Item 1. Financial Statements

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Item 1. Financial Statements

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in millions of dollars)

(Unaudited)


	June 30, 2024		December 31, 2023
Assets
Cash and cash equivalents	$	1,799	$	3,686
Receivables	72		71
Inventories:
Leaf tobacco	562		649
Other raw materials	199		204
Work in process	25		22
Finished product	388		340
	1,174		1,215
Income taxes	316		496
Other current assets	179		117
Total current assets	3,540		5,585

Property, plant and equipment, at cost	4,507		4,582
Less accumulated depreciation	2,887		2,930
	1,620		1,652

Goodwill	6,945		6,791
Other intangible assets, net	13,048		13,686
Investments in equity securities	8,335		10,011
Other assets	899		845
Total Assets	$	34,387	$	38,570

See notes to condensed consolidated financial statements.

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Continued)

(in millions of dollars, except share and per share data)

(Unaudited)

________________________________________________


	June 30, 2024		December 31, 2023
Liabilities
Current portion of long-term debt	$	1,553	$	1,121
Accounts payable	556		582
Accrued liabilities:
Marketing	763		716
Settlement charges	1,320		2,563
Other	1,900		1,902
Deferred gain from the sale of IQOS System commercialization rights	—		2,700
Dividends payable	1,690		1,735
Total current liabilities	7,782		11,319

Long-term debt	23,470		25,112
Deferred income taxes	3,281		2,799
Accrued pension costs	127		130
Accrued postretirement health care costs	1,086		1,079
Other liabilities	1,607		1,621
Total liabilities	37,353		42,060
Contingencies (Note 14)
Stockholders’ Equity (Deficit)
Common stock, par value $0.33 1/3 per share (2,805,961,317 shares issued)	935		935
Additional paid-in capital	5,876		5,906
Earnings reinvested in the business	33,651		31,094
Accumulated other comprehensive losses	(2,283)		(2,673)
Cost of repurchased stock (1,095,982,189 shares at June 30, 2024 and 1,042,499,542 shares at December 31, 2023)	(41,195)		(38,802)
Total stockholders’ equity (deficit) attributable to Altria	(3,016)		(3,540)
Noncontrolling interests	50		50
Total stockholders’ equity (deficit)	(2,966)		(3,490)
Total Liabilities and Stockholders’ Equity (Deficit)	$	34,387	$	38,570

See notes to condensed consolidated financial statements.

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of dollars, except per share data)

(Unaudited)

_____________________________________


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2024		2023			2024		2023
Net revenues	$	11,785	$	12,227		$	6,209	$	6,508
Cost of sales	3,039		3,115			1,602		1,681
Excise taxes on products	1,791		2,026			932		1,070
Gross profit	6,955		7,086			3,675		3,757
Marketing, administration and research costs	1,394		1,424			788		852
Asset impairment	354		—			354		—
Operating income	5,207		5,662			2,533		2,905
Interest and other debt expense, net	515		486			261		257
Net periodic benefit income, excluding service cost	(49)		(62)			(25)		(31)
(Income) losses from investments in equity securities	(414)		(47)			(119)		(127)
Gain on the sale of IQOS System commercialization rights	(2,700)		—			(2,700)		—
Earnings before income taxes	7,855		5,285			5,116		2,806
Provision for income taxes	1,923		1,381			1,313		689


Net earnings	$	5,932	$	3,904		$	3,803	$	2,117
Per share data:
Basic and diluted earnings per share	$	3.41	$	2.18		$	2.21	$	1.19

See notes to condensed consolidated financial statements.

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

(Unaudited)

_____________________


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
	2024		2023		2024		2023
Net earnings	$	5,932	$	3,904	$	3,803	$	2,117
Other comprehensive earnings (losses), net of deferred income taxes:
Benefit plans	(2)		(11)		(1)		(5)
ABI	394		66		(8)		78
Currency translation adjustments and other	(2)		7		(8)		(3)
Other comprehensive earnings (losses), net of deferred income taxes	390		62		(17)		70
Comprehensive earnings	$	6,322	$	3,966	$	3,786	$	2,187

See notes to condensed consolidated financial statements.

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

for the Six Months Ended June 30, 2024 and 2023

(in millions of dollars, except per share data)

(Unaudited)

_______________________________________


	Attributable to Altria
	Common Stock		Additional Paid-in Capital		Earnings Reinvested in the Business		Accumulated Other Comprehensive Losses		Cost of Repurchased Stock		Non- controlling Interests		Total Stockholders’ Equity (Deficit)
Balances, December 31, 2023	$	935	$	5,906	$	31,094	$	(2,673)	$	(38,802)	$	50	$	(3,490)
Net earnings	—		—		5,932		—		—		—		5,932
Other comprehensive earnings (losses), net of deferred income taxes	—		—		—		390		—		—		390
Stock award activity	—		(12)		—		—		23		—		11
Cash dividends declared ($1.96 per share)	—		—		(3,375)		—		—		—		(3,375)
Repurchases of common stock	—		(18)		—		—		(2,392)		—		(2,410)

Other	—		—		—		—		(24)		—		(24)
Balances, June 30, 2024	$	935	$	5,876	$	33,651	$	(2,283)	$	(41,195)	$	50	$	(2,966)




Balances, December 31, 2022	$	935	$	5,887	$	29,792	$	(2,771)	$	(37,816)	$	50	$	(3,923)
Net earnings	—		—		3,904		—		—		—		3,904
Other comprehensive earnings (losses), net of deferred income taxes	—		—		—		62		—		—		62
Stock award activity	—		(7)		—		—		20		—		13
Cash dividends declared ($1.88 per share)	—		—		(3,356)		—		—		—		(3,356)
Repurchases of common stock	—		—		—		—		(472)		—		(472)
Other	—		—		—		—		(5)		—		(5)
Balances, June 30, 2023	$	935	$	5,880	$	30,340	$	(2,709)	$	(38,273)	$	50	$	(3,777)

See notes to condensed consolidated financial statements.

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

for the Three Months Ended June 30, 2024 and 2023

(in millions of dollars, except per share data)

(Unaudited)

_______________________________________



	Attributable to Altria
	Common Stock		Additional Paid-in Capital			Earnings Reinvested in the Business		Accumulated Other Comprehensive Losses		Cost of Repurchased Stock		Non- controlling Interests		Total Stockholders’ Equity (Deficit)
Balances, March 31, 2024	$	935	$	5,521		$	31,535	$	(2,266)	$	(40,839)	$	50	$	(5,064)
Net earnings	—		—			3,803		—		—		—		3,803
Other comprehensive earnings (losses), net of deferred income taxes	—		—			—		(17)		—		—		(17)
Stock award activity	—		13			—		—		—		—		13
Cash dividends declared ($0.98 per share)	—		—			(1,687)		—		—		—		(1,687)
Repurchases of common stock	—		342		(1)	—		—		(352)		—		(10)
Other	—		—			—		—		(4)		—		(4)
Balances, June 30, 2024	$	935	$	5,876		$	33,651	$	(2,283)	$	(41,195)	$	50	$	(2,966)


Balances, March 31, 2023	$	935	$	5,866	$	29,898	$	(2,779)	$	(37,796)	$	50	$	(3,826)
Net earnings	—		—		2,117		—		—		—		2,117
Other comprehensive earnings (losses), net of deferred income taxes	—		—		—		70		—		—		70
Stock award activity	—		14		—		—		—		—		14
Cash dividends declared ($0.94 per share)	—		—		(1,675)		—		—		—		(1,675)
Repurchases of common stock	—		—		—		—		(472)		—		(472)
Other	—		—		—		—		(5)		—		(5)
Balances, June 30, 2023	$	935	$	5,880	$	30,340	$	(2,709)	$	(38,273)	$	50	$	(3,777)

(1) Represents the fair value of the shares received at final settlement of the ASR Agreements that were transferred to cost of repurchased stock. For further discussion, see Note 1. Background and Basis of Presentation.

See notes to condensed consolidated financial statements.

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in millions of dollars)

(Unaudited)

_____________________


For the Six Months Ended June 30,	2024		2023
Cash Provided by (Used in) Operating Activities
Net earnings	$	5,932	$	3,904
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization	139		114
Deferred income tax provision (benefit) (1)	444		(180)
Unrecognized tax benefit (1)	88		550
Fair value adjustment for NJOY Transaction contingent payments	140		—
(Income) losses from investments in equity securities	(414)		(47)
Gain on the sale of IQOS System commercialization rights	(2,700)		—
Dividends from ABI	139		163
Asset impairment	354		—
Cash effects of changes: (2)
Receivables	(1)		(58)
Inventories	41		9
Accounts payable	(16)		(82)
Income taxes	177		(191)
Accrued liabilities and other current assets	(351)		187
Accrued settlement charges	(1,243)		(1,363)
Pension plan contributions	(9)		(11)
Pension and postretirement, net	(50)		(63)
Other, net (1)	132		176
Net cash provided by (used in) operating activities	2,802		3,108
Cash Provided by (Used in) Investing Activities
Capital expenditures	(64)		(103)
Proceeds from the ABI Transaction (3)	2,353		—

Acquisition of NJOY, net of cash acquired	—		(2,750)
Other, net	(10)		(5)
Net cash provided by (used in) investing activities	$	2,279	$	(2,858)

(1) 2023 relates to unrecognized tax benefit from the ordinary loss for cash tax purposes with respect to a portion of our tax basis associated with our former investment in JUUL, partially offset by our estimated corporate alternative minimum tax credit carryforward. 2023 amounts have been reclassified to conform to the current year presentation.

(2) 2023 amounts are net of the effects from the NJOY Transaction. For further details see Note 2. Acquisition of NJOY.

(3) For further discussion of the ABI Transaction, see Note 6. Investments in Equity Securities.

See notes to condensed consolidated financial statements.

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(in millions of dollars)

(Unaudited)

_____________________


For the Six Months Ended June 30,	2024		2023
Cash Provided by (Used in) Financing Activities

Proceeds from short-term borrowings	$	—	$	2,000

Long-term debt repaid	(1,121)		(1,566)
Repurchases of common stock	(2,410)		(472)
Dividends paid on common stock	(3,420)		(3,365)

Other, net	(15)		(15)
Net cash provided by (used in) financing activities	(6,966)		(3,418)
Cash, cash equivalents and restricted cash:
Increase (decrease)	(1,885)		(3,168)
Balance at beginning of period	3,721		4,091
Balance at end of period	$	1,836	$	923

The following table provides a reconciliation of cash, cash equivalents and restricted cash (1) to the amounts reported on our condensed consolidated balance sheets:
	At June 30, 2024		At December 31, 2023
Cash and cash equivalents	$	1,799	$	3,686
Restricted cash included in other current assets	9		5
Restricted cash included in other assets	28		30

Cash, cash equivalents and restricted cash	$	1,836	$	3,721

(1) Restricted cash consisted of cash deposits collateralizing appeal bonds posted by PM USA to obtain stays of judgments pending appeals. See Note 14. Contingencies.

See notes to condensed consolidated financial statements.

Altria Group, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1. Background and Basis of Presentation

When used in these notes, 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.

**▪**Background: At June 30, 2024, our wholly owned subsidiaries included Philip Morris USA Inc. (“PM USA”), which is engaged in the manufacture and sale of cigarettes in the United States; John Middleton Co. (“Middleton”), which is engaged in the manufacture and sale of machine-made large cigars and is a wholly owned subsidiary of PM USA; UST LLC (“UST”), which, through its wholly owned subsidiary U.S. Smokeless Tobacco Company LLC (“USSTC”), is engaged in the manufacture and sale of moist smokeless tobacco products (“MST”) and snus products; Helix Innovations LLC (“Helix”), which operates in the United States and Canada, and Helix Innovations GmbH and its affiliates (“Helix International”), which operate internationally in the rest-of-world, are engaged in the manufacture and sale of oral nicotine pouches; and NJOY, LLC (“NJOY”), which is engaged in the manufacture and sale of e-vapor products. Other wholly owned subsidiaries included Altria Group Distribution Company (“AGDC”), which provides sales and distribution services to our domestic operating companies; and Altria Client Services LLC (“ALCS”), which provides various support services to our companies in areas such as legal, regulatory, research and product development, consumer engagement, finance, human resources and external affairs. Our access to the operating cash flows of our subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany loans by our subsidiaries. At June 30, 2024, our significant subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests.

At June 30, 2024, we also owned a 75% economic interest in Horizon Innovations LLC (“Horizon”), a joint venture with JTI (US) Holding, Inc., a subsidiary of Japan Tobacco Inc., which owned the remaining 25% economic interest. Horizon is responsible for the U.S. marketing and commercialization of heated tobacco stick products owned by either party.

