Altria Group 10-Q 2025-03-31

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended March 31, 2025

or

For the transition period from to

Commission File Number 1-08940

Altria Group, Inc.

(Exact name of registrant as specified in its charter)

804-274-2200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No þ

At April 21, 2025, there were 1,684,451,818 shares outstanding of the registrant’s common stock, par value $0.33 1/3 per share.

ALTRIA GROUP, INC.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in millions of dollars)

(Unaudited)

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)

________________________________________________

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)

_____________________________________

See notes to condensed consolidated financial statements.

**Altria Group, Inc. and Subsidiaries

Showing the first 8K of 159K characters. Open the full section

The following discussion should be read in conjunction with the other sections in this Quarterly Report on Form 10-Q (“Form 10-Q”), including our condensed consolidated financial statements and related notes contained in Item 1. Financial Statements of this Form 10-Q (“Item 1”). When used in this Form 10-Q, the terms “Altria,” “we,” “us” and “our” refer to either (i) Altria Group, Inc. and its consolidated subsidiaries or (ii) Altria Group, Inc. only and not its consolidated subsidiaries, as appropriate in the context.

In this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) section, we refer to the following “adjusted” financial measures: adjusted operating companies income (loss) (“OCI”); adjusted OCI margins; adjusted net earnings; adjusted diluted earnings per share (“EPS”); and adjusted effective tax rates. We also refer to the ratio of debt-to-Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization, as defined in our credit agreement, which includes certain adjustments). These financial measures are not required by, or calculated in accordance with, United States generally accepted accounting principles (“GAAP”) and may not be calculated the same as similarly titled measures used by other companies. These financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. For a further description of these non-GAAP financial measures, see the Non-GAAP Financial Measures section below.

Executive Summary

Our Business

We have a leading portfolio of tobacco products for U.S. tobacco consumers age 21+. Our Vision is to responsibly lead the transition of adult smokers to a smoke-free future (“Vision”). We are Moving Beyond Smoking™, leading the way in moving adult smokers away from cigarettes by taking action to transition millions to potentially less harmful choices - believing it is a substantial opportunity for adult tobacco consumers, our businesses and society. As we execute on our Vision, we established our 2028 Enterprise Goals (“2028 Goals”) to provide our investors with specific metrics to measure our progress. For further discussion of our 2028 Goals, see our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”).

Our wholly owned subsidiaries include leading manufacturers of both combustible and smoke-free products. In combustibles, we own Philip Morris USA Inc. (“PM USA”), the most profitable U.S. cigarette manufacturer, and John Middleton Co. (“Middleton”), a leading U.S. cigar manufacturer.

In smoke-free products, we own U.S. Smokeless Tobacco Company LLC (“USSTC”), the leading global moist smokeless tobacco (“MST”) manufacturer, Helix Innovations LLC (“Helix”), a leading manufacturer of oral nicotine pouches, and NJOY, LLC (“NJOY”), a manufacturer of tobacco and menthol e-vapor products covered by marketing granted orders (“MGO”) from the U.S. Food and Drug Administration (“FDA”). In January 2025, the U.S. International Trade Commission (“ITC”) issued an exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE (NJOY’s pod-based e-vapor product) in the United States, which became effective on March 31, 2025. For further discussion, see Note 14. Contingencies to our condensed consolidated financial statements in Item 1 (“Note 14”). Additionally, we have a majority-owned joint venture, Horizon Innovations LLC (“Horizon”), for the U.S. marketing and commercialization of heated tobacco stick products. As of this Form 10-Q, Horizon had no products in the U.S. marketplace.

The brand portfolios of our operating companies include Marlboro, Black & Mild, Copenhagen, Skoal, on! and NJOY. Trademarks related to Altria referenced in this Form 10-Q are the property of Altria or our subsidiaries or are used with permission.

Our investments in equity securities include Anheuser-Busch InBev SA/NV (“ABI”), the world’s largest brewer, and Cronos Group Inc. (“Cronos”), a leading Canadian cannabinoid company.

Trends and Developments

In this section of MD&A, we discuss certain factors that have impacted our businesses as of the date of this Form 10-Q. In addition, we are aware of and address certain trends and developments that could, individually or in the aggregate, have a material impact on our businesses, including the value of our investments in equity securities, in the future. In this section, we focus on the discretionary income pressures on adult tobacco consumers, illicit flavored disposable e-vapor products, the ITC orders on NJOY ACE, recent regulatory actions and tariffs and their effects or potential effects on our businesses. Other trends and developments are discussed elsewhere in MD&A.

