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Item 2. Management’s Discussion and Analysis

2025-10-30 compared with 2025-07-30 · 238 added, 225 removed, 915 unchanged (34% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the other sections in this Quarterly Report on Form 10-Q (“Form 10-Q”), including our condensed consolidated financial statements and related notes contained in Item 1.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the other sections in this Quarterly Report on Form 10-Q (“Form 10-Q”), including our condensed consolidated financial statements and related notes contained in Item 1.

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.

All references to “Notes” in this MD&A are to Notes to our condensed consolidated financial statements in Item 1.

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.

only and not its consolidated subsidiaries, as appropriate in the context.

In this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) section, we refer to the following “adjusted” financial measures:

In this MD&A section, we refer to the following “adjusted” financial measures:

adjusted operating companies income (loss) (“OCI”);

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These financial measures are not required by, or calculated in accordance with, United States generally accepted accounting principles (“GAAP”) and may not be calculated the same as similarly titled measures used by other companies.

These financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.

These financial measures should thus be considered

as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.

For a further description of these non-GAAP financial measures, see the Non-GAAP Financial Measures section below.

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marketing and commercialization of heated tobacco stick products.

As of this Form 10-Q, Horizon had no products in the U.S.

As of the date of this Form 10-Q, Horizon had no products in the U.S.

The brand portfolios of our operating companies include Marlboro , Black & Mild , Copenhagen , Skoal , on!

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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, tariffs and evolving consumer preferences.

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

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.

During the first three quarters of 2025, U.S.

adult tobacco consumers continued to experience inflationary pressures on discretionary income, with lower-income consumers being particularly affected.

Inflation remained a persistent concern, staying above the Federal Reserve’s 2% target.

Persistently high prices for essentials such as groceries and housing continued to constrain consumer spending, with low-income earners increasingly cutting back and relying more on credit.

Gas prices continued to trend downward as expected despite marginal increases in the third quarter with the average price of gas remaining above $3.00 per gallon.

Tariffs introduced earlier in 2025 have steadily increased over the past several months, weighing on consumer confidence and contributing to ongoing headwinds for discretionary spending.

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

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.

We do not expect higher tariffs to have a material impact on our costs in 2025 based on presently available information on tariffs.

For the third quarter of 2025, the discount share of the cigarette category reached 32.2%, an increase of 2.4 share points versus the third 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.

We estimate that, when adjusted for trade inventory movements, calendar differences and other factors, total estimated domestic cigarette industry volume declined by 8% in the third quarter of 2025 versus the third quarter of 2024.

When adjusted for trade inventory movements and calendar differences, PM USA’s domestic cigarette shipment volume declined by an estimated 9% in the third quarter of 2025 versus the third 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.

nicotine pouch category continued to grow throughout the third quarter of 2025 to 55.7% of the U.S.

oral tobacco category, an increase of 11.1 share points versus the third 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.

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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.

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

Throughout 2024 and the first three quarters 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.

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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:

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 Nine Months Ended September 30, 2025

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

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

For the six months ended June 30, 2024

For the nine months ended September 30, 2024

$ 8,225 $ 4.75

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(1,503) (0.86)

2025 NPM Adjustment Items

2025 Acquisition and disposition-related items

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Operations 163 0.09

For the six months ended June 30, 2025

For the nine months ended September 30, 2025

$ 5,830 $ 3.45

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▪ Operations:

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.

The increase of $163 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI, partially offset by higher interest and other debt expense, net and lower net periodic benefit income, excluding service cost.

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:

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

The changes in net earnings and diluted EPS for the three months ended September 30, 2025, from the three months ended September 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

For the three months ended September 30, 2024

$ 2,293 $ 1.34

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)

(1,515) (0.88)

2025 NPM Adjustment Items

2025 Acquisition and disposition-related items

$ (12) $ (0.01)

2025 Asset impairment, exit and implementation costs

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Operations 35 0.02

For the three months ended June 30, 2025

For the three months ended September 30, 2025

$ 2,375 $ 1.41

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▪ 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.

The increase of $35 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI.

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

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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”).

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”).

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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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.

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.

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

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

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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.

Goodwill and Other Intangible Assets, net (“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.

