of the MST category could impact the carrying value of our assets, such as our smokeless tobacco product goodwill and trademarks.

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

Throughout the first quarter of 2025, U.S.

adult tobacco consumers remained under pressure largely due to the continued compounding effects of high prices exceeding overall wage growth, especially among low income consumers.

Although the year-over-year increases in the rate of inflation moderated in the first quarter of 2025, high prices on every day expenses, such as groceries and housing, continued to constrain consumers’ disposable income.

While gas prices in the first quarter of 2025 were lower than in the prior year, the average price remained above $3.00 per gallon.

In addition, consumer credit and delinquency rates remain at historically high levels, and potential tariff activity induced consumer fear of price hikes and rising inflation.

Throughout the first quarter of 2025, this speculation drove a decline of nearly 13% in consumer sentiment versus the fourth quarter of 2024 to the lowest levels since 2022.

We will continue to monitor the additional pressure that tariff-related price increases may have on adult tobacco consumer purchase behavior.

Overall discretionary income pressures on adult tobacco consumers have increased discount brand share performance and negatively impacted the sales volumes of our companies’ premium brands.

For the first quarter of 2025, the discount share of the cigarette category reached 30.9%, an increase of 0.6 share points sequentially and an increase of 1.8 share points versus the first quarter of 2024.

We continue to monitor the evolving regulatory, macroeconomic (including inflation and tariffs) and consumer dynamics within our business environment to assess potential 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.

▪ the highly competitive nature of all tobacco categories, including competitive disadvantages related to the impact on cigarette prices due to the settlement of certain healthcare cost recovery litigation and the growth of innovative tobacco products, such as e-vapor and oral nicotine pouch products;

▪ the growth 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;

We continue to monitor the evolving business, legal and regulatory challenges within our business environment to assess potential impacts on us.

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

FSPTCA and FDA Regulation

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▪ equip the FDA with a variety of investigatory and enforcement tools, including the authority to inspect product manufacturing and other facilities (see Investigation and Enforcement below).

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

Effective April 2022, the U.S.

Congress expanded the statutory definition of tobacco products to include products containing nicotine derived from any source, including synthetic nicotine.

See Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement below for additional information on the effects of the statutory change.

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 an MGO from, the FDA before marketing such products in the United States.

See Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement below for additional information.

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.

▪ Final Tobacco Marketing Rule:

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

The Final Tobacco Marketing Rule, as amended, among other things:

▪ restricts the use of non-tobacco trade and brand names on cigarettes and smokeless tobacco products;

▪ prohibits sampling of all tobacco products except that sampling of smokeless tobacco products is permitted in qualified adult-only facilities;

▪ prohibits the sale or distribution of items such as hats and tee shirts with cigarette or smokeless tobacco brands or logos;

▪ prohibits cigarettes and smokeless tobacco brand name sponsorship of any athletic, musical, artistic or other social or cultural event, or any entry or team in any event;

▪ requires the development by the FDA of graphic warnings for cigarettes, establishes warning requirements for other tobacco products and gives the FDA the authority to require new warnings for any type of tobacco product (see FDA Regulatory Actions - Graphic Warnings below).

▪ Rulemaking and Guidance:

From time to time, the FDA issues proposed regulations and guidance, which may be issued in draft or final form, that generally involve public comment and may include scientific review.

The FDA also may request comments on broad topics through an Advanced Notice of Proposed Rulemaking (“ANPRM”).

We actively engage with the FDA to develop and implement the FSPTCA’s regulatory framework, including submission of comments to various FDA policies and proposals and participation in public hearings and engagement sessions.

The FDA’s implementation of the FSPTCA and related regulations and guidance also may have an impact on enforcement efforts by states, territories and localities of their laws and regulations as well as of the State Settlement Agreements (see State Settlement Agreements below).

Such enforcement efforts may adversely affect our operating companies’ ability to market and sell tobacco products in those states, territories and localities.

Such enforcement efforts may adversely affect our operating companies’ abilities to market and sell tobacco products in those states, territories and localities.

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

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.

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

(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.

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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▪ 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

(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.

The FDA pre-market authorization enforcement policy varies based on product type and date of availability on the market, specifically:

For products currently on the market, the FDA pre-market authorization enforcement policy varies based on product type and date of availability on the market, specifically:

▪ Pre-existing Tobacco Products are exempt from the pre-market authorization requirement;

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Thereafter, unless the FDA granted the product a marketing order, the product is subject to possible FDA enforcement.

Modifications to currently marketed products, including modifications that result from, for example, changes to the quantity of tobacco product(s) in a package, a manufacturer being unable to acquire ingredients or a supplier or contract manufacturer being unable to maintain the consistency required in ingredients or manufacturing processes, could trigger the FDA’s pre-market review processes.

The FSPTCA requires the FDA to issue a marketing order (either an MGO or a marketing denial order (“MDO”)) with respect to a PMTA no later than 180 days after receipt of the PMTA.

Following the 180-day FDA review period, the FSPTCA allows any party that receives an MDO to seek expedited judicial review of the ruling in a federal appellate court within 30 days.

Together, these statutory deadlines for FDA action and judicial review create a structure and timeline for manufacturers seeking to market new products.

We are unaware of any FDA enforcement actions relating to products for which a PMTA has been pending longer than the 180-day review period.

Although it is possible that the FDA may bring such an action in the future, we believe that any enforcement action against sales in the United States of products with PMTAs pending for more than 180 days would conflict with the FSPTCA and FDA enforcement practice to date.

