UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-08940

Altria Group, Inc.

(Exact name of registrant as specified in its charter)

Virginia

13-3260245

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer
Identification No.)

6601 West Broad Street,

Richmond,

Virginia

23230

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code (804) 274-2200

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

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


Title of each class	Trading Symbols	Name of each exchange on which registered
Common Stock, $0.33 1/3 par value	MO	New York Stock Exchange
1.000% Notes due 2023	MO23A	New York Stock Exchange
1.700% Notes due 2025	MO25	New York Stock Exchange
2.200% Notes due 2027	MO27	New York Stock Exchange
3.125% Notes due 2031	MO31	New York Stock Exchange

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.

Large accelerated filer

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

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 ~~October 21, 2021,~~July 19, 2022, there were ~~1,836,988,822~~1,800,823,383 shares outstanding of the registrant’s common stock, par value $0.33 1/3 per share.

Table of Contents

ALTRIA GROUP, INC.

TABLE OF CONTENTS



		Page No.
PART I -	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Condensed Consolidated Balance Sheets at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021	3

	Condensed Consolidated Statements of Earnings ~~(Losses)~~ for the ~~Nine~~Six and Three Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	5

	Condensed Consolidated Statements of Comprehensive Earnings ~~(Losses)~~ for the ~~Nine~~ Six and Three Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	6

	Condensed Consolidated Statements of Stockholders’ Equity (Deficit) ~~Equity~~ for the ~~Nine~~ Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	7

	Three Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	8

	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021	9

	Notes to Condensed Consolidated Financial Statements	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4136

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	7669

Item 4.	Controls and Procedures	7769

PART II -	OTHER INFORMATION

Item 1.	Legal Proceedings	7769

Item 1A.	Risk Factors	7770

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7870





Item 6.	Exhibits	7972

Signature	Signature	8073

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in millions of dollars)

(Unaudited)


		September 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Assets	Assets					Assets
Cash and cash equivalents	Cash and cash equivalents	$	2,957	$	4,945	Cash and cash equivalents	$	2,567	$	4,544
Receivables	Receivables	36		137		Receivables	43		47
Inventories:	Inventories:					Inventories:
Leaf tobacco	Leaf tobacco	644		844		Leaf tobacco	605		744
Other raw materials	Other raw materials	159		200		Other raw materials	183		166
Work in process	Work in process	30		502		Work in process	29		23
Finished product	Finished product	300		420		Finished product	327		261
		1,133		1,966			1,144		1,194

Assets held for sale		1,490		—

Other current assets	Other current assets	404		69		Other current assets	332		298
Total current assets	Total current assets	6,020		7,117		Total current assets	4,086		6,083
Property, plant and equipment, at cost	Property, plant and equipment, at cost	4,418		5,150		Property, plant and equipment, at cost	4,345		4,432
Less accumulated depreciation	Less accumulated depreciation	2,900		3,138		Less accumulated depreciation	2,788		2,879
		1,518		2,012			1,557		1,553
Goodwill	Goodwill	5,177		5,177		Goodwill	5,177		5,177
Other intangible assets, net	Other intangible assets, net	12,326		12,615		Other intangible assets, net	12,372		12,306
Investments in equity securities ($1,740 million and $1,868 million at September 30, 2021 and December 31, 2020, respectively, measured at fair value)		13,874		19,529
Investments in equity securities ($451 million and $1,720 million at June 30, 2022 and December 31, 2021, respectively, measured at fair value)						Investments in equity securities ($451 million and $1,720 million at June 30, 2022 and December 31, 2021, respectively, measured at fair value)	12,590		13,481

Other assets	Other assets	649		964		Other assets	964		923
Total Assets	Total Assets	$	39,564	$	47,414	Total Assets	$	36,746	$	39,523

See notes to condensed consolidated financial statements.

Table of Contents

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets (Continued)

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

(Unaudited)


		September 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021
Liabilities	Liabilities					Liabilities

Current portion of long-term debt	Current portion of long-term debt	$	1,105	$	1,500	Current portion of long-term debt	$	2,634	$	1,105
Accounts payable	Accounts payable	266		380		Accounts payable	396		449
Accrued liabilities:	Accrued liabilities:					Accrued liabilities:
Marketing	Marketing	680		523		Marketing	708		664

Settlement charges	Settlement charges	2,996		3,564		Settlement charges	1,749		3,349
Other	Other	1,109		1,494		Other	1,194		1,365

Dividends payable	Dividends payable	1,661		1,602		Dividends payable	1,630		1,647
Liabilities held for sale		295		—

Total current liabilities	Total current liabilities	8,112		9,063		Total current liabilities	8,311		8,579
Long-term debt	Long-term debt	27,022		27,971		Long-term debt	25,046		26,939
Deferred income taxes	Deferred income taxes	3,557		4,532		Deferred income taxes	3,898		3,692
Accrued pension costs	Accrued pension costs	280		551		Accrued pension costs	197		200
Accrued postretirement health care costs	Accrued postretirement health care costs	1,512		1,951		Accrued postretirement health care costs	1,437		1,436
Other liabilities	Other liabilities	307		381		Other liabilities	260		283
Total liabilities	Total liabilities	40,790		44,449		Total liabilities	39,149		41,129
Contingencies (Note 12)		0		0
Redeemable noncontrolling interest		39		40
Stockholders’ (Deficit) Equity
Contingencies (Note 11)						Contingencies (Note 11)	0		0

Stockholders’ Equity (Deficit)						Stockholders’ Equity (Deficit)
Common stock, par value $0.33 1/3 per share (2,805,961,317 shares issued)	Common stock, par value $0.33 1/3 per share (2,805,961,317 shares issued)	935		935		Common stock, par value $0.33 1/3 per share (2,805,961,317 shares issued)	935		935
Additional paid-in capital	Additional paid-in capital	5,846		5,910		Additional paid-in capital	5,861		5,857
Earnings reinvested in the business	Earnings reinvested in the business	30,685		34,679		Earnings reinvested in the business	30,252		30,664
Accumulated other comprehensive losses	Accumulated other comprehensive losses	(3,430)		(4,341)		Accumulated other comprehensive losses	(2,377)		(3,056)
Cost of repurchased stock (967,321,022 shares at September 30, 2021 and 947,542,152 shares at December 31, 2020)		(35,303)		(34,344)
Total stockholders’ (deficit) equity attributable to Altria		(1,267)		2,839
Noncontrolling interests		2		86
Total stockholders’ (deficit) equity		(1,265)		2,925
Total Liabilities and Stockholders’ (Deficit) Equity		$	39,564	$	47,414
Cost of repurchased stock (1,003,717,832 shares at June 30, 2022 and 982,785,699 shares at December 31, 2021)						Cost of repurchased stock (1,003,717,832 shares at June 30, 2022 and 982,785,699 shares at December 31, 2021)	(37,074)		(36,006)
Total stockholders’ equity (deficit)						Total stockholders’ equity (deficit)	(2,403)		(1,606)
Total Liabilities and Stockholders’ Equity (Deficit)						Total Liabilities and Stockholders’ Equity (Deficit)	$	36,746	$	39,523

See notes to condensed consolidated financial statements.

Table of Contents

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Earnings ~~(Losses)~~

(in millions of dollars, except per share data)

(Unaudited)

_____________________________________


		For the Nine Months Ended September 30,				For the Three Months Ended September 30,					For the Six Months Ended June 30,				For the Three Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net revenues	Net revenues	$	19,758	$	19,849	$	6,786	$	7,123	Net revenues	$	12,435	$	12,972	$	6,543	$	6,936
Cost of sales	Cost of sales	5,348		5,909		1,858		1,961		Cost of sales	3,154		3,490		1,708		1,882
Excise taxes on products	Excise taxes on products	3,733		4,063		1,255		1,445		Excise taxes on products	2,242		2,478		1,169		1,322
Gross profit	Gross profit	10,677		9,877		3,673		3,717		Gross profit	7,039		7,004		3,666		3,732
Marketing, administration and research costs	Marketing, administration and research costs	1,850		1,585		722		557		Marketing, administration and research costs	1,050		1,128		561		546

Operating income	Operating income	8,827		8,292		2,951		3,160		Operating income	5,989		5,876		3,105		3,186
Interest and other debt expense, net	Interest and other debt expense, net	869		893		266		310		Interest and other debt expense, net	561		603		280		295
Loss on early extinguishment of debt	Loss on early extinguishment of debt	649		—		—		—		Loss on early extinguishment of debt	—		649		—		—
Net periodic benefit income, excluding service cost	Net periodic benefit income, excluding service cost	(152)		(58)		(63)		(3)		Net periodic benefit income, excluding service cost	(93)		(89)		(47)		(46)
(Income) losses from equity investments	(Income) losses from equity investments	5,789		306		5,915		472		(Income) losses from equity investments	1,229		(126)		1,263		(75)
Impairment of JUUL equity securities		—		2,600		—		2,600

(Gain) loss on Cronos-related financial instruments	(Gain) loss on Cronos-related financial instruments	128		202		135		105		(Gain) loss on Cronos-related financial instruments	14		(7)		4		103

Earnings (losses) before income taxes		1,544		4,349		(3,302)		(324)
Provision (benefit) for income taxes		693		1,817		(582)		632
Net earnings (losses)		851		2,532		(2,720)		(956)
Earnings before income taxes										Earnings before income taxes	4,278		4,846		1,605		2,909
Provision for income taxes										Provision for income taxes	1,428		1,275		714		759
Net earnings										Net earnings	2,850		3,571		891		2,150
Net (earnings) losses attributable to noncontrolling interests	Net (earnings) losses attributable to noncontrolling interests	—		11		(2)		4		Net (earnings) losses attributable to noncontrolling interests	—		2		—		(1)
Net earnings (losses) attributable to Altria		$	851	$	2,543	$	(2,722)	$	(952)
Net earnings attributable to Altria										Net earnings attributable to Altria	$	2,850	$	3,573	$	891	$	2,149
Per share data:	Per share data:									Per share data:
Basic earnings (losses) per share attributable to Altria		$	0.46	$	1.37	$	(1.48)	$	(0.51)
Diluted earnings (losses) per share attributable to Altria		$	0.46	$	1.36	$	(1.48)	$	(0.51)

Basic and diluted earnings per share attributable to Altria										Basic and diluted earnings per share attributable to Altria	$	1.57	$	1.93	$	0.49	$	1.16

See notes to condensed consolidated financial statements.

Table of Contents

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings ~~(Losses)~~

(in millions of dollars)

(Unaudited)

_____________________


		For the Nine Months Ended September 30,				For the Three Months Ended September 30,					For the Six Months Ended June 30,				For the Three Months Ended June 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net earnings (losses)		$	851	$	2,532	$	(2,720)	$	(956)
Net earnings										Net earnings	$	2,850	$	3,571	$	891	$	2,150
Other comprehensive earnings (losses), net of deferred income taxes:	Other comprehensive earnings (losses), net of deferred income taxes:									Other comprehensive earnings (losses), net of deferred income taxes:
Benefit plans	Benefit plans	383		27		6		(15)		Benefit plans	31		377		16		349
ABI	ABI	495		(928)		161		(15)		ABI	643		334		565		(183)
Currency translation adjustments and other	Currency translation adjustments and other	33		(16)		5		23		Currency translation adjustments and other	5		28		4		6
Other comprehensive earnings (losses), net of deferred income taxes	Other comprehensive earnings (losses), net of deferred income taxes	911		(917)		172		(7)		Other comprehensive earnings (losses), net of deferred income taxes	679		739		585		172

Comprehensive earnings (losses)		1,762		1,615		(2,548)		(963)
Comprehensive earnings										Comprehensive earnings	3,529		4,310		1,476		2,322
Comprehensive (earnings) losses attributable to noncontrolling interests	Comprehensive (earnings) losses attributable to noncontrolling interests	—		11		(2)		4		Comprehensive (earnings) losses attributable to noncontrolling interests	—		2		—		(1)
Comprehensive earnings (losses) attributable to Altria		$	1,762	$	1,626	$	(2,550)	$	(959)
Comprehensive earnings attributable to Altria										Comprehensive earnings attributable to Altria	$	3,529	$	4,312	$	1,476	$	2,321

See notes to condensed consolidated financial statements.

Table of Contents

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) ~~Equity~~

for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021

(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’
(Deficit) Equity
Balances, December 31, 2020 $ 935 $ 5,910 $ 34,679 $ (4,341) $ (34,344) $ 86 $ 2,925
Net earnings (losses) (1)
— — 851 — — (4) 847
Other comprehensive earnings (losses), net of deferred income taxes — — — 911 — — 911
Stock award activity — 13 — — 13 — 26
Cash dividends declared ($2.62 per share) — — (4,845) — — — (4,845)
Repurchases of common stock — — — — (972) — (972)
Other (2)
— (77) — — — (80) (157)
Balances, September 30, 2021 $ 935 $ 5,846 $ 30,685 $ (3,430) $ (35,303) $ 2 $ (1,265)



	Common Stock		Additional Paid-in Capital		Earnings Reinvested in the Business		Accumulated Other Comprehensive Losses		Cost of Repurchased Stock		Total Stockholders’ Equity (Deficit)
Balances, December 31, 2021	$	935	$	5,857	$	30,664	$	(3,056)	$	(36,006)	$	(1,606)
Net earnings	—		—		2,850		—		—		2,850
Other comprehensive earnings (losses), net of deferred income taxes	—		—		—		679		—		679
Stock award activity	—		4		—		—		15		19
Cash dividends declared ($1.80 per share)	—		—		(3,262)		—		—		(3,262)
Repurchases of common stock	—		—		—		—		(1,083)		(1,083)


Balances, June 30, 2022	$	935	$	5,861	$	30,252	$	(2,377)	$	(37,074)	$	(2,403)

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’
(Deficit) Equity
Balances, December 31, 2019 $ 935 $ 5,970 $ 36,539 $ (2,864) $ (34,358) $ 97 $ 6,319
Net earnings (losses) (1)
— — 2,543 — — (13) 2,530
Other comprehensive earnings (losses), net of deferred income taxes — — — (917) — — (917)
Stock award activity — 3 — — 14 — 17
Cash dividends declared ($2.54 per share) — — (4,726) — — — (4,726)
Other — — — — — 9 9
Balances, September 30, 2020 $ 935 $ 5,973 $ 34,356 $ (3,781) $ (34,344) $ 93 $ 3,232


	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, 2020	$	935	$	5,910	$	34,679	$	(4,341)	$	(34,344)	$	86	$	2,925
Net earnings (losses)	—		—		3,573		—		—		(4)		3,569
Other comprehensive earnings (losses), net of deferred income taxes	—		—		—		739		—		—		739
Stock award activity	—		7		—		—		13		—		20
Cash dividends declared ($1.72 per share)	—		—		(3,187)		—		—		—		(3,187)
Repurchases of common stock	—		—		—		—		(650)		—		(650)

Other (1)	—		(77)		—		—		—		(80)		(157)
Balances, June 30, 2021	$	935	$	5,840	$	35,065	$	(3,602)	$	(34,981)	$	2	$	3,259

(1)Amounts attributable to noncontrolling interests for the nine months ended September 30, 2021 and 2020 exclude net earnings of $4 million and $2 million, respectively, due to the redeemable noncontrolling interest related to Stag’s Leap Wine Cellars, ~~which is reported in the mezzanine equity section on the condensed consolidated balance sheets.~~

~~(2)~~ Represents the purchase of the remaining noncontrolling interests in ~~Helix. For additional information, see Note 1.~~ ~~Background and Basis~~Helix in the second quarter of ~~Presentation~~.

2021.

See notes to condensed consolidated financial statements.