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

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.

We believe that the estimated fair value of the e-vapor reporting unit at March 31, 2025 remains reasonable and there are no events or circumstances indicating an impairment for the three months ended September 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, if we experience unfavorable outcomes with respect to litigation proceedings (including actions alleging patent infringement), 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.

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

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

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 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.

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Consolidated Operating Results

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

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

(in millions) 2025 2024 2025 2024

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As discussed further in Note 11.

Segment Reporting to our condensed consolidated financial statements in Item 1 (“Note 11”), our CODM reviews OCI, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate the performance of, and allocate resources to, our segments.

Segment Reporting (“Note 11”), our CODM reviews OCI, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate the performance of, and allocate resources to, our segments.

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

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

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

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

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$ 7,876 $ 2,046 $ 5,830 $ 3.45

NPM Adjustment Items (2) — (2) —

Acquisition and disposition-related items 96 16 80 0.05

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See Non-GAAP Financial Measures above.

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

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

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

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$ 3,075 $ 700 $ 2,375 $ 1.41

NPM Adjustment Items (2) — (2) —

Acquisition and disposition-related items 1 (2) 3 —

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

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

Acquisition and disposition-related items 44 11 33 0.02

Asset impairment, exit and implementation costs 354 90 264 0.15

Tobacco and health and certain other litigation items 22 6 16 0.01

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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:

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

▪ NPM Adjustment Items:

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

Contingencies (“Note 14”) and NPM Adjustment Items in Note 11, respectively.

▪ 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.

We recorded net pre-tax charges reflecting expenses primarily 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.

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

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

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

(in millions) 2025 2024 2025 2024

Net revenues (1)

$ 42 $ — $ — $ —

Cost of sales (1)

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(1) Included in our all other category.

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

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.

(2) Recorded as general corporate expense, net of $34 million and $9 million of insurance recoveries for the nine and three months ended 2025, respectively.

In 2024 and 2025, we incurred total costs of $166 million primarily associated with the ITC determination and patent infringement lawsuits related to the NJOY Transaction, which were offset by insurance recoveries of $59 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 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.

Additionally, we recorded a non-cash, pre-tax charge of $25 million for the nine months ended September 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 nine months ended September 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.

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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.

in April 2024, for the nine months ended September 30, 2024.

▪ Asset Impairment, Exit and Implementation Costs:

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.

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 nine months ended September 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.

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

For further discussion, see Note 4.

We recorded exit and implementation costs of $43 million and $13 million related to our Optimize & Accelerate initiative (“Initiative”) for the nine and three months ended September 30, 2025, respectively.

For a breakdown of these costs by segment, see Note 5.

Exit and Implementation Costs .

▪ Tobacco and Health and Certain Other Litigation Items:

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▪ 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.

We recorded pre-tax amortization expense of definite-lived intangible assets of $112 million and $102 million for the nine months ended September 30, 2025 and 2024, respectively, and $38 million for each of the three months ended September 30, 2025 and 2024 in marketing, administration and research costs in our condensed consolidated statements of earnings.

▪ ABI-Related Special Items:

We recorded net pre-tax income of $62 million from our investment in ABI for the six months ended June 30, 2024, which consisted 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 losses of $36 million and $34 million from our investment in ABI for the nine and three months ended September 30, 2025, respectively, consisting primarily of mark-to-market losses on certain ABI financial instruments associated with its share commitments.

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

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

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

Investments in Equity Securities.

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 $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.

We recorded income tax items of $20 million for the three months ended September 30, 2025, due primarily to an income tax benefit from tax reserves, which includes a favorable rate differential associated with certain cross-border taxes, related to an unfavorable federal court ruling concerning a change in the application of foreign attribution rules relevant to our investment in ABI, partially offset by tax expense associated with the increase of a valuation allowance related to our unrecognized capital losses.

For further discussion, see Note 13.

Income Taxes .

We recorded income tax items of $41 million for the nine months ended September 30, 2024, due primarily to an income tax benefit from the partial release of a valuation allowance 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.

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

Nine Months Ended September 30, 2025 Compared with Nine Months Ended September 30, 2024

Net revenues, which include excise taxes billed to customers, decreased $611 million (3.4%), 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.