In the future, our operating companies may decide to commercialize products that have not received MGOs from the FDA if the operating company submitted a PMTA with respect to any such product in compliance with the FSPTCA and the FDA failed to issue a marketing order within the statutory review period.

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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PM USA and USSTC have Provisional Products included in this subset of products.

While we believe PM USA’s and USSTC’s current Provisional Products meet the statutory requirements of the FSPTCA, we cannot predict how the FDA will ultimately apply law, regulation and guidance to their various SE reports.

Should PM USA or USSTC receive unfavorable determinations on any SE reports currently pending with the FDA, we believe PM USA and USSTC can replace the vast majority of these product volumes with other FDA authorized products or with Pre-existing Tobacco Products.

Cigarette and smokeless tobacco products introduced into the market or modified after March 22, 2011 are “Non-Provisional Products” and must receive an MGO from the FDA prior to being offered for sale.

Should PM USA or USSTC receive unfavorable determinations on any SE report currently pending with the FDA, we believe PM USA and USSTC can replace the vast majority of these product volumes with other FDA authorized products or with Pre-existing Tobacco Products.

Cigarette and smokeless tobacco products introduced into the market or modified after March 22, 2011 are “Non-Provisional Products” and must apply to receive an MGO from the FDA prior to being offered for sale.

MGOs for Non-Provisional Products may be obtained by filing an SE report, a PMTA or using another pre-market pathway established by the FDA.

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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 a 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.

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.

A number of the denials are subject to challenges initiated by the affected manufacturers.

For those products still under FDA review, it is uncertain when and for how long the FDA may permit continued marketing and sale of those products pursuant to its case-by-case discretion.

For products (new or modified) not on the market as of August 8, 2016, manufacturers must file an SE report or a PMTA and receive FDA authorization prior to marketing and selling the product.

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

For those products still under FDA review, it is uncertain when and for how long the FDA may permit continued marketing and sale of those products pursuant to its discretion.

For products (new or modified) not on the market as of August 8, 2016, manufacturers must file an SE report or a PMTA.

As described above, the FSPTCA requires the FDA to issue a marketing order with respect to a PMTA no later than 180 days after receipt of the PMTA.

Helix submitted PMTAs for on!

oral nicotine pouches in May 2020 and PMTAs for on!

oral nicotine pouches on the market as of August 2016 in May 2020, PMTAs for additional on!

oral nicotine pouches in September 2024 and PMTAs for on!

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

As of April 24, 2025, the FDA has not issued marketing order decisions for any on!

PLUS products.

As of April 24, 2025, Middleton has received MGOs 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.

These products are not currently marketed or sold.

In March 2023, the FDA authorized USSTC to communicate a modified risk claim about its Copenhagen Classic Snuff MST product.

This product is not currently marketed or sold.

The authorized claim for Copenhagen Classic Snuff is “IF YOU SMOKE, CONSIDER THIS:

Switching completely to this product from cigarettes reduces risk of lung cancer.” In February 2025, USSTC filed a notice with the FDA withdrawing its modified risk application.

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.

As of July 28, 2025, the FDA has not issued a marketing order with respect to any on!

As of July 28, 2025, Middleton has received MGOs or exemptions that cover over 99% of its cigar product volume.

As a result of our June 2023 acquisition of NJOY Holdings, Inc., 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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Also in May 2024, NJOY re-submitted PMTAs for blueberry and watermelon flavored pod-based e-vapor products that work exclusively with the Bluetooth ® -enabled NJOY ACE 2.0 device.

These products previously received marketing denial orders (“MDOs”) on the basis of FDA concerns regarding underage use.

These products previously received MDOs on the basis of FDA concerns regarding potential underage use.

NJOY ACE and the NJOY ACE 2.0 are subject to U.S.

International Trade Commission exclusion and cease-and-desist orders prohibiting their importation and sale in the United States.

NJOY Daily is not subject to these orders.

Effect of Adverse FDA Determinations :

FDA review timeframes have varied.

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 MGO, an FDA enforcement action 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, an MGO withdrawal or an enforcement action by the FDA with respect to one or more products (each of which could 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 or enforcement actions concerning innovative tobacco products could have a material adverse effect on our innovative tobacco businesses and our ability to achieve our Vision.

Post-Market Surveillance :

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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 :

FDA review time frames have varied.

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 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.

In the future, if the FDA fails to issue a marketing order within the statutory review period with respect to a PMTA submitted by one of our operating companies and that operating company elects to commercialize the applicable product, we expect that our operating company would operate consistent with the post-market record keeping and reporting requirements of the FDA’s most recently issued MGOs for similar products.

▪ FDA Regulatory Actions

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The FDA appealed the decision, and, in March 2024, the U.S.

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

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

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

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District Court for the Southern District of Georgia, challenging the final rule on substantive and procedural grounds.

Briefing is ongoing, and a hearing on PM USA’s request to enjoin the rule was held in April 2025.

A hearing on PM USA’s request to enjoin the rule was held in April 2025.

▪ Underage Access and Use of Certain Tobacco Products :

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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 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.

For more information on the FDA’s and other federal agencies’ enforcement efforts, see Investigation and Enforcement below.

▪ E-Vapor Products :

As of April 24, 2025, 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.

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 MDOs.

As of July 28, 2025, 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 benefits of their products to adult smokers overcome the risks 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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Court of Appeals for the Fifth Circuit’s determination, concluding that manufacturers had been given fair notice of the PMTA requirements, and remanded the case for further review.