At June 30, 2024, we had investments in Anheuser-Busch InBev SA/NV (“ABI”) and Cronos Group Inc. (“Cronos”). In March 2024, we sold a portion of our investment in ABI (“ABI Transaction”). For further discussion of our investments in equity securities and the ABI Transaction, see Note 6. Investments in Equity Securities.

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

In January 2024, our Board of Directors authorized a new $1.0 billion share repurchase program that it increased to $3.4 billion in March 2024 (as increased, “January 2024 share repurchase program”). We entered into accelerated share repurchase (“ASR”) transactions under two separate agreements with bank counterparties (collectively, “ASR Agreements”) to repurchase shares of our common stock having an aggregate value of $2.4 billion (“Repurchase Price”). In the first quarter of 2024, we paid the Repurchase Price and received 46.5 million shares of our common stock, which represented approximately 85% of the Repurchase Price, or $2,040 million, based on the closing price per share of our common stock on the date we entered into the ASR Agreements. In the second quarter of 2024, we received approximately 7.4 million additional shares of our common stock upon the final settlement of the ASR Agreements. The total number of shares repurchased under the ASR Agreements was based on volume-weighted average prices of our common stock during the term of the ASR transactions, less a discount. We funded the ASR transactions with proceeds from the ABI Transaction. The ASR transactions were accounted for as equity transactions and included in cost of repurchased stock on our condensed consolidated balance sheet when the shares were received. At June 30, 2024, we had $990 million remaining under the January 2024 share repurchase program. The timing of share repurchases depends upon marketplace conditions and other factors, and the program remains subject to the discretion of our Board.

Our share repurchase activity was as follows:


	For the Six Months Ended June 30,					For the Three Months Ended June 30,
(in millions, except per share data)	2024		(1)	2023		2024		(1)	2023
Total number of shares repurchased	54.1			10.4		7.6			10.4
Aggregate cost of shares repurchased	$	2,410		$	472	$	370		$	472
Average price per share of shares repurchased	$	44.50		$	45.37	$	48.36		$	45.37

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

**▪**Basis of Presentation: Our interim condensed consolidated financial statements are unaudited. Our management believes that all adjustments necessary for a fair statement of the interim results presented have been reflected in our interim condensed consolidated financial statements. All such adjustments were of a normal recurring nature. Net revenues and net earnings for any interim period are not necessarily indicative of results that may be expected for the entire year.

These statements should be read in conjunction with our audited consolidated financial statements and related notes, which appear in our Annual Report on Form 10-K for the year ended December 31, 2023.

On January 1, 2024, we adopted Accounting Standards Update (“ASU”) 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU No. 2022-03”). This guidance clarifies that a contractual restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. This guidance also specifies required disclosures for equity securities subject to contractual sale restrictions. We applied ASU No. 2022-03 for the fair value disclosure of our investment in ABI. For further discussion, see Note 6. Investments in Equity Securities.

For a description of issued accounting guidance applicable to, but not yet adopted by, us, see Note 15. New Accounting Guidance Not Yet Adopted.

Note 2. Acquisition of NJOY

On June 1, 2023, we acquired NJOY Holdings (“NJOY Transaction”), which provided us with full global ownership of NJOY’s e-vapor product portfolio, including NJOY ACE. The total consideration for the NJOY Transaction of approximately $2.9 billion consisted of approximately $2.75 billion in cash payments (net of cash acquired) plus the fair value of up to $500 million in additional cash payments contingent on receipt of U.S. Food and Drug Administration (“FDA”) authorizations with respect to NJOY’s menthol ($250 million), blueberry ($125 million) and watermelon ($125 million) pod products. The fair value of these contingent payments at March 31, 2024, December 31, 2023 and on the acquisition date was approximately $130 million, which was included in the total consideration.

On June 21, 2024, the FDA issued marketing granted orders for four NJOY menthol e-vapor products. As a result, we became obligated to make cash payments totaling $250 million under the acquisition agreement, which payments occurred in July 2024. Additionally, we recorded a pre-tax charge of approximately $140 million for the change in the fair value of contingent payments for the six and three months ended June 30, 2024, as an acquisition-related cost in marketing, administration and research costs in our condensed consolidated statement of earnings. At June 30, 2024, the fair value of total contingent payments was approximately $270 million after recording the fair value adjustment.

Contingent payments related to the NJOY Transaction were recognized at their estimated fair value as of the acquisition date. Subsequent changes to the fair value of the liability resulting from contingent payments are recognized in earnings until the contingency is resolved. In determining the estimated fair value of contingent payments, we made certain judgments, estimates and assumptions, the most significant of which was the likelihood of certain potential regulatory outcomes. Contingent payments are classified in Level 3 of the fair value hierarchy.

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

We funded the initial NJOY Transaction cash payments at closing through a combination of borrowings under a $2.0 billion term loan facility, the issuance of commercial paper and available cash. For further discussion regarding the term loan facility, see Note 12. Debt.

We accounted for this acquisition as a business combination. On June 1, 2024, we finalized our purchase price allocation for the NJOY Transaction. The amounts in the table below represent the final purchase price allocation to assets acquired and liabilities assumed in the NJOY Transaction, including measurement period adjustments made during the three months ended March 31, 2024. We recorded no measurement period adjustments in 2023 or during the three months ended June 30, 2024.


(in millions)	Preliminary Purchase Price Allocation		Measurement Period Adjustments		Final Purchase Price Allocation
Cash and cash equivalents	$	22	$	—	$	22
Receivables	7		—		7
Inventories	19		—		19
Other assets	7		—		7
Property, plant and equipment	16		—		16
Other intangible assets:
Developed technology (amortizable)	1,000		—		1,000
Trademarks (amortizable)	230		(40)		190
Supplier agreements (amortizable)	180		(180)		—
Accounts payable	(7)		—		(7)
Accrued liabilities	(20)		—		(20)
Deferred income taxes	(167)		66		(101)
Total identifiable net assets	1,287		(154)		1,133
Total consideration	2,901		—		2,901
Goodwill	$	1,614	$	154	$	1,768

The excess of the total consideration over the identifiable net assets acquired in the NJOY Transaction primarily reflects the value of future growth opportunities in the e-vapor category. None of the goodwill or other intangible assets is deductible for tax purposes.

The significant assumptions used in determining the fair values of the identifiable intangible assets included volume growth rates, operating margins, the assessment of acquired technology life cycles, discount rates, as well as other factors. We determined the fair values of the identifiable intangible assets using an income approach. The fair value measurements were primarily based on significant inputs that are not observable in the market, such as discounted cash flow analyses, and thus are classified in Level 3 of the fair value hierarchy. We amortize these intangible assets over a weighted-average period of approximately 18 years.

Note 3. Revenues from Contracts with Customers

We disaggregate net revenues based on product type. For further discussion, see Note 11. Segment Reporting.

In 2023, substantially all cash discounts, offered in contracts with our customers for prompt payment, were based on a flat rate per unit based on agreed-upon payment terms. Beginning in the first quarter of 2024 for PM USA and USSTC, cash discounts in contracts with our customers were based on a percentage of the list price based on agreed-upon payment terms. We record receivables net of the cash discounts on our condensed consolidated balance sheets.

We record payments received by our businesses in advance of product shipment as deferred revenue. These payments are included in other accrued liabilities on our condensed consolidated balance sheets until control of such products is obtained by the customer. Deferred revenue from contracts with customers was $310 million and $258 million at June 30, 2024 and December 31, 2023, respectively. When cash is received in advance of product shipment, our companies satisfy their performance obligations within three days of receiving payment. At June 30, 2024 and December 31, 2023, there were no differences between amounts recorded as deferred revenue from contracts with customers and amounts subsequently recognized as revenue.

Receivables were $72 million and $71 million at June 30, 2024 and December 31, 2023, respectively. At June 30, 2024 and December 31, 2023, there were no expected differences between amounts recorded and subsequently received, and we did not record an allowance for credit losses against these receivables.

We record an allowance for returned goods, which is included in other accrued liabilities on our condensed consolidated balance sheets. It is USSTC’s policy to accept authorized sales returns from its customers for products that have passed the freshness date printed on product packaging due to the limited shelf life of USSTC’s MST and snus products. We record estimated sales returns, which are based principally on historical volume and return rates, as a reduction to revenues. Actual sales returns will differ from estimated sales returns to the extent actual results differ from estimated assumptions. We reflect differences between actual and estimated sales returns in the period in which the actual amounts become known. These differences, if any, have not had a material impact on our condensed consolidated financial statements. All returned goods are

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

Sales incentives include variable payments related to goods sold by our businesses. We include estimates of variable consideration as a reduction to revenues upon shipment of goods to customers. The sales incentives that require significant estimates and judgments are as follows:

*▪*Price promotion payments- We make price promotion payments, substantially all of which are made to our retail partners to incent the promotion of certain product offerings in select geographic areas.

*▪*Wholesale and retail participation payments- We make payments to our wholesale and retail partners to incent merchandising and sharing of sales data in accordance with our trade agreements.

These estimates primarily include estimated wholesale to retail sales volume and historical acceptance rates. Actual payments will differ from estimated payments to the extent actual results differ from estimated assumptions. Differences between actual and estimated payments are reflected in the period such information becomes available. These differences, if any, have not had a material impact on our condensed consolidated financial statements.

Note 4. Supplier Financing

We facilitate a voluntary supplier financing program through a third-party intermediary under which participating suppliers may elect to sell receivables due from us to participating third-party financial institutions at the sole discretion of both the suppliers and the financial institutions (“Program”). Our responsibility is limited to making payment on the terms originally negotiated with our supplier, regardless of whether our supplier sells its receivable to a financial institution. We pay the third-party intermediary a nominal fee to administer the Program. Under the terms of the agreement with our third-party intermediary, ALCS has a direct obligation to pay the participating financial institutions or the participating suppliers when payment obligations are due, unless such obligations are satisfied by the applicable ALCS affiliate. Additionally, Altria guarantees the obligations of ALCS to those parties. We do not enter into agreements with any of the participating financial institutions in connection with the Program. The range of payment terms we negotiate with our suppliers (up to 120 days) is consistent irrespective of whether a supplier participates in the Program.

We have no economic interest in a supplier’s sale of a receivable. Once a qualifying supplier elects to participate in the Program and reaches an agreement with a participating third-party financial institution, the qualifying supplier elects which individual invoices it sells to the financial institution.

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

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

Note 5. Goodwill and Other Intangible Assets, net

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


	Goodwill				Other Intangible Assets, net
(in millions)	June 30, 2024		December 31, 2023		June 30, 2024		December 31, 2023
Smokeable products segment	$	99	$	99	$	2,951	$	2,963
Oral tobacco products segment	5,078		5,078		8,695		9,065
Other	1,768		1,614		1,402		1,658
Total	$	6,945	$	6,791	$	13,048	$	13,686

Other intangible assets consisted of the following:


	June 30, 2024				December 31, 2023
(in millions)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Indefinite-lived intangible assets	$	11,089	$	—	$	11,443	$	—
Definite-lived intangible assets	2,621		662		2,841		598
Total other intangible assets	$	13,710	$	662	$	14,284	$	598

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

Middleton. Definite-lived intangible assets, consisting primarily of intellectual property (which includes developed technology), certain cigarette trademarks, e-vapor trademarks and customer relationships, are amortized over a weighted-average period of approximately 19 years. Pre-tax amortization expense for definite-lived intangible assets was $64 million and $45 million for the six months ended June 30, 2024 and 2023, respectively, and $37 million and $27 million for the three months ended June 30, 2024 and 2023, respectively. We estimate our annualized amortization expense, which includes the impact of the NJOY Transaction and related measurement period adjustments, for each of the next five years to be approximately $150 million, assuming no additional transactions occur that require the amortization of intangible assets.

On April 30, 2024, we assigned the exclusive U.S. commercialization rights to the IQOS Tobacco Heating System (“IQOS System”) to Philip Morris International Inc. (“PMI”) pursuant to the terms of a purchase agreement entered into with PMI in October 2022. In exchange for the assignment of the U.S. commercialization rights to the IQOS System, we received total cash payments of approximately $2.8 billion ($1.0 billion in 2022 and $1.8 billion, including interest, in the third quarter of 2023), $2.7 billion of which was classified as a deferred gain on our condensed consolidated balance sheet at December 31, 2023. Upon the assignment of the U.S. commercialization rights to the IQOS System, we recorded a pre-tax gain of $2.7 billion for the six and three months ended June 30, 2024 in our condensed consolidated statements of earnings.