Cost of sales decreased $426 million (9.3%), due primarily to lower shipment volume and lower per unit settlement charges in our smokeable products segment, partially offset by higher NJOY costs and lower NPM adjustment items.

Excise taxes on products decreased $333 million (12.3%), due primarily to lower shipment volume in our smokeable products segment.

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Operating income decreased $111 million (1.3%), 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.

(Income) losses from investments in equity securities were unfavorable $132 million (24.9%), due primarily to lower income from our equity investment in ABI (which includes our gain on the ABI Transaction in 2024 and lower ownership interest).

Provision for income taxes decreased $610 million (23%), 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 net earnings of $5,830 million decreased $2,395 million (29.1%), due primarily to the gain on the sale of the IQOS System commercialization rights in 2024, unfavorable results from our equity investment in ABI, lower operating income and unfavorable income tax items.

Reported basic and diluted EPS of $3.45, each decreased by 27.4% due to lower reported net earnings, partially offset by fewer shares outstanding.

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 net earnings of $6,966 million increased $244 million (3.6%), due primarily to higher OCI and a lower adjusted tax rate, partially offset by higher interest and other debt expense, net and lower net periodic benefit income, excluding service cost.

Adjusted diluted EPS of $4.12 increased by 5.9%, 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.

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

Net revenues, which include excise taxes billed to customers, decreased $187 million (3.0%), due primarily to lower net revenues in our smokeable and oral tobacco products segments.

Cost of sales decreased $97 million (6.3%), due primarily to lower shipment volume and lower per unit settlement charges in our smokeable products segment, partially offset by lower NPM adjustment items.

Excise taxes on products decreased $94 million (10.3%), 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.

Marketing, administration and research costs decreased $76 million (11.6%), due primarily to lower acquisition-related items discussed above, included in general corporate expense.

Operating income increased $78 million (2.5%), due primarily to higher OCI and lower general corporate expenses.

Reported net earnings of $2,375 million increased $82 million (3.6%), due primarily to higher operating income.

Reported basic and diluted EPS of $1.41, each increased by 5.2% due to higher reported net earnings and fewer shares outstanding.

Adjusted net earnings of $2,444 million increased $56 million (2.3%), due primarily to higher OCI.

Adjusted diluted EPS of $1.45 increased by 3.6%, due to higher adjusted net earnings and fewer shares outstanding.

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▪ 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;

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

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

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▪ impose restrictions on the advertising, promotion, sale and distribution of tobacco products (see Final Tobacco Marketing Rule below);

▪ establish pre-market review pathways for new and modified tobacco products (see Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement below);

▪ establish premarket review pathways for new and modified tobacco products (see Premarket Review Pathways for Tobacco Products and Market Authorization Enforcement below);

▪ prohibit any express or implied claims that a tobacco product is or may be less harmful than other tobacco products without FDA authorization;

▪ authorize the FDA to impose tobacco product standards that are appropriate for the protection of the public health (see Potential Product Standards below);

▪ authorize the FDA to impose tobacco product standards that are appropriate for the protection of public health (see Potential Product Standards below);

▪ 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).

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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.

See Premarket 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.

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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.

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.

We actively engage

(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.

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).

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▪ 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

(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.

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

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

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▪ advance operational excellence.

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

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

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

▪ Premarket Review Pathways for Tobacco Products and Market Authorization Enforcement:

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

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.

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;

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

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

▪ cigarette and smokeless tobacco products that were modified or first introduced into the market between February 15, 2007 and March 22, 2011 are generally considered “Provisional Products” for which SE reports were required to be filed by March 22, 2011.

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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.

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 process.

While it is possible that the FDA may bring an enforcement action relating to commercialized products for which a PMTA has been pending longer than the 180-day review period, we believe that any such enforcement action would conflict with the FSPTCA.

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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therefore, those determinations did not impact business results.

PM USA and USSTC have other Provisional Products that continue to be subject to the FDA’s pre-market review process.

PM USA and USSTC have other Provisional Products that continue to be subject to the FDA’s premarket review process.

In the meantime, they can continue marketing these products unless the FDA determines that a specific Provisional Product is not substantially equivalent.