Table of Contents

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Deficit) ~~Equity~~

for the Three Months Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021

(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’
(Deficit) Equity
Balances, June 30, 2021 $ 935 $ 5,840 $ 35,065 $ (3,602) $ (34,981) $ 2 $ 3,259
Net earnings (losses) (1)
— — (2,722) — — — (2,722)
Other comprehensive earnings (losses), net of deferred income taxes — — — 172 — — 172
Stock award activity — 6 — — — — 6
Cash dividends declared $0.90 per share) — — (1,658) — — — (1,658)
Repurchases of common stock — — — — (322) — (322)
Balances, September 30, 2021 $ 935 $ 5,846 $ 30,685 $ (3,430) $ (35,303) $ 2 $ (1,265)



	Common Stock		Additional Paid-in Capital		Earnings Reinvested in the Business		Accumulated Other Comprehensive Losses		Cost of Repurchased Stock		Total Stockholders’ Equity (Deficit)
Balances, March 31, 2022	$	935	$	5,848	$	30,988	$	(2,962)	$	(36,569)	$	(1,760)
Net earnings	—		—		891		—		—		891
Other comprehensive earnings (losses), net of deferred income taxes	—		—		—		585		—		585
Stock award activity	—		13		—		—		2		15
Cash dividends declared ($0.90 per share)	—		—		(1,627)		—		—		(1,627)
Repurchases of common stock	—		—		—		—		(507)		(507)

Balances, June 30, 2022	$	935	$	5,861	$	30,252	$	(2,377)	$	(37,074)	$	(2,403)

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’
(Deficit) Equity
Balances, June 30, 2020 $ 935 $ 5,964 $ 36,908 $ (3,774) $ (34,345) $ 98 $ 5,786
Net earnings (losses) (1)
— — (952) — — (5) (957)
Other comprehensive earnings (losses), net of deferred income taxes — — — (7) — — (7)
Stock award activity — 9 — — 1 — 10
Cash dividends declared ($0.86 per share) — — (1,600) — — — (1,600)
Balances, September 30, 2020 $ 935 $ 5,973 $ 34,356 $ (3,781) $ (34,344) $ 93 $ 3,232


	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, 2021	$	935	$	5,905	$	34,507	$	(3,774)	$	(34,660)	$	82	$	2,995
Net earnings	—		—		2,149		—		—		—		2,149
Other comprehensive earnings (losses), net of deferred income taxes	—		—		—		172		—		—		172
Stock award activity	—		12		—		—		4		—		16
Cash dividends declared ($0.86 per share)	—		—		(1,591)		—		—		—		(1,591)
Repurchases of common stock	—		—		—		—		(325)		—		(325)
Other (1)	—		(77)		—		—		—		(80)		(157)
Balances, June 30, 2021	$	935	$	5,840	$	35,065	$	(3,602)	$	(34,981)	$	2	$	3,259

(1) ~~Amounts attributable to~~Represents the purchase of the remaining noncontrolling interests for the three months ended September 30, 2021 and 2020 exclude net earnings of $2 million and $1 million, respectively, due to the redeemable noncontrolling interest related to Stag’s Leap Wine Cellars, ~~which is reported~~in Helix in the ~~mezzanine equity section on the condensed consolidated balance sheets.~~second quarter of 2021.

See notes to condensed consolidated financial statements.

Table of Contents

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in millions of dollars)

(Unaudited)

_____________________

For the Nine Months Ended September 30, 2021 2020
Cash Provided by (Used in) Operating Activities
Net earnings (losses) $ 851 $ 2,532
Adjustments to reconcile net earnings (losses) to operating cash flows:
Depreciation and amortization 190 192
Deferred income tax provision (benefit) (1,180) (111)
(Income) losses from equity investments 5,789 306
Dividends from ABI 119 108
(Gain) loss on Cronos-related financial instruments 128 202
Impairment of JUUL equity securities — 2,600
Loss on early extinguishment of debt 649 —
Cash effects of changes:
Receivables (7) 1
Inventories 118 136
Accounts payable 3 24
Income taxes (200) —
Accrued liabilities and other current assets (104) (504)
Accrued settlement charges (568) (140)
Pension plan contributions (23) (16)
Pension provisions and postretirement, net (127) (35)
Other, net (1)
104 549
Net cash provided by (used in) operating activities 5,742 5,844
Cash Provided by (Used in) Investing Activities
Capital expenditures (102) (162)
Other, net 60 55
Net cash provided by (used in) investing activities $ (42) $ (107)

~~(1)~~ ~~2020 primarily reflects inventory-related amounts associated with the wine business strategic reset. For further discussion, see Note 9.Segment Reporting.~~


For the Six Months Ended June 30,	2022		2021
Cash Provided by (Used in) Operating Activities
Net earnings	$	2,850	$	3,571
Adjustments to reconcile net earnings to operating cash flows:
Depreciation and amortization	109		128
Deferred income tax provision (benefit)	20		64
(Income) losses from equity investments	1,229		(126)
Dividends from ABI	104		119

(Gain) loss on Cronos-related financial instruments	14		(7)



Loss on early extinguishment of debt	—		649

Cash effects of changes:
Receivables	4		5
Inventories	50		172
Accounts payable	(47)		(113)
Income taxes	6		(171)
Accrued liabilities and other current assets	(177)		3
Accrued settlement charges	(1,600)		(1,584)
Pension plan contributions	(8)		(6)
Pension provisions and postretirement, net	(74)		(73)
Other, net	81		48
Net cash provided by (used in) operating activities	2,561		2,679
Cash Provided by (Used in) Investing Activities
Capital expenditures	(83)		(53)



Other, net	(67)		44
Net cash provided by (used in) investing activities	$	(150)	$	(9)

See notes to condensed consolidated financial statements.

Table of Contents

Altria Group, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Continued)

(in millions of dollars)

(Unaudited)

_____________________


For the Nine Months Ended September 30,		2021		2020
For the Six Months Ended June 30,						For the Six Months Ended June 30,	2022		2021
Cash Provided by (Used in) Financing Activities	Cash Provided by (Used in) Financing Activities					Cash Provided by (Used in) Financing Activities
Proceeds from short-term borrowings		$	—	$	3,000
Repayment of short-term borrowings		—		(3,000)
Long-term debt issued	Long-term debt issued	5,472		1,993		Long-term debt issued	$	—	$	5,472
Long-term debt repaid	Long-term debt repaid	(6,542)		(1,000)		Long-term debt repaid	—		(6,542)
Repurchases of common stock	Repurchases of common stock	(972)		—		Repurchases of common stock	(1,083)		(650)
Dividends paid on common stock	Dividends paid on common stock	(4,787)		(4,690)		Dividends paid on common stock	(3,279)		(3,196)

Premiums and fees related to early extinguishment of debt	Premiums and fees related to early extinguishment of debt	(623)		—		Premiums and fees related to early extinguishment of debt	—		(623)
Other, net	Other, net	(216)		(16)		Other, net	(11)		(210)
Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(7,668)		(3,713)		Net cash provided by (used in) financing activities	(4,373)		(5,749)
Cash, cash equivalents and restricted cash:	Cash, cash equivalents and restricted cash:					Cash, cash equivalents and restricted cash:
Increase (decrease)	Increase (decrease)	(1,968)		2,024		Increase (decrease)	(1,962)		(3,079)
Balance at beginning of period	Balance at beginning of period	5,006		2,160		Balance at beginning of period	4,594		5,006
Balance at end of period	Balance at end of period	$	3,038	$	4,184	Balance at end of period	$	2,632	$	1,927

The following table provides a reconciliation of cash, cash equivalents and restricted cash to the amounts reported on Altria’s condensed consolidated balance sheets:
The following table provides a reconciliation of cash, cash equivalents and restricted cash (1) to the amounts reported on Altria’s condensed consolidated balance sheets:						The following table provides a reconciliation of cash, cash equivalents and restricted cash (1) to the amounts reported on Altria’s condensed consolidated balance sheets:
		At September 30, 2021		At December 31, 2020			At June 30, 2022		At December 31, 2021
Cash and cash equivalents	Cash and cash equivalents	$	2,957	$	4,945	Cash and cash equivalents	$	2,567	$	4,544
Restricted cash included in other current assets (1)		—		1
Restricted cash included in other assets (1)		45		60
Cash included in assets held for sale (2)		36		—
Restricted cash included in other current assets						Restricted cash included in other current assets	24		—
Restricted cash included in other assets						Restricted cash included in other assets	41		50

Cash, cash equivalents and restricted cash	Cash, cash equivalents and restricted cash	$	3,038	$	5,006	Cash, cash equivalents and restricted cash	$	2,632	$	4,594

(1)Restricted cash consisted primarily of cash deposits collateralizing appeal bonds posted by PM USA to obtain stays of judgments pending appeals. See Note ~~12.~~11. Contingencies.

~~(2)~~ ~~Cash included in assets held for sale at September 30, 2021 is related to the Ste. Michelle Transaction. For further discussion, see Note 3.~~ ~~Assets Held for Sale~~.

See notes to condensed consolidated financial statements.

Table of Contents

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 ~~term~~terms “Altria,” ~~refers~~“we,” “us” and “our” refer to either (i) Altria Group, Inc. and its consolidated subsidiaries ~~unless~~or (ii) Altria Group, Inc. only and not its consolidated subsidiaries, as appropriate in the ~~context requires otherwise.~~context.

▪Background: At ~~September~~June 30, ~~2021, Altria’s~~2022, 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 pipe tobacco and is a wholly owned subsidiary of PM USA; UST LLC (“UST”), which through its wholly owned ~~subsidiaries, including~~subsidiary U.S. Smokeless Tobacco Company LLC (“USSTC”~~) and Ste. Michelle Wine Estates Ltd. (“Ste. Michelle”~~), is engaged in the manufacture and sale of moist smokeless tobacco products (“MST”), and snus ~~products and wine;~~products; Helix Innovations LLC (“Helix”), which operates in the United States and Canada, and Helix Innovations GmbH and its ~~subsidiaries~~affiliates (“Helix ROW”), which operate internationally in the rest-of-world, are engaged in the manufacture and sale of ~~on!~~ oral nicotine pouches; and Philip Morris Capital Corporation (“PMCC”), which ~~maintains a portfolio of finance assets, substantially all of which are~~has one leveraged ~~leases.~~

On July 8, 2021, UST entered into a share purchase agreement pursuant to which it agreed to sell its subsidiary, International Wine & Spirits Ltd. (“IWS”), which includes Ste. Michelle. The sale was completed on October 1, 2021. At September 30, 2021, the assets and liabilities associated with the pending sale of IWS were classified as assets held for sale on Altria’s condensed consolidated balance sheet. For further discussion, see Note 3. ~~Assets Held for Sale~~.

~~Altria owns 100% of the global~~ ~~on!~~ ~~business as a result of transactions in December 2020 and April 2021 to purchase the remaining 20% interest in (i) Helix ROW and (ii) Helix, respectively~~. ~~The total purchase price of the December 2020 and April 2021 transactions was approximately $250 million.~~

lease remaining. Other ~~Altria~~ wholly owned subsidiaries included Altria Group Distribution Company, which provides sales and distribution services to ~~certain Altria~~our domestic tobacco operating ~~subsidiaries,~~companies, and Altria Client Services LLC, which provides various support services to our companies in areas such as legal, regulatory, consumer engagement, finance, human resources and external ~~affairs to Altria and its subsidiaries.~~affairs. Altria’s access to the operating cash flows of ~~its~~our wholly owned subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany loans by ~~its~~our subsidiaries. At ~~September~~June 30, ~~2021, Altria’s~~2022, our significant wholly owned subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests.

On October 1, 2021, UST sold its subsidiary, International Wine & Spirits, which included Ste. Michelle Wine Estates Ltd. (“Ste. Michelle”).

At ~~September~~June 30, ~~2021, Altria’s~~2022, we had investments in the following equity ~~securities consisted of~~securities: Anheuser-Busch InBev SA/NV (“ABI”), Cronos Group Inc. (“Cronos”) and JUUL Labs, Inc. (“JUUL”). ~~Altria accounts~~We account for ~~its~~our investments in ABI and Cronos under the equity method of accounting using a one-quarter lag. ~~Altria accounts~~We account for ~~its~~our equity investment in JUUL under the fair value option.

For further discussion of ~~Altria’s~~our investments in equity securities, see Note 4.3. Investments in Equity Securities.

▪~~Dividends and~~ Share Repurchases: In ~~August~~January 2021, ~~Altria’s~~our Board of Directors ~~(the “Board~~(“Board of Directors” or “Board”) approved a 4.7% increase in the quarterly dividend rate to $0.90 per share of Altria common stock versus the previous rate of $0.86 per share. The current annualized dividend rate is $3.60. Future dividend payments remain subject to the discretion of the Board.

~~In July 2019, the Board of Directors~~ authorized a $1.0 billion share repurchase program. In April 2020, the Board rescinded the $500 million remaining in this program as part of Altria’s efforts to enhance its liquidity position in response to the COVID-19 pandemic. Altria did not repurchase any shares in 2020.

~~In January 2021, the Board authorized a new~~ $2.0 billion share repurchase program ~~of which $1,028 million was remaining at September 30, 2021. In~~that it expanded to $3.5 billion in October 2021 (as expanded, the ~~Board authorized a $1.5 billion expansion of this program to $3.5 billion.~~“January 2021 share repurchase program”). At June 30, 2022, we had $742 million remaining in the January 2021 share repurchase program. The timing of share repurchases under this program depends upon marketplace conditions and other factors, and the program remains subject to the discretion of ~~the~~our Board.

~~Altria’s~~Our share repurchase activity ~~for the nine and three months ended September 30, 2021~~ was as follows:

(in millions, except per share data) For the Nine Months Ended September 30, 2021 For the Three Months Ended September 30, 2021
Total number of shares repurchased 20.2 6.7
Aggregate cost of shares repurchased $ 972 $ 322
Average price per share of shares repurchased $ 48.17 $ 48.35

~~Table of Contents~~


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions, except per share data)	2022		2021		2022		2021
Total number of shares repurchased	21.4		13.5		10.1		6.6
Aggregate cost of shares repurchased	$	1,083	$	650	$	507	$	325
Average price per share of shares repurchased	$	50.53	$	48.09	$	50.35	$	49.21

▪Basis of Presentation: ~~The~~Our interim condensed consolidated financial statements ~~of Altria~~ are unaudited. ~~It is the opinion of Altria’s~~Our management believes that all adjustments necessary for a fair statement of the interim results presented have been reflected in ~~the~~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.

~~Certain immaterial prior year amounts have been reclassified to conform with the current year’s presentation.~~

These statements should be read in conjunction with ~~Altria’s~~our audited consolidated financial statements and related notes, which appear in ~~Altria’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2020 (the “2020 Form 10-K”).~~2021.

On January 1, ~~2021, Altria~~2022, we adopted Accounting Standards Update (“ASU”) ~~2019-12,~~2020-06, ~~Income Taxes (Topic 740): Simplifying the~~ Accounting for ~~Income Taxes~~Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU No. ~~2019-12”~~2020-06”). This guidance ~~removes certain exceptions for investments, intraperiod allocations and interim calculations, and adds guidance to reduce complexity in~~simplifies the accounting for ~~income taxes. The~~certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Our adoption of ASU No. ~~2019-12~~2020-06 did not have a material impact on ~~Altria’s~~our condensed consolidated financial statements.

~~Additionally, on January 1, 2021, Altria adopted ASU No. 2020-01,~~ ~~Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815):Clarifying the Interactions between Topic 321, Topic 323, and Topic 815~~ ~~(“ASU No. 2020-01”). This guidance provides clarification~~Table of the interaction of rules for equity securities, the equity method of accounting, and forward contracts and purchase options on certain types of securities. The adoption of ASU No. 2020-01 did not have a material impact on Altria’s condensed consolidated financial statements.Contents

For a description of issued accounting guidance applicable to, but not yet adopted by, ~~Altria,~~us, see Note ~~13.~~12. New Accounting Guidance Not Yet Adopted.

Note 2. Revenues from Contracts with Customers

~~Altria disaggregates~~We disaggregate net revenues based on product type. For further discussion, see Note 9.8. Segment Reporting.

~~In 2020, a majority of Altria’s businesses offered~~We calculate substantially all cash discounts, offered to customers for prompt payment, ~~and calculated cash discounts~~ as a ~~percentage of the list price~~flat rate per unit based on ~~historical experience and~~ agreed-upon payment terms. ~~Beginning in~~Prior to the first quarter of 2021 for USSTC and the third quarter of 2021 for PM USA, cash discounts were calculated as a ~~flat rate per unit,~~percentage of the list price based on historical experience and agreed-upon payment terms. ~~Altria’s businesses~~We record receivables net of the cash discounts on ~~Altria’s~~our condensed consolidated balance sheets.

~~Altria’s businesses that receive~~We record payments received in advance of product shipment ~~record such payments~~ as deferred revenue. These payments are included in other accrued liabilities on ~~Altria’s~~our condensed consolidated balance sheets until control of such products is obtained by the customer. Deferred revenue was ~~$260~~$303 million and ~~$301~~$287 million at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. When cash is received in advance of product shipment, ~~Altria’s businesses~~we satisfy ~~their~~our performance obligations within three days of receiving payment. At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were no differences between amounts recorded as deferred revenue and amounts subsequently recognized as revenue.

Receivables were ~~$144~~$43 million ~~(including $108 million in assets held for sale)~~ and ~~$137~~$47 million at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, there were no expected differences between amounts recorded and subsequently received, and ~~Altria’s businesses~~we did not record an allowance for ~~doubtful accounts~~credit losses against these receivables.

~~Altria’s businesses~~We record an allowance for returned goods, which is included in other accrued liabilities on ~~Altria’s~~our condensed consolidated balance sheets. ~~While all of Altria’s tobacco operating companies sell tobacco products with dates relative to freshness as printed on product packaging, it~~It is USSTC’s policy to accept authorized sales returns from its customers for products that have passed ~~such dates~~the freshness date printed on product packaging due to the limited shelf life of USSTC’s MST and snus products. ~~Altria’s businesses~~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. ~~Altria’s businesses~~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 ~~Altria’s~~our condensed consolidated financial statements. All returned goods are destroyed upon return and not included in inventory. Consequently, ~~Altria’s businesses~~we do not record an asset for ~~their~~USSTC’s right to recover goods from customers upon return.