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


	For the Six Months Ended				For the Year Ended
	June 30, 2024				December 31, 2023
(in millions)	Goodwill		Other Intangible Assets, net		Goodwill		Other Intangible Assets, net
Balance at January 1	$	6,791	$	13,686	$	5,177	$	12,384
Changes due to:
Acquisitions (1)	154		(220)		1,614		1,430
Asset impairment	—		(354)		—		—
Amortization	—		(64)		—		(128)
Balance at end of period	$	6,945	$	13,048	$	6,791	$	13,686

(1) Substantially all of the 2023 amounts are attributable to the NJOY Transaction. The 2024 amount represents the measurement period adjustments made during the three months ended March 31, 2024 related to the NJOY Transaction. For additional information regarding the NJOY Transaction, see Note 2. Acquisition of NJOY.

We conduct a required annual review of goodwill and indefinite-lived intangibles for potential impairment, and more frequently if an event occurs or circumstances change that would require us to perform an interim quantitative impairment assessment. Apart from the factors leading us to perform a quantitative assessment for the Skoal intangible asset as discussed below, there have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required as of June 30, 2024. We will perform our annual impairment testing during the fourth quarter of 2024.

At December 31, 2023, the estimated fair value of the Skoal trademark exceeded its carrying value of $3.9 billion by approximately 6% ($0.2 billion). Sales volumes of MST products, including Skoal, have continued to be negatively impacted due in part to evolving adult tobacco consumer preferences, which has resulted in consumers increasingly moving across tobacco categories. In connection with the preparation of our financial statements for the period ended June 30, 2024, we evaluated the accelerated growth of innovative tobacco products, including oral nicotine pouches, and the related increase in competitive activity among tobacco categories, which have continued to contribute to reductions in sales volumes for MST products, including Skoal. We concluded that the expected impact from the sales volume declines on the Skoal trademark represented a triggering event, and as a result of this conclusion, we performed an interim impairment assessment as of June 30, 2024. As a result of (i) lower projected revenue and income due to lower volume assumptions, (ii) a decrease in the perpetual growth rate to 0% (1% at October 1, 2023 valuation) and (iii) an increase in the discount rate to 11.5% (11.0% at October 1, 2023 valuation), we determined the estimated fair value of the Skoal trademark as of June 30, 2024, was below its carrying value and recorded a non-cash, pre-tax impairment of $354 million for the six and three months ended June 30, 2024 in our condensed consolidated statements of earnings. Our estimate of the fair value and carrying value of the Skoal trademark at June 30, 2024 was $3.6 billion, after recording the impairment.

We used an income approach to estimate the fair value of the Skoal trademark. The income approach reflects the discounting of expected future cash flows at a rate of return that incorporates the risk-free rate for the use of those funds, the expected rate of inflation and the risks associated with realizing expected future cash flows. In performing the discounted cash flow analysis, we made various judgments, estimates and assumptions, the most significant of which were volume, revenue, income, operating margins, perpetual growth rate and discount rate. All significant inputs used in the valuation are classified in Level 3 of the fair value hierarchy.

Our annual impairment test of goodwill and indefinite-lived intangible assets as of October 1, 2023 resulted in no impairment charges. At June 30, 2024 and December 31, 2023, there were no accumulated impairment losses related to goodwill.

Note 6. Investments in Equity Securities

The carrying amount of our investments consisted of the following:


(in millions)	June 30, 2024		December 31, 2023
ABI	$	8,020	$	9,676
Cronos	315		335

Total	$	8,335	$	10,011

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


	For the Six Months Ended June 30,						For the Three Months Ended June 30,
(in millions)	2024			2023			2024		2023
ABI (1)	$	(434)	(2)	$	(340)		$	(121)	$	(135)
Cronos (1)	20			43			2		8
(Income) losses from investments under equity method of accounting	(414)			(297)			(119)		(127)
JUUL	—			250		(3)	—		—
(Income) losses from investments in equity securities	$	(414)		$	(47)		$	(119)	$	(127)

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

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

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

Investment in ABI

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

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

▪are convertible by us into ordinary shares of ABI on a one-for-one basis;

▪rank equally with ordinary shares of ABI with regards to dividends and voting rights; and

▪have director nomination rights with respect to ABI.

On March 14, 2024, we converted 60 million shares of our Restricted Shares to ordinary shares of ABI. In March 2024, we completed the ABI Transaction, which consisted of the following:

▪We sold 35 million ordinary shares of ABI in a global secondary offering for gross proceeds of approximately $2.2 billion (“Secondary Offering”). In connection with the Secondary Offering, we (i) agreed to a 180-day lockup with the lead underwriter with respect to our remaining approximately 159 million ABI shares (ending September 10, 2024) and (ii) granted the underwriters an option to purchase up to an additional 5.25 million ordinary shares of ABI, which the underwriters did not exercise prior to its expiration.

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

At June 30, 2024, we had an approximate 8.1% ownership interest in ABI, consisting of approximately 125 million Restricted Shares and approximately 34 million ordinary shares of ABI. As a result of the ABI Transaction, in the first quarter of 2024, we received pre-tax cash proceeds totaling approximately $2.4 billion and incurred transaction costs of approximately $62 million. In conjunction with the ABI Transaction, we entered into the ASR Agreements. For further discussion of the ASR Agreements, see Note 1. Background and Basis of Presentation.

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


(in millions)	For the Six Months Ended June 30, 2024
Gain on partial sale of our investment	$	165
Transaction costs	(62)
Total pre-tax gain on ABI Transaction	$	103

▪The pre-tax gain on the partial sale of our investment was recorded in (income) losses from investments in equity securities and includes a $408 million gain representing the excess of the selling price of the ABI shares sold over the carrying value of those shares, partially offset by a $243 million reclassification of the proportionate share of our pre-tax accumulated other comprehensive losses directly attributable to ABI and our designated net investment hedges related to our investment in ABI (see Note 7. Financial Instruments and Note 10. Other Comprehensive Earnings/Losses).

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

In addition, in conjunction with the ABI Transaction, we recorded an income tax benefit from the partial release of a valuation allowance of approximately $94 million in provision for income taxes in our condensed consolidated statement of earnings for the six months ended June 30, 2024. For further discussion, see Note 13. Income Taxes.

We expect to maintain two seats on ABI’s board of directors through ABI’s 2025 annual general meeting. Following that meeting, as a result of our reduced ownership interest in ABI following the ABI Transaction, we expect to have one seat on ABI’s board of directors, in accordance with our rights as a holder of Restricted Shares. We will continue to account for our investment in ABI under the equity method of accounting because we have active representation on ABI’s board of directors and certain ABI board committees. Through this representation, we have the ability to exercise significant influence over the operating and financial policies of ABI and participate in ABI’s policy making processes.

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

The fair value of our investment in ABI was based on (i) unadjusted quoted prices in active markets for ABI’s ordinary shares and was classified in Level 1 of the fair value hierarchy and (ii) observable inputs other than Level 1 prices, such as quoted prices for similar assets for the Restricted Shares and was classified in Level 2 of the fair value hierarchy. We can convert our Restricted Shares to ordinary shares at our discretion after the expiration of the 180-day lockup period. The fair value of each Restricted Share is based on the value of an ordinary share.

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

At June 30, 2024, the carrying value of our investment in ABI exceeded its share of ABI’s net assets attributable to equity holders of ABI by approximately $1.9 billion. Substantially all of this difference is comprised of goodwill and other indefinite-lived intangible assets (consisting primarily of trademarks). This difference represents a $0.6 billion reduction from December 31, 2023, primarily due to the ABI Transaction.

Investment in Cronos

At June 30, 2024, we had a 41.0% ownership interest in Cronos, consisting of approximately 157 million shares, which we account for under the equity method of accounting. We report our share of Cronos’s results using a one-quarter lag because Cronos’s results are not available in time for us to record them in the concurrent period.

The fair value of our investment in Cronos was based on unadjusted quoted prices in active markets for Cronos’s common shares and was classified in Level 1 of the fair value hierarchy. At June 30, 2024, the fair value of our investment in Cronos exceeded its carrying value by approximately $50 million or approximately 16%. At December 31, 2023, the fair value of our investment in Cronos was less than its carrying value by $8 million or approximately 2%.

Former Investment in JUUL Labs, Inc. (“JUUL”)

In March 2023, we entered into a stock transfer agreement with JUUL under which we transferred to JUUL all of our beneficially owned JUUL equity securities and, in exchange, received a non-exclusive, irrevocable global license to certain of JUUL’s heated tobacco intellectual property. In addition, all other agreements between us and JUUL were terminated or we were removed as parties thereto, other than certain litigation-related agreements and a license agreement relating to our non-trademark licensable intellectual property rights in the e-vapor field, which remain in force solely with respect to our e-vapor

intellectual property as of or prior to March 3, 2023. As a result of the stock transfer agreement, for the six months ended June 30, 2023, we recorded a non-cash, pre-tax loss of $250 million on the disposition of our JUUL equity securities in (income) losses from investments in equity securities in our condensed consolidated statement of earnings.

Note 7. Financial Instruments

We enter into derivative financial instruments to mitigate the potential impact of certain market risks, including foreign currency exchange rate risk. We use various types of derivative financial instruments, including forward contracts, options and swaps. We do not enter into or hold derivative financial instruments for trading or speculative purposes.

Our investment in ABI, whose functional currency is the Euro, exposes us to foreign currency exchange risk on the carrying value of our investment. To manage this risk, we may designate certain foreign exchange contracts, including cross-currency swap contracts and forward contracts (collectively, “foreign currency contracts”), and Euro denominated unsecured long-term notes (“foreign currency denominated debt”) as net investment hedges of our investment in ABI.

At June 30, 2024 and December 31, 2023, we had no outstanding foreign currency contracts. When we have foreign currency contracts in effect, counterparties are domestic and international financial institutions. Under these contracts, we are exposed to potential losses in the event of non-performance by these counterparties. We manage our credit risk by entering into transactions with counterparties that have investment grade credit ratings, limiting the amount of exposure we have with each counterparty and monitoring the financial condition of each counterparty. The counterparty agreements contain provisions that require us to maintain an investment grade credit rating. In the event our credit rating falls below investment grade, counterparties to our foreign currency contracts can require us to post collateral.

The aggregate carrying value and fair value of our total long-term debt were as follows:


(in millions)	June 30, 2024		December 31, 2023
Carrying value	$	25,023	$	26,233
Fair value	22,675		24,373
Foreign currency denominated debt included in long-term debt:
Carrying value	3,206		3,303
Fair value	3,062		3,125

Our estimate of the fair value of our total long-term debt is based on observable market information derived from a third-party pricing source and is classified in Level 2 of the fair value hierarchy.

Net Investment Hedging

We recognize changes in the carrying value of the foreign currency denominated debt due to changes in the Euro to U.S. dollar exchange rate in accumulated other comprehensive losses related to ABI.

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

In addition, as a result of the ABI Transaction, for the six months ended June 30, 2024, we reclassified $42 million of pre-tax gains from our designated net investments hedges included in accumulated other comprehensive losses to (income) losses from investments in equity securities in our condensed consolidated statement of earnings. For further discussion of the ABI Transaction and reclassification of accumulated other comprehensive losses, see Note 6. Investments in Equity Securities and Note 10. Other Comprehensive Earnings/Losses.

Note 8. Benefit Plans

Components of Net Periodic Benefit Cost (Income)

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


	Pension				Postretirement				Pension				Postretirement
	For the Six Months Ended June 30,								For the Three Months Ended June 30,
(in millions)	2024		2023		2024		2023		2024		2023		2024		2023
Service cost	$	21	$	20	$	8	$	8	$	12	$	11	$	4	$	4
Interest cost	161		166		32		34		81		83		16		17
Expected return on plan assets	(233)		(243)		(3)		(4)		(117)		(122)		(2)		(2)
Amortization:
Net loss (gain)	13		2		(2)		—		6		1		(1)		—
Prior service cost (credit)	3		3		(20)		(20)		2		2		(10)		(10)

Net periodic benefit cost (income)	$	(35)	$	(52)	$	15	$	18	$	(16)	$	(25)	$	7	$	9

Employer Contributions

We make contributions to our pension plans to the extent that the contributions are tax deductible and pay benefits that relate to plans for salaried employees that cannot be funded under Internal Revenue Service regulations. We made employer contributions of $9 million to our pension plans and did not make any contributions to our postretirement plans during the six months ended June 30, 2024. Currently, we anticipate making additional employer contributions of up to approximately $20 million to our pension plans and contributions of up to approximately $30 million to our postretirement plans in 2024. However, the foregoing estimates of 2024 contributions to our pension and postretirement plans are subject to change as a result of changes in tax and other benefit laws, changes in interest rates and asset performance significantly above or below the assumed long-term rate of return for each respective plan.