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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.

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

PM USA and USSTC may not be able to obtain an MGO for non-provisional products because the FDA may determine that any such product does not meet the statutory requirements for approval.

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

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.

In September 2025, the FDA launched a pilot program intended to increase efficiency and streamline the review process for PMTAs for select oral nicotine pouch products.

Also in September 2025, the FDA communicated to Helix that PMTAs for certain of its products, including on!

PLUS, were being reviewed through the pilot program.

As of October 27, 2025, the FDA has not issued a marketing order with respect to any on!

In October 2025, following the expiration of the 180-day statutory review period, Helix began commercializing on!

Helix intends to comply with the post-market record keeping and reporting requirements of the FDA’s most recently issued MGOs for similar products.

As of October 27, 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.

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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.

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.

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 operating company will execute its plans 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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District Court for the Southern District of Georgia, challenging the final rule on substantive and procedural grounds.

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

In August 2025, the federal court vacated the final rule on the basis that the FDA violated federal law by not disclosing timely data it relied on in creating the rule.

In October 2025, the FDA appealed that decision to the U.S.

Court of Appeals for the Eleventh Circuit.

▪ Underage Access and Use of Certain Tobacco Products :

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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.

As of October 27, 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.

A number of these manufacturers are challenging the MDOs for their products.

number of these manufacturers are challenging the MDOs for their products.

In January 2024, the U.S.

Court of Appeals for the Fifth Circuit ruled that the FDA had unlawfully changed its position with respect to the information required to obtain a PMTA.

The court decided the case en banc , with all judges on the court hearing the case.

In July 2024, the U.S.

Supreme Court agreed to review the U.S.

Court of Appeals for the Fifth Circuit’s decision.

In April 2025, the U.S.

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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.

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.

The public comment period on the proposed product standard closed in September 2025, and we have engaged 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.

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

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

Between the end of 1998 and October 27, 2025, the weighted-average state cigarette excise tax increased from $0.36 to $2.01 per pack.

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

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

As of October 27, 2025, four states (Hawaii, Indiana, Maine and New Jersey) 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.

Many 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.

This ad valorem method results in more tax being paid on premium products than is paid on lower-priced products of equal weight.

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

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

As of October 27, 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 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.

As of October 27, 2025, 34 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-vapor products.

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

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

As of July 28, 2025, 182 countries, as well as the European Union, have become parties to the FCTC.

As of October 27, 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.

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As discussed in Note 14, during 1997 and 1998, PM USA and other major domestic cigarette manufacturers entered into the State Settlement Agreements.

These settlements require participating manufacturers to make substantial annual payments, which are adjusted for several factors, including inflation, operating income, market share and industry volume.

These settlements require participating manufacturers to make substantial annual payments,

which are adjusted for several factors, including inflation, operating income, market share and industry volume.

Higher rates of inflation can increase our financial liability under the State Settlement Agreements as the State Settlement Agreements’ inflation calculations require us to apply the higher of 3% or the U.S.

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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.

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.

As of October 27, 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 Maryland Department of Assessments and Taxation rulemaking.

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

As of July 28, 2025, legislation relating to this issue is pending in one other state.

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

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

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

As of October 27, 2025, legislation relating to this issue is pending in one other state.

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

states and localities on e-vapor and oral nicotine pouch products have been enacted or proposed internationally.

We have challenged and will continue to challenge certain federal, state and local legislation and other governmental action, including through litigation.

Certain legislation imposing restrictions on tobacco products, such as state laws requiring manufacturers of e-vapor products to certify that they are in compliance with federal law in order to sell products in the state, aligns with our Vision, and we actively engage with lawmakers in support of such legislation.

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Such action also could negatively impact adult smokers’ transition to smoke-free products, which could materially adversely affect our innovative tobacco businesses and our ability to achieve our Vision.

We have challenged and will continue to challenge certain federal, state and local legislation and other governmental action, including through litigation.

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

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 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.

As of October 27, 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.

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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.

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.

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.

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

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

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:

For example, we are, or 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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Reasons for the discontinuation include change in corporate policy and, with respect to e-vapor products, reported illnesses and the uncertain regulatory environment.