Sales incentives include variable payments related to goods ~~sold by Altria’s businesses. Altria’s businesses~~sold. 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-~~Altria’s businesses~~ We make price promotion payments, substantially all of which are made to ~~their~~our retail partners, to incent the promotion of certain product offerings in select geographic areas.

~~Table of Contents~~

Wholesale and retail participation payments- ~~Altria’s businesses~~We make payments to ~~their~~our wholesale and retail partners to incent merchandising and sharing of sales data in accordance with ~~each business’s~~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 ~~Altria’s~~our condensed consolidated financial statements.

~~Note 3. Assets Held for Sale~~

On July 8, 2021, UST entered into a share purchase agreement pursuant to which it agreed to sell its subsidiary, IWS, which includes Ste. Michelle, to an entity controlled by investment funds managed by Sycamore Partners Management, L.P. in an all-cash transaction with a purchase price of approximately $1.2 billion and the assumption of certain liabilities of IWS and its subsidiaries (the “Ste. Michelle Transaction”).

At September 30, 2021, the assets and liabilities associated with the Ste. Michelle Transaction were classified as assets held for sale and were measured at their fair value less costs to sell, resulting in a pre-tax charge of $41 million. A reserve (as shown below), representing the adjustment to record the assets and liabilities at their fair value less costs to sell, was included as a component of assets held for sale in Altria’s condensed consolidated balance sheets at September 30, 2021. Altria recorded an additional pre-tax charge of $10 million for disposition-related costs related to the Ste. Michelle Transaction. The total pre-tax charges of $51 million were included in the wine segment and recorded in marketing, administration and research costs in Altria’s condensed consolidated statements of earnings (losses) for the nine and three months ended September 30, 2021.

On October 1, 2021, UST completed the sale of IWS and received approximately $1.2 billion in net cash proceeds. Altria expects to record additional adjustments related to the Ste. Michelle Transaction in the fourth quarter of 2021 and does not expect these adjustments to be material.

~~The major classes of assets and liabilities of IWS classified as held for sale at September 30, 2021 were as follows:~~


~~(in millions)~~	~~September 30, 2021~~
~~Assets held for sale~~
~~Cash and cash equivalents~~	$	36
~~Receivables~~	~~108~~
~~Inventories~~	~~715~~
~~Property, plant and equipment, net of accumulated depreciation~~	~~407~~
~~Other intangible assets, net~~	~~236~~
~~Other assets~~	29
~~Total assets~~	~~1,531~~
~~Reserve~~	~~(41)~~
~~Total assets held for sale~~	~~1,490~~

~~Liabilities held for sale~~
~~Accounts payable~~	~~114~~
~~Accrued liabilities~~	83
~~Accrued pension costs~~	49
~~Other liabilities~~	49
~~Total liabilities held for sale~~	~~295~~

~~Assets and liabilities held for sale, net~~	$	~~1,195~~

~~Table of Contents~~

Note 4.3. Investments in Equity Securities

The carrying amount of ~~Altria’s~~our investments consisted of the following:


(in millions)	(in millions)	September 30, 2021		December 31, 2020		(in millions)	June 30, 2022		December 31, 2021
ABI	ABI	$	11,237	$	16,651	ABI	$	11,702	$	11,144
JUUL	JUUL	1,705		1,705		JUUL	450		1,705
Cronos (1)	Cronos (1)	932		1,173		Cronos (1)	438		632
Total	Total	$	13,874	$	19,529	Total	$	12,590	$	13,481

(1) ~~Atria’s~~Our investment in Cronos at ~~September~~June 30, 2022 and December 31, 2021 consisted of ~~Altria’s~~our equity method investment in Cronos ~~($897 million),~~of $437 million and $617 million, respectively, and also included the Cronos warrant ~~($32 million)~~ and the Fixed-price Preemptive Rights, ~~($3 million),~~which are measured at fair value (collectively, “Investment in Cronos”). The Investment in Cronos at December 31, 2020 consisted of Altria’s equity method investment in Cronos ($1,010 million), the Cronos warrant ($139 million) and the Fixed-price Preemptive Rights ($24 million). See below for further discussion.

~~Income (losses)~~

Table of Contents

(Income) losses from equity investments accounted for under the equity method of accounting and fair value option consisted of the following:


		For the Nine Months Ended September 30,				For the Three Months Ended September 30,					For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
ABI (1)	ABI (1)	$	(5,644)	$	(306)	$	(6,036)	$	(418)	ABI (1)	$	(212)	$	(392)	$	(12)	$	(74)
Cronos(1)	Cronos(1)	(145)		—		21		(54)		Cronos(1)	186		166		120		99
Income (losses) from investments under equity method of accounting		(5,789)		(306)		$	(6,015)	$	(472)
(Income) losses from investments under equity method of accounting										(Income) losses from investments under equity method of accounting	(26)		(226)		$	108	$	25
JUUL	JUUL	—		—		100		—		JUUL	1,255		100		1,155		(100)
Income (losses) from equity investments		$	(5,789)	$	(306)	$	(5,915)	$	(472)
(Income) losses from equity investments										(Income) losses from equity investments	$	1,229	$	(126)	$	1,263	$	(75)

(1) ~~For the nine~~Includes our share of amounts recorded by our investees and ~~three months ended September 30, 2021, Altria recorded a non-cash, pre-tax impairment charge of $6,157 million~~additional adjustments, if required, related to ~~its~~(i) the conversion from international financial reporting standards to GAAP and (ii) adjustments to our investment required under the equity ~~investment in ABI. See below for further discussion.~~method of accounting.

Investment in ABI

At ~~September~~June 30, ~~2021, Altria~~2022, we had an approximate 10% ownership interest in ABI, consisting of 185 million restricted shares of ABI (the “Restricted Shares”) and 12 million ordinary shares of ABI. The Restricted Shares:

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

▪are convertible by ~~Altria~~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.

The Restricted Shares were subject to a ~~five-year~~five-year lock-up period that ended October 10, 2021. As of this filing, ~~Altria has~~we have not elected to convert ~~its~~our Restricted Shares into ordinary shares of ABI.

~~Altria accounts~~We account for ~~its~~our investment in ABI under the equity method of accounting because ~~Altria has~~we have the ability to exercise significant influence over the operating and financial policies of ABI, including having active representation on ABI’s board of directors and certain ABI board committees. Through this representation, ~~Altria participates~~we participate in ~~ABI~~ABI’s policy making processes.

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

The fair value of ~~Altria’s~~our equity investment in ABI is 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. ~~Altria~~We can convert ~~its~~the Restricted Shares to ordinary shares at ~~its~~our discretion. Therefore, the fair value of each Restricted Share is based on the value of an ordinary share.

~~In October 2019,~~At June 30, 2022, the fair value of ~~Altria’s equity investment in ABI declined below its carrying value and has not recovered. At December 31, 2020, the fair value of Altria’s~~our equity investment in ABI was ~~$13.8~~$10.6 billion (carrying value of ~~$16.7~~$11.7 billion), which was ~~less than~~below its carrying value by $1.1 billion or approximately ~~17%~~9%. ~~In preparing its financial statements for the period ended December 31, 2020, Altria evaluated the factors related to the fair value decline, including the impact on the~~The fair value of ~~ABI’s shares during~~our equity investment in ABI at December 31, 2021 was $11.9 billion, which exceeded its carrying value of $11.1 billion by approximately 7%. Accounting guidance requires the ~~COVID-19 pandemic, which has negatively impacted ABI’s business. Altria evaluated~~evaluation of the following factors when determining if the decline in fair value is other than temporary: (i) the duration and magnitude of the fair value ~~decline, ABI’s~~decline; (ii) the financial condition and near-term prospects of the investee; and ~~Altria’s~~(iii) the investor’s intent and ability to hold its

~~Table of Contents~~

equity investment until full recovery to its carrying value in the near term. In preparing our financial statements for the period ended June 30, 2022, we have evaluated these factors, including the macroeconomic and geopolitical factors that have resulted in significant changes to certain foreign exchange rates, including the Euro to U.S. dollar exchange rate. Additionally, ABI ~~until recovery. Altria~~has delivered consistent business and earnings performance over the past several quarters demonstrating its ability to continue to execute its strategies and navigate challenges. At June 30, 2022, we concluded that the decline in fair value of ~~its~~our equity investment in ABI ~~at December 31, 2020~~ below its carrying value was temporary and, therefore, no impairment was ~~recorded at that time.~~

Following the consideration of the same factors, Altria, in preparing its financial statements for the period ended September 30, 2021, concluded that the decline in fair value of its investment in ABI at September 30, 2021 was other than temporary. As a result, Altria recorded a non-cash, pre-tax impairment charge of $6.2 billion for the nine and three months ended September 30, 2021, which was recorded to income (losses) from equity investments in its condensed consolidated statements of earnings (losses). This impairment charge reflects the difference betweenrecorded. At July 25, 2022, the fair value of ~~Altria’s investment in ABI using ABI’s share price at September 30, 2021 and the carrying value of Altria’s~~our equity investment in ABI at September 30, 2021. Altria continues to have confidence in ABI’s (i) long-term strategies, (ii) premium global brands, (iii) experienced management team and (iv) capability to successfully navigate its near-term challenges. Altria further expects that the impacts related to the COVID-19 pandemic that have negatively impacted ABI’s global business are transitory, but now also anticipates that the full recovery to carrying value will take longer than previously expected. This is evidenced by the resumption of declines in fair value during the third quarter of 2021, following positive share price momentum during the first half of 2021. At September 30, 2021, prior to recording the impairment charge, the fair value of Altria’s investment in ABI was below ~~the~~its carrying value by $0.9 billion or approximately 35%, which represents an additional 18% reduction in ABI’s share price since December 31, 2020. After recording the impairment charge, the fair value and carrying value of Altria’s equity investment in ABI at September 30, 2021 were $11.2 billion.

At September 30, 2021, the carrying value of Altria’s equity investment in ABI exceeded its share of ABI’s net assets attributable to equity holders of ABI by approximately $5.1 billion. Substantially all of this difference is comprised of goodwill and other indefinite-lived intangible assets (consisting primarily of trademarks)8%.

Investment in JUUL

In December 2018, ~~Altria~~we made an investment in JUUL for $12.8 billion and received a 35% economic interest in JUUL through non-voting shares, which were convertible at ~~Altria’s~~our election into voting shares (“Share Conversion”), and a security convertible into additional non-voting or voting shares, as applicable, upon settlement or exercise of certain JUUL convertible securities (the “JUUL Transaction”). At June 30, 2022, we had a 35% ownership interest in JUUL, consisting of 42 million voting shares.

~~Altria~~

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We received a broad preemptive right to purchase JUUL shares, exercisable each quarter upon dilution, to maintain ~~its~~our ownership percentage and iswe are subject to a standstill restriction under which itwe may not acquire additional JUUL shares above ~~its~~our 35% interest. Furthermore, ~~Altria~~we agreed not to sell or transfer any of ~~its~~our JUUL shares until December 20, 2024.

As part of the JUUL Transaction, we entered into a services agreement with JUUL pursuant to which we agreed to provide JUUL with certain commercial services, as requested by JUUL, for an initial term of six years. In January 2020, we amended certain JUUL Transaction agreements and entered into a new cooperation agreement. In conjunction with these amendments, the parties agreed that we would discontinue all services as of March 31, 2020 except regulatory affairs support for JUUL’s pursuit of its pre-market tobacco applications and/or its modified risk tobacco products applications.

We also agreed to non-competition obligations generally requiring that we participate in the e-vapor business only through JUUL. However, we have the option to be released from our non-compete obligation (i) in the event JUUL is prohibited by federal law from selling e-vapor products in the United States for a continuous period of at least 12 months (subject to tolling of this period in certain circumstances), (ii) if the carrying value of our investment in JUUL is not more than 10% of its initial carrying value of $12.8 billion or (iii) if we are no longer providing JUUL services as of December 20, 2024. If any of the conditions described above are met and we elect to be released from our non-competition obligations, we would lose our board designation rights (other than the right to appoint one independent director so long as our ownership continues to be at least 10%), preemptive rights, consent rights and certain other rights with respect to our investment in JUUL and, in addition, our JUUL shares would be converted to single vote common stock, which would result in a significant reduction in our voting power. As discussed below, at June 30, 2022, the carrying value of our investment in JUUL was $450 million, which was less than 10% of our initial carrying value of $12.8 billion. As a result, we currently have the option to be released from our non-competition obligations. However, as of this filing, we have not elected to be released from our non-competition obligations. We retain our option to be released from the non-competition obligations in accordance with our relationship agreement with JUUL.

Additionally, with respect to certain litigation in which we and JUUL are both defendants against third-party plaintiffs, we agreed not to pursue any claims against JUUL for indemnification or reimbursement except for any non-contractual claims for contribution or indemnity where a judgment has been entered against us and JUUL.

OnIn April 1, 2020, the U.S. Federal Trade Commission (“FTC”) issued an administrative complaint challenging ~~Altria’s~~our investment in JUUL. In February 2022, the administrative law judge dismissed the FTC’s complaint. FTC complaint counsel appealed that decision to the FTC, which appeal remains pending. For further discussion, see Note ~~12.~~11. Contingencies - Antitrust Litigation.

In November 2020, ~~Altria~~we exercised ~~its~~our rights to convert ~~its~~our non-voting JUUL shares into voting shares. ~~Altria does~~We do not currently intend to exercise ~~its~~our additional governance rights obtained upon Share Conversion, including the right to elect directors to JUUL’s board, as described below, or to vote ~~its~~our JUUL shares other than as a passive ~~investor, pending~~investor.

If we choose to exercise our governance rights, JUUL has agreed to:

▪ restructure JUUL’s current 7-member board of directors to a 9-member board that will include independent board members. The new structure will include: (i) 3 independent directors (1 of whom will be designated by us and 2 of whom will be designated by JUUL stockholders other than us) unanimously certified as independent by a nominating committee, which will include at least 1 Altria designee, (ii) 2 directors designated by us, (iii) 3 directors designated by JUUL stockholders other than us and (iv) the ~~outcome~~JUUL chief executive officer; and

▪ create a litigation oversight committee, which will include 2 Altria designated directors (1 of whom will chair the ~~FTC~~litigation oversight committee). The committee will have oversight authority and review of litigation management for matters in which JUUL and we are co-defendants and have, or reasonably could have, a written joint defense agreement in effect between them. Subject to certain limitations, the Litigation Oversight Committee will recommend to JUUL changes to outside counsel and litigation strategy by majority vote, with disagreements by JUUL’s management being resolved by majority vote of JUUL’s board of directors.

In June 2022, the U.S. Food and Drug Administration (“FDA”) issued marketing denial orders (“MDOs”) to JUUL ordering all of JUUL’s products currently marketed in the United States off the market. In July 2022, the FDA administratively stayed the MDOs on a temporary basis, citing its determination that there are scientific issues unique to the JUUL pre-market tobacco applications that warrant additional review. This administrative ~~complaint. At September 30, 2021, Altria had a 35% ownership interest in JUUL, consisting of 42 million voting shares.~~stay temporarily suspends the MDOs and JUUL’s products currently remain on the market.

Following Share Conversion in the fourth quarter of 2020, ~~Altria~~we elected to account for ~~its~~our equity method investment in JUUL under the fair value option. Under this option, ~~Altria’s~~our condensed consolidated statements of earnings ~~(losses)~~ include any cash dividends received from ~~its~~our investment in JUUL and any changes in the estimated fair value of ~~its~~our investment, which is calculated quarterly. ~~Altria believes~~We believe the fair value option provides quarterly transparency to investors as to the fair market value of ~~Altria’s~~our investment in JUUL, given the changes and volatility in the e-vapor category since ~~Altria’s~~our initial investment, as well as the lack of publicly available information regarding JUUL’s business or a market-derived valuation.

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We use an income approach to estimate the fair value of our investment in JUUL. The income approach reflects the discounting of future cash flows for the United States and international markets 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 future cash flows.

In determining the estimated fair value of our investment in JUUL, at June 30, 2022 and December 31, 2021, we made certain judgments, estimates and assumptions, the most significant of which were likelihood of certain potential regulatory and liquidity outcomes, sales volume, operating margins, discount rates and perpetual growth rates. All significant inputs used in the valuation are classified in Level 3 of the fair value hierarchy. Additionally, in determining these significant assumptions, we made judgments regarding the (i) likelihood of certain potential regulatory actions impacting the e-vapor category and specifically whether the FDA will ultimately authorize JUUL’s products, which have received MDOs and are now under additional administrative review; (ii) likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, the absence of which could result in JUUL seeking protection under bankruptcy or other insolvency law; (iii) risk created by the number and types of legal cases pending against JUUL; (iv) expectations for the future state of the e-vapor category, including competitive dynamics; and (v) timing of international expansion plans. Due to these uncertainties, our future cash flow projections of JUUL are based on a range of scenarios that consider certain potential regulatory, liquidity and market outcomes.