Courts of Appeals have upheld adverse FDA determinations, and there are pending requests that the U.S.

Supreme Court review these decisions.

Courts of Appeals have upheld adverse FDA determinations.

▪ Potential Product Standards

▪ Nicotine in Cigarettes and Other Combustible Tobacco Products :

In March 2018, the FDA issued an ANPRM seeking comments on the potential public health benefits and any possible adverse effects of lowering nicotine in combustible cigarettes to non-addictive or minimally addictive levels.

In January 2025, the FDA proposed a tobacco product standard that would establish a maximum nicotine level in cigarettes and certain other combustible tobacco products (including little cigars, cigarillos and most large cigars) significantly lower than the average concentration in these products currently on the market with the aim of making such products minimally or non-addictive.

If not withdrawn, the proposed product standard may proceed through the rulemaking process, including the solicitation of public comment, which we believe would take multiple years to complete.

The public comment period on the proposed product standard is scheduled to close on September 15, 2025, and we intend to engage with the FDA through the rulemaking process, including by submitting comments.

We believe the rulemaking process for this proposed product standard will take multiple years to complete.

▪ Flavors in Tobacco Products :

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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.

In April 2024, the FDA announced the indefinite delay of a decision on the menthol ban, citing the high volume of feedback received during the notice-and-comment period.

In January 2025, the Trump Administration withdrew the two proposed product standards from the Office of Management and Budget (“OMB”) and sent them back to the FDA.

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▪ 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;

▪ ensuring that finished and bulk tobacco products are manufactured according to established specifications;

▪ minimizing the manufacture and distribution of tobacco products that do not meet specifications;

▪ requiring manufacturers to take appropriate measures to prevent contamination of tobacco products;

▪ requiring investigation and identification of products that do not meet specifications and requiring manufacturers to institute appropriate corrective actions, such as a recall;

▪ establishing the ability to trace all components or parts, ingredients, additives and materials, as well as each batch of finished or bulk tobacco products, to aid in investigations of those that do not meet specifications.

We engaged with the FDA through the rulemaking process, including during the notice-and-comment period, which closed in October 2023.

OMB currently lists the rule as a long-term action.

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.

OMB lists the rule as a long-term action.

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

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Investigations or enforcement actions could result in significant costs or otherwise have a material adverse effect on our business, results of operations, cash flows or financial position.

Although the FDA, in conjunction with other federal entities, has increased enforcement activity, insufficient actions against manufacturers, distributors and retailers of tobacco products requiring FDA review for which no PMTA has been submitted have allowed such products to proliferate on the market.

In addition, the FDA’s failure to clearly define product pathways and issue marketing orders within the statutory review period has resulted in a market with few authorized smoke-free products available to adult tobacco consumers.

Tobacco products are subject to substantial excise taxes in the United States.

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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 April 24, 2025, the weighted-average state cigarette excise tax increased from $0.36 to $1.93 per pack.

Between the end of 1998 and July 28, 2025, the weighted-average state cigarette excise tax increased from $0.36 to $1.93 per pack.

Three states (Maryland, Colorado and Rhode Island) increased excise taxes in 2024.

As of April 24, 2025, no states have increased excise taxes in 2025.

However, various increases are under consideration or have been proposed.

As of July 28, 2025, three states (Hawaii, Indiana and Maine) have increased excise taxes in 2025.

Various other increases are under consideration or have been proposed.

A majority of states currently tax MST using an ad valorem method, which is calculated as a percentage of the price of the product, typically the wholesale price.

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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 April 24, 2025, the federal government, 24 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.

As of July 28, 2025, the federal government, 25 states, Puerto Rico, Philadelphia, Pennsylvania and Cook County, Illinois have adopted a weight-based tax methodology for MST.

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

As of April 24, 2025, 32 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-vapor products.

As of July 28, 2025, 36 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.

Similarly, 17 states and the District of Columbia have enacted legislation to tax oral nicotine pouches.

Various excise tax increases are under consideration or have been proposed.

For example, in April 2025, the Indiana state legislature passed a budget proposal that, if signed by the governor of Indiana, would increase the state’s cigarette excise tax to $2 per pack and increase the state’s excise taxes on both e-vapor and oral nicotine products, in each case effective July 1, 2025.

Additionally, in April 2025, the Washington state legislature passed a bill that, if signed by the governor of Washington, would subject oral nicotine pouches to the same state taxes currently applicable to other tobacco products, effective January 1, 2026.

Tax increases are expected to continue to have an adverse impact on sales of our operating companies’ products through lower consumption levels and the potential shift in adult tobacco consumer purchases from premium to non-premium or discount cigarettes, to lower-taxed tobacco products or to counterfeit and contraband products.

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

As of April 24, 2025, 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.

As of July 28, 2025, 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 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 cessation.

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

There are a number of proposals currently under consideration by the governing body of the FCTC, some of which call for substantial restrictions on the manufacture, marketing, distribution and sale of tobacco products.

There are a number of proposals under consideration by the governing body of the FCTC, some of which call for substantial restrictions on the manufacture, marketing, distribution and sale of tobacco products.

It is not possible to predict the outcome of these proposals or the impact of any FCTC actions on legislation or regulation in the United States, either indirectly or as a result of the United States becoming a party to the FCTC, or whether or how these actions might indirectly influence FDA regulation and enforcement.

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The State Settlement Agreements also place numerous requirements and restrictions on participating manufacturers’ business operations, including prohibitions and restrictions on the advertising and marketing of cigarettes and smokeless tobacco products.