Furthermore, third-party digital platforms, such as app stores, have restricted, and in some cases prohibited, communications with adult tobacco consumers concerning tobacco products.

Furthermore, third-party digital platforms, such as app stores, have restricted, and in some cases prohibit, communications with adult tobacco consumers concerning tobacco products.

It is possible that if this private sector activity becomes more widespread it could have an adverse effect on our business, results of operations, cash flows or financial position.

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Counterfeit tobacco products, for example, are manufactured by unknown third parties in unregulated environments.

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

Counterfeit versions

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

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

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

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.

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.

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, distributors and retailers of illicit e-vapor products.

Pursuant to the terms of the settlement, a foreign manufacturer and certain domestic distributors of illicit disposable e-vapor devices are prohibited from selling or shipping flavored e-vapor products to consumers, retailers, wholesalers or distributors located in the State of California and from selling or shipping such products to anyone if they have actual knowledge that the products will ultimately be resold or reshipped to consumers in the State of California.

In June 2024, the U.S.

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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.

Reduced demand for raw materials, ingredients and component parts may reduce supply and availability of raw materials, ingredients and component parts as suppliers divert resources to other products or cease producing these products.

these products.

Furthermore, challenging economic conditions can create the risk that our suppliers, distributors, logistics providers or other third-party partners suffer financial or operational difficulties, which may impact their ability to provide us with or distribute finished product, raw materials and component parts and services in a timely manner or at all.

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

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

(in millions) 2025 2024 Change 2025 2024 Change

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

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

Nine Months Ended September 30, 2025 Compared with Nine Months Ended September 30, 2024

Net revenues, which include excise taxes billed to customers, decreased $575 million (3.6%), due primarily to lower shipment volume ($1,944 million), partially offset by higher pricing ($1,327 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).

Reported OCI increased $158 million (1.9%), due primarily to higher pricing, which includes higher promotional investments, lower per unit settlement charges, lower costs ($33 million) and lower tobacco and health and certain other litigation items ($15 million), partially offset by lower shipment volume ($1,308 million), costs associated with the Initiative in 2025 ($38 million) and lower NPM adjustment items ($27 million).

Adjusted OCI increased $208 million (2.5%), 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

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

Net revenues, which include excise taxes billed to customers, decreased $153 million (2.8%), due primarily to lower shipment volume ($530 million), partially offset by higher pricing ($359 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.

Reported OCI increased $5 million (0.2%), due primarily to higher pricing, which includes higher promotional investments, lower per unit settlement charges and lower tobacco and health and certain other litigation items ($17 million), partially offset by lower shipment volume ($366 million), lower NPM adjustment items ($21 million) and higher costs ($20 million).

Adjusted OCI increased $21 million (0.7%), due primarily to higher pricing, which includes higher promotional investments, lower per unit settlement charges, partially offset by lower shipment volume and higher costs.

Shipment Volume and Retail Share Results

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Shipment Volume

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

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

(sticks in millions) 2025 2024 Change 2025 2024 Change

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The following table summarizes our cigarettes retail share performance:

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

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

2025 2024 Percentage Point Change 2025 2024 Percentage Point Change

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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%.

Nine Months Ended September 30, 2025 Compared with the Nine Months Ended September 30, 2024

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 10.6%, 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, partially offset by trade inventory movements.

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

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 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.

Shipments of premium cigarettes accounted for 94.3% and 95.8% of our smokeable products segment’s reported domestic cigarettes shipment volume for the nine months ended September 30, 2025 and 2024, respectively.

Marlboro share of the premium segment was 59.5%, an increase of 0.2 share points.

Total cigarettes industry discount category retail share was 31.4%, an increase of 2.0 share points, primarily due to continued discretionary income pressures on adult tobacco consumers.

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.

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

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 8.2%, 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, partially offset by trade inventory movements.

When adjusted for trade inventory movements and calendar differences, our smokeable products segment domestic cigarette shipment volume decreased by an estimated 9%.

When adjusted for trade inventory movements, calendar differences and other factors, total estimated domestic cigarette industry volume decreased by an estimated 8%.