The following table provides a reconciliation of the beginning and ending balance of ~~Altria’s~~our investment in JUUL, which is classified in Level 3 of the fair value hierarchy:


	Investment
(in millions)	Balance
Balance at December 31, 2020	$	1,705
Unrealized gains (losses) included in ~~income (losses)~~(income) losses from equity investments	—
Balance at ~~September 30,~~December 31, 2021	$	1,705
Unrealized gains (losses) included in (income) losses from equity investments	(1,255)
Balance at June 30, 2022	$	450

For the six and three months ended ~~September~~June 30, ~~2021, Altria~~2022, we recorded a non-cash, pre-tax unrealized ~~gain~~losses of ~~$100~~$1,255 million and $1,155 million, respectively, as a result of changes in the estimated fair value of ~~its~~our investment in JUUL. ~~At September~~The decrease in the estimated fair value was primarily driven by (i) a decrease in the likelihood of a favorable outcome from the FDA for JUUL’s products that are currently marketed in the United States, which have received MDOs and are now under additional administrative review, (ii) a decrease in the likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, which could result in JUUL seeking protection under bankruptcy or other insolvency law, and (iii) projections of higher operating expenses resulting in lower long-term operating margins.

For the six and three months ended June 30, 2021, we recorded a non-cash, pre-tax unrealized loss of $100 million and a non-cash, pre-tax unrealized gain of $100 million, respectively, as a result of changes in the estimated fair value of ~~Altria’s JUUL~~our investment ~~was $1.7 billion, unchanged from its December 31, 2020 estimated fair value.~~in JUUL. There were no material

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changes to the significant assumptions used in the valuations, as described ~~below,~~above, during the ~~nine~~six and three months ended ~~September~~June 30, ~~2021.~~

Prior to Share Conversion, Altria accounted for its investment in JUUL as an investment in an equity security. Since the JUUL shares do not have a readily determinable fair value, Altria elected to measure its investment in JUUL at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. There were no upward or downward adjustments2021, compared to the carrying value of Altria’s investment in JUUL resulting from observable price changes in orderly transactions since the JUUL Transaction through the date of Share Conversion. In addition, prior to Share Conversion, Altria reviewed its investment in JUUL for impairment by performing a qualitative assessment of impairment indicators on a quarterly basis in connection with the preparation of its financial statements. If this qualitative assessment indicated that Altria’s investment in JUUL may be impaired, a quantitative assessment was performed. If the quantitative assessment indicated the estimated fair value of the investment was less than its carrying value, the investment was written down to its fair value.

In September 2020, JUUL announced a strategic update, which included its plans for a significant global workforce reduction, its evaluation of its resource allocation and the possibility of exiting various international markets. As part of the preparation of Altria’s financial statementsassumptions used for the period ended September 30, 2020, Altria performed a qualitative assessment of impairment indicators for its investment in JUUL and determined that JUUL’s strategic update was an indicator of impairment at September 30, 2020, given the significant deterioration in JUUL’s business prospects.

Given the existence of this impairment indicator, Altria performed a quantitative valuation of its investment in JUUL during the third quarter of 2020 and recorded a non-cash, pre-tax charge of $2.6 billion for the nine and three months ended September 30, 2020, reported as impairment of JUUL equity securities in its condensed consolidated statements of earnings (losses). The impairment charge was driven by Altria’s projections of lower JUUL revenues over time due to lower pricing assumptions and delays in JUUL achieving previously forecasted operating margin performance. These drivers were the result of (i) JUUL’s revised international expansion plans and (ii) the evolving U.S. e-vapor category and associated competitive dynamics.

Altria uses an income approach to estimate the fair value of its investment in JUUL. The income approach reflects the discounting of future cash flows for the U.S. and international markets 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 future cash flows. Future cash flows were based on a range of scenarios that consider various potential regulatory and market outcomes.

~~In determining the estimated fair value of its investment in JUUL, as of September 30, 2021 and~~ December 31, 2020 Altria made various judgments, estimates and assumptions, the most significant of which were sales volume, operating margins, discount rates and perpetual growth rates. All significant inputs used in the valuation are classified in Level 3 of the fair value hierarchy. Additionally, in determining these significant assumptions, Altria made judgments regarding the (i) likelihood and extent of various potential regulatory actions and the continued adverse public perception impacting the e-vapor category and specifically JUUL, (ii) risk created by the number and types of legal cases pending against JUUL and (iii) expectations for the future state of the e-vapor category, including competitive dynamics.valuation.

Investment in Cronos

At ~~September~~June 30, ~~2021, Altria~~2022, we had a ~~41.9%~~41.4% ownership interest in Cronos, consisting of 156.6 million shares, which ~~Altria accounts~~we account for under the equity method of accounting. ~~Altria’s ownership percentage decreased from 43.5% at December 31, 2020 due to the issuance of additional shares by Cronos. Altria reports its~~We report our share of Cronos’s results using a one-quarter lag because Cronos’s results are not available in time for ~~Altria~~us to record them in the concurrent period.

The fair value of our equity method investment in Cronos is based on unadjusted quoted prices in active markets for Cronos’s common shares and was classified in Level 1 of the fair value hierarchy. The fair value and carrying value of our equity method investment in Cronos at December 31, 2021 was $617 million.

At March 31, 2022, the fair value of our equity method investment in Cronos exceeded its carrying value by $55 million or approximately 10%. In the second quarter of 2022, the fair value of our equity method investment in Cronos declined below its carrying value and had not recovered as of June 30, 2022. Accounting guidance requires the evaluation of the following factors when determining if the decline in fair value is other than temporary: (i) the duration and magnitude of the fair value decline; (ii) the financial condition and near-term prospects of the investee; and (iii) the investor’s intent and ability to hold its equity method investment until full recovery to its carrying value in the near-term. In preparing our financial statements for the period ended June 30, 2022, we evaluated these factors and determined that there was not sufficient evidence to conclude that the impairment was temporary. As a result, we recorded a non-cash, pre-tax impairment charge of $107 million for the six and three months ended June 30, 2022, which was recorded to (income) losses from equity investments in our condensed consolidated statement of earnings. The impairment charge reflects the difference between the fair value of our equity method investment in Cronos using Cronos’s share price and the Canadian dollar (“CAD”) to U.S. dollar exchange rate at June 30,

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2022 and the carrying value of our equity method investment in Cronos at June 30, 2022. At June 30, 2022, prior to recording the impairment charge, the fair value of our equity method investment in Cronos was less than its carrying value by approximately 20%. After recording the impairment charge, the fair value and carrying value of our equity method investment in Cronos at June 30, 2022 were both $437 million.

As part of ~~its~~our Investment in Cronos, at ~~September~~June 30, ~~2021, Altria~~2022, we also owned:

▪anti-dilution protections to purchase Cronos common shares, exercisable each quarter upon dilution, to maintain ~~its~~our ownership percentage. Certain of the anti-dilution protections provide ~~Altria~~us the ability to purchase additional Cronos common shares at a per share exercise price of ~~Canadian dollar (“CAD”)~~CAD $16.25 upon the occurrence of specified events (“Fixed-price Preemptive Rights”). Based on ~~Altria’s~~our assumptions as of ~~September~~June 30, ~~2021, Altria estimates~~2022, we estimate the Fixed-price Preemptive Rights allows ~~Altria~~us to purchase up to an additional approximately 1411 million common shares of Cronos; and

▪a warrant providing ~~Altria~~us the ability to purchase an additional approximate 10% of common shares of Cronos (approximately 8384 million common shares at ~~September~~June 30, ~~2021)~~2022) at a per share exercise price of CAD $19.00, which expires on March 8, 2023.

If exercised in full, the exercise prices for the warrant and Fixed-price Preemptive Rights are approximately CAD $1.6 billion and CAD $0.2 billion, respectively (approximately ~~USD $1.3~~U.S. dollar $1.2 billion and ~~$0.2~~$0.1 billion, respectively, based on the CAD to ~~USD~~U.S. dollar exchange rate on ~~October~~July 25, ~~2021)~~2022). At ~~September~~June 30, ~~2021,~~2022, upon full exercise of the Fixed-price Preemptive Rights, to the

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extent such rights become available, and the warrant, ~~Altria~~we would own approximately ~~53%~~52% of the outstanding common shares of Cronos.

~~For a discussion of derivatives related~~The Fixed-price Preemptive Rights and Cronos warrant are derivative financial instruments, which are required to ~~the Investment in Cronos, including Altria’s accounting for changes in the~~be recorded at fair ~~value of these derivatives, see Note 5.~~ ~~Financial Instruments~~.

value. The fair ~~value~~values of ~~Altria’s equity method investment in~~the Fixed-price Preemptive Rights and Cronos ~~is based on unadjusted quoted prices in active markets~~warrant are estimated using Black-Scholes option-pricing models, adjusted for ~~Cronos’s common shares and was~~observable inputs (which are classified in Level 1 of the fair value ~~hierarchy. In September 2021, the fair value~~hierarchy), including share price, and unobservable inputs, including probability factors and weighting of ~~Altria’s equity method investment~~expected life, volatility levels and risk-free interest rates (which are classified in Cronos declined below its carrying value. At September 30, 2021, the fair value of Altria’s equity method investment in Cronos was less than its carrying value by $14 million or approximately 2%. The fair value of Altria’s equity method investment in Cronos exceeded its carrying value by $77 million or approximately 8% at December 31, 2020. Based on Altria’s evaluation of the duration and magnitudeLevel 3 of the fair value ~~decline at September 30, 2021, Altria concluded that~~hierarchy). We elect to record the ~~decline~~gross assets and liabilities of derivative financial instruments executed with the same counterparty on our condensed consolidated balance sheets in investments in equity securities.

We record in our condensed consolidated statements of earnings any changes in the fair ~~value~~values of ~~its equity method investment~~the Fixed-price Preemptive Rights and Cronos warrant as gains or losses on Cronos-related financial instruments in the periods in which the changes occur.

We recorded non-cash, pre-tax unrealized (gains) losses, representing the changes in the fair values of the Fixed-price Preemptive Rights and Cronos ~~below its carrying value is temporary and, therefore, no impairment was recorded.~~warrant, as follows:


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2022		2021		2022		2021
Fixed-price Preemptive Rights	$	1	$	4	$	1	$	18
Cronos warrant	13		(11)		3		85
Total	$	14	$	(7)	$	4	$	103

Note 5.4. Financial Instruments

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

~~Altria’s~~Our investment in ABI, whose functional currency is the Euro, exposes ~~Altria~~us to foreign currency exchange risk on the carrying value of ~~its~~our investment. To manage this risk, ~~Altria designates~~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 ~~Altria’s~~our investment in ABI.

In May 2021, all outstanding foreign currency contracts ~~matured.~~matured and, at June 30, 2022 and December 31, 2021, we had no outstanding foreign currency contracts. When ~~Altria has~~we have foreign currency contracts in effect, counterparties are domestic and international financial institutions. Under these contracts, ~~Altria is~~we are exposed to potential losses ~~due to~~in the event of non-performance by these counterparties. ~~Altria manages its~~We manage our credit risk by entering into transactions with counterparties ~~with~~that have investment grade credit ratings, limiting the amount of exposure ~~Altria has~~we have with each counterparty and monitoring the financial condition of each counterparty. The counterparty agreements contain provisions that require ~~Altria~~us to maintain an investment grade credit rating. In the event ~~Altria’s~~our credit rating falls below investment grade, counterparties to ~~Altria’s~~our foreign currency contracts can require ~~Altria~~us to post collateral. ~~No collateral was received or posted related to derivative assets and liabilities at December 31, 2020.~~

~~The following table provides (i) the aggregate notional amounts~~

Table of ~~foreign currency contracts and (ii) the aggregate carrying value and fair value of foreign currency denominated debt:~~Contents

(in millions) September 30, 2021 December 31, 2020
Foreign currency contracts (notional amounts) $ — $ 1,066
Foreign currency denominated debt
Carrying value 4,905 5,171
Fair value 5,288 5,687

Altria’s estimates of the fair values of its foreign currency contracts are determined using valuation models with significant inputs that are readily available in public markets, or can be derived from observable market transactions, and therefore are classified in Level 2 of the fair value hierarchy. An adjustment for credit risk and non-performance risk is included in the fair values of foreign currency contracts.

The following table provides the aggregate carrying value and fair value of ~~Altria’s~~our total long-term debt:


(in millions)	(in millions)	September 30, 2021		December 31, 2020		(in millions)	June 30, 2022		December 31, 2021
Carrying value	Carrying value	$	28,127	$	29,471	Carrying value	$	27,680	$	28,044
Fair value	Fair value	31,037		34,682		Fair value	23,956		30,459
Foreign currency denominated debt included in long-term debt above:						Foreign currency denominated debt included in long-term debt above:
Carrying value						Carrying value	4,444		4,817
Fair value						Fair value	4,150		5,114

~~Altria’s~~Our estimate of the fair value of ~~its~~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.

The ~~Fixed-price Preemptive Rights and Cronos warrant, which are further discussed~~decrease in ~~Note 4.~~ ~~Investments~~the carrying value of our long-term debt was primarily driven by changes in ~~Equity Securities, are derivative financial instruments, which are required to be recorded at fair value. The fair values~~Euro denominated debt resulting from the strengthening of the ~~Fixed-price Preemptive Rights and Cronos warrant are estimated using Black-Scholes option-pricing models, adjusted for observable inputs (which are classified~~U.S. dollar versus the Euro during the first six months of 2022. The decrease in ~~Level 1 of~~ the fair value ~~hierarchy), including share price, and unobservable inputs, including~~

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~~probability factors and weighting of expected life, volatility levels and risk-free~~our long-term debt was primarily driven by increases in interest ~~rates (which are classified in Level 3 of the fair value hierarchy) based on the following assumptions at:~~

Fixed-price Preemptive Rights Cronos Warrant
September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Share price (1)
C$7.15 C$8.84 C$7.15 C$8.84
Expected life (2)
0.81 year 1.05 years 1.43 years 2.18 years
Expected volatility (3)
67.32% 80.68% 67.32% 80.68%
Risk-free interest rate (4)(5)
0.24% 0.13% 0.39% 0.21%
Expected dividend yield (6)
—% —% —% —%

~~(1)~~ ~~Based on the closing market price for Cronos common stock on the Toronto Stock Exchange on the date indicated.~~

~~(2)~~ Based on the weighted-average expected life of the Fixed-price Preemptive Rights (with a range from approximately 0.25 year to 4.00 years at September 30, 2021 and 0.25 year to 5 years at December 31, 2020) and the March 8, 2023 expiration date of the Cronos warrant.

~~(3)~~ Based on a blend of historical volatility of the underlying equity security and implied volatility from traded options on the underlying equity security at September 30, 2021. Based on a blend of historical volatility levels of the underlying equity security and peer companies at December 31, 2020.

~~(4)~~ Based on the implied yield currently available on Canadian Treasury zero coupon issues (with a range from approximately 0.12% to 0.89% at September 30, 2021 and 0.06% to 0.39% at December 31, 2020) weighted for the remaining expected life of the Fixed-price Preemptive Rights.

~~(5)~~ ~~Based on the implied yield currently available on Canadian Treasury zero coupon issues and the expected life of the Cronos warrant.~~

~~(6)~~ ~~Based on Cronos’s expected dividend payments.~~

~~The following table provides a reconciliation of the beginning and ending balance of the Fixed-price Preemptive Rights and Cronos warrant, which are classified in Level 3 of the fair value hierarchy:~~


~~(in millions)~~
~~Balance at December 31, 2019~~	$	~~303~~

~~Pre-tax earnings (losses) recognized in net earnings (losses)~~	~~(140)~~
~~Balance at December 31, 2020~~	~~163~~
~~Pre-tax earnings (losses) recognized in net earnings (losses)~~	~~(128)~~
~~Balance at September 30, 2021~~	$	35

Altria elects to record the gross assets and liabilities of derivative financial instruments executed with the same counterparty on its condensed consolidated balance sheets. The fair values of Altria’s derivative financial instruments on a gross basis included on the condensed consolidated balance sheets were as follows:

Fair Value of Assets Fair Value of Liabilities
(in millions)
Balance Sheet Classification September 30, 2021 December 31, 2020 Balance Sheet Classification September 30, 2021 December 31, 2020
Derivatives designated as hedging instruments:
Foreign currency contracts Other current assets $ — $ — Other accrued liabilities $ — $ 87
Foreign currency contracts Other assets — — Other liabilities — —
Total $ — $ — $ — $ 87
Derivatives not designated as hedging instruments:
Cronos warrant Investments in equity securities $ 32 $ 139
Fixed-price Preemptive Rights Investments in equity securities 3 24
Total $ 35 $ 163
Total derivatives $ 35 $ 163 $ — $ 87

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Altria records in its condensed consolidated statements of earnings (losses) any changes in the fair values of the Fixed-price Preemptive Rights and Cronos warrant as gains or losses on Cronos-related financial instruments in the periods in which the changes occur. For the nine and three months ended September 30, 2021 and 2020, Altria recorded non-cash, pre-tax unrealized gains (losses), representing the changes in the fair values of the Fixed-price Preemptive Rights and Cronos warrant, as follows:

For the Nine Months Ended September 30, For the Three Months Ended September 30,
(in millions) 2021 2020 2021 2020
Fixed-price Preemptive Rights $ (21) $ (54) $ (17) $ (25)
Cronos warrant (107) (148) (118) (80)
Total $ (128) $ (202) $ (135) $ (105)
rates.