Among these are prohibitions of outdoor and transit brand advertising, payments for product placement and free sampling (except in adult-only facilities).

The State Settlement Agreements also place restrictions on the use of brand name sponsorships and brand name non-tobacco products and prohibitions on targeting youth and the use of cartoon characters.

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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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The legislation varies in terms of the type of tobacco products, the conditions under which such products are or would be restricted or prohibited, and exceptions to the restrictions or prohibitions.

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 April 24, 2025, 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.

As of July 28, 2025, 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 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.

Maryland banned e-vapor product flavors other than tobacco and menthol through Department of Taxation rulemaking.

Maryland banned e-vapor product flavors other than tobacco and menthol through Maryland Department of Assessments and Taxation rulemaking.

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

As of April 24, 2025, legislation relating to this issue is pending in three other states.

As of July 28, 2025, 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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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 April 24, 2025, 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.

As of July 28, 2025, 44 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 and advocate for raising the minimum legal age to purchase all tobacco products to 21 at the federal and state levels.

▪ Health Effects of Tobacco Products, Including E-vapor Products:

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It is not possible to predict the results of ongoing scientific research or the types of future scientific research into the health risks of tobacco exposure and the impact of such research on legislation and regulation.

Scientific determinations as to any health risks or negative health consequences associated with the use of e-vapor and other innovative tobacco products could materially adversely affect our innovative tobacco products businesses and our ability to achieve our Vision.

determinations as to any health risks or negative health consequences associated with the use of e-vapor and other innovative tobacco products could materially adversely affect our innovative tobacco products businesses and our ability to achieve our Vision.

Most jurisdictions within the United States have restricted smoking in public places and some have restricted vaping in public places.

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In addition to the actions discussed above, other regulatory initiatives affecting the tobacco industry have been adopted or are being considered at the federal level and in a number of state and local jurisdictions.

For example, in recent years, legislation has been introduced or enacted at the state or local level to subject tobacco products to various reporting requirements and performance standards;

For example, legislation has been introduced or enacted at the state or local level to subject tobacco products to various reporting requirements and performance standards;

establish educational campaigns relating to tobacco consumption or tobacco control programs or provide additional funding for governmental tobacco control activities;

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From time to time, we are subject to governmental investigations on a range of matters.

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:

For example, we 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;

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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 requiring FDA review for which no PMTA has been submitted;

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

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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.

Prohibitory policies, such as California’s ban on the sale of flavored tobacco products, which went into effect in 2022, can have unintended negative consequences, including the proliferation of counterfeit and unregulated products.

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.

Prohibitionist policies, such as California’s ban on the sale of flavored tobacco products, which went into effect in 2022, can have unintended negative consequences, including the proliferation of counterfeit and unregulated products.

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 illicit e-vapor products.

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, distributors and retailers of illicit e-vapor products.

In June 2024, the U.S.

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laws, including the FSPTCA.

While these federal entities have increased enforcement activity against manufacturers, distributors and retailers of tobacco products requiring FDA review for which no PMTA has been submitted, we do not believe these efforts have had a significant impact on the volume of such products on the market.

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

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

Current geopolitical and macroeconomic conditions (including tariffs, inflation, high interest rates, labor shortages, supply and demand imbalances 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, wood tips used in our cigar products and aluminum used in our packaging).

Current geopolitical and macroeconomic conditions (including tariffs, inflation, high interest rates, labor shortages, supply and demand imbalances and international armed conflict) and adverse weather events have caused and continue to cause worldwide disruptions and delays to supply chains and commercial markets, and have limited access to, and increased the cost of, raw materials, ingredients and component parts (for example, wood tips used in our cigar products and aluminum used in our packaging).

As consumer demand increases for innovative smoke-free products and decreases for combustible and MST products, the volume of raw materials, ingredients and component parts required for the production of combustible and MST products has decreased.

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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.

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 current macroeconomic and geopolitical conditions, including tariffs, 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.

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Operating Results

For the Three Months Ended March 31,

(in millions) 2025 2024 Change

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

(in millions) 2025 2024 Change 2025 2024 Change

Net revenues $ 9,979 $ 10,401 (4.1) % $ 5,357 $ 5,495 (2.5) %

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Reported OCI margins (1)

63.2 % 59.9 % 3.3 pp

63.7 % 60.6 % 3.1 pp 64.1 % 61.2 % 2.9 pp

Adjusted OCI margins (1)

64.4 % 60.2 % 4.2 pp

64.5 % 61.0 % 3.5 pp 64.5 % 61.6 % 2.9 pp

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

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Net revenues, which include excise taxes billed to customers, decreased $284 million (5.8%), due primarily to lower shipment volume ($775 million), partially offset by higher pricing ($491 million), which includes lower promotional investments.

Reported OCI increased $30 million (1.2%), due primarily to higher pricing, which includes lower promotional investments, lower per unit settlement charges and manufacturing costs ($73 million), partially offset by lower shipment volume ($510 million) and higher marketing, administration and research costs ($13 million), which include higher tobacco and health and certain other litigation items and costs associated with our Optimize & Accelerate initiative in 2025.

Adjusted OCI increased $67 million (2.7%), due primarily to higher pricing, which includes lower promotional investments, lower per unit settlement charges and manufacturing costs ($73 million) and lower marketing, administration and research costs ($18 million), partially offset by lower shipment volume.

Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024

Net revenues, which include excise taxes billed to customers, decreased $422 million (4.1%), due primarily to lower shipment volume ($1,414 million), partially offset by higher pricing ($968 million), which includes higher promotional investments.