Note 9. Earnings per Share

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


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2024		2023		2024		2023
Net earnings	$	5,932	$	3,904	$	3,803	$	2,117
Less: Distributed and undistributed earnings attributable to share-based awards	(14)		(7)		(9)		(4)
Earnings for basic and diluted EPS	$	5,918	$	3,897	$	3,794	$	2,113



Weighted-average shares for basic and diluted EPS	1,738		1,784		1,718		1,782

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

Note 10. Other Comprehensive Earnings/Losses

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


	For the Six Months Ended June 30, 2024
(in millions)	Benefit Plans		ABI			Currency Translation Adjustments and Other		Accumulated Other Comprehensive Losses
Balances, December 31, 2023	$	(1,493)	$	(1,195)		$	15	$	(2,673)

Other comprehensive earnings (losses) before reclassifications	—		243			(2)		241
Deferred income taxes	—		(54)			—		(54)
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	—		189			(2)		187

Amounts reclassified to net earnings	(3)		257			—		254
Deferred income taxes	1		(52)			—		(51)
Amounts reclassified to net earnings, net of deferred income taxes	(2)		205			—		203

Other comprehensive earnings (losses), net of deferred income taxes	(2)		394		(1)	(2)		390

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


	For the Three Months Ended June 30, 2024
(in millions)	Benefit Plans		ABI			Currency Translation Adjustments and Other		Accumulated Other Comprehensive Losses
Balances, March 31, 2024	$	(1,494)	$	(793)		$	21	$	(2,266)

Other comprehensive earnings (losses) before reclassifications	—		(11)			(8)		(19)
Deferred income taxes	—		1			—		1
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	—		(10)			(8)		(18)

Amounts reclassified to net earnings	(1)		2			—		1
Deferred income taxes	—		—			—		—
Amounts reclassified to net earnings, net of deferred income taxes	(1)		2			—		1

Other comprehensive earnings (losses), net of deferred income taxes	(1)		(8)		(1)	(8)		(17)

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


	For the Six Months Ended June 30, 2023
(in millions)	Benefit Plans		ABI			Currency Translation Adjustments and Other		Accumulated Other Comprehensive Losses
Balances, December 31, 2022	$	(1,436)	$	(1,369)		$	34	$	(2,771)

Other comprehensive earnings (losses) before reclassifications	—		72			7		79
Deferred income taxes	—		(13)			—		(13)
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	—		59			7		66

Amounts reclassified to net earnings	(14)		9			—		(5)
Deferred income taxes	3		(2)			—		1
Amounts reclassified to net earnings, net of deferred income taxes	(11)		7			—		(4)

Other comprehensive earnings (losses), net of deferred income taxes	(11)		66		(1)	7		62

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


	For the Three Months Ended June 30, 2023
(in millions)	Benefit Plans		ABI			Currency Translation Adjustments and Other		Accumulated Other Comprehensive Losses
Balances, March 31, 2023	$	(1,442)	$	(1,381)		$	44	$	(2,779)

Other comprehensive earnings (losses) before reclassifications	—		90			(3)		87
Deferred income taxes	—		(18)			—		(18)
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	—		72			(3)		69

Amounts reclassified to net earnings	(6)		8			—		2
Deferred income taxes	1		(2)			—		(1)
Amounts reclassified to net earnings, net of deferred income taxes	(5)		6			—		1

Other comprehensive earnings (losses), net of deferred income taxes	(5)		78		(1)	(3)		70

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

(1) Primarily reflects our share of ABI’s currency translation adjustments and the impact of our designated net investment hedges related to our investment in ABI. For further discussion of designated net investment hedges, see Note 7. Financial Instruments.

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


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2024		2023		2024		2023
Benefit Plans: (1)
Net loss	$	14	$	3	$	7	$	2
Prior service cost/credit	(17)		(17)		(8)		(8)
	(3)		(14)		(1)		(6)
ABI (2)	257		9		2		8

Pre-tax amounts reclassified from accumulated other comprehensive losses to net earnings	$	254	$	(5)	$	1	$	2

(1) Amounts are included in net periodic benefit income, excluding service cost. For further details, see Note 8. Benefit Plans.

(2) Amounts are included in (income) losses from investments in equity securities. For the six months ended June 30, 2024, as a result of the ABI Transaction, we reclassified $243 million from our accumulated other comprehensive losses of which $285 million is directly attributable to ABI, partially offset by $42 million from our designated net investment hedges related to our investment in ABI. For further information, see Note 6. Investments in Equity Securities and Note 7. Financial Instruments.

Note 11. Segment Reporting

At June 30, 2024, our reportable segments were (i) smokeable products, consisting of combustible cigarettes and machine-made large cigars; and (ii) oral tobacco products, consisting of MST, snus and oral nicotine pouches.

Our all other category included (i) NJOY (beginning June 1, 2023); (ii) Horizon; (iii) Helix International; and (iv) other business activities, all of which consists of research and development (“R&D”) expense related to certain new product platforms and technologies.

Our chief operating decision maker (“CODM”) reviews operating companies income (loss) (“OCI”) to evaluate the performance of, and allocate resources to, our segments. OCI for our segments is defined as operating income before general corporate expenses and amortization of intangibles. Interest and other debt expense, net, along with net periodic benefit income, excluding service cost, and provision for income taxes are centrally managed at the corporate level and, accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by our CODM.

Segment data were as follows:


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2024		2023		2024		2023
Net revenues:
Smokeable products	$	10,401	$	10,910	$	5,495	$	5,820
Oral tobacco products	1,362		1,308		711		680
All other	22		9		3		8
Net revenues	$	11,785	$	12,227	$	6,209	$	6,508
Earnings before income taxes:
OCI:
Smokeable products	$	5,246	$	5,349	$	2,807	$	2,846
Oral tobacco products	532		859		97		443
All other	(172)		(13)		(111)		(4)
Amortization of intangibles	(64)		(45)		(37)		(27)
General corporate expenses	(335)		(488)		(223)		(353)
Operating income	5,207		5,662		2,533		2,905
Interest and other debt expense, net	515		486		261		257
Net periodic benefit income, excluding service cost	(49)		(62)		(25)		(31)
(Income) losses from investments in equity securities	(414)		(47)		(119)		(127)
Gain on the sale of IQOS System commercialization rights	(2,700)		—		(2,700)		—

Earnings before income taxes	$	7,855	$	5,285	$	5,116	$	2,806

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

**▪**Asset Impairment: We recorded a non-cash, pre-tax impairment of the Skoal trademark of $354 million for the six and three months ended June 30, 2024 in our oral tobacco products segment. For further discussion, see Note 5. Goodwill and Other Intangible Assets, net.

**▪**Tobacco and Health and Certain Other Litigation Items: We recorded pre-tax charges related to tobacco and health and certain other litigation items as follows:


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2024		2023		2024		2023
Smokeable products segment	$	38	$	52	$	20	$	40
General corporate expenses	30		338		24		240
Interest and other debt expense, net	—		11		—		10
Total	$	68	$	401	$	44	$	290

We recorded the amounts shown in the table above for our smokeable products segment and general corporate expenses in marketing, administration and research costs in our condensed consolidated statements of earnings. For further discussion, see Note 14. Contingencies.

**▪**Other Business Activities: Our R&D investments have evolved and shifted from our traditional tobacco businesses to new product platforms and technologies. Beginning January 1, 2024, our R&D expense is aligned with how our CODM now evaluates performance results and allocates resources for segment reporting. For the six and three months ended June 30, 2024, using this approach, we recorded the majority of our pre-tax R&D expense of $104 million and $53 million, respectively, in our all other category, which now includes other business activities related to R&D expense for certain new product platforms and technologies. For the six and three months ended June 30, 2023, the majority of our pre-tax R&D expense of $98 million and $55 million, respectively, was recorded in our smokeable products segment.

Note 12. Debt

Short-term Borrowings and Borrowing Arrangements

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

In June 2023, we entered into a $2.0 billion term loan facility and borrowed the full amount available to fund a portion of the cash payments at the closing of the NJOY Transaction. In July 2023, upon receipt of the remaining payment of approximately $1.8 billion (including interest) from PMI related to the sale of the IQOS System commercialization rights, we repaid the term loan facility in full.

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

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

Pricing for interest and fees under our Credit Agreement may be modified in the event of a change in the rating of our long-term senior unsecured debt. We expect interest rates on borrowings under our Credit Agreement to be based on the Term Secured Overnight Financing Rate plus a percentage based on the higher of the ratings of our long-term senior unsecured debt from Moody’s Investors Service, Inc. and Standard & Poor’s Financial Services LLC. The applicable percentage for borrowings under our Credit Agreement at June 30, 2024 was 1.0% based on our long-term senior unsecured debt ratings on that date. Our Credit Agreement does not include any other rating triggers or any provisions that could require the posting of collateral.

Our Credit Agreement includes various covenants, one of which requires us to maintain a ratio of Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization) to Consolidated Interest Expense of not less than 4.0 to 1.0, calculated as of the end of the applicable quarter on a rolling four quarters basis. At June 30, 2024, we were in compliance with our covenants in our Credit Agreement. The terms “Consolidated EBITDA” and “Consolidated Interest Expense,” each as defined in our Credit Agreement, include certain adjustments.

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

Long-term Debt

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

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

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

For a discussion of the fair value of our long-term debt and the designation of our Euro denominated senior unsecured notes as a net investment hedge of our investment in ABI, see Note 7. Financial Instruments.

Note 13. Income Taxes

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


	For the Six Months Ended June 30,						For the Three Months Ended June 30,
(in millions)	2024			2023			2024			2023
Earnings before income taxes	$	7,855		$	5,285		$	5,116		$	2,806
Provision for income taxes	1,923			1,381			1,313			689
Income tax rate	24.5		%	26.1		%	25.7		%	24.6		%

Our income tax rate for the six months ended June 30, 2024 differs from the U.S. federal statutory rate of 21%, due primarily to state tax expense and the change in the fair value of the contingent payments related to the NJOY Transaction, which is treated as an outside basis difference that we do not expect to reverse in the foreseeable future, partially offset by an income tax benefit from the partial release of a valuation allowance recorded against a deferred tax asset associated with our JUUL-related losses. The valuation allowance release was due to our capital gain on the ABI Transaction. Our income tax rate for the three months ended June 30, 2024 differs from the U.S. federal statutory rate of 21%, due primarily to state tax expense and the change in the fair value of the contingent payments related to the NJOY Transaction, which is treated as an outside basis difference that we

do not expect to reverse in the foreseeable future. For further discussion regarding the NJOY Transaction, see Note 2. Acquisition of NJOY.

Our income tax rate for the six months ended June 30, 2023 differs from the U.S. federal statutory rate of 21%, due primarily to state tax expense and a valuation allowance recorded against a deferred tax asset related to the disposition of our former investment in JUUL. Our income tax rate for the three months ended June 30, 2023 differs from the U.S. federal statutory rate of 21%, due primarily to state tax expense.

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


(in millions)
Balance at beginning of year	$	2,256
Additions to valuation allowance charged to income tax expense	7
Releases of valuation allowance credited to income tax benefit	(94)
Foreign currency translation	—
Reductions to valuation allowance due to NJOY Transaction (no impact to earnings)	(4)
Balance at end of period	$	2,165

We determine deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. We record a valuation allowance when it is more likely than not that some portion or all of a deferred tax asset will not be realized. We determine the realizability of deferred tax assets based on the weight of all available positive and negative evidence. In reaching this determination, we consider the character of the assets and the possible sources of taxable income of the appropriate character within the carryback and carryforward periods available under the tax law. There is a potential that sufficient positive evidence may be available in future periods to cause us to further reduce or eliminate the valuation allowance on certain deferred tax assets. That change to the valuation allowance would result in the recognition of previously unrecognized deferred tax assets and a decrease in income tax expense in the period the release would be recorded.

The changes in the valuation allowances for the six months ended June 30, 2024 were due primarily to the ABI Transaction. The cumulative valuation allowance at June 30, 2024 was primarily attributable to deferred tax assets recorded in connection with the unrealized capital losses related to our former investment in JUUL and our investment in Cronos. As we continue to evaluate all sources of potential income that may become available to utilize these losses, our valuation allowance position may change. For further discussion of the ABI Transaction, see Note 6. Investments in Equity Securities.

Note 14. Contingencies

Legal proceedings covering a wide range of matters are pending or threatened in various United States and foreign jurisdictions against Altria and certain of our subsidiaries, including PM USA and NJOY, as well as our indemnitees. Various types of claims may be raised in these proceedings, including product liability, unfair trade practices, antitrust, income tax liability, contraband shipments, patent infringement, employment matters, environmental matters, claims alleging violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), claims for contribution and claims of competitors, shareholders or distributors. Legislative action, such as changes to tort law, also may expand the types of claims and remedies available to plaintiffs.