Net Investment Hedging

The pre-tax effects of ~~Altria’s~~our net investment hedges on accumulated other comprehensive losses and ~~the~~our condensed consolidated statements of earnings ~~(losses)~~ were as follows:


		Gain (Loss) Recognized in Accumulated Other Comprehensive Losses				Gain (Loss) Recognized in Net Earnings (Losses)				Gain (Loss) Recognized in Accumulated Other Comprehensive Losses				Gain (Loss) Recognized in Net Earnings (Losses)					(Gain) Loss Recognized in Accumulated Other Comprehensive Losses				(Gain) Loss Recognized in Net Earnings				(Gain) Loss Recognized in Accumulated Other Comprehensive Losses				(Gain) Loss Recognized in Net Earnings
		For the Nine Months Ended September 30,								For the Three Months Ended September 30,									For the Six Months Ended June 30,								For the Three Months Ended June 30,
(in millions)	(in millions)	2021		2020		2021		2020		2021		2020		2021		2020		(in millions)	2022		2021		2022		2021		2022		2021		2022		2021
Foreign currency contracts	Foreign currency contracts	$	16	$	(28)	$	7	$	33	$	—	$	(66)	$	—	$	8	Foreign currency contracts	$	—	$	(16)	$	—	$	(7)	$	—	$	19	$	—	$	(2)
Foreign currency denominated debt	Foreign currency denominated debt	270		(215)		—		—		118		(206)		—		—		Foreign currency denominated debt	(375)		(152)		—		—		(247)		54		—		—
Total	Total	$	286	$	(243)	$	7	$	33	$	118	$	(272)	$	—	$	8	Total	$	(375)	$	(168)	$	—	$	(7)	$	(247)	$	73	$	—	$	(2)

~~The~~We recognized changes in the fair value of the foreign currency contracts and in the carrying value of the foreign currency denominated debt due to changes in the Euro to ~~USD~~U.S. dollar exchange rate ~~were recognized~~ in accumulated other comprehensive losses related to ABI. ~~Gains~~We recognized gains on the foreign currency contracts arising from components excluded from effectiveness testing ~~were recognized~~ in interest and other debt expense, net in ~~the~~our condensed consolidated statements of earnings ~~(losses)~~ based on an amortization approach.

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Note 6.5. Benefit Plans

Components of Net Periodic Benefit (Income) Cost

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


		Pension				Postretirement				Pension				Postretirement					Pension				Postretirement				Pension				Postretirement
		For the Nine Months Ended September 30,								For the Three Months Ended September 30,									For the Six Months Ended June 30,								For the Three Months Ended June 30,
(in millions)	(in millions)	2021		2020		2021		2020		2021		2020		2021		2020		(in millions)	2022		2021		2022		2021		2022		2021		2022		2021
Service cost	Service cost	$	51	$	55	$	15	$	13	$	17	$	18	$	5	$	5	Service cost	$	32	$	34	$	10	$	10	$	17	$	17	$	5	$	5
Interest cost	Interest cost	139		188		29		44		46		62		8		14		Interest cost	104		93		20		21		52		47		10		10
Expected return on plan assets	Expected return on plan assets	(393)		(376)		(10)		(11)		(131)		(125)		(2)		(4)		Expected return on plan assets	(247)		(262)		(6)		(8)		(124)		(131)		(3)		(4)
Amortization:	Amortization:																	Amortization:
Net loss	Net loss	99		108		16		7		33		55		2		—		Net loss	48		66		8		14		24		33		4		7
Prior service cost (credit)	Prior service cost (credit)	3		4		(35)		(22)		1		2		(20)		(7)		Prior service cost (credit)	3		2		(23)		(15)		1		1		(11)		(9)

Net periodic benefit (income) cost	Net periodic benefit (income) cost	$	(101)	$	(21)	$	15	$	31	$	(34)	$	12	$	(7)	$	8	Net periodic benefit (income) cost	$	(60)	$	(67)	$	9	$	22	$	(30)	$	(33)	$	5	$	9

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Employer Contributions

~~Altria makes~~We make contributions to ~~the~~our pension plans to the extent that the contributions are tax deductible and pays benefits that relate to plans for salaried employees that cannot be funded under Internal Revenue Service regulations. ~~Altria~~We made employer contributions of ~~$23~~$8 million to ~~its~~our pension plans and did not make any contributions to ~~its~~our postretirement plans during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022. Currently, ~~Altria anticipates~~we anticipate making additional employer contributions ~~to its pension plans~~ of up to approximately $5$25 million to our pension plan and ~~no additional contributions~~$30 million to ~~its~~our postretirement plans ~~for the remainder of 2021.~~in 2022. However, the foregoing estimates of ~~2021~~2022 contributions to ~~the~~our pension and postretirement plans are subject to change as a result of changes in tax and other benefit laws, changes in interest rates, as well as asset performance significantly above or below the assumed long-term rate of return for each respective plan.

~~During~~Plan amendments to our postretirement plans for the year ended December 31, 2021 included several plan changes announced in the second quarter of 2021 ~~Altria announced several amendments~~ to ~~its~~our salaried retiree healthcare plans, primarily changing ~~its~~ post-age 65 coverage to a private medicare marketplace. These amendments triggered a plan remeasurement asin the second quarter of ~~May 31,~~ 2021, ~~and resulted~~resulting in ~~Altria recording~~ a reduction of $432 million (including discount rate impact and other changes) to ~~its accrued~~our postretirement ~~health care costs liability~~obligation in the second quarter of 2021 and a corresponding reduction to ~~its~~ accumulated other comprehensive ~~losses on its condensed consolidated balance sheet. Ongoing amortization has been adjusted to reflect these changes as of June 1, 2021 and is reflected in the amounts shown above.~~losses.

Note 7.6. Earnings ~~(Losses)~~ per Share

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

For the Nine Months Ended September 30, For the Three Months Ended September 30,
(in millions) 2021 2020 2021 2020
Net earnings (losses) attributable to Altria $ 851 $ 2,543 $ (2,722) $ (952)
Less: Distributed and undistributed earnings attributable to share-based awards (8) (6) (2) (1)
Earnings (losses) for basic and diluted EPS $ 843 $ 2,537 $ (2,724) $ (953)
Weighted-average shares for basic EPS 1,849 1,858 1,842 1,858
Plus: contingently issuable performance stock units — 1 — 1
Weighted-average shares for diluted EPS 1,849 1,859 1,842 1,859


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2022		2021		2022		2021
Net earnings attributable to Altria	$	2,850	$	3,573	$	891	$	2,149
Less: Distributed and undistributed earnings attributable to share-based awards	(6)		(6)		(2)		(3)
Earnings for basic and diluted EPS	$	2,844	$	3,567	$	889	$	2,146



Weighted-average shares for basic and diluted EPS	1,813		1,853		1,809		1,849

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Note 8.7. Other Comprehensive Earnings/Losses

The following tables set forth the changes in each component of accumulated other comprehensive losses, net of deferred income taxes, attributable to Altria:


		For the Nine Months Ended September 30, 2021											For the Six Months Ended June 30, 2022
(in millions)	(in millions)	Benefit Plans			ABI			Currency Translation Adjustments and Other		Accumulated Other Comprehensive Losses		(in millions)	Benefit Plans		ABI			Currency Translation Adjustments and Other		Accumulated Other Comprehensive Losses
Balances, December 31, 2020		$	(2,420)		$	(1,938)		$	17	$	(4,341)
Balances, December 31, 2021												Balances, December 31, 2021	$	(1,612)	$	(1,512)		$	68	$	(3,056)

Other comprehensive earnings (losses) before reclassifications	Other comprehensive earnings (losses) before reclassifications	432		(1)	685			35		1,152		Other comprehensive earnings (losses) before reclassifications	—		884			5		889
Deferred income taxes	Deferred income taxes	(118)			(151)			—		(269)		Deferred income taxes	—		(195)			—		(195)
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	314			534			35		883		Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	—		689			5		694

Amounts reclassified to net earnings (losses)		92			(49)			(2)		41
Amounts reclassified to net earnings												Amounts reclassified to net earnings	41		(58)			—		(17)
Deferred income taxes	Deferred income taxes	(23)			10			—		(13)		Deferred income taxes	(10)		12			—		2
Amounts reclassified to net earnings (losses), net of deferred income taxes		69			(39)			(2)		28
Amounts reclassified to net earnings, net of deferred income taxes												Amounts reclassified to net earnings, net of deferred income taxes	31		(46)			—		(15)

Other comprehensive earnings (losses), net of deferred income taxes	Other comprehensive earnings (losses), net of deferred income taxes	383			495		(2)	33		911		Other comprehensive earnings (losses), net of deferred income taxes	31		643		(1)	5		679

Balances, September 30, 2021		$	(2,037)		$	(1,443)		$	50	$	(3,430)
Balances, June 30, 2022												Balances, June 30, 2022	$	(1,581)	$	(869)		$	73	$	(2,377)

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		For the Three Months Ended September 30, 2021										For the Three Months Ended June 30, 2022
(in millions)	(in millions)	Benefit Plans		ABI			Currency Translation Adjustments and Other		Accumulated Other Comprehensive Losses		(in millions)	Benefit Plans		ABI			Currency Translation Adjustments and Other		Accumulated Other Comprehensive Losses
Balances, June 30, 2021		$	(2,043)	$	(1,604)		$	45	$	(3,602)
Balances, March 31, 2022											Balances, March 31, 2022	$	(1,597)	$	(1,434)		$	69	$	(2,962)

Other comprehensive earnings (losses) before reclassifications	Other comprehensive earnings (losses) before reclassifications	—		215			6		221		Other comprehensive earnings (losses) before reclassifications	—		746			4		750
Deferred income taxes	Deferred income taxes	(9)		(48)			—		(57)		Deferred income taxes	—		(163)			—		(163)
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	(9)		167			6		164		Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	—		583			4		587

Amounts reclassified to net earnings (losses)	Amounts reclassified to net earnings (losses)	20		(7)			(1)		12		Amounts reclassified to net earnings (losses)	20		(23)			—		(3)
Deferred income taxes	Deferred income taxes	(5)		1			—		(4)		Deferred income taxes	(4)		5			—		1
Amounts reclassified to net earnings (losses), net of deferred income taxes	Amounts reclassified to net earnings (losses), net of deferred income taxes	15		(6)			(1)		8		Amounts reclassified to net earnings (losses), net of deferred income taxes	16		(18)			—		(2)

Other comprehensive earnings (losses), net of deferred income taxes	Other comprehensive earnings (losses), net of deferred income taxes	6		161		(2)	5		172		Other comprehensive earnings (losses), net of deferred income taxes	16		565		(1)	4		585

Balances, September 30, 2021		$	(2,037)	$	(1,443)		$	50	$	(3,430)
Balances, June 30, 2022											Balances, June 30, 2022	$	(1,581)	$	(869)		$	73	$	(2,377)


	For the Six Months Ended June 30, 2021
(in millions)	Benefit Plans			ABI			Currency Translation Adjustments and Other		Accumulated Other Comprehensive Losses
Balances, December 31, 2020	$	(2,420)		$	(1,938)		$	17	$	(4,341)

Other comprehensive earnings (losses) before reclassifications	432		(2)	470			29		931
Deferred income taxes	(109)			(103)			—		(212)
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	323			367			29		719

Amounts reclassified to net earnings	72			(42)			(1)		29
Deferred income taxes	(18)			9			—		(9)
Amounts reclassified to net earnings, net of deferred income taxes	54			(33)			(1)		20

Other comprehensive earnings (losses), net of deferred income taxes	377			334		(1)	28		739

Balances, June 30, 2021	$	(2,043)		$	(1,604)		$	45	$	(3,602)

2119

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		For the Nine Months Ended September 30, 2020										For the Three Months Ended June 30, 2021
(in millions)	(in millions)	Benefit Plans		ABI			Currency Translation Adjustments and Other		Accumulated Other Comprehensive Losses		(in millions)	Benefit Plans			ABI			Currency Translation Adjustments and Other		Accumulated Other Comprehensive Losses
Balances, December 31, 2019		$	(2,192)	$	(693)		$	21	$	(2,864)
Balances, March 31, 2021											Balances, March 31, 2021	$	(2,392)		$	(1,421)		$	39	$	(3,774)

Other comprehensive earnings (losses) before reclassifications	Other comprehensive earnings (losses) before reclassifications	(75)		(1,211)			(16)		(1,302)		Other comprehensive earnings (losses) before reclassifications	432		(2)	(220)			7		219
Deferred income taxes	Deferred income taxes	19		260			—		279		Deferred income taxes	(109)			48			—		(61)
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	(56)		(951)			(16)		(1,023)		Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes	323			(172)			7		158

Amounts reclassified to net earnings (losses)	Amounts reclassified to net earnings (losses)	111		29			—		140		Amounts reclassified to net earnings (losses)	34			(14)			(1)		19
Deferred income taxes	Deferred income taxes	(28)		(6)			—		(34)		Deferred income taxes	(8)			3			—		(5)
Amounts reclassified to net earnings (losses), net of deferred income taxes	Amounts reclassified to net earnings (losses), net of deferred income taxes	83		23			—		106		Amounts reclassified to net earnings (losses), net of deferred income taxes	26			(11)			(1)		14

Other comprehensive earnings (losses), net of deferred income taxes	Other comprehensive earnings (losses), net of deferred income taxes	27		(928)		(2)	(16)		(917)		Other comprehensive earnings (losses), net of deferred income taxes	349			(183)		(1)	6		172

Balances, September 30, 2020		$	(2,165)	$	(1,621)		$	5	$	(3,781)
Balances, June 30, 2021											Balances, June 30, 2021	$	(2,043)		$	(1,604)		$	45	$	(3,602)

(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 4. Financial Instruments.

For the Three Months Ended September 30, 2020
(in millions) Benefit Plans ABI Currency
Translation
Adjustments and Other Accumulated
Other
Comprehensive
Losses
Balances, June 30, 2020 $ (2,150) $ (1,606) $ (18) $ (3,774)
Other comprehensive earnings (losses) before reclassifications (75) (71) 23 (123)
Deferred income taxes 19 22 — 41
Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes (56) (49) 23 (82)
Amounts reclassified to net earnings (losses) 55 44 — 99
Deferred income taxes (14) (10) — (24)
Amounts reclassified to net earnings (losses), net of deferred income taxes 41 34 — 75
Other comprehensive earnings (losses), net of deferred income taxes (15) (15) (2) 23 (7)
Balances, September 30, 2020 $ (2,165) $ (1,621) $ 5 $ (3,781)

~~(1)~~(2) Reflects the remeasurement impact of salaried retiree healthcare plan amendments. For further discussion, see Note 6.5. Benefit Plans.

~~(2)~~ Primarily reflects Altria’s share of ABI’s currency translation adjustments and the impact of Altria’s designated net investment hedges. For further discussion of designated net investment hedges, see Note 5. ~~Financial Instruments.~~

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The following table sets forth pre-tax amounts by component, reclassified from accumulated other comprehensive losses to net ~~earnings (losses):~~earnings:


		For the Nine Months Ended September 30,				For the Three Months Ended September 30,					For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Benefit Plans: (1)	Benefit Plans: (1)									Benefit Plans: (1)
Net loss	Net loss	$	124	$	129	$	39	$	60	Net loss	$	61	$	85	$	30	$	42
Prior service cost/credit	Prior service cost/credit	(32)		(18)		(19)		(5)		Prior service cost/credit	(20)		(13)		(10)		(8)
		92		111		20		55			41		72		20		34
ABI (2)	ABI (2)	(49)		29		(7)		44		ABI (2)	(58)		(42)		(23)		(14)
Currency Translation Adjustments and Other (2)	Currency Translation Adjustments and Other (2)	(2)		—		(1)		—		Currency Translation Adjustments and Other (2)	—		(1)		—		(1)
Pre-tax amounts reclassified from accumulated other comprehensive losses to net earnings (losses)		$	41	$	140	$	12	$	99
Pre-tax amounts reclassified from accumulated other comprehensive losses to net earnings										Pre-tax amounts reclassified from accumulated other comprehensive losses to net earnings	$	(17)	$	29	$	(3)	$	19

(1) Amounts are included in net defined benefit plan costs. For further ~~information related to defined benefit plans,~~details, see Note 6.5. Benefit Plans.