Shipments of premium cigarettes accounted for 92.5% and 96.1% of our smokeable products segment’s reported domestic cigarettes shipment volume for the three months ended September 30, 2025 and 2024, respectively.

Marlboro share of the premium segment was 59.6%, an increase of 0.3 share points versus the prior year and 0.1 share point sequentially.

Total cigarettes industry discount category retail share was 32.2%, an increase of 2.4 share points versus the prior year and 1.0 share point 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.

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

▪ 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.

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PM USA also increased the list price of all its other cigarette brands 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.

▪ Effective October 12, 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.

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Operating Results

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

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

(in millions) 2025 2024 Change 2025 2024 Change

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

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

Nine Months Ended September 30, 2025 Compared with Nine Months Ended September 30, 2024

Net revenues, which include excise taxes billed to customers, increased $12 million (0.6%), as higher pricing ($192 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”) ($180 million).

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.

Reported OCI increased $394 million (39.6%), due primarily to a non-cash impairment of the Skoal trademark ($354 million) in 2024, higher pricing, which includes higher promotional investments, and lower costs ($29 million), partially offset by lower volume/mix ($176 million).

Adjusted OCI increased $45 million (3.3%), due to higher pricing, which includes higher promotional investments, and lower costs, partially offset by lower volume/mix.

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

Net revenues, which include excise taxes billed to customers, decreased $33 million (4.6%) due primarily to lower volume/mix ($97 million), partially offset by higher pricing ($64 million).

Reported OCI decreased $5 million (1.1%), due primarily to lower volume/mix ($86 million), partially offset by higher pricing and lower costs ($18 million).

Adjusted OCI decreased $4 million (0.9%), due primarily to lower volume/mix, partially offset by higher pricing and lower costs.

Shipment Volume and Retail Share Results

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Shipment Volume

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

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

(cans in millions) 2025 2024 Change 2025 2024 Change

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

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

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

2025 2024 Percentage Point Change 2025 2024 Percentage Point Change

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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.

Nine Months Ended September 30, 2025 Compared with Nine Months Ended September 30, 2024

Our oral tobacco products segment’s reported domestic shipment volume decreased 5.2%, driven primarily 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 3.5%.

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.

Total oral tobacco products category industry volume increased by an estimated 14.5% over the six months ended September 30, 2025, driven primarily by growth in oral nicotine pouches, partially offset by declines in MST volumes.

nicotine pouch category grew to 52.4% of the U.S.

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’s share of the nicotine pouch category was 16.6%, a decrease of 2.1 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.

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

Our oral tobacco products segment’s reported domestic shipment volume decreased 9.6%, driven primarily by retail share losses, calendar differences, trade inventory movements and other factors, partially offset by the industry’s growth rate.

When adjusted for calendar differences and trade inventory movements, our oral tobacco products segment’s reported domestic shipment volume decreased by an estimated 5.5%.

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 pouches was 8.7%, a decrease of 0.1 share point versus the prior year and unchanged sequentially.

nicotine pouch category grew to 55.7% of the U.S.

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

▪ 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.

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

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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 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 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.

At September 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 June 30, 2025, we had $1.3 billion of cash and cash equivalents.

At September 30, 2025, we had $3.5 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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The impact of credit ratings on the cost of borrowings under our Credit Agreement is discussed in Note 12.

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

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

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

Short-term Debt Long-term Debt Outlook

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(“Moody’s”) P-2 A3 Stable

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

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

Fitch Ratings Inc.

F2 BBB Stable

(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 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.

At September 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.

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

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

Long-Term Debt - At June 30, 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 on borrowing arrangements, see Note 12.

Long-Term Debt - At September 30, 2025 and December 31, 2024, our total long-term debt was $25.7 billion and $24.9 billion, respectively.

In the first and third quarters of 2025, we issued senior unsecured notes each in the aggregate principal amount of $1.0 billion ($2.0 billion total).

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

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 September 30, 2025 from approximately 4.3% at December 31, 2024.

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

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)

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

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

(in millions)

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Dividends from less than 50% owned affiliates 181

Asset impairment and exit costs 36

Exit costs 38

Impairment of goodwill 873

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

(2) Balance at June 30, 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 June 30, 2025.