Litigation is subject to uncertainty, and it is possible that there could be adverse developments in pending or future cases. An unfavorable outcome or settlement of pending tobacco-related or other litigation could encourage the commencement of additional litigation. Damages claimed in some tobacco-related and other litigation are or can be significant and, in certain cases, have ranged in the billions of dollars. The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrates that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome. In certain cases, plaintiffs claim that defendants’ liability is joint and several. In such cases, we may face the risk that one or more co-defendants decline or otherwise fail to participate in the bonding required for an appeal or to pay their proportionate or jury-allocated share of a judgment. As a result, under certain circumstances, we may have to pay more than our proportionate share of any bonding- or judgment-related amounts. Furthermore, in those cases where plaintiffs are successful, we also may be required to pay interest and attorneys’ fees.

Although PM USA historically has been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from seeking to collect judgments while adverse verdicts have been appealed, there remains a risk that such relief may not be obtainable in all cases. This risk has been substantially reduced given that 47 states and Puerto Rico limit the dollar amount of bonds or require no bond at all. However, tobacco litigation plaintiffs have challenged the constitutionality of Florida’s bond cap statute in several cases, and plaintiffs may challenge state bond cap statutes in other jurisdictions as well.

Such challenges may include the applicability of state bond caps in federal court. States, including Florida, also may seek to repeal or alter bond cap statutes through legislation. Although we cannot predict the outcome of such challenges, it is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome of one or more such challenges.

We record provisions in our condensed consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, except to the extent discussed elsewhere in this Note 14. Contingencies: (i) management has concluded that it is not probable that a loss has been incurred in any of the pending cases; (ii) management is unable to estimate the possible loss or range of loss that could result from an unfavorable outcome in any of the pending cases; and (iii) accordingly, management has not provided any amounts in our condensed consolidated financial statements for unfavorable outcomes, if any. Litigation defense costs are expensed as incurred.

We have achieved substantial success in managing litigation. Nevertheless, litigation is subject to uncertainty and significant challenges remain. It is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation. We believe, and have been so advised by counsel handling the respective cases, that we have valid defenses to the litigation pending against us, as well as valid bases for appeal of adverse verdicts. We have defended, and will continue to defend, vigorously against litigation challenges. However, we may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.

Judgments Paid and Provisions for Tobacco and Health (Including Engle Progeny Litigation) and Certain Other Litigation Items: The changes in our accrued liability for tobacco and health and certain other litigation items, including related interest costs, for the periods specified below are as follows:


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2024		2023		2024		2023
Accrued liability for tobacco and health and certain other litigation items at beginning of period	$	346	$	71	$	364	$	171
Pre-tax charges for:
Tobacco and health and certain other litigation (1)	38		52		20		40
Shareholder derivative lawsuits (2)	—		98		—		—
JUUL-related settlements (3)	30		240		24		240
Related interest costs	—		11		—		10



Payments	(263)		(91)		(257)		(80)
Accrued liability for tobacco and health and certain other litigation items at end of period	$	151	$	381	$	151	$	381

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

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

(3) Includes the settlement of certain e-vapor product litigation relating to JUUL e-vapor products. See E-vapor Product Litigation below for a discussion of these settlements.

The accrued liability for tobacco and health and certain other litigation items, including related interest costs, was included in accrued liabilities and other liabilities on our condensed consolidated balance sheets. Pre-tax charges except for related interest costs were included in marketing, administration and research costs in our condensed consolidated statements of earnings. Pre-tax charges for related interest costs were included in interest and other debt expense, net in our condensed consolidated statements of earnings.

After exhausting all appeals in those cases resulting in adverse verdicts associated with tobacco-related litigation, since October 2004, PM USA has paid judgments and settlements (including related costs and fees) totaling approximately $1.1 billion and interest totaling approximately $241 million as of June 30, 2024. These amounts include payments for Engle progeny judgments (and related costs and fees) totaling approximately $444 million and related interest totaling approximately $60 million.

Security for Judgments: To obtain stays of judgments pending appeal, PM USA has posted various forms of security. As of June 30, 2024, PM USA has posted appeal bonds totaling approximately $37 million, which have been collateralized with restricted cash and are included in assets on our condensed consolidated balance sheets.

Overview of Tobacco-Related Litigation

Types and Number of U.S. Cases: Claims related to tobacco products generally fall within the following categories: (i) smoking and health cases alleging personal injury brought on behalf of individual plaintiffs; (ii) health care cost recovery cases brought by governmental (both domestic and foreign) plaintiffs seeking reimbursement for health care expenditures allegedly caused by cigarette smoking and/or disgorgement of profits; (iii) e-vapor cases alleging violation of RICO, fraud, failure to warn, design defect, negligence, antitrust, patent infringement and unfair trade practices; and (iv) other tobacco-related litigation described below. Plaintiffs’ theories of recovery and the defenses raised in tobacco-related litigation are discussed below.

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


	July 29, 2024	July 27, 2023	July 25, 2022
Individual Smoking and Health Cases (1)	177	171	162
Health Care Cost Recovery Actions (2)	1	1	1
E-vapor Cases	81 (3)	5,326	4,030
Other Tobacco-Related Cases (4)	3	3	3

(1) Includes as of July 29, 2024, 23 cases filed in Illinois, 15 cases filed in New Mexico, 73 cases filed in Massachusetts, 11 cases filed in Oregon, three cases filed in Hawaii and 29 non-Engle cases filed in Florida. Does not include individual smoking and health cases brought by or on behalf of plaintiffs in Florida state and federal courts following the decertification of the Engle class (these Engle progeny cases are discussed below in Smoking and Health Litigation - Engle Progeny Cases). Also does not include approximately 664 Broin cases. For further discussion of the Broin cases, see Other Smoking and Health Class Actions below.

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

(3) In May 2023, we reached agreement on terms to resolve the majority of the Multidistrict Litigation lawsuits, and, in March 2024, the court granted final approval of the settlement. Pending final dismissal of these cases, as of July 29, 2024, the remaining cases include 21 individual cases that opted out of the settlement, 21 class action lawsuits (three class action lawsuits pending in Canada and 18 class actions participating in the settlement but pending dismissal) and one individual state court case relating to the Multidistrict Litigation. Also includes 38 cases brought by Native American tribes that are subject to a separate settlement. For further discussion of the Multidistrict Litigation settlement and the settlement of the cases brought by Native American tribes, see E-vapor Product Litigation below.

(4) Includes as of July 29, 2024, one inactive smoking and health case alleging personal injury and purporting to be brought on behalf of a class of individual plaintiffs and two inactive class action lawsuits alleging that use of the terms “Lights” and “Ultra Lights” constitute deceptive and unfair trade practices, common law or statutory fraud, unjust enrichment, breach of warranty or violations of RICO.

International Tobacco-Related Cases: As of July 29, 2024, (i) Altria is named as a defendant in three e-vapor class action lawsuits in Canada; (ii) PM USA is a named defendant in 10 health care cost recovery actions in Canada, eight of which also name Altria as a defendant; and (iii) PM USA and Altria are named as defendants in seven smoking and health class actions filed in various Canadian provinces. See Guarantees and Other Similar Matters below for a discussion of the Distribution Agreement (defined below) between Altria and PMI that provides for indemnities for certain liabilities concerning tobacco products.

Tobacco-Related Cases Set for Trial: As of July 29, 2024, one Engle progeny case, one individual smoking and health case and no e-vapor cases are set for trial through September 30, 2024. Trial dates are subject to change.

Trial Results: Since January 1999, excluding the Engle progeny cases (separately discussed below), verdicts have been returned in 83 tobacco-related cases in which PM USA was a defendant. Verdicts in favor of PM USA and other defendants were returned in 52 of the 83 cases. Of the 31 non-Engle progeny cases in which verdicts were returned in favor of plaintiffs, 27 have reached final resolution.

See Smoking and Health Liti**gation - Engle Progeny Trial Results below for a discussion of verdicts in state and federal Engle progeny cases involving PM USA as of July 29, 2024.

Smoking and Health Litigation

Overview: Plaintiffs’ allegations of liability in smoking and health cases are based on various theories of recovery, including negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, nuisance, breach of express and implied warranties, breach of special duty, conspiracy, concert of action, violations of unfair trade practice laws and consumer protection statutes and claims under the federal and state anti-racketeering statutes. Plaintiffs in the smoking and health cases seek various forms of relief, including compensatory and punitive damages, treble/multiple damages and other statutory damages and penalties, creation of medical monitoring and smoking cessation funds, disgorgement of profits, and injunctive and equitable relief. Defenses raised in these cases include lack of proximate cause, assumption of the risk, comparative fault and/or contributory negligence, statutes of limitations and preemption by the Federal Cigarette Labeling and Advertising Act.

**Non-**Engle Progeny Litigation: Summarized below are the non-Engle progeny smoking and health cases pending or concluded within the last 12 months in which a verdict was returned in favor of plaintiff and against PM USA. Charts listing certain verdicts for plaintiffs in the Engle progeny cases can be found in Smoking and Health Litigation - Engle Progeny Trial Results below.

Taylor: In April 2024, a jury in an Oregon state court returned a verdict in favor of plaintiff and against PM USA, awarding less than $1 million in compensatory damages and allocating 51% of the fault to PM USA. The jury found that plaintiff was not entitled to punitive damages. Plaintiff has filed a notice of appeal of the judgment, and PM USA intends to appeal the judgment.

Roach: In December 2023, a jury in a Hawaii state court returned a verdict in favor of plaintiff and against PM USA, awarding less than $1 million in compensatory damages and allocating 39% of the fault to PM USA. The jury found that plaintiff was not entitled to punitive damages. Following the verdict, the parties submitted a stipulation of dismissal with prejudice to the court. Pursuant to the agreement, PM USA was not required to pay the damages awarded by the jury, the parties agreed to bear their own costs and the parties agreed not to pursue appeals.

Ricapor-Hall: In August 2023, a jury in a Hawaii state court returned a verdict in favor of plaintiff and against PM USA, awarding $6 million in compensatory damages and $8 million in punitive damages. In October 2023, the court entered judgment against PM USA for $11 million, having reduced the compensatory damages award to $3 million based on the jury’s finding on comparative fault and a set-off against plaintiff’s settlements with other defendants. We filed post-trial motions challenging the verdict, which were denied in March 2024. In April 2024, we filed a notice of appeal and a motion to stay execution pending appeal, and the court has stayed execution of the final judgment pending resolution of PM USA’s appeal rights. PM USA’s appeal remains pending, and plaintiff has noticed a cross-appeal.

Deswert: In May 2023, a jury in a Pennsylvania state court returned a verdict in favor of plaintiff and against PM USA, awarding less than $1 million in compensatory damages and allocating 50% of the fault to PM USA. Despite the comparative fault finding, the compensatory damages award would not have been reduced due to the jury’s finding for plaintiff on the strict liability claim. Plaintiff’s claim for punitive damages was dismissed prior to the trial. In lieu of appealing the trial court’s verdict, PM USA settled plaintiff’s claims in July 2023 for an immaterial amount.

Woodley: In February 2023, a jury in a Massachusetts state court returned a verdict in favor of plaintiff and against PM USA, awarding $5 million in compensatory damages. There was no claim for punitive damages. Following the denial of PM USA’s post-trial motions, PM USA appealed the judgment to the Appeals Court of Massachusetts, and the appeal remains pending.

Fontaine: In September 2022, a jury in a Massachusetts state court returned a verdict in favor of plaintiff and against PM USA, awarding approximately $8 million in compensatory damages and $1 billion in punitive damages. In September 2023, the court denied PM USA’s motion for a new trial and partially granted PM USA’s motion for remittitur, reducing the punitive damages award to $56 million. In December 2023, the court entered a final judgment awarding plaintiff $8 million in compensatory damages, $56 million in punitive damages and prejudgment interest. PM USA has noticed an appeal to the Appeals Court of Massachusetts, and the appeal remains pending.

Greene: In September 2019, a jury in a Massachusetts state court returned a verdict in favor of plaintiffs and against PM USA, awarding approximately $10 million in compensatory damages. In May 2020, the court ruled on plaintiffs’ remaining claim and trebled the compensatory damages award to approximately $30 million. In February 2021, the trial court awarded plaintiffs attorneys’ fees and costs in the amount of approximately $2.3 million. PM USA appealed the judgment, and, in May 2023, the Massachusetts Supreme Judicial Court affirmed the trial court judgment and orders denying PM USA’s post-trial motions, concluding the case. We recorded a pre-tax charge of approximately $48 million and paid the recorded amount in the second quarter of 2023.