(2) Amounts are included in (income) losses from equity investments. For further information, ~~related to equity investments,~~ see Note 4.3. Investments in Equity Securities.

Note 9.8. Segment Reporting

~~The~~Our products ~~of Altria’s subsidiaries~~ include smokeable tobacco products, consisting of combustible cigarettes manufactured and sold by PM USA, and machine-made large cigars and pipe tobacco manufactured and sold by Middleton; oral tobacco products, consisting of MST and snus products manufactured and sold by USSTC, and oral nicotine pouches manufactured and sold by ~~Helix; and wine produced and/or distributed by Ste. Michelle. The~~Helix. These products ~~and services of these subsidiaries~~ constitute ~~Altria’s~~our reportable segments of smokeable products and oral tobacco products ~~and wine.~~at June 30, 2022. The financial services and the innovative tobacco products businesses, which include the heated tobacco business and Helix ROW, are included in all other.

~~Altria’s~~Prior to the sale of our wine business on October 1, 2021, wine produced and/or sold by Ste. Michelle was a reportable segment.

Our chief operating decision maker ~~(the “CODM”~~(“CODM”) reviews operating companies income (loss) (“OCI”) to evaluate the performance of, and allocate resources to, ~~the~~our segments. OCI for ~~the~~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/cost, excluding service cost, and provision ~~(benefit)~~ for income taxes are centrally managed at the corporate level and,

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accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by ~~the~~our CODM.

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Segment data were as follows:


		For the Nine Months Ended September 30,				For the Three Months Ended September 30,					For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Net revenues:
Net Revenues:										Net Revenues:
Smokeable products	Smokeable products	$	17,275	$	17,522	$	5,975	$	6,313	Smokeable products	$	11,138	$	11,300	$	5,873	$	6,050
Oral tobacco products	Oral tobacco products	1,945		1,901		626		640		Oral tobacco products	1,278		1,319		665		693
Wine	Wine	494		434		177		157		Wine	—		317		—		167
All other	All other	44		(8)		8		13		All other	19		36		5		26
Net revenues	Net revenues	$	19,758	$	19,849	$	6,786	$	7,123	Net revenues	$	12,435	$	12,972	$	6,543	$	6,936
Earnings (losses) before income taxes:
Earnings before Income Taxes:										Earnings before Income Taxes:
OCI:	OCI:									OCI:
Smokeable products	Smokeable products	$	7,901	$	7,609	$	2,753	$	2,789	Smokeable products	$	5,321	$	5,148	$	2,762	$	2,776
Oral tobacco products	Oral tobacco products	1,269		1,297		405		436		Oral tobacco products	837		864		430		472
Wine	Wine	21		(347)		(24)		19		Wine	—		45		—		27
All other	All other	(56)		(63)		(30)		(7)		All other	(20)		(26)		(15)		(12)
Amortization of intangibles	Amortization of intangibles	(53)		(54)		(18)		(17)		Amortization of intangibles	(35)		(35)		(18)		(18)
General corporate expenses	General corporate expenses	(255)		(150)		(135)		(60)		General corporate expenses	(114)		(120)		(54)		(59)

Operating income	Operating income	8,827		8,292		2,951		3,160		Operating income	5,989		5,876		3,105		3,186
Interest and other debt expense, net	Interest and other debt expense, net	(869)		(893)		(266)		(310)		Interest and other debt expense, net	561		603		280		295
Loss on early extinguishment of debt	Loss on early extinguishment of debt	(649)		—		—		—		Loss on early extinguishment of debt	—		649		—		—
Net periodic benefit income, excluding service cost	Net periodic benefit income, excluding service cost	152		58		63		3		Net periodic benefit income, excluding service cost	(93)		(89)		(47)		(46)
Income (losses) from equity investments		(5,789)		(306)		(5,915)		(472)
Impairment of JUUL equity securities		—		(2,600)		—		(2,600)
Gain (loss) on Cronos-related financial instruments		(128)		(202)		(135)		(105)
Earnings (losses) before income taxes		$	1,544	$	4,349	$	(3,302)	$	(324)
(Income) losses from equity investments										(Income) losses from equity investments	1,229		(126)		1,263		(75)

(Gain) loss on Cronos-related financial instruments										(Gain) loss on Cronos-related financial instruments	14		(7)		4		103
Earnings before income taxes										Earnings before income taxes	$	4,278	$	4,846	$	1,605	$	2,909

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

▪Non-Participating Manufacturer (“NPM”) Adjustment Items: ~~Pre-tax (income)~~We recorded pre-tax income for NPM adjustment items ~~was~~of $60 million and $32 million for the six months ended June 30, 2022 and 2021, respectively, in our smokeable products segment. We recorded ~~to Altria’s~~these items in cost of sales in our condensed consolidated statements of ~~earnings (losses) as follows:~~
For the Nine Months Ended September 30, For the Three Months Ended September 30,
(in millions) 2021 2021
Smokeable products segment $ (53) $ (21)
Interest and other debt expense, net (23) (23)
Total $ (76) $ (44)

earnings. NPM adjustment items result from the resolutions of certain disputes with states and territories related to the NPM adjustment provision under the ~~1998~~ Master Settlement Agreement (such dispute resolutions are referred to as “NPM Adjustment Items” and are more fully described in Health Care Cost Recovery Litigation in Note ~~12.~~11. Contingencies). ~~The amounts shown in the table above for the smokeable products segment were recorded as reductions to cost of sales, which increased OCI in the smokeable products segment.~~

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▪Tobacco and Health and Certain Other Litigation Items: ~~Pre-tax~~Werecorded pre-tax charges related to tobacco and health and certain other litigation items ~~were recorded in Altria’s condensed consolidated statements of earnings (losses)~~ as follows:


		For the Nine Months Ended September 30,				For the Three Months Ended September 30,					For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Smokeable products segment	Smokeable products segment	$	72	$	73	$	29	$	34	Smokeable products segment	$	50	$	43	$	38	$	8
General corporate		70		—		70		—
General corporate expenses										General corporate expenses	7		—		7		—
Interest and other debt expense, net	Interest and other debt expense, net	6		3		6		—		Interest and other debt expense, net	1		—		1		—
Total	Total	$	148	$	76	$	105	$	34	Total	$	58	$	43	$	46	$	8

~~The~~We recorded the amounts shown in the table above for the smokeable products segment ~~and general corporate were recorded~~ in marketing, administration and research ~~costs.~~costs in our condensed consolidated statements of earnings. For further discussion, see Note ~~12.~~11. Contingencies.

▪~~COVID-19 Special Items:~~ ~~Net pre-tax charges~~Table of $50 million ($41 million in the smokeable products segment and $9 million in the oral tobacco products segment) related to the COVID-19 pandemic were recorded in Altria’s condensed consolidated statements of earnings (losses) for the nine months ended September 30, 2020. The net pre-tax charges, which were directly related to disruptions caused by or efforts to mitigate the impact of the COVID-19 pandemic, were all recorded in costs of sales and included premium pay, personal protective equipment and health screenings, which were partially offset by certain employment tax credits. The COVID-19 special items do not include the inventory-related implementation costs associated with the wine business strategic reset discussed below. These implementation costs were due to increased inventory levels, which were further negatively impacted by the COVID-19 pandemic, including economic uncertainty and government restrictions.Contents

▪~~Implementation, Acquisition and Disposition-Related~~Acquisition-Related Costs:

~~Ste. Michelle Transaction:~~ For the nine and three months ended September 30, 2021, pre-tax disposition-related costs of $51 million were recorded in the wine segment, which consisted of a pre-tax charge of $41 million to record the assets and liabilities associated with the Ste. Michelle Transaction at their fair value less costs to sell and $10 million of other disposition-related costs. For further discussion, see Note 3. ~~Assets Held for Sale~~.

~~Wine Business Strategic Reset~~: During the nine months ended September 30, 2020, Ste. Michelle recorded pre-tax implementation costs of $395 million associated with a strategic reset initiated in the first quarter of 2020 to maximize Ste. Michelle’s profitability and achieve improved long-term cash flow generation. Substantially all of the charges consisted of the following: (i) write-off of inventory ($292 million) as Ste. Michelle no longer believed that the benefit of the blending and production plans for its inventory outweighed inventory carrying cost given the reduced product volume demand; and (ii) estimated losses on future non-cancelable grape purchase commitments that Ste. Michelle believed no longer had a future economic benefit ($100 million). These charges were included in cost of sales in Altria’s condensed consolidated statements of earnings (losses).

~~Acquisition-Related Costs: For the nine months ended September 30, 2021, Altria~~We recorded pre-tax acquisition-related costs of $37 million for the six months ended June 30, 2021 in ~~the~~our oral tobacco products segment primarily for the settlement of an arbitration related to the 2019 on! transaction. ~~These~~We included these costs ~~were included~~ in marketing, administration and research costs in ~~Altria’s~~our condensed consolidated statements of ~~earnings (losses).~~earnings.

Note ~~10.~~9. Debt

Short-term Borrowings and Borrowing Arrangements

At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020, Altria~~2021, we had no short-term borrowings.

~~On August 18, 2021, Altria entered into an extension and amendment (the “Extension and Amendment”) to its $3.0 billion~~We have a senior unsecured 5-year revolving credit agreement (as amended, the “Credit Agreement”)~~. The Extension and Amendment extends the maturity date~~ that provides for borrowings up to an aggregate principal amount of the Credit Agreement from August 1, 2023 to August 1, 2024 and amends the Credit Agreement to update certain provisions regarding a successor interest rate to the London Interbank Offered Rate (“LIBOR”) and make certain other market updates. All other terms and conditions of the Credit Agreement remain in full force and effect.$3.0 billion. The Credit Agreement, which is used for general corporate purposes, expires on August 1, 2024 and includes an ~~additional~~ option, subject to certain conditions, for ~~Altria~~us to extend the expiration date for an additional one-year period.

At ~~September~~June 30, ~~2021,~~2022, we had availability under the Credit Agreement ~~had available~~for borrowings of up to an aggregate principal amount of $3.0 billion.

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Pricing for interest and fees under the Credit Agreement may be modified in the event of a change in the rating of ~~Altria’s~~our long-term senior unsecured debt. Interest rates on borrowings under the Credit Agreement are expected to be based on ~~LIBOR,~~the London Interbank Offered Rate (“LIBOR”), or a fallback benchmark rate determined based on prevailing market convention, plus a percentage based on the higher of the ratings of ~~Altria’s~~our long-term senior unsecured debt from Moody’s Investors Service, Inc. (“Moody’s”) and Standard & Poor’s Financial Services LLC (“S&P”). The applicable percentage ~~based on Altria’s long-term senior unsecured debt ratings at September 30, 2021~~ for borrowings under the Credit Agreement at June 30, 2022 was 1.0%. based on our long-term senior unsecured debt ratings on that date. The Credit Agreement does not include any other rating triggers or any provisions that could require the posting of collateral.

The Credit Agreement includes various covenants, one of which requires ~~Altria~~us to maintain a ratio of consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) 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 ~~September~~June 30, ~~2021,~~2022, the ratio of consolidated EBITDA to Consolidated Interest Expense, calculated in accordance with the Credit Agreement, was ~~9.8~~10.7 to 1.0. At ~~September~~June 30, ~~2021, Altria was~~2022, we were in compliance with ~~its~~our covenants in the Credit Agreement. The terms “Consolidated EBITDA” and “Consolidated Interest Expense,” each as defined in the Credit Agreement, include certain adjustments.

In March 2020, due to the uncertainty at that time in the global capital markets, including the commercial paper markets, resulting from the COVID-19 pandemic, Altria elected to borrow the full $3.0 billion available under the Credit Agreement as a precautionary measure to increase its cash position and preserve financial flexibility. In June 2020, Altria repaid the full amount outstanding under the Credit Agreement using the net proceeds from the issuance of long-term senior unsecured notes issued in May 2020 and available cash.

Any commercial paper issued by ~~Altria~~us and borrowings under the Credit Agreement are guaranteed by PM USA.

Long-term Debt

The aggregate carrying value of ~~Altria’s~~our total long-term debt at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~$28.1~~$27.7 billion and ~~$29.5~~$28.0 billion, respectively.

~~In May~~During the first quarter of 2021, ~~Altria repaid in full senior unsecured notes in the aggregate principal amount of $1.5 billion at maturity.~~

~~In February 2021, Altria~~we issued long-term senior unsecured notes in the aggregate principal amount of $5.5 ~~billion (the “Notes”). The~~billion. We used the net proceeds from ~~the Notes were used~~these notes (i) to fund the purchase and redemption of certain unsecured notes and payment of related fees and expenses, as described below, and (ii) for other general corporate purposes. ~~The Notes contain the following terms:~~

▪~~$1.75 billion at 2.450%, due 2032, interest payable semiannually beginning August 4, 2021;~~

▪~~$1.50 billion at 3.400%, due 2041, interest payable semiannually beginning August 4, 2021;~~

▪~~$1.25 billion at 3.700%, due 2051, interest payable semiannually beginning August 4, 2021; and~~

▪~~$1.00 billion at 4.000%, due 2061, interest payable semiannually beginning August 4, 2021.~~

The Notes are Altria’s senior unsecured obligations and rank equally in right of payment with all of Altria’s existing and future senior unsecured indebtedness. Upon the occurrence of both (i) a change of control of Altria and (ii) the Notes ceasing to be rated investment grade by each of Moody’s, S&P and Fitch Ratings, Inc. within a specified time period, Altria will be required to make an offer to purchase the Notes at a price equal to 101% of the aggregate principal amount of such Notes, plus accrued and unpaid interest to the date of repurchase as and to the extent set forth in the terms of the Notes.

~~The obligations of Altria under the Notes are guaranteed by PM USA.~~

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During the first quarter of 2021, ~~Altria~~we completed debt tender offers to purchase for cash certain of ~~its~~our long-term senior unsecured notes in an aggregate principal amount of $4,042 ~~million. Details of the debt tender offers are as follows:~~


~~(in millions)~~	~~Principal Amount of Notes Purchased~~
~~2.850% Notes due 2022~~	$	~~795~~
~~2.950% Notes due 2023~~	~~132~~
~~4.000% Notes due 2024~~	~~624~~
~~3.800% Notes due 2024~~	~~655~~
~~4.400% Notes due 2026~~	~~430~~
~~4.800% Notes due 2029~~	~~1,094~~
~~9.950% Notes due 2038~~	65
~~10.200% Notes due 2039~~	18
~~6.200% Notes due 2059~~	~~229~~
	$	~~4,042~~

~~During the first quarter of 2021, Altria~~million and also redeemed all of ~~its~~our outstanding 3.490% ~~Notes~~notes due 2022 in an aggregate principal amount of $1.0 billion.

As a result of the debt tender offers and redemption, during the first quarter of 2021, ~~Altria~~we recorded pre-tax losses on early extinguishment of debt of $649 million, which included premiums and fees of $623 million and the write-off of ~~related~~ unamortized debt discounts and debt issuance costs of $26 million.

At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, accrued interest on long-term debt of ~~$206~~$376 million and ~~$458~~$429 million, respectively, was included in other accrued liabilities on ~~Altria’s~~our condensed consolidated balance sheets.

For a discussion of the fair value of ~~Altria’s~~our long-term debt and the designation of ~~its~~our Euro denominated senior unsecured notes as a net investment hedge of ~~its~~our investment in ABI, see Note 5.4. Financial Instruments.

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Note ~~11.~~10. Income Taxes

Earnings ~~(losses)~~ before income taxes, provision ~~(benefit)~~ for income taxes and income tax rates consisted of the following:


		For the Nine Months Ended September 30,						For the Three Months Ended September 30,							For the Six Months Ended June 30,						For the Three Months Ended June 30,
(in millions)	(in millions)	2021			2020			2021			2020			(in millions)	2022			2021			2022			2021
Earnings (losses) before income taxes		$	1,544		$	4,349		$	(3,302)		$	(324)
Provision (benefit) for income taxes		693			1,817			(582)			632
Earnings before income taxes														Earnings before income taxes	$	4,278		$	4,846		$	1,605		$	2,909
Provision for income taxes														Provision for income taxes	1,428			1,275			714			759
Income tax rate	Income tax rate	44.9		%	41.8		%	17.6		%	(195.1)		%	Income tax rate	33.4		%	26.3		%	44.5		%	26.1		%

~~Altria’s~~Our income tax rates for the ~~nine~~six and three months ended ~~September~~June 30, ~~2021 and 2020 are not comparable in~~2022 differ from the U.S. federal statutory rate of 21%, due primarily to a ~~meaningful way due~~valuation allowance recorded against a deferred tax asset related to the ~~following significant pre-tax charges and valuation allowances:~~

▪decreases in the ~~$6,157 million impairment~~estimated fair value of ~~Altria’s equity~~our investment in ~~ABI during the nine and three months ended September 30, 2021;and~~JUUL.