(2) Balance at September 30, 2025.

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

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.

Supplier Financing , 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 $2.9 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.

We paid approximately $2.9 billion and $3.3 billion for the nine months ended September 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 $2.5 billion and $2.9 billion of charges to cost of sales for the nine months ended September 30, 2025 and 2024, respectively, and $0.9 billion of charges to cost of sales for each of the three months ended September 30, 2025 and 2024, 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 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.

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 September 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 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.

During the first nine months of 2025 and 2024, we paid dividends of $5,175 million and $5,108 million, respectively, an increase of 1.3%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase programs.

In August 2025, our Board of Directors (“Board of Directors” or “Board”) approved a 3.9% increase in the quarterly dividend rate to $1.06 per share of our common stock versus the previous rate of $1.02 per share.

Our current annualized dividend rate is $4.24 per share.

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

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

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

In October 2025, the Board authorized a $1.0 billion expansion of our existing share repurchase program from $1.0 billion to $2.0 billion, which now expires on December 31, 2026.

For further discussion of our share repurchase programs, see Note 1.

Background and Basis of Presentation to our condensed consolidated financial statements in Item 1 and Part II, Item 2.

Background and Basis of Presentation and Part II, Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds of this Form 10-Q.

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Cash Provided by/Used in Operating Activities

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.

During the first nine months of 2025, net cash provided by operating activities was $6,019 million compared with $5,413 million during the first nine months of 2024.

This increase was due primarily to lower payments for State Settlement Agreements, excise taxes and litigation, and a portion of the NJOY contingent payments in 2024 ($140 million), partially offset by lower net revenues.

We had a working capital deficit at September 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 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.

During the first nine months of 2025, net cash used in investing activities was $139 million compared with net cash provided by investing activities of $2,238 million during the first nine 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 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.

During the first nine months of 2025, net cash used in financing activities was $5,542 million compared with $9,444 million during the first nine months of 2024.

This decrease was due to lower share repurchases, issuances of long-term debt in 2025 and a portion of the NJOY contingent payments in 2024 ($110 million), partially offset by higher repayments of long-term debt.

New Accounting Guidance Not Yet Adopted

New Accounting Guidance Not Yet Adopted to our condensed consolidated financial statements in Item 1 for a discussion of issued accounting guidance applicable to, but not yet adopted by, us.

New Accounting Guidance Not Yet Adopted for a discussion of issued accounting guidance applicable to, but not yet adopted by, us.

Contingencies

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Parent Guarantor

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

September 30, 2025 December 31, 2024 September 30, 2025 December 31, 2024

Due from Non-Guarantor Subsidiaries

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(in millions of dollars)

For the Six Months Ended June 30, 2025

For the Nine Months Ended September 30, 2025

Guarantor (2)

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Net earnings (losses) (344) 5,927

(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.

(1) For the nine months ended September 30, 2025, net earnings (losses) include $277 million of intercompany interest income from non-guarantor subsidiaries and $314 million of interest expense from non-guarantor subsidiaries.

(2) For the nine months ended September 30, 2025, net earnings (losses) include $190 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.

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

You should 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 and First Quarter Form 10-Q.

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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▪ increases in tobacco product-related taxes;

▪ our failure to complete or manage successfully strategic transactions, including acquisitions, dispositions, joint ventures and investments in third parties, or realize the anticipated benefits of such transactions;

▪ our failure to complete or manage successfully strategic relationships or transactions, including acquisitions, dispositions, joint ventures and investments in third parties, or realize the anticipated benefits of such transactions;

▪ significant changes in price, availability or quality of tobacco, other raw materials or component parts, including as a result of changes in macroeconomic, climate and geopolitical conditions;

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▪ the risk that we may be required to write down goodwill and intangible assets, including trademarks and other intellectual property, due to impairment;

▪ the risks associated with our Optimize & Accelerate initiative, including risks relating to business continuity, our internal control over financial reporting and audit procedures and our ability to recognize the expected savings;

▪ the risks associated with the Initiative, including risks relating to business continuity, our internal control over financial reporting and audit procedures and our ability to recognize the expected savings;

▪ the risk that we could decide, or be required, to recall products;

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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