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

Engle Progeny Cases: Engle progeny cases are individual smoking and health lawsuits filed by Florida resident plaintiffs against one or more cigarette manufacturer defendants. The lawsuits arose following the Florida Supreme Court’s decertification of the class in Engle, et. al. v. R.J. Reynolds Tobacco Co., et. al., a smoking and health class action lawsuit filed in Florida state court against multiple defendants, including PM USA, in which the jury returned a verdict in favor of the plaintiff class and the trial court assessed punitive damages against the defendants. In July 2006, the Florida Supreme Court mandated that the trial court’s punitive damages award be vacated, that the class approved by the trial court be decertified and that members of the decertified class could file individual actions against defendants within one year of issuance of the mandate. Plaintiffs in Engle progeny lawsuits are entitled to rely on certain liability findings from the class action lawsuit, substantially reducing each plaintiff’s burden of proof. These liability findings stipulate: (i) that smoking causes various diseases; (ii) that nicotine in cigarettes is addictive; (iii) that defendants’ cigarettes were defective and unreasonably dangerous; (iv) that defendants concealed or omitted material information not otherwise known or available knowing that the material was

false or misleading or failed to disclose a material fact concerning the health effects or addictive nature of smoking; (v) that defendants agreed to conceal or omit information regarding the health effects of cigarettes or their addictive nature with the intention that smokers would rely on the information to their detriment; (vi) that defendants sold or supplied cigarettes that were defective; and (vii) that defendants were negligent.

Pending Engl****e Progeny Cases: The deadline for filing Engle progeny cases expired in January 2008, at which point a total of approximately 9,300 federal and state claims were pending. As of July 29, 2024, approximately 252 state court cases were pending against PM USA or Altria asserting individual claims by or on behalf of approximately 287 state court plaintiffs. Because of a number of factors, including docketing delays, duplicated filings and overlapping dismissal orders, these numbers are estimates. Each federal Engle progeny case has been resolved.

Engle Progeny Trial Results: As of July 29, 2024, 146 federal and state Engle progeny cases involving PM USA have resulted in verdicts. Eighty-eight were returned in favor of plaintiffs, five of which have been reversed post-trial or on appeal and remain pending. Fifty-eight verdicts were returned in favor of PM USA, two of which have been reversed post-trial or on appeal and remain pending. In addition, there have been a number of mistrials, only some of which have resulted in new trials as of July 29, 2024.

Post-trial activity in a case can result in final resolution that differs from the initial verdict. In many cases, parties have appealed either compensatory or punitive damages awards or both. Courts also have increased and decreased the amounts of punitive damages juries have awarded, declared mistrials and vacated judgments, in whole or in part, with respect to compensatory and punitive damages awards. Initial verdicts have been reversed in whole or in part on appeal or following retrial. Juries have returned verdicts in favor of or against PM USA awarding no damages. In cases where juries returned verdicts against PM USA awarding no damages, some trial courts have decided to award plaintiff damages notwithstanding the verdict. Cases also have been dismissed with or without prejudice before or after a verdict.

The charts below list the verdicts in and post-trial status of certain Engle progeny cases in which verdicts were returned in favor of plaintiffs. The first chart lists cases that are pending as of July 29, 2024 where PM USA has determined an unfavorable outcome is not probable and the amount of loss cannot be reasonably estimated, and the second chart lists cases that have concluded in the past 12 months. In this Note 14. Contingencies, references to “R.J. Reynolds” are to R.J. Reynolds Tobacco Company. Unless otherwise noted for a particular case, the jury’s award for compensatory damages will not be reduced by any finding of plaintiff’s comparative fault. Further, the damages noted reflect adjustments based on post-trial or appellate rulings.

Currently Pending Engle Cases with Verdicts Against PM USA

(rounded to nearest $ million)


Plaintiff	Verdict Date	Defendant(s)	Court	Compensatory Damages(1)	Punitive Damages (PM USA)	Post-Trial Status
Garcia	June 2024	PM USA	Miami-Dade	$6 million	$10 million	Post-trial motions pending.
Chacon	October 2023	PM USA	Miami-Dade	<$1 million	<$1 million	Appeals to the Third District Court of Appeal pending.
Schertzer	April 2022	PM USA and R.J. Reynolds	Miami-Dade	$3 million	$0	Appeal to the Florida Supreme Court pending.(2)
Lipp	September 2021	PM USA	Miami-Dade	$15 million	$28 million	Third District Court of Appeal reversed and remanded for a new trial. Plaintiff's motion for rehearing pending.
McCall	March 2019	PM USA	Broward	<$1 million (<$1 million PM USA)	<$1 million	Appeal to the Fourth District Court of Appeal pending.
Chadwell	September 2018	PM USA	Miami-Dade	$2 million	$0	Third District Court of Appeal reversed the judgment in part and remanded for entry of a verdict reducing compensatory damages based on jury’s comparative fault finding.
Kaplan (McLaughlin)	July 2018	PM USA and R.J. Reynolds	Broward	$2 million	$0	Appeal to the Fourth District Court of Appeal pending.
Cooper (Blackwood)	September 2015	PM USA and R.J. Reynolds	Broward	$5 million (<$1 million PM USA)	$0	Retrial of punitive damages claim pending.

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

(2) Does not include a separate judgment against PM USA for $3 million in fees and costs. PM USA has appealed the fees and costs judgment to the Third District Court of Appeal, which has stayed the appeal pending Florida Supreme Court disposition of the merits appeal.

Engle Cases Concluded Within Past 12 Months

(rounded to nearest $ million)


Plaintiff	Verdict Date	Defendant(s)	Court	Payment Amount for Damages (if any)
Hoffman	January 2023	PM USA	Miami-Dade	$3 million
Levine	September 2022	PM USA and R.J. Reynolds	Miami-Dade	$1 million
Duignan	February 2020	PM USA and R.J. Reynolds	Pinellas	$4 million
Ferraiuolo	November 2023	PM USA and R.J. Reynolds	Duval	<$1 million
Garcia	May 2021	PM USA	Miami-Dade	$3 million

Other Smoking and Health Class Actions: Since the dismissal in May 1996 of a purported nationwide class action brought on behalf of allegedly addicted smokers, plaintiffs have filed numerous putative smoking and health class action suits in various state and federal courts. In general, these cases have purported to be brought on behalf of residents of a particular state or states (although a few cases have purported to be nationwide in scope) and have raised addiction claims and, in many cases, claims of physical injury as well.

Class certification has been denied or reversed by courts in 61 smoking and health class actions involving PM USA in Arkansas (1), California (1), Delaware (1), the District of Columbia (2), Florida (2), Illinois (3), Iowa (1), Kansas (1), Louisiana (1), Maryland (1), Michigan (1), Minnesota (1), Nevada (29), New Jersey (6), New York (2), Ohio (1), Oklahoma (1), Oregon (1), Pennsylvania (1), Puerto Rico (1), South Carolina (1), Texas (1) and Wisconsin (1). See Certain Other Tobacco-Related Litigation below for a discussion of “Lights” and “Ultra Lights” class action cases and medical monitoring class action cases pending against PM USA.

As of July 29, 2024, PM USA and Altria are named as defendants, along with other cigarette manufacturers, in seven class actions filed in the Canadian provinces of Alberta, Manitoba, Nova Scotia, Saskatchewan, British Columbia and Ontario. In Saskatchewan, British Columbia (two separate cases) and Ontario, plaintiffs seek class certification on behalf of individuals who suffer or have suffered from various diseases, including chronic obstructive pulmonary disease, emphysema, heart disease or cancer, after smoking defendants’ cigarettes. In the actions filed in Alberta, Manitoba and Nova Scotia, plaintiffs seek certification of classes of all individuals who smoked defendants’ cigarettes. In March 2019, all of these class actions were stayed as a result of three Canadian tobacco manufacturers (none of which is related to us) seeking protection under Canada’s Companies’ Creditors Arrangement Act (which is similar to Chapter 11 bankruptcy in the United States). The companies entered into these proceedings following a Canadian appellate court upholding two smoking and health class action verdicts against those companies totaling approximately CAD $13 billion. See Guarantees and Other Similar Matters below for a discussion of the Distribution Agreement between Altria and PMI, which provides for indemnities for certain liabilities concerning tobacco products.

As of July 29, 2024, PM USA is named as a defendant in approximately 664 cases brought by flight attendants against United States cigarette manufacturers seeking compensatory damages for personal injuries allegedly caused by exposure to environmental tobacco smoke (“ETS”). The flight attendants allege that they are members of an ETS smoking and health class action in Florida that was settled in 1997 (Broin). The terms of the court-approved settlement in that case allowed class members to file individual lawsuits seeking compensatory damages but prohibited them from seeking punitive damages. Class members were prohibited from filing individual lawsuits after 2000 under the court-approved settlement. In July 2024, we reached agreement on terms to resolve approximately 627 individual Broin lawsuits. Accordingly, in the second quarter of 2024, we recorded a pre-tax provision of $4 million related to the settlement of these cases.

Health Care Cost Recovery Litigation

Overview: In the health care cost recovery litigation, governmental entities seek reimbursement of health care cost expenditures allegedly caused by tobacco products and, in some cases, of future expenditures and damages. Relief sought by some but not all plaintiffs includes punitive damages, multiple damages and other statutory damages and penalties, injunctions prohibiting alleged marketing and sales to minors, disclosure of research, disgorgement of profits, funding of anti-smoking programs, additional disclosure of nicotine yields, and payment of attorney and expert witness fees.

Although there have been some decisions to the contrary, most judicial decisions in the United States have dismissed all or most health care cost recovery claims against cigarette manufacturers. Nine federal circuit courts of appeals and eight state appellate courts, relying primarily on grounds that plaintiffs’ claims were too remote, have ordered or affirmed dismissals of health care cost recovery actions. The U.S. Supreme Court has refused to consider plaintiffs’ appeals from the cases decided by five federal circuit courts of appeal.

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

Since the beginning of 2008, the Canadian Provinces of British Columbia, New Brunswick, Ontario, Newfoundland and Labrador, Quebec, Alberta, Manitoba, Saskatchewan, Prince Edward Island and Nova Scotia have brought health care reimbursement claims against cigarette manufacturers. PM USA is named as a defendant in the British Columbia and Quebec cases, while both Altria and PM USA are named as defendants in the New Brunswick, Ontario, Newfoundland and Labrador, Alberta, Manitoba, Saskatchewan, Prince Edward Island and Nova Scotia cases. The Nunavut Territory and Northwest Territory have passed legislation permitting similar claims, but lawsuits based on this legislation have not been filed. All of these cases have been stayed pending resolution of proceedings in Canada involving three tobacco manufacturers (none of which are affiliated with us) under the Companies’ Creditors Arrangement Act discussed above. See Smoking and Health Litigation - Other Smoking and Health Class Actions above for a discussion of these proceedings. See Guarantees and Other Similar Matters below for a discussion of the Distribution Agreement between Altria and PMI that provides for indemnities for certain liabilities concerning tobacco products.

Settlements of Health Care Cost Recovery Litigation: In November 1998, PM USA and certain other tobacco product manufacturers entered into the Master Settlement Agreement (the “MSA”) with 46 states, the District of Columbia and certain United States territories to settle asserted and unasserted health care cost recovery and other claims. PM USA and certain other tobacco product manufacturers had previously entered into agreements to settle similar claims brought by Mississippi, Florida, Texas and Minnesota (together with the MSA, the “State Settlement Agreements”). The State Settlement Agreements require that the original participating manufacturers or “OPMs” (now PM USA, R.J. Reynolds and, with respect to certain brands, ITG Brands, LLC (“ITG”)) make annual payments of approximately $10.4 billion, subject to adjustments for several factors, including inflation, market share and industry volume. In addition, the OPMs are required to pay settling plaintiffs’ attorneys’ fees, subject to an annual cap of $500 million, on a pro rata basis based on market share. These quarterly payments will end in the fourth quarter of 2024. For the three months ended June 30, 2024 and 2023, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $900 million and $1.0 billion, respectively. For the six months ended June 30, 2024 and 2023, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $1.8 billion and $1.9 billion, respectively. These amounts include PM USA’s estimate of amounts related to NPM Adjustments discussed below.

Non-Participating Manufacturer (“NPM”) Adjustment Disputes: The “NPM Adjustment” is a reduction in MSA payments made by the OPMs and those manufacturers that are subsequent signatories to the MSA (collectively, the “participating manufacturers” or “PMs”) that applies if the PMs collectively lose at least a specified level of market share to non-participating manufacturers since 1997, subject to certain conditions and defenses. The applicability of this reduction has been subject to certain disputes, some of which have been resolved via settlement, as discussed below.

Settlements of NPM Adjustment Disputes.