▪the $2,600 million impairment of Altria’s investment in JUUL during the nine and three months ended September 30, 2020 and valuation allowances associated with Altria’s investments in JUUL and Altria’s Investment in Cronos.

~~Altria’s~~Our income tax rates for the ~~nine and three~~six months ended ~~September~~June 30, 2021 differ from the U.S. federal statutory rate of 21%, due primarily to ~~the state~~valuation allowances recorded against deferred tax ~~treatment of the impairment charge on Altria’s equity~~assets related to our investment in ~~ABI.~~JUUL and our Investment in Cronos.

~~Altria’s~~Our income tax rates for the ~~nine and~~ three months ended ~~September~~June 30, ~~2020~~2021 differ from the U.S. federal statutory rate of 21%, due primarily to a valuation ~~allowances primarily attributable to~~allowance recorded against a deferred tax ~~assets recorded~~asset related to our Investment in ~~connection with~~Cronos, partially offset by a valuation allowance release related to the ~~impairment~~increase in the estimated fair value of ~~Altria’s~~our investment in ~~JUUL, and Altria’s Investment in Cronos.~~JUUL.

For further information on the ~~impairments~~changes in the estimated fair value of ~~Altria’s equity investment in ABI and~~our investment in JUUL and our Investment in Cronos, see Note 43. Investments in Equity Securities.

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The following chart provides a reconciliation of the beginning and ending valuation allowances for the period ended ~~September~~June 30, ~~2021:~~2022:


(in millions)
Balance at beginning of year	$	~~2,817~~3,097
Additions to valuation allowance charged to income tax expense	~~264~~368
Reductions to valuation allowance credited to income tax benefit	~~(73)~~(8)
Foreign currency translation	~~(4)~~(1)
Balance at end of period	$	~~3,004~~3,456

~~Altria determines~~We determine the realizability of deferred tax assets based on the weight of available evidence, that it is more-likely-than-not that the deferred tax asset will not be realized. In reaching this determination, ~~Altria considers~~we consider all available positive and negative evidence, including the character of the loss, carryback and carryforward considerations, future reversals of temporary differences and available tax planning strategies.

The ~~current~~ changes in valuation allowances for the six months ended June 30, 2022 were due primarily to deferred tax assets recorded in connection with ~~Altria’s Investment in Cronos and changes~~decreases in the estimated fair value of ~~its~~our investment in JUUL. The cumulative valuation allowance at ~~the end of the period is~~June 30, 2022 was primarily attributable to deferred tax assets recorded in connection with ~~Altria’s~~our investment in JUUL and our Investment in Cronos.

Note ~~12.~~11. Contingencies

Legal proceedings covering a wide range of matters are pending or threatened in various ~~U.S.~~United States and foreign jurisdictions against Altria and ~~its~~certain of our subsidiaries, including PM USA and USSTC, as well as ~~their respective~~our indemnitees and ~~Altria’s~~ investees. 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, 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, demonstrate 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

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cases, ~~Altria or its subsidiaries~~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, ~~Altria or its subsidiaries~~ under certain circumstances, we may have to pay more than ~~their~~our proportionate share of any bonding- or judgment-related amounts. Furthermore, in those cases where plaintiffs are successful, ~~Altria or its subsidiaries~~we also may be required to pay interest and attorneys’ fees.

Although PM USA has historically 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. As discussed below, 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 ~~Altria~~we cannot predict the outcome of such challenges, it is possible that ~~the~~our consolidated results of operations, cash flows or financial position ~~of Altria, or one or more of its subsidiaries,~~ could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome of one or more such challenges.

~~Altria and its subsidiaries~~We record provisions in ~~the~~our condensed consolidated financial statements for pending litigation when ~~they~~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 ~~12.~~11. 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 ~~the~~our condensed consolidated financial statements for unfavorable outcomes, if any. Litigation defense costs are expensed as incurred.

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

Judgments Paid and Provisions for Tobacco and Health ~~and Certain Other Litigation Items~~ (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)	2022		2021		2022		2021
Accrued liability for tobacco and health and certain other litigation items at beginning of period	$	91	$	9	$	—	$	8
Pre-tax charges for:
Tobacco and health and certain other litigation (1)	57		43		45		8
Related interest costs	1		—		1		—



Payments	(124)		(52)		(21)		(16)
Accrued liability for tobacco and health and certain other litigation items at end of period	$	25	$	—	$	25	$	—

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

The accrued liability for tobacco and health and certain other litigation items, including related interest costs, was included in accrued liabilities on our condensed consolidated balance sheets. Pre-tax charges for tobacco and health and certain other litigation were included in marketing, administration and research costs on our condensed consolidated statements of earnings. Pre-tax charges for related interest costs were included in interest and other debt expense, net on 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 ~~$865~~$929 million and interest totaling approximately ~~$218~~$228 million as of ~~September~~June 30, ~~2021.~~2022. These amounts include payments for Engle progeny judgments (and related costs and fees) totaling approximately ~~$410~~$421 million and related interest totaling approximately ~~$56~~$57 million.

~~The changes in Altria’s 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 Nine Months Ended September 30, For the Three Months Ended September 30,
(in millions) 2021 2020 2021 2020
Accrued liability for tobacco and health and certain other litigation items at beginning of period $ 9 $ 14 $ — $ 22
Pre-tax charges for:
Tobacco and health and certain other litigation (1)
142 73 99 34
Related interest costs 6 3 6 —
Payments (1)
(60) (81) (8) (47)
Accrued liability for tobacco and health and certain other litigation items at end of period $ 97 $ 9 $ 97 $ 9

~~(1)~~ ~~Includes amounts related to certain other litigation and pre-trial resolution~~Table of ~~certain tobacco and health cases.~~Contents

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

Security for Judgments: To obtain stays of judgments pending appeal, PM USA has posted various forms of security. As of ~~September 30, 2021,~~July 25, 2022, PM USA has posted appeal bonds totaling approximately ~~$45~~$50 million, which have been collateralized with restricted cash that are included in assets on ~~the~~our condensed consolidated balance sheets.

Overview of ~~Altria and/or PM USA~~ 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 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.

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The table below lists the number of certain tobacco-related cases pending in the ~~U.S.~~United States against ~~PM USA and/or Altria~~us as ~~of October 25, 2021, October 27, 2020 and October 28, 2019:~~of:


		October 25, 2021	October 27, 2020	October 28, 2019		July 25, 2022	July 26, 2021
Individual Smoking and Health Cases (1)	Individual Smoking and Health Cases (1)	179	142	95	Individual Smoking and Health Cases (1)	162	169
Health Care Cost Recovery Actions (2)	Health Care Cost Recovery Actions (2)	1	1	1	Health Care Cost Recovery Actions (2)	1	1
E-vapor Cases (3)	E-vapor Cases (3)	2,951	1,145	—	E-vapor Cases (3)	4,030	2,626
Other Tobacco-Related Cases (4)	Other Tobacco-Related Cases (4)	3	4	4	Other Tobacco-Related Cases (4)	3	3

(1) Includes 18as of July 25, 2022, 16 cases filed in Illinois, 1718 cases filed in New Mexico, 4036 cases filed in Massachusetts and 7058 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 case (these Engle progeny cases are discussed below in Smoking and Health Litigation - Engle Class Action). Also does not include ~~1,471~~1,396 cases brought by flight attendants 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, which 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.

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

(3) Includes 53as of July 25, 2022, 58 class action lawsuits, ~~2,548~~2,957 individual lawsuits and ~~350~~1,015 “third party” lawsuits relating to JUUL e-vapor products, which include school districts, state and local government, tribal and healthcare organization lawsuits. JUUL is an additional named defendant in each of these lawsuits. The 5358 class action lawsuits include 2832 cases in the Northern District of California (“Multidistrict Litigation” or “MDL”) involving plaintiffs whose claims were previously included in other class action complaints but were refiled as separate stand-alone class actions for procedural and other reasons.

(4) Includes as of July 25, 2022, 1 inactive smoking and health case alleging personal injury and purporting to be brought on behalf of a class of individual plaintiffs and 2 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 ~~October~~July 25, ~~2021,~~2022, (i) Altria is named as a defendant in 3 e-vapor class action lawsuits in Canada; (ii) PM USA is a named defendant in 10 health care cost recovery actions in Canada, 8 of which also name Altria as a defendant; and (iii) PM USA and Altria are named as defendants in 7 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 Philip Morris International Inc. (“PMI”) that provides for indemnities for certain liabilities concerning tobacco products.

Tobacco-Related Cases Set for Trial: As of ~~October~~July 25, ~~2021, no~~2022, 6 Engle progeny orcases, 2 individual smoking and health cases ~~against PM USA~~and no e-vapor cases are set for trial through ~~December 31, 2021.~~September 30, 2022. Trial dates are subject to ~~change and many of the trials were postponed due to the COVID-19 pandemic; however, the courts are reopening and additional trials may be scheduled for the remainder of 2021.~~change.

Trial Results: Since January 1999, excluding the Engle progeny cases (separately discussed below), verdicts have been returned in 6970 tobacco-related cases in which PM USA was a defendant. Verdicts in favor of PM USA and other defendants were returned in 4445 of the 6970 cases. These 4445 cases were tried in Alaska (1), California (7), Connecticut (1), Florida (10), Louisiana (1), Massachusetts ~~(4)~~(5), Mississippi (1), Missouri (4), New Hampshire (1), New Jersey (1), New York (5), Ohio (2), Pennsylvania (1), Rhode Island (1), Tennessee (2) and West Virginia (2). One case in Massachusetts, Main, where the verdict was initially returned in favor of PM USA, was reversed on appeal and remanded for a new trial.

Of the 25 non-Engle progeny cases in which verdicts were returned in favor of plaintiffs, 2023 have reached final ~~resolution,~~ ~~and 2 cases (Gentile~~ ~~and~~ ~~Principe) that were initially returned in favor of plaintiffs were reversed post-trial and remain pending.~~resolution.

See Smoking and Health Litigation - Engle Progeny Trial Results below for a discussion of verdicts in state and federal Engle progeny cases involving PM USA as of ~~October~~July 25, ~~2021.~~2022.

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

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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.

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Non-Engle Progeny Litigation: Summarized below are the non-Engle progeny smoking and health cases pending during ~~2021~~2022 (or recently concluded) 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.

Principe: In February 2020, a jury in a Florida state court returned a verdict in favor of plaintiff and against PM USA, awarding approximately $11 million in compensatory damages. There was no claim for punitive damages. PM USA appealed the trial court verdict to the Third District Court of Appeal and, in September 2021, the appellate court reversed the trial court’s decision and found in favor of PM USA. Plaintiff moved for a rehearing before the Third District Court of Appeal, which the court denied in March 2022. In April 2022, plaintiff filed a notice to invoke the discretionary jurisdiction of the Florida Supreme Court. In July 2022, the Florida Supreme Court denied plaintiff’s motion for discretionary review.

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. ~~Also in February 2021, PM USA served its post-trial motions to reverse the judgment or for a new trial. The trial court denied the post-trial motions in June 2021.~~ In July 2021, following denial of PM USA’s post-trial motions, PM USA appealed the judgment to the Appeals Court of ~~Massachusetts.~~Massachusetts, which appeal remains pending.

Laramie: In August 2019, a jury in a Massachusetts state court returned a verdict in favor of plaintiff and against PM USA, awarding $11 million in compensatory damages and $10 million in punitive damages. PM USA appealed and, in February 2021, the Massachusetts Supreme Judicial Court asserted jurisdiction over the appeal. In September 2021, the Massachusetts Supreme Judicial Court affirmed the trial court award of $21 million in compensatory and punitive damages. PM USA recorded a pre-tax provision of approximately $27.1 million ~~for the judgment, including interest,~~ in the third quarter of ~~2021.~~

~~Gentile: In October 2017, a jury in a Florida state court returned a verdict in favor of plaintiff~~2021 and ~~against PM USA, awarding approximately $7.1~~paid $30.3 million ~~in compensatory damages and allocating 75% of the fault to PM USA. PM USA appealed. In September 2019, the Florida Fourth District Court of Appeal reversed~~(including the judgment ~~entered by the trial court, granted PM USA judgment on certain claims~~ and ~~remanded for a new trial on the remaining claims. Plaintiff petitioned the Florida Supreme Court for further review, which the court denied~~interest) in ~~January~~December 2021.

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 Class Action: In July 2000, in the second phase of the Engle smoking and health class action in Florida, a jury returned a verdict assessing punitive damages totaling approximately $145 billion against various defendants, including $74 billion against PM USA. Following entry of judgment, PM USA appealed. In May 2003, the Florida Third District Court of Appeal reversed the judgment entered by the trial court and instructed the trial court to order the decertification of the class. Plaintiffs petitioned the Florida Supreme Court for further review.

In July 2006, the Florida Supreme Court ordered that the 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. The court further declared the following Phase I findings are entitled to res judicata effect in such individual actions brought within one year of the issuance of the mandate: (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 misrepresent information regarding the health effects or addictive nature of cigarettes with the intention of causing the public to rely on this information to their detriment; (vi) 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; (vii) that all defendants sold or supplied cigarettes that were defective; and (viii) that defendants were negligent.

In August 2006, PM USA and plaintiffs sought rehearing from the Florida Supreme Court on parts of its July 2006 opinion. In December 2006, the Florida Supreme Court refused to revise its July 2006 ruling, except that it revised the set of Phase I findings entitled to res judicata effect by excluding finding (v) listed above (relating to agreement to misrepresent information), and added the finding that defendants sold or supplied cigarettes that, at the time of sale or supply, did not conform to the representations of fact made by defendants. In February 2008, the trial court decertified the class.

Pending Engle 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 ~~October~~July 25, ~~2021,~~2022, approximately ~~1,026~~727 state court cases were pending against PM USA or Altria asserting individual claims by or on behalf of approximately ~~1,285~~911 state court plaintiffs. Because of a number of factors, including docketing delays, duplicated filings and overlapping dismissal orders, these numbers

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are estimates. While the ~~Federal~~2015 federal Engle ~~Agreement (discussed below)~~agreement resolved nearly all Engle progeny cases pending in federal court, as of ~~October~~July 25, ~~2021, 2 cases were~~2022, 1 case was pending against PM USA in federal court representing the ~~cases~~only case excluded from that agreement.

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Engle Progeny Trial Results: As of ~~October~~July 25, ~~2021, 137~~2022, 139 federal and state Engle progeny cases involving PM USA have resulted in verdicts since the Florida Supreme Court Engle decision. NaN verdicts were returned in favor of plaintiffs, and 78 verdicts (Skolnick, Calloway, Oshinsky-Blacker, McCoy, Mahfuz, Neff,Frogel and ~~Frogel~~ Gloger) that were initially returned in favor of plaintiffs were reversed post-trial or on appeal and remain pending. In 2 cases, Kaplan (McLaughlin) and Sommers, the punitive damages awards were vacated on appeal and remanded for new trials. In Sommers, the trial court granted PM USA’s motion for summary judgment, and plaintiff has appealed.

NaN verdicts were returned in favor of PM USA, of which 4445 were state cases. In addition, there have been a number of mistrials, only some of which have resulted in new trials as of ~~October~~July 25, ~~2021.~~2022. The jury in one case, Garcia, awarded plaintiff compensatory damages and found plaintiff was entitled to punitive damages; however, the court declared a mistrial in the second phase of the trial regarding punitive damages because the jury was unable to determine the amount of the punitive damages. NaN verdicts (Pearson, D. Cohen, Collar and Chacon) that were returned in favor of PM USA were subsequently reversed for new trials. Juries in 2 cases (Reider and Banks) returned zero damages verdicts in favor of PM USA. Juries in 2 other cases (Weingart and Hancock) returned verdicts against PM USA awarding no damages, but the trial court in each case decided to award plaintiffs damages. NaN case, Pollari, resulted in a verdict in favor of PM USA following a retrial of an initial verdict returned in favor of plaintiff. Plaintiff and defendants appealed the verdict and the appellate court affirmed the ~~judgement~~judgment in favor of the defendants. NaN cases, Gloger, Rintoul (Caprio) and Duignan, resulted in verdicts in favor of plaintiffs following retrial of initial verdicts returned in favor of plaintiffs. ~~Post-trial appeals are~~A post-trial appeal is pending in ~~those 3 cases.~~Duignan. The verdicts in the retrials in Gloger and Rintoul (Caprio) were reversed upon appeal and remanded for new trials. NaN cases, Freeman and Harris, resulted in an appellate reversal of a jury verdict in favor of plaintiff, and a judgment in favor of PM USA.

The charts below list the verdicts and post-trial developments in certain Engle progeny cases in which verdicts were returned in favor of plaintiffs. The first chart lists cases that are pending as of ~~October~~July 25, ~~2021~~2022 but where PM USA has determined an unfavorable outcome is not probable and the amount of loss cannot be reasonably estimated. The second chart lists cases that have concluded ~~within~~in the ~~previous~~past 12 months. 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. ~~As of October 25, 2021, there are no~~ ~~Engle~~ progeny cases where PM USA has recorded a provision in its condensed consolidated financial statements because PM USA has not determined for any currently pending case that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.

References below to “R.J. Reynolds,” “Lorillard” and “Liggett Group” are to R.J. Reynolds Tobacco Company, Lorillard Tobacco Company and Liggett Group, LLC, respectively.

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)

~~Appeal~~Post-Trial Status

Schertzer

April 2022

PM USA and R.J. Reynolds

Miami-Dade

$3 million

Defendants’ and PM USA’s post-trial motions pending.

Lipp

September 2021

PM USA

Miami-Dade

$15 million

$28 million

~~Defendant’s post-trial motions denied. Defendant plans~~Appeal by defendant to ~~appeal.~~Third District Court of Appeal pending.

Garcia

May 2021

PM USA

Miami-Dade

$36 million

Mistrial

~~Appeal~~Appeals by plaintiff and defendant to Third District Court of Appeal pending.

Duignan

February 2020 (2)

PM USA and R.J. Reynolds

Pinellas

$3 million

$12 million

~~Appeal by defendants~~Defendants’ petition for review to ~~Second District~~the Florida Supreme Court ~~of Appeal~~ pending.

~~Cuddihee~~

~~January 2020~~

~~PM USA~~

~~Duval~~

~~$3 million~~

~~Appeal by defendant to First District Court of Appeal pending.~~

~~Rintoul~~ (~~Caprio~~)

~~November 2019~~ ~~(2)~~

~~PM USA and R.J. Reynolds~~

~~Broward~~

~~$9 million~~

~~$74 million~~

~~Appeal by plaintiff and defendants to Fourth District Court of Appeal pending.~~

~~Gloger~~

~~November 2019~~ ~~(2)~~

~~PM USA and R.J. Reynolds~~

~~Miami-Dade~~

~~$15 million~~

~~$11 million~~

~~Appeal by defendants to Third District Court of Appeal pending.~~

McCall

March 2019

PM USA

Broward

<$1 million (<$1 million PM USA)

New trial ordered on punitive damages.

~~Neff~~Holliman

~~March~~February 2019

PM USA

Miami-Dade

$3 million

Appeal by defendant to Third District Court of Appeal pending.

Chadwell

September 2018

PM USA

Miami-Dade

$2 million

Defendants’ petition for review to the Florida Supreme Court pending.

Kaplan (McLaughlin)

July 2018

PM USA and R.J. Reynolds

Broward

$42 million

$~~2 million~~0

Florida Supreme Court vacated the punitive damages award in accordance with the decision in Sheffield(3). The Fourth District Court of ~~Appeal reversed~~Appeals affirmed the ~~judgment against defendants~~compensatory damages award and ~~remanded for~~granted a new ~~trial. Plaintiff's motion for rehearing was denied.~~trial on punitive damages.

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Plaintiff

Verdict Date

Defendant(s)

Court

Compensatory Damages (1)

Punitive Damages
(PM USA)

~~Appeal~~Post-Trial Status

~~Mahfuz~~

~~February 2019~~

~~PM USA and R.J. Reynolds~~

~~Broward~~

~~$12 million~~

~~$10 million~~

~~Fourth District Court of Appeal reversed the judgment against defendants and remanded for a new trial. Plaintiff's motion for rehearing was denied.~~

~~Holliman~~

~~February 2019~~

~~PM USA~~

~~Miami-Dade~~

~~$3 million~~

~~Defendant’s appeal to Third District Court of Appeal pending.~~

~~Chadwell~~

~~September 2018~~

~~PM USA~~

~~Miami-Dade~~

~~$2 million~~

~~Third District Court of Appeal affirmed the compensatory damages award. PM USA petitioned Florida Supreme Court for review. Case stayed pending Florida Supreme Court decision in~~ ~~Prentice~~.~~(3)~~

~~Kaplan~~

~~July 2018~~

~~PM USA and R.J. Reynolds~~

~~Broward~~

~~$2 million~~

Fourth District Court of Appeal affirmed the verdict and reaffirmed the verdict on rehearing. Defendants sought review of the decision before the Florida Supreme Court and the court stayed the case pending its decision in ~~Sheffield~~.~~(3)~~

R. Douglas

November 2017

PM USA

Duval

<$1 million

Awaiting entry of final judgment by the trial court.

~~Sommers~~

~~April 2017~~

~~PM USA~~

~~Miami-Dade~~

~~$1 million~~

Third District Court of Appeal affirmed compensatory damages award and granted new trial on punitive damages. Florida Supreme Court denied PM USA’s petition for review of the Third District Court of Appeal’s decision. PM USA paid approximately $1 million for the compensatory damages award and awaits the new trial on punitive damages.~~(4)~~Cooper ~~The trial court stayed the new trial on punitive damages pending Florida Supreme Court’s decision in~~ (~~Sheffield~~Blackwood.~~(3)~~)

~~Cooper (Blackwood)~~

September 2015

PM USA and R.J. Reynolds

Broward

$5 million

(<$1 million PM USA)

Fourth District Court of Appeal affirmed ~~judgment~~the compensatory damages award and granted a new trial on punitive damages.

D. Brown

January 2015

PM USA

Federal Court - Middle District of Florida

$8 million

($5 million PM USA)

$~~9 million~~0

~~Appeal by defendant to~~ U.S. Court of Appeals for the Eleventh Circuit ~~stayed pending Florida Supreme Court decision in~~ ~~Prentice~~.~~(3)~~

vacated the punitive damages award and reduced the compensatory damages to $5 million based on plaintiff’s comparative fault.

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

(2) Plaintiff’s verdict following a retrial of an initial verdict in favor of plaintiff.

(3) PM USA is not a defendant in ~~Prentice~~ orSheffield. ~~Prentice~~ ~~and~~ ~~Sheffield~~ ~~are~~, which is discussed below in Engle Progeny Appellate Issues.

~~(4)~~ Plaintiff was granted an award of approximately $3 million in fees, costs and interest that PM USA appealed. The Florida Third District Court of Appeals affirmed the award and PM USA paid the award amount in March 2021.

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Engle Cases Concluded Within Past 12 Months~~(1)~~

(rounded to nearest $ million)

Plaintiff

Verdict Date

Defendant(s)

Court

Accrual Date

Payment Amount
~~(if~~ (if any)

Payment Date

~~Berger (Cote)~~Cuddihee

~~September 2014~~January 2020

PM USA

~~Federal Court - Middle District of Florida~~

~~Fourth quarter of 2018 and first quarter of 2021~~

~~$29 million~~

~~February 2021~~

~~Santoro~~

~~March 2017~~

~~PM USA, R.J. Reynolds and Liggett Group~~

~~Broward~~Duval

Second quarter of ~~2020 and first quarter of 2021~~2022

$12 million

~~January 2021~~June 2022

~~(1)~~ ~~In 6 cases in which PM USA paid the judgments more than a year ago,~~ ~~Naugle,Gore~~, ~~M. Brown,Jordan,Theis~~ ~~and~~ ~~Landi, plaintiffs were awarded approximately $8 million, $2 million, $8 million, $4 million, $1 million and $3 million in fees and costs, respectively. PM USA has appealed in all of these cases, except~~ ~~Theis~~ ~~and~~ ~~Landi. In~~ ~~M. Brown~~, in March 2021 the Florida First District Court of Appeals affirmed the fee award and reversed the pre-judgment interest award and, in April 2021, PM USA paid $8.2 million in satisfaction of the fee award and post-judgment interest. In ~~Theis, PM USA paid $1 million in satisfaction of fees and costs in May 2021 and, in~~ ~~Landi, PM USA paid approximately $1.5 million in satisfaction of fees, costs and interest in July 2021 (R.J. Reynolds paid approximately $1.5 million of the approximately $3 million award).~~

Engle Progeny Appellate Issues: ~~The Florida appellate courts are considering~~Appellate decisions in the following ~~appeals which~~Engle progeny cases may have wide application to other Engle progeny cases:

In Mary Sheffield v. R.J. Reynolds Tobacco Company, an Engle progeny case against R.J. Reynolds only, the Florida Supreme Court ~~has taken jurisdiction to resolve the~~resolved a conflict among Florida’s District Courts of Appeal ~~over whether~~finding that the 1999 amendments to Florida’s punitive damages statute (including its caps and bar on multiple punitive damages awards for the same course of conduct) apply in wrongful death cases where the decedent was injured prior to the October 1, 1999 effective date of the amendments but died from his or her injuries after such effective date. ~~Oral argument was held before the Florida Supreme Court in April 2021; a decision has not yet been issued.~~

In Linda Prentice v. R.J. Reynolds Tobacco Company, an Engle progeny case against R.J. Reynolds only, the Florida ~~First~~Supreme Court resolved a conflict among Florida’s District ~~Court~~Courts of Appeal ~~in January 2020 reversed a judgment in favor of the plaintiff and remanded for a new trial. The court held that the trial court had erred by failing to instruct the jury~~finding that in order for an Engle plaintiff to prevail on ~~her claim for conspiracy to commit~~ fraudulent concealment ~~the~~and conspiracy claims, plaintiff ~~was required to~~must prove that ~~her decedent~~the smoker relied to his or her detriment on a statement that concealed or omitted material information about the health risks or addictiveness of smoking. ~~That holding conflicts with decisions from the Second, Third, and Fourth District Courts of Appeal, which have each held that~~ ~~Engle~~ ~~plaintiffs do not need to prove reliance on a statement, and instead can prevail by proving reliance on the~~ ~~Engle~~ ~~defendants’ concealment of information. In August 2020, the~~The Florida Supreme Court ~~accepted jurisdiction in the case. As an alternative ground~~declined to ~~approve the First District Court of Appeal’s decision in its favor in~~ ~~Prentice, R.J. Reynolds has asked the Florida Supreme Court to reconsider~~revisit its prior decisions giving preclusive effect to the Engle Phase I findings, ~~preclusive effect~~described above in Engle Class Action. Plaintiffs filed a motion seeking rehearing on the proper remedy for cases in which the court’s jury instructions did not comply with the Florida Supreme Court’s decision in ~~Engle~~Prentice ~~progeny cases, as described more fully in the section~~ ~~Engle~~ ~~Class Action above. Oral argument was held before~~. In May 2022, the Florida Supreme Court ~~in June 2021; a decision has not yet been issued.~~denied plaintiffs’ motion for rehearing.

Florida Bond Statute: In June 2009, Florida amended its existing bond cap statute by adding a $200 million bond cap that applies to all state Engle progeny lawsuits in the aggregate and establishes individual bond caps for individual Engle progeny cases in amounts that vary depending on the number of judgments in effect at a given time. Plaintiffs have been unsuccessful in various challenges to the bond cap statute in Florida state court.

No federal court has yet addressed the constitutionality of the bond cap statute or the applicability of the bond cap to Engle progeny cases tried in federal court.

From time to time, legislation has been presented to the Florida legislature that would repeal the bond cap statute; however to date, no legislation repealing the statute has passed.

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 ~~purport~~have purported to be brought on behalf of residents of a particular state or states (although a few cases ~~purport~~have purported to be nationwide in scope) and ~~raise~~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),

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Pennsylvania (1), Puerto Rico (1), South Carolina (1), Texas (1) and Wisconsin (1). See Certain Other Tobacco-Related

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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 ~~October~~July 25, ~~2021,~~2022, PM USA and Altria are named as defendants, along with other cigarette manufacturers, in 7 class actions filed in the Canadian provinces of Alberta, Manitoba, Nova Scotia, Saskatchewan, British Columbia and Ontario. In Saskatchewan, British Columbia (2 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 3 Canadian tobacco manufacturers (none of which is related to ~~Altria or its subsidiaries)~~us) seeking protection under Canada’s Companies’ Creditors Arrangement Act (which is similar to Chapter 11 bankruptcy in the ~~U.S.)~~United States). The companies entered into these proceedings following a Canadian appellate court upholding 2 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.

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 ~~U.S.~~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 ~~United States~~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 ~~U.S.,~~United States, health care cost recovery actions have also 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 3 tobacco manufacturers (none of which are affiliated with ~~Altria or its subsidiaries)~~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 ~~1998~~ Master Settlement Agreement (the “MSA”) with 46 states, the District of Columbia and certain ~~U.S.~~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 $9.4 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.~~million; these quarterly payments are expected to end in 2024. For the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately ~~$1.1~~$1.0 billion and $1.2 billion, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately ~~$3.2~~$1.9 billion and ~~$3.3~~$2.1 billion, respectively. These amounts include PM USA’s estimate of amounts related to NPM Adjustments discussed below.

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

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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 independent auditor (“IA”) appointed under the MSA has calculated that PM USA’s share of the maximum potential NPM Adjustments for ~~2004-2020~~2004-2021 is (exclusive of interest or earnings): $388 million for 2004; $181 million for 2005; $154 million for 2006; $185 million for 2007; $250 million for 2008; $211 million for 2009; $218 million for 2010; $166 million for 2011; $214 million for 2012; $224 million for 2013; $258 million for 2014; $313 million for 2015; $292 million for 2016; ~~$302~~$285 million for 2017; ~~$325~~$318 million for 2018; ~~$444~~$415 million for 2019; ~~and $572~~$573 million for ~~2020.~~2020; and $635 million for 2021. These maximum amounts will be reduced, likely substantially, to reflect the NPM Adjustment settlements discussed below, and potentially for current and future calculation disputes and other developments. In addition, PM USA’s recovery of these amounts, even as reduced, is dependent upon subsequent determinations regarding state-specific defenses and disputes with other PMs.

Settlements of NPM Adjustment Disputes.

▪Multi-State Settlement. By the end of 2018, PM USA entered into a multi-state settlement of NPM Adjustment disputes with a total of 36 MSA states and territories in which PM USA settled the NPM Adjustment disputes through 2022 with 35 of the 36 states, and through 2024 with 1 state. In March 2022, Illinois joined the multi-state settlement, settling the NPM Adjustment disputes through 2028 and bringing the total number of settling states and territories to 37. As a result, PM USA will receive approximately $80 million for 2004-2021 ($20 million of which relates to the 2019-2021 “transition years”). In connection with this development for Illinois, PM USA recorded $80 million as a reduction in cost of sales in the first quarter of 2022. Pursuant to the multi-state settlement, PM USA has received ~~$1.03~~$1.15 billion and expects to receive approximately ~~$320~~$410 million in credits to offset PM USA’s MSA payments through ~~2029.~~2036.

▪New York Settlement. In 2015, PM USA entered into a separate NPM Adjustment settlement with New York in which PM USA settled the NPM Adjustment disputes with New York in perpetuity. PM USA has received ~~$373~~$435 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 with Montana in which PM USA settled the NPM Adjustment disputes with Montana through 2030. This settlement resulted in a payment by PM USA of $4 million.

Continuing NPM Adjustment Disputes with States That Have Not Settled.

▪2004 NPM Adjustment. The PMs and the 109 states that have not settled the NPM Adjustment disputes are currently arbitrating NPM Adjustment disputes for 2004 in a multi-state arbitration. A tenth state, Illinois, also participated in the arbitration, but joined the multi-state settlement after the arbitration panel issued its decisions described below. Hearings for 9 of the 10 states ~~have concluded.~~concluded by the end of 2020. In September 2021, the arbitration panels issued decisions finding that 2 states, Missouri and Washington, were not diligent in their enforcement of their escrow statutes in 2004 and, therefore, are subject to the NPM adjustment for 2004. The arbitration panels further found that the remaining 7 states were diligent in their enforcement and, therefore, are not subject to the NPM adjustment for 2004. The hearing for one remaining state ~~is currently scheduled for February 2022. Several~~concluded in March 2022; however, a decision has not yet been issued. The two states determined by the arbitration panel to be non-diligent have filed motions in applicable state courts and with the arbitration panels challenging these determinations and several issues remain to be resolved by the arbitration panels that will affect the final amount of the 2004 NPM adjustment PM USA and other PMs will receive. PM USA recorded $21 million as a reduction toin cost of sales in the third quarter of 2021 for its estimate of the minimum amount of the 2004 NPM adjustment it will receive. PM USA estimates it is entitled to interest of approximately $23 million in connection with the 2004 NPM adjustment, which it recorded as interest income in the third quarter of 2021.

▪2005-2007 NPM Adjustments. The PMs and the 109 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 98 of the 109 states, and one year, 2005, for 1 state. As of ~~October~~July 25, ~~2021,~~2022, no decisions