U.S. adult tobacco consumers remained under pressure throughout the first quarter of 2025 largely due to the compounding effects of high prices exceeding overall wage growth and historically high levels of consumer credit and delinquency rates, which are beginning to moderate. Although inflation rates moderated in the first quarter of 2025, increased prices and anticipation of higher prices from increased tariffs may further pressure adult tobacco consumers. We have not yet seen a material impact on adult tobacco consumer purchasing behavior from the impact of tariffs and tariff speculation. We will continue to monitor these and other conditions that impact adult tobacco consumer discretionary income and purchasing behaviors, including overall tobacco product expenditures, mix between premium and discount brand purchases, and adoption of smoke-free products; however, we expect discretionary income pressures will continue to influence adult tobacco consumers’ purchase behaviors through 2025. In addition, we are monitoring the effects of tariffs on our businesses, including prices and the availability and quality of raw materials and ingredient and component parts for production. While we expect higher tariffs to impact our costs in 2025, we do not expect the impact to be material based on presently available information on tariffs.

Product assortment, regulation and enforcement continue to evolve in the e-vapor category. For the 12 months ended March 31, 2025, we estimate the e-vapor category grew by approximately 30% versus the prior 12-month period, driven by the growth of illicit flavored disposable e-vapor products. We estimate that illicit products now represent more than 60% of the e-vapor category. In response to the proliferation of illicit disposable e-vapor products, states and the federal government took various regulatory and enforcement actions throughout the year in 2024, but these actions have failed to slow this trend. Select states have established e-vapor product registries based on pre-market tobacco product application (“PMTA”) submissions or MGOs. Additionally, we continue to see increased illicit activity across multiple tobacco categories, including nicotine pouch products and cigarettes. Throughout 2024 and into the first quarter of 2025, various synthetic oral nicotine pouch products emerged in traditional tobacco retailers. We continue to track the overall dynamics across multiple tobacco categories as well as competitive threats to our brands.

As discussed above in Our Business, the ITC orders related to NJOY ACE became effective March 31, 2025. As a result, we performed an interim impairment assessment for the e-vapor reporting unit and recorded a non-cash impairment of our e-vapor reporting unit goodwill. For further discussion, see Note 4. Goodwill and Other Intangible Assets, net to our condensed consolidated financial statements in Item 1 (“Note 4”).

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

Showing the first 8K of 156K characters. Open the full section

Interest Rate Risk

The fair value of our long-term debt, all of which is fixed-rate debt, is subject to fluctuations resulting primarily from changes in market interest rates. The fair value of our long-term debt and the change in fair value based on a 1% increase or decrease in market interest rates were as follows:

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 and S&P. The applicable percentage for borrowings under our Credit Agreement at March 31, 2025 was 1.0% based on our long-term senior unsecured debt ratings on that date. At March 31, 2025 and December 31, 2024, we had no borrowings under our Credit Agreement.

We carried out an evaluation, with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e)) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this Form 10-Q. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

See Note 14 for a discussion of legal proceedings pending against us. See also Exhibits 99.1 and 99.2 to this Form 10-Q.

Information regarding Risk Factors appears in Part I, Item 1A. Risk Factors of our 2024 Form 10-K. Except as set forth below, there have been no material changes to the risk factors previously disclosed in our 2024 Form 10-K. We elaborate on these and other risks we face throughout this Form 10-Q, particularly in the Business Environment section preceding our discussion of our operating results above in MD&A.

Risks Relating to Our Business

Business Operations Risks

Failure to complete or manage strategic transactions, including acquisitions, dispositions, joint ventures and investments in third parties, or realize the anticipated benefits of such transactions, could have a material adverse effect on our business, financial position and our ability to achieve our Vision.

We regularly evaluate potential strategic transactions, including acquisitions, dispositions, joint ventures and investments in third parties. Opportunities for strategic transactions may be limited, and the success of any such transaction is dependent upon our ability to complete and realize the expected benefits of the transaction in the expected time frame or at all. Following the completion of a transaction there may be certain financial, managerial, staffing and talent and operational risks, including

diversion of management’s attention from existing core businesses, difficulties integrating other businesses into existing operations and other challenges presented by a transaction that does not achieve anticipated sales levels and profitability. We may not be able to enter into attractive business relationships or execute and complete strategic transactions on favorable terms or at all, and any such relationships or transactions may not improve our competitive position or have the intended financial outcomes. For example, our former investment in JUUL did not result in and, to date, our investment in Cronos has not, resulted in the economic and competitive advantages expected at the time the investments were made.