▪Multi-State Settlement. As of January 2022, a total of 36 states and territories had settled NPM Adjustment disputes relating to varying periods of time. In March 2022, August 2023 and February 2024, Illinois, Iowa and Idaho, respectively, joined the multi-state settlement, bringing the total number of states and territories that have joined the multi-state settlement to 39. In the first quarter of 2022, PM USA recorded $80 million, $20 million of which related to the 2019 through 2021 “transition years,” as a reduction in cost of sales as a result of Illinois joining the multi-state settlement. As a result of Iowa joining the multi-state settlement, PM USA will receive approximately $19 million for 2005 through 2022, $4 million of which relates to the 2020 through 2022 “transition years.” Accordingly, PM USA recorded $19 million as a reduction in cost of sales in the third quarter of 2023. As a result of Idaho joining the multi-state settlement, PM USA will receive approximately $8 million for 2005 through 2023, $2 million of which relates to the 2021 through 2023 “transition years.” In connection with this development, PM USA recorded $8 million as a reduction in cost of sales in the first quarter of 2024. Pursuant to the multi-state settlement, PM USA has received $1.37 billion since the first group of states entered the NPM Adjustment dispute settlement in 2014 and expects to receive annual credits applied against PM USA’s MSA payments through 2041.

▪New York Settlement. In 2015, PM USA entered into a separate NPM Adjustment settlement in which PM USA settled the NPM Adjustment disputes with New York in perpetuity. PM USA has received $572 million pursuant to the New York settlement and expects to receive annual credits applied against the MSA payments due to New York going forward.

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

Continuing NPM Adjustment Disputes with States That Have Not Settled.

▪2004 NPM Adjustment. The PMs and the nine states that had not settled the NPM Adjustment disputes for 2004 participated in a multi-state arbitration. Iowa subsequently joined the multistate settlement in August 2023. The arbitration panel found three of the remaining eight states that have not settled the NPM Adjustment disputes, Washington, Missouri and New Mexico, were not diligent in the enforcement of their escrow statutes in 2004, and PM USA received

approximately $52 million on account of the 2004 NPM Adjustment as a credit against its April 2023 MSA payment. PM USA recorded $44 million and $8 million in third quarter of 2021 and fourth quarter of 2022, respectively. Washington, Missouri and New Mexico have challenged those determinations in their respective state courts, and several issues remain to be resolved by the state trial and appellate courts that may affect the final amount of the 2004 NPM adjustment PM USA and other PMs will receive.

▪2005-2007 NPM Adjustments. The PMs and the seven states that have not settled the NPM Adjustment disputes are currently arbitrating NPM Adjustment disputes before a single arbitration panel. The arbitration encompasses three years, 2005-2007, for six of the seven states, and one year, 2005, for one state. As of July 29, 2024, the arbitration panel had issued decisions for Maryland, Washington and Wisconsin, finding Maryland and Wisconsin diligent for all three years and Washington not diligent for all three years. PM USA recorded $14 million as a reduction of costs of sales and $21 million as interest income in the fourth quarter of 2023 for its estimate of the minimum amount of the 2005 through 2007 NPM Adjustment it will receive.

▪Subsequent Years. No assurance can be given as to when proceedings for 2008 and subsequent years will be scheduled or the precise form those proceedings will take.

Other Disputes under the State Settlement Agreements: The payment obligations of the tobacco product manufacturers that are parties to the State Settlement Agreements, as well as the allocations of any NPM Adjustments and related settlements, have been and may continue to be affected by R.J. Reynolds’s acquisition of Lorillard Tobacco Company in 2015 and its related sale of certain cigarette brands to ITG (the “ITG transferred brands”). PM USA continues to dispute how the ITG transferred brands are treated in allocating the NPM Adjustments and profit adjustments under the State Settlement Agreements.

In December 2019, the State of Mississippi filed a motion in Mississippi state court seeking to enforce the Mississippi State Settlement Agreement against PM USA, R.J. Reynolds and ITG concerning the tax rates used in the annual calculation of the net operating profit adjustment payments starting in 2018. The Mississippi state court held a hearing in October 2021 and issued a decision in June 2022 granting the State’s motion. PM USA appealed the court’s decision in June 2024, and the appeal remains pending.

In May 2023, PM USA and R.J. Reynolds filed a motion in the United States District Court for the Eastern District of Texas seeking to enforce the Texas State Settlement Agreement against the State of Texas concerning the same tax rate issue raised by the State of Mississippi. The State of Texas filed a cross-motion to enforce, and the court found in favor of the State of Texas. As of July 29, 2024, the court had not made a determination on damages. PM USA intends to appeal.

In July 2024, the State of Minnesota filed a motion in Minnesota state court seeking to enforce the Minnesota State Settlement Agreement against PM USA, R.J. Reynolds and ITG concerning the same state tax issues raised by Mississippi and Texas. The motion remains pending.

In January 2021, PM USA and other PMs reached an agreement with several MSA states to waive the PMs’ claim under the most favored nation provision of the MSA in connection with a settlement between those MSA states and a non-participating manufacturer, S&M Brands, Inc. (“S&M Brands”), under which the states released certain claims against S&M Brands in exchange for receiving a portion of the funds S&M Brands deposited into escrow accounts in those states pursuant to the states’ escrow statutes. In consideration for waiving its most favored nation claim, PM USA received approximately $32 million from the escrow funds paid to those MSA states under their settlement with S&M Brands. These funds were received in January 2021 and were recorded in our condensed consolidated statement of earnings (losses) for the first quarter of 2021 as a reduction in cost of sales.

Federal Government’s Lawsuit: In 1999, the U.S. government filed a lawsuit in the U.S. District Court for the District of Columbia against various cigarette manufacturers, including PM USA, and others, including Altria, asserting claims under three federal statutes. The case ultimately proceeded only under the civil provisions of RICO. In August 2006, the district court held that certain defendants, including Altria and PM USA, violated RICO and engaged in certain “sub-schemes” to defraud that the government had alleged.

The court did not impose monetary penalties on defendants, but ordered various types of non-monetary relief, including an injunction against conveying any express or implied health message or health descriptors on cigarette packaging or in cigarette advertising or promotional material, including “lights,” “ultra lights” and “low tar,” which the court found could cause consumers to believe one cigarette brand is less hazardous than another brand, and the issuance of “corrective statements” in various media regarding the adverse health effects of smoking, the addictiveness of smoking and nicotine, the lack of any significant health benefit from smoking “low tar” or “light” cigarettes, defendants’ manipulation of cigarette design to ensure optimum nicotine delivery and the adverse health effects of exposure to ETS.

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

2022, the district court entered a consent order approving a settlement with respect to corrective statements on point-of-sale signage. In addition to the $28 million of provisions recorded in 2022, we recorded in the first quarter of 2024 provisions of $15 million for estimated costs of implementing the corrective statements on point-of-sale signage remedy.

In June 2020, the U.S. government filed a motion with the district court asking for clarification as to whether the court-ordered injunction that applies to cigarettes discussed above also applies to HeatSticks, a heated tobacco product used with the IQOS System. The district court ruled that HeatSticks are cigarettes as defined in the court ordered injunction, and PM USA appealed the district court’s ruling. In connection with our assignment of the exclusive U.S. commercialization rights to the IQOS System to PMI, the U.S. government asserted that the assignment of those rights required district court approval and was subject to PMI becoming bound by the court-ordered injunction and, in January 2024, requested that we petition the district court for approval of the assignment agreement. In May 2024, we entered into an agreement with the U.S. government resolving its concerns regarding our assignment of the exclusive U.S. commercialization rights to the IQOS System to PMI, in which PM USA agreed to obtain district court approval for any future similar transaction and to post additional point-of-sale signage containing the corrective statements referenced above. The cost of implementing the additional point-of-sale signage did not require an increase to the previously recorded provisions for point-of-sale signage discussed above. Pursuant to the settlement, PM USA voluntarily dismissed its appeal of the district court’s ruling that HeatSticks are subject to the court’s injunction.

E-vapor Product Litigation

We have been named as defendants in class action lawsuits, individual lawsuits and “third party” lawsuits relating to JUUL e-vapor products, which include school districts, state and local governments and tribal and healthcare organization lawsuits. We refer to this litigation in the United States collectively as the “Multidistrict Litigation.” The theories of recovery in the Multidistrict Litigation include violation of RICO, fraud, failure to warn, design defect, negligence, public nuisance and unfair trade practices. Plaintiffs seek various remedies, including compensatory and punitive damages, restitution or remediation (for plaintiffs that are government entities) and an injunction prohibiting product sales.

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

In May 2023, we reached agreement on terms to resolve the majority of the Multidistrict Litigation lawsuits as well as the group of cases pending in a consolidated California state court proceeding for $235 million, for which amount we recorded a pre-tax provision in the second quarter of 2023. In March 2024, the court granted final approval of the class action settlement, and we paid the settlement amount in the second quarter of 2024. The settlement applies to all of the Multidistrict Litigation except 38 “third party” cases brought by Native American tribes, which we separately agreed to settle in July 2024. We recorded a pre-tax provision for $20 million in the second quarter of 2024 related to the settlement of these cases. Neither settlement applies to three class action lawsuits pending in Canada, the cases brought by state attorneys general, discussed below, or 17 putative class actions antitrust lawsuits. For a description of the antitrust cases not subject to the settlement, see Antitrust Litigation below.

Four of the “third party” lawsuits noted above against us and JUUL were initiated, individually, by the attorneys general of Alaska, Hawaii, Minnesota and New Mexico alleging violations of state consumer protection and other similar laws. In April 2023, January 2024, February 2024 and April 2024, we agreed to settle the Minnesota, Alaska, Hawaii and New Mexico lawsuits, respectively, for immaterial amounts.

In May 2023, Fuma International LLC (“Fuma”) filed a lawsuit against Altria and our affiliates Nu Mark LLC (“Nu Mark”), AGDC, ALCS and NJOY in the United States District Court for the Eastern District of Virginia asserting claims of patent infringement based on the sale of various Nu Mark and NJOY products, including NJOY ACE, in the United States. In August 2023, we entered into an agreement with Fuma resulting in NJOY’s acquisition of the patents that Fuma asserted in its lawsuit. The parties separately agreed that Fuma would dismiss its patent infringement claims in exchange for $10 million, and such claims were dismissed in August 2023. We recorded a pre-tax provision for $10 million in the third quarter of 2023 related to the agreement and paid such amount to Fuma in August 2023.

In June 2023, JUUL and VMR Products LLC (“VMR”) filed a lawsuit against Altria and our affiliates AGDC, ALCS, NJOY Holdings and NJOY in the United States District Court for the District of Arizona asserting claims of patent infringement based on the sale of NJOY ACE in the United States. Plaintiffs seek various remedies, including damages and an injunction on sales of NJOY ACE. The lawsuit is currently stayed.

Also in June 2023, the same plaintiffs filed a related action against the same defendants with the U.S. International Trade Commission (“ITC”). There, the plaintiffs also allege patent infringement, but the remedies sought include an exclusion order that would prohibit the importation of NJOY ACE into the United States. No damages are recoverable in the proceedings before the ITC. A hearing before the ALJ was held in May 2024, and the ALJ must issue an initial determination and recommendation by August 9, 2024. Once issued, the ALJ’s decision will be reviewed by the ITC, which must issue its final determination by

December 9, 2024. If the ITC issues an exclusion order, the ITC must send that order to the President of the United States for review. The President would then have 60 days to review the ITC’s determination. If the President does not affirmatively reject the ITC’s determination, the determination automatically becomes final and takes effect after the 60 days have elapsed or earlier if the President notifies the ITC of approval before the 60 days elapse. A final exclusion order can be appealed to the United States Court of Appeals for the Federal Circuit, but a final exclusion order prohibiting the importation of NJOY ACE would be unlikely to be stayed during the pendency of such an appeal. In November 2023, Altria and our affiliates filed petitions with the U.S. Patent Office Patent Trial and Appeal Board (“PTAB”) challenging the validity of the patents underlying JUUL and VMR’s patent infringement claims. In June 2024, the PTAB denied Altria’s request to institute review as to two of the patents and granted Altria’s request as to one of the patents. The request with respect to one patent remains pending. The PTAB will conduct proceedings and issue its validity decisions within 12 months from the date it instituted review, after which appeals may be filed with the United States Court of Appeals for the Federal Circuit.