Reported OCI increased $153 million (2.9%), due primarily to higher pricing, which includes higher promotional investments, lower per unit settlement charges and lower costs ($53 million), partially offset by lower shipment volume ($942 million) and costs associated with our Optimize & Accelerate initiative in 2025 ($26 million).

Adjusted OCI increased $187 million (3.5%), due primarily to higher pricing, which includes higher promotional investments, lower per unit settlement charges and lower costs, partially offset by lower shipment volume.

Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024

Net revenues, which include excise taxes billed to customers, decreased $138 million (2.5%), due primarily to lower shipment volume ($639 million), partially offset by higher pricing ($477 million), which includes higher promotional investments.

Reported OCI increased $123 million (4.4%), due primarily to higher pricing, which includes higher promotional investments, lower per unit settlement charges, lower costs ($26 million) and lower tobacco and health and certain other litigation items ($16 million), partially offset by lower shipment volume ($432 million) and costs associated with our Optimize & Accelerate initiative in 2025 ($13 million).

Adjusted OCI increased $120 million (4.2%), due primarily to higher pricing, which includes higher promotional investments, lower per unit settlement charges and lower costs, partially offset by lower shipment volume.

Shipment Volume and Retail Share Results

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Shipment Volume

For the Three Months Ended March 31,

(sticks in millions) 2025 2024 Change

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

(sticks in millions) 2025 2024 Change 2025 2024 Change

Marlboro 27,436 31,289 (12.3) % 14,458 16,316 (11.4) %

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The following table summarizes our cigarettes retail share performance:

For the Three Months Ended March 31,

2025 2024 Percentage Point Change

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

2025 2024 Percentage Point Change 2025 2024 Percentage Point Change

Marlboro 41.0 % 42.0 % (1.0) 41.0 % 41.9 % (0.9)

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For other trade classes selling cigarettes, retail share is based on shipments from wholesalers to retailers through the Store Tracking Analytical Reporting System, as provided by MSAi.

This service is not designed to capture sales through other channels, including the internet, direct mail and some illicitly tax-advantaged outlets.

This service is not designed to capture sales through other channels, including the internet, direct mail and some tax-advantaged outlets.

It is the standard practice of retail services to periodically refresh their retail scan services, which could restate retail share results that were previously released in these services.

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.

Three Months Ended March 31, 2025 Compared with the Three Months Ended March 31, 2024

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 13.7%, 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 calendar differences.

When adjusted for calendar differences and trade inventory movements, our smokeable products segment domestic cigarette shipment volume decreased by an estimated 12%.

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

Six Months Ended June 30, 2025 Compared with the Six Months Ended June 30, 2024

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 11.9%, driven primarily by the industry’s decline rate (impacted by the continued growth of flavored disposable e-vapor products, the majority of which we believe have evaded the regulatory process, and discretionary income pressures on adult tobacco consumers), retail share losses and calendar differences.

When adjusted for calendar differences and trade inventory movements, our smokeable products

segment domestic cigarette shipment volume decreased by an estimated 11.0%.

When adjusted for trade inventory movements, calendar differences and other factors, total estimated domestic cigarette industry volume decreased by an estimated 8.5%.

Shipments of premium cigarettes accounted for 96.1% and 95.6% of our smokeable products segment’s reported domestic cigarettes shipment volume for the three months ended March 31, 2025 and 2024, respectively.

Shipments of premium cigarettes accounted for 95.3% and 95.7% of our smokeable products segment’s reported domestic cigarettes shipment volume for the six months ended June 30, 2025 and 2024, respectively.

Marlboro share of the premium segment was 59.4%, an increase of 0.1 share point.

Total cigarettes industry discount category retail share was 31.0%, an increase of 1.8 share points, primarily due to continued discretionary income pressures on adult tobacco consumers.

For a discussion regarding discount category dynamics in 2025, the growth of illicit e-vapor products and the economic conditions that impact adult tobacco consumer purchasing behavior, see Operating Results by Business Segment - Business Environment - Summary above.

Three Months Ended June 30, 2025 Compared with the Three Months Ended June 30, 2024

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 10.2%, driven primarily by the industry’s decline rate (impacted by the continued growth of flavored disposable e-vapor products, the majority of which we believe have evaded the regulatory process, and discretionary income pressures on adult tobacco consumers) and retail share losses.

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, total estimated domestic cigarette industry volume decreased by an estimated 8.5%.

Shipments of premium cigarettes accounted for 94.5% and 95.8% of our smokeable products segment’s reported domestic cigarettes shipment volume for the three months ended June 30, 2025 and 2024, respectively.

Marlboro share of the premium segment was 59.5%, an increase of 0.2 share points versus the prior year and sequentially.

Total cigarettes industry discount category retail share was 31.2%, an increase of 1.9 share points versus the prior year and 0.4 share points sequentially, primarily due to continued discretionary income pressures on adult tobacco consumers.

For a discussion regarding discount category dynamics in 2025, the growth of flavored disposable e-vapor products and the economic conditions that impact adult tobacco consumer purchasing behavior, see Trends and Developments and Operating Results by Business Segment - Business Environment - Summary above.

Pricing Actions

PM USA and Middleton executed the following pricing actions during 2025 and 2024:

▪ Effective April 20, 2025, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.14 per five-pack.

▪ Effective April 13, 2025, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) and L&M by $0.20 per pack.

PM USA also increased the list price of all its other premium cigarette brands by $0.25 per pack.