We may not be able to realize the expected benefits of the NJOY Transaction in the expected manner or timeframe, if at all, including due to the ITC exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE in the United States, which became effective on March 31, 2025. As a result of the ITC’s orders, we project that our e-vapor reporting unit will have lower volume and revenue due to NJOY ACE’s removal from the U.S. market and higher costs associated with the commercialization of NJOY’s future e-vapor product portfolio resulting in lower operating margins. Accordingly, in connection with the preparation of our financial statements for the first quarter of 2025, we recorded a non-cash impairment of the value of goodwill within our e-vapor reporting unit. If any of the judgments and assumptions we made in determining the fair value of the e-vapor reporting unit fail to materialize as anticipated, we could have one or more additional non-cash impairments of the value of goodwill in our e-vapor reporting unit in future periods. Other factors that could negatively impact our ability to realize the expected benefits of the NJOY Transaction in the expected manner or timeframe, if at all, include (i) our failure to receive or maintain regulatory authorizations; (ii) changes in adult tobacco consumer preferences; (iii) our failure to comply with regulatory requirements; (iv) prevailing economic, market, regulatory or business conditions, or changes in such conditions negatively affecting our business and our plans with respect to the e-vapor category and (v) the outcome of any current or future legal proceeding or investigation related to the NJOY Transaction or NJOY or its products.

If the NJOY Transaction or any other acquisition, disposition, joint venture, investment in a third party or other strategic relationship is not successful, there could be a material negative impact on our business, financial position and results of operations and our ability to achieve our Vision.

We may be required to write down goodwill and intangible assets, including trademarks and other intellectual property, due to impairment, which could have a material adverse effect on our results of operations or financial position.

We periodically calculate the fair value of our reporting units and intangible assets to test for impairment. This calculation may be affected by several factors, including general macroeconomic conditions, the proliferation of illicit products, government actions, including FDA regulatory actions and inaction, changes in category growth (decline) rates as a result of changing adult tobacco consumer preferences, success of planned new product expansions, competitive activity, unfavorable outcomes with respect to litigation proceedings, including actions brought against us alleging patent infringement, and income and excise taxes. Certain events also can trigger an immediate review of intangible assets.

In connection with the preparation of our financial statements for the first quarter of 2025, we recorded an impairment of the value of goodwill within our e-vapor reporting unit as a result of the ITC exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE into the United States, which became effective on March 31, 2025. As a result of the ITC’s orders, we project that our e-vapor reporting unit will have lower volume and revenue due to NJOY ACE’s removal from the U.S. market and higher costs associated with the commercialization of NJOY’s future e-vapor product portfolio resulting in lower operating margins. If any of the judgments and assumptions we made in determining the fair value of the e-vapor reporting unit fail to materialize as anticipated, we could have one or more additional non-cash impairments of the value of goodwill in our e-vapor reporting unit in future periods. In addition to the factors referenced above, these estimates and assumptions include the (i) timing and extent of effective enforcement against illicit flavored disposable e-vapor products; (ii) timing and likelihood of regulatory authorizations of e-vapor products, including of NJOY’s products; (iii) timing of the commercialization of NJOY e-vapor products in the United States; (iv) long-term growth of the e-vapor category; and (v) conversion rates of illicit flavored disposable e-vapor consumers to lawful e-vapor products and, specifically, NJOY’s e-vapor products. Fair value calculations are sensitive to changes in these estimates and assumptions, some of which relate to broader macroeconomic conditions and governmental actions outside of our control.

Additionally, in the second quarter of 2024, we recorded an impairment of the value of the Skoal trademark. This impairment was the result of the decrease in the fair value of the Skoal trademark caused by decreases in the size of the MST products category, which were due, in part, to the growth of nicotine pouch volumes. We continue to monitor several factors that impact the fair value of our goodwill and intangible assets. For example, if Skoal’s actual revenue and income or long-term outlook are significantly unfavorable compared to forecasted performance used to estimate the fair value or if the discount rate used to estimate the fair value increases, we could have an additional non-cash impairment of the carrying value of the Skoal trademark in future periods.

If any impairment is determined to exist, we will incur impairment charges, which could have a material adverse effect on our results of operations or financial position.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In January 2025, our Board authorized a $1.0 billion share repurchase program (“January 2025 share repurchase program”), which we expect to complete by December 31, 2025. 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 for each of the three months in the period ended March 31, 2025, was as follows:

(1) The total number of shares purchased includes (a) shares purchased under the January 2025 share repurchase program and (b) shares withheld by Altria in an amount equal to the statutory withholding taxes for vested stock-based awards previously granted to eligible employees (which totaled 4,262 in January, 344,085 in February and 325 in March).

During the quarter ended March 31, 2025, none of our directors or officers adopted, modified or terminated any “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement,” as each term is defined in Item 408(a) of Regulation S-K.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

ALTRIA GROUP, INC.

/s/ SALVATORE MANCUSO

Salvatore Mancuso

Executive Vice President and

Chief Financial Officer

April 29, 2025