In August 2023, NJOY filed a complaint against JUUL in the United States District Court for the District of Delaware asserting claims of patent infringement based on the sale of certain JUUL e-vapor products, including the currently marketed JUUL device and JUULpods, in the United States. The lawsuit is currently stayed. Also in August 2023, NJOY filed a related action against JUUL with the ITC alleging patent infringement and seeking a ban on the importation and sale of the same JUUL products in the United States. A hearing before the ALJ was held in June 2024, and, once issued, the ALJ’s recommendation will be reviewed by the ITC. NJOY’s action against JUUL in the ITC will proceed in the same manner as discussed above with respect to VMR and JUUL’s action against NJOY. In November 2023, JUUL filed petitions with the PTAB challenging the validity of the patents underlying NJOY’s patent infringement claims. In May 2024, the PTAB agreed to review JUUL’s challenge to both of the NJOY patents asserted against JUUL. The PTAB will conduct proceedings and issue its validity decisions within 12 months from the date it instituted review, after which appeals may be filed with the United States Court of Appeals for the Federal Circuit.

We, JUUL and VMR have engaged with a mediator to attempt to negotiate a resolution of the proceedings pending before the ITC, United States District Courts and the PTAB. Based on the preliminary status of the mediation and the status of the proceedings before the ITC, United States District Courts and the PTAB, we have determined that a loss is not probable or reasonably estimable as of the date of this filing.

IQOS Litigation

In April 2020, RAI Strategic Holdings, Inc. and R.J. Reynolds Vapor Co., which are affiliates of R.J. Reynolds, filed a lawsuit against Altria, PM USA, ALCS, PMI and its affiliate, Philip Morris Products S.A., in the U.S. District Court for the Eastern District of Virginia asserting claims of patent infringement based on the sale of the IQOS System electronic device and Marlboro HeatSticks in the United States. Plaintiffs seek various remedies, including preliminary and permanent injunctive relief, treble damages and attorneys’ fees. Altria and PMI were previously dismissed from the lawsuit, and plaintiffs’ claims against the other defendants have been stayed.

PM USA, ALCS and Philip Morris Products S.A. filed counterclaims against plaintiffs in the Eastern District of Virginia lawsuit alleging patent infringement by R.J. Reynolds’ e-vapor products. In June 2022, PM USA and ALCS reached an agreement with R.J. Reynolds resulting in dismissal of their counterclaims. In addition, ALCS filed a separate lawsuit against R.J. Reynolds in the U.S. District Court for the Middle District of North Carolina also alleging patent infringement by R.J. Reynolds’ e-vapor products. In September 2022, a jury awarded ALCS $95 million in damages for past infringement, plus supplemental damages and interest. In January 2023, the court ordered R.J. Reynolds to pay ALCS a 5.25% royalty on future sales of its infringing product resulting in positive net income through the expiration of the relevant patents in 2035. R.J. Reynolds has filed a notice of appeal of the judgment, and the appeal remains pending. In July 2024, R.J. Reynolds moved the district court to vacate the judgment, including the damages awards and ongoing royalties, on the grounds that R.J. Reynolds obtained a sub-license to the asserted patents from JUUL in December 2023. We will oppose the motion. As gains related to this lawsuit have not yet been determined to be realized or realizable in accordance with GAAP, they have not been recognized in our financial statements.

In November 2020, Healthier Choices Management Corp. filed an additional unrelated patent infringement case in the U.S. District Court for the Northern District of Georgia against PM USA and Philip Morris Products S.A. seeking damages and equitable relief. In February 2021, defendants filed a motion to dismiss the lawsuit, which the court granted in July 2021. In December 2021, the U.S. District Court denied plaintiff’s motion to amend the complaint and plaintiff appealed this ruling to the U.S. Court of Appeals for the Federal Circuit, which reversed the district court’s decision and remanded for further proceedings. On remand, the U.S. District Court stayed the case pending the outcome of plaintiff’s appeal from a ruling by the U.S. Patent and Trademark Office, which issued a decision that the claims of the asserted patent are not valid. That appeal remains pending.

Antitrust Litigation

In March 2023, we entered into a stock transfer agreement with JUUL pursuant to which, among other things, we transferred to JUUL all of our beneficially owned JUUL equity securities. See Note 6. Investments in Equity Securities for a discussion of our disposition of our investment in JUUL.

In April 2020, the FTC issued an administrative complaint against Altria and JUUL alleging that our 35% investment in JUUL and the associated agreements constitute an unreasonable restraint of trade in violation of Section 1 of the Sherman Antitrust Act of 1890 (“Sherman Act”) and Section 5 of the Federal Trade Commission Act of 1914, and substantially lessened competition in violation of Section 7 of the Clayton Antitrust Act (“Clayton Act”). In March 2023, following our disposition of our investment in JUUL, we filed a motion to dismiss the complaint. In June 2023, the FTC dismissed the action as no longer in the public interest.

Also as of July 29, 2024, 17 putative class action lawsuits have been filed against Altria and JUUL in the U.S. District Court for the Northern District of California. In November 2020, these lawsuits were consolidated into three complaints (one on behalf of direct purchasers, one on behalf of indirect purchasers and one on behalf of indirect resellers). The consolidated lawsuits, as amended, cite the FTC administrative complaint and allege that Altria and JUUL violated Sections 1, 2 and/or 3 of the Sherman Act and Section 7 of the Clayton Act and various state antitrust, consumer protection and unjust enrichment laws by restraining trade and/or substantially lessening competition in the U.S. closed-system electronic cigarette market. Plaintiffs seek various remedies, including treble damages, attorneys’ fees, a declaration that the agreements between Altria and JUUL are invalid and rescission of the transaction. In February 2024, the court ordered that certain of the direct-purchaser plaintiffs’ claims against JUUL be sent to arbitration pursuant to an arbitration provision in JUUL’s online purchase agreement and dismissed without prejudice the direct-purchaser plaintiffs’ claims for injunctive relief. The trial with respect to the consolidated lawsuits is set to commence in May 2026.

Shareholder Class Action and Shareholder Derivative Lawsuits

Shareholder Class Action**:** In the fourth quarter of 2021, we agreed to settle a class action lawsuit brought by purported Altria shareholders against Altria and certain of our current and former executives and JUUL, its founders and certain of its current and former executives alleging false and misleading statements and omissions relating to our former investment in JUUL. Pursuant to the settlement, which was granted final approval by the trial court in March 2022, among other things, (i) all claims asserted against Altria and the other named defendants were resolved without any liability or wrongdoing attributed to them personally or to Altria and (ii) Altria agreed to pay the class an aggregate amount of $90 million, which amount included attorneys’ fees. We recorded pre-tax provisions totaling $90 million in 2021 and, in January 2022, paid $90 million to plaintiffs’ escrow account.

Federal and State Shareholder Derivative Lawsuits**:** In October 2022, we agreed to settle a series of federal and state derivative cases brought by Altria shareholders on behalf of themselves and Altria against Altria and certain of our current and former executives and directors and JUUL, its founders and certain of its current and former executives. The cases related to our former investment in JUUL and asserted claims of breach of fiduciary duty by the Altria defendants and aiding and abetting in that alleged breach of fiduciary duty by the remaining defendants.

Under the terms of the settlement, which became effective in May 2023, among other things, we agreed to provide $100 million in funding over a five-year period to underage tobacco prevention and cessation programs, which may include positive youth development programs, led by independent third-party organizations. We expect to begin funding in 2024. In 2022, we recorded pre-tax provisions totaling $27 million for costs associated with the independent monitoring of our funding commitments and attorneys’ fees. In the first quarter of 2023, we recorded pre-tax provisions totaling approximately $100 million related to the settlement, and in April 2023, paid $15 million to plaintiffs’ escrow account for attorneys’ fees.

Certain Other Tobacco-Related Litigation

“Lights/Ultra Lights” Cases and Other Smoking and Health Class Actions**:** Plaintiffs have sought certification of their cases as class actions, alleging among other things, that the uses of the terms “Lights” and/or “Ultra Lights” constitute deceptive and unfair trade practices, common law or statutory fraud, unjust enrichment or breach of warranty, and have sought injunctive and equitable relief, including restitution and, in certain cases, punitive damages. These class actions have been brought against PM USA and, in certain instances, Altria or our other subsidiaries, on behalf of individuals who purchased and consumed various brands of cigarettes. Defenses raised in these cases include lack of misrepresentation, lack of causation, injury and damages, the statute of limitations, non-liability under state statutory provisions exempting conduct that complies with federal regulatory directives, and the First Amendment. Twenty-one state courts in 23 “Lights” cases have refused to certify class actions,

dismissed class action allegations, reversed prior class certification decisions or have entered judgment in favor of PM USA. As of July 29, 2024, two “Lights/Ultra Lights” class actions are pending in U.S. state courts. Neither case is active.

As of July 29, 2024, one smoking and health case alleging personal injury or seeking court-supervised programs or an ongoing medical monitoring program on behalf of individuals exposed to ETS and purporting to be brought on behalf of a class of individual plaintiffs, is pending in a U.S. state court. The case is currently inactive.

UST Litigation**:** UST and/or its tobacco subsidiaries have been named in a number of individual tobacco and health lawsuits over time. Plaintiffs’ allegations of liability in these cases have been based on various theories of recovery, such as negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, breach of implied warranty, addiction and breach of consumer protection statutes. Plaintiffs have typically sought various forms of relief, including compensatory and punitive damages, and certain equitable relief, including disgorgement. Defenses raised in these cases have included lack of causation, assumption of the risk, comparative fault and/or contributory negligence, and statutes of limitations. As of July 29, 2024, there is no such case pending against UST and/or its tobacco subsidiaries.

Environmental Regulation

Altria and our former subsidiaries are subject to various federal, state and local laws and regulations concerning the discharge of materials into the environment, or otherwise related to environmental protection, including, in the United States: the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as “Superfund”), which can impose joint and several liability on each responsible party. Altria and our former subsidiaries are involved in several cost recovery/contribution cases subjecting them to potential costs of remediation and natural resource damages under Superfund or other laws and regulations. We expect to continue to make capital and other expenditures in connection with environmental laws and regulations.

We provide for expenses associated with environmental remediation obligations on an undiscounted basis when such amounts are probable and can be reasonably estimated. Such accruals are adjusted as new information develops or circumstances change. Other than those amounts, it is not possible to reasonably estimate the cost of any environmental remediation and compliance efforts that we may undertake in the future. In the opinion of our management, however, compliance with environmental laws and regulations, including the payment of any remediation costs or damages and the making of related expenditures, has not had a material adverse effect on our condensed consolidated results of operations, capital expenditures, financial position or cash flows.

Guarantees and Other Similar Matters

In the ordinary course of business, we have agreed to indemnify a limited number of third parties in the event of future litigation. At June 30, 2024, we (i) had $45 million of unused letters of credit obtained in the ordinary course of business and (ii) were contingently liable for guarantees related to our own performance, including $19 million for surety bonds recorded on our condensed consolidated balance sheet. In addition, from time to time, we issue lines of credit to affiliated entities. These items have not had, and are not expected to have, a significant impact on our liquidity.

Under the terms of a distribution agreement between Altria and PMI (“Distribution Agreement”), entered into as a result of our 2008 spin-off of our former subsidiary PMI, liabilities concerning tobacco products will be allocated based in substantial part on the manufacturer. PMI will indemnify Altria and PM USA for liabilities related to tobacco products manufactured by PMI or contract manufactured for PMI by PM USA, and PM USA will indemnify PMI for liabilities related to tobacco products manufactured by PM USA, excluding tobacco products contract manufactured for PMI. We do not have a related liability recorded on our condensed consolidated balance sheet at June 30, 2024 as the fair value of this indemnification is insignificant. PMI has agreed not to seek indemnification with respect to the IQOS System patent litigation discussed above under IQOS Litigation, excluding the patent infringement case filed with the U.S. District Court for the Northern District of Georgia.

As part of the supplier financing program, Altria guarantees the financial obligations of ALCS under the financing program agreement. For further discussion of the supplier financing program, see Note 4. Supplier Financing.

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

Note 15. New Accounting Guidance Not Yet Adopted

The following table provides a description of issued accounting guidance applicable to, but not yet adopted by, us:


Standards	Description	Effective Date for Public Entity	Effect on Financial Statements
ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures	The guidance will require disclosure of incremental segment information on an annual and interim basis.	The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.	We are in the process of evaluating the impact of this guidance on our consolidated financial statements and related disclosures.
ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures	The guidance will require additional income tax disclosures, primarily related to the rate reconciliation and income taxes paid information.	The guidance is effective for fiscal years beginning after December 15, 2024.	We are in the process of evaluating the impact of this guidance on our consolidated financial statements and related disclosures.
ASU 2024-01 Compensation-Stock Compensation (Topic 718): Scope Application of Profits Interest and Similar Awards	The guidance seeks to reduce ambiguity in the treatment of profits interest awards and provides specific guidance on whether a profits interest award should be accounted for as a share-based payment arrangement, or in a manner similar to a cash bonus or profit-sharing arrangement.	The guidance is effective for fiscal years beginning after December 15, 2024, and interim periods within those annual periods.	We do not expect the adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

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