▪ Effective January 19, 2025, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) and L&M by $0.17 per pack.

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

▪ Effective April 13, 2025, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) and L&M by $0.20 per pack.

▪ Effective July 20, 2025, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) and L&M by $0.17 per pack.

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

▪ Effective April 20, 2025, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.14 per five-pack.

Oral Tobacco Products Segment

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Operating Results

For the Three Months Ended March 31,

(in millions) 2025 2024 Change

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

(in millions) 2025 2024 Change 2025 2024 Change

Net revenues $ 1,407 $ 1,362 3.3 % $ 753 $ 711 5.9 %

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Reported OCI margins (1)

68.8 % 69.5 % (0.7) pp

68.6 % 40.5 % 28.1 pp 68.4 % 14.1 % 54.3 pp

Adjusted OCI margins (1)

69.2 % 69.5 % (0.3) pp

68.9 % 67.5 % 1.4 pp 68.7 % 65.6 % 3.1 pp

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

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Net revenues, which include excise taxes billed to customers, was essentially unchanged, as higher pricing ($58 million), which includes higher promotional investments, was mostly offset by lower shipment volume and a higher percentage of on!

Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024

Net revenues, which include excise taxes billed to customers, increased $45 million (3.3%), as higher pricing ($128 million), which includes higher promotional investments, was partially offset by lower shipment volume and a higher percentage of on!

shipment volume relative to MST (“volume/mix”) ($83 million).

Reported OCI was essentially unchanged, as lower volume/mix ($57 million), was mostly offset by higher pricing, which includes higher promotional investments.

Adjusted OCI was unchanged, as higher pricing, which includes higher promotional investments, was mostly offset by lower volume/mix.

Reported OCI increased $399 million (75.0%), due primarily to a non-cash impairment of the Skoal trademark ($354 million) in 2024 and higher pricing, which includes higher promotional investments, partially offset by lower volume/mix ($90 million).

Adjusted OCI increased $49 million (5.5%), due to higher pricing, which includes higher promotional investments, and lower costs ($11 million), partially offset by lower volume/mix.

Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024

Net revenues, which include excise taxes billed to customers, increased $42 million (5.9%), as higher pricing ($70 million), which includes higher promotional investments, was partially offset by lower volume/mix ($28 million).

Reported OCI increased $401 million (100+%), due primarily to a non-cash impairment of the Skoal trademark ($354 million) in 2024 and higher pricing, which includes higher promotional investments, partially offset by lower volume/mix ($33 million).

Adjusted OCI increased $49 million (10.9%), due to higher pricing, which includes higher promotional investments, and lower costs ($12 million), partially offset by lower volume/mix.

Shipment Volume and Retail Share Results

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Shipment Volume

For the Three Months Ended March 31,

(cans in millions) 2025 2024 Change

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

(cans in millions) 2025 2024 Change 2025 2024 Change

Copenhagen 185.6 203.0 (8.6) % 95.9 103.9 (7.7) %

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Prior to 2025, our reported oral tobacco segment retail share performance data excluded synthetic oral nicotine pouch products.

Throughout 2024 and into the first quarter of 2025, we have been tracking the quarterly sequential growth of synthetic oral nicotine pouch products in various traditional tobacco retailers.

Throughout 2024 and into the first quarter of 2025, we tracked the quarterly sequential growth of synthetic oral nicotine pouch products in various traditional tobacco retailers.

Based on the consistency of this trend, beginning in the first quarter of 2025 our reported oral tobacco products segment retail share performance data and category industry volume estimates have been updated to include synthetic oral nicotine pouch products.

The following table summarizes our oral tobacco products segment’s retail restated share performance:

For the Three Months Ended March 31,

2025 2024 Percentage Point Change

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

2025 2024 Percentage Point Change 2025 2024 Percentage Point Change

Copenhagen 16.4 % 19.8 % (3.4) 15.9 % 19.4 % (3.5)

Skoal 6.3 7.8 (1.5) 6.1 7.7 (1.6)

8.7 7.5 1.2 8.7 8.0 0.7

Other 2.5 2.6 (0.1) 2.4 2.6 (0.2)

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It is the standard practice of retail services to periodically refresh their retail scan services, which could restate retail share results that were previously released in these services.

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.

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Our oral tobacco products segment’s reported domestic shipment volume decreased 5.0%, primarily driven by retail share losses, calendar differences, trade inventory movements and other factors, partially offset by the industry’s growth rate.

Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024

Our oral tobacco products segment’s reported domestic shipment volume decreased 2.9%, primarily driven by retail share losses, calendar differences and other factors, partially offset by the industry’s growth rate 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 2.5%.

Total oral tobacco products category industry volume increased by an estimated 10% over the six months ended March 31, 2025, primarily driven by growth in oral nicotine pouches, partially offset by declines in MST volumes.

Total oral tobacco products category industry volume increased by an estimated 11% over the six months ended June 30, 2025, primarily driven by growth in oral nicotine pouches, partially offset by declines in MST volumes.

Our oral tobacco products segment’s retail share was 33.9%, as share declines for MST products were partially offset by oral nicotine pouch segment share growth.

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In addition, on!

’s share of the nicotine pouch category was 17.9%, an increase of 0.5 share points versus the prior year.

For a discussion regarding the growth of oral nicotine pouch products and the related impact on the MST category and economic conditions that impact adult tobacco consumer purchasing behavior, see Operating Results by Business Segment - Business Environment - Summary above.

’s share of the nicotine pouch category was 17.3%, a decrease of 0.9 share points versus the prior year.

Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024

Our oral tobacco products segment’s reported domestic shipment volume decreased 1.0%, primarily driven by retail share losses and other factors, partially offset by the industry’s growth rate and trade inventory movements.

When adjusted for trade inventory movements, our oral tobacco products segment’s reported domestic shipment volume decreased by an estimated 4%.

Our oral tobacco products segment’s retail share was 33.1%, 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 8.7%, an increase of 0.7 share points versus the prior year, and a decrease of 0.1 share point sequentially.

nicotine pouch category grew to 52.0% of the U.S.

oral tobacco category, an increase of 10.0 share points versus the prior year.

In addition, on!

’s share of the nicotine pouch category was 16.7%, a decrease of 2.3 share points versus the prior year.

For a discussion regarding the growth of oral nicotine pouch products and the related impact on the MST category and economic conditions that impact adult tobacco consumer purchasing behavior, see Trends and Developments and Operating Results by Business Segment - Business Environment - Summary above.

Pricing Actions

USSTC and Helix executed the following pricing actions during 2025 and 2024:

▪ Effective April 22, 2025, USSTC increased the list price on its Copenhagen and Red Seal brands by $0.12 per can.

USSTC also increased the list price on its Skoal brands by $0.17 per can.

▪ Effective February 23, 2025, Helix increased the list price on its on!

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▪ Effective January 23, 2024, USSTC increased the list price on its Copenhagen , Skoal and Red Seal brands by $0.11 per can.

▪ Effective April 22, 2025, USSTC increased the list price on its Copenhagen and Red Seal brands by $0.12 per can.

USSTC also increased the list price on its Skoal brands by $0.17 per can.

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

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Reported domestic shipment volumes for NJOY consumables (1) increased 23.9% to 13.5 million units.

Reported domestic shipment volume for NJOY devices decreased 70% to 0.3 million units.

NJOY retail share of consumables in the U.S.

multi-outlet and convenience channel increased 2.4 share points to 6.6%.

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

For a discussion regarding the growth of illicit e-vapor products and the ITC’s exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE in the United States, see Note 14.

For more information on the impairment of the e-vapor reporting unit goodwill, see Note 4.

▪ Effective July 22, 2025, USSTC increased the list price on its Copenhagen and Red Seal brands by $0.12 per can.

USSTC also increased the list price on its Skoal brands by $0.17 per can and Husky brands by $0.25 per can.

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 March 31, 2025, our significant subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests.

At June 30, 2025, 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 March 31, 2025, we had $4.7 billion of cash and cash equivalents.

At June 30, 2025, we had $1.3 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 March 31, 2025, the credit ratings and outlook for our indebtedness by major credit rating agencies were:

At June 30, 2025, the credit ratings and outlook for our indebtedness by major credit rating agencies were:

Short-term Debt Long-term Debt Outlook

Moody’s Investors Service, Inc.

(“Moody’s”) P-2 A3 Negative (1)

Standard & Poor’s Financial Services LLC (“S&P”) A-2 BBB Positive

(“Moody’s”) P-2 A3 Stable

Standard & Poor’s Financial Services LLC (“S&P”) A-2 BBB+ (1)

Fitch Ratings Inc.

F2 BBB Stable

(1) On April 28 2025, Moody’s changed its outlook to Stable from Negative.

(1) On May 14, 2025, S&P changed its long-term debt credit rating to BBB+ from BBB and outlook to Stable from Positive.

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 March 31, 2025, 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 June 30, 2025, 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.

In July 2025, we entered into an extension agreement to 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 March 31, 2025 and December 31, 2024, our total long-term debt was $26.1 billion and $24.9 billion, respectively.

In February 2025, we issued U.S.

dollar denominated senior unsecured notes in the aggregate principal amount of $1.0 billion.

Long-Term Debt - At June 30, 2025 and December 31, 2024, our total long-term debt was $24.7 billion and $24.9 billion, respectively.

In May 2025 and June 2025, we repaid in full at maturity our senior unsecured notes in the aggregate principal amounts of $750 million and $857 million (€750 million), respectively.

In addition, in the first quarter of 2025, we issued senior unsecured notes in the aggregate principal amount of $1.0 billion.

As a result of the issuances and repayments, the weighted-average coupon interest rate on our total long-term debt increased to approximately 4.5% at June 30, 2025 from approximately 4.3% at December 31, 2024.

For further discussion of long-term debt, see Note 12.

At March 31, 2025, our debt-to-Consolidated net earnings and debt-to-Consolidated EBITDA ratios were calculated as follows:

For the Twelve Months Ended March 31, 2025 (1)

At June 30, 2025, our debt-to-Consolidated net earnings and debt-to-Consolidated EBITDA ratios were calculated as follows:

For the Twelve Months Ended June 30, 2025 (1)

(in millions)

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Dividends from less than 50% owned affiliates 181

Gain on the sale of IQOS System commercialization rights

Impairment of goodwill and other intangible assets 1,227

Exit costs 35

Asset impairment and exit costs 36

Impairment of goodwill 873

Fair value adjustment for NJOY Transaction contingent payments 25

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Long-term debt (2 )

Total Debt $ 26,059

Total Debt / Consolidated net earnings 2.6

Total Debt / Consolidated EBITDA 2.1

Debt $ 24,720

Debt / Consolidated net earnings 2.8

Debt / Consolidated EBITDA 2.0

(1) Calculated for the four most recent fiscal quarters.

(2) Balance at March 31, 2025.

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 March 31, 2025.

(2) Balance at June 30, 2025.

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

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

As part of the supplier financing program further discussed in Note 3.

Supplier Financing to our condensed consolidated financial statements in Item 1, Altria guarantees the financial obligations of ALCS under the financing program agreement.

In addition, as discussed below in Supplemental Guarantor Financial Information and in Note 12, PM USA guarantees our obligations under our outstanding debt securities, any borrowings under our Credit Agreement and any amounts outstanding under our commercial paper program.

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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 $2.7 billion in April 2025 for amounts accrued in 2024 under the State Settlement Agreements.

We recorded $0.7 billion and $0.9 billion of charges to cost of sales for the three months ended March 31, 2025 and 2024, 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, market share and inflation.

We paid approximately $2.9 billion and $3.1 billion for the six months ended June 30, 2025 and 2024, 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 $1.6 billion and $1.9 billion of charges to cost of sales for the six months ended June 30, 2025 and 2024, respectively, and $0.9 billion and $1.0 billion of charges to cost of sales for the three months ended June 30, 2025 and 2024, respectively, 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, market share and inflation.

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 March 31, 2025, PM USA had posted appeal bonds totaling $24 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 June 30, 2025, PM USA had posted appeal bonds totaling $24 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 three months of 2025, we paid dividends of $1,730 million, essentially unchanged from the first three months of 2024, reflecting fewer shares outstanding as a result of shares we repurchased under our share repurchase programs, mostly offset by a higher dividend rate.

During the first six months of 2025 and 2024, we paid dividends of $3,454 million and $3,420 million, respectively, an increase of 1.0%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase programs.

Our current annualized dividend rate is $4.08 per share.

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Cash Provided by/Used in Operating Activities

During the first three months of 2025, net cash provided by operating activities was $2,720 million compared with $2,877 million during the first three months of 2024.

This decrease was due primarily to lower net revenues, partially offset by lower excise tax payments.

We had a working capital deficit at March 31, 2025 and December 31, 2024, 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 six months of 2025, net cash provided by operating activities was $2,925 million compared with $2,802 million during the first six months of 2024.

This increase was due primarily to lower payments for State Settlement Agreements, litigation, excise taxes and income taxes, partially offset by payments for certain transferable income tax credits and lower net revenues.

We had a working capital deficit at June 30, 2025 and December 31, 2024, 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 three months of 2025, net cash used in investing activities was $43 million compared with net cash provided by investing activities of $2,316 million during the first three months of 2024.

During the first six months of 2025, net cash used in investing activities was $79 million compared with net cash provided by investing activities of $2,279 million during the first six months of 2024.

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

Cash Provided by/Used in Financing Activities

During the first three months of 2025, net cash used in financing activities was $1,085 million compared with $5,268 million during the first three months of 2024.

This decrease was due to higher share repurchases in 2024, repayments of long-term debt in 2024 and issuances of long-term debt in 2025.

During the first six months of 2025, net cash used in financing activities was $4,693 million compared with $6,966 million during the first six months of 2024.

This decrease was due to lower share repurchases and issuances of long-term debt in 2025, partially offset by higher repayments of long-term debt.

New Accounting Guidance Not Yet Adopted

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Parent Guarantor

March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024 June 30, 2025 December 31, 2024

Due from Non-Guarantor Subsidiaries

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(in millions of dollars)

For the Three Months Ended March 31, 2025

For the Six Months Ended June 30, 2025

Guarantor (2)

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Net earnings (losses) (274) 3,825

(1) For the three months ended March 31, 2025, net earnings (losses) include $92 million of intercompany interest income from non-guarantor subsidiaries and $113 million of interest expense from non-guarantor subsidiaries.

(2) For the three months ended March 31, 2025, net earnings (losses) include $72 million of intercompany interest income from non-guarantor subsidiaries.

(1) For the six months ended June 30, 2025, net earnings (losses) include $184 million of intercompany interest income from non-guarantor subsidiaries and $214 million of interest expense from non-guarantor subsidiaries.

(2) For the six months ended June 30, 2025, net earnings (losses) include $132 million of intercompany interest income from non-guarantor subsidiaries.

Cautionary Factors That May Affect Future Results

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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.

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

In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that, individually or in the aggregate, could cause actual results and outcomes, including with respect to our ability to achieve our Vision, to differ materially from those contained in, or implied by, any forward-looking statements we make.

Any such statement is qualified by reference to the following cautionary statements.

We elaborate on these important

factors and the risks we face throughout this Form 10-Q, particularly in the “Executive Summary” and “Business Environment” sections preceding our discussion of the operating results of our segments above, and in our other publicly filed reports, including our 2024 Form 10-K.

We elaborate on these important factors and the risks we face throughout this Form 10-Q, particularly in the Executive Summary and Business Environment sections preceding our discussion of the operating results of our segments above, and in our other publicly filed reports, including our 2024 Form 10-K and First Quarter Form 10-Q.

These factors and risks include the following:

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▪ 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;

▪ changes, including in macroeconomic and geopolitical conditions (including inflation and tariffs), 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;

▪ unfavorable outcomes with respect to litigation proceedings or any governmental investigations, including significant monetary and non-monetary remedies and importation bans;

▪ the risks associated with significant federal, state and local government actions, including FDA regulatory actions and inaction, and various private sector actions;

▪ the risk that regulators, including the FDA, and courts may interpret laws, rules and regulations applicable to our operating companies’ products differently than we do;

▪ increases in tobacco product-related taxes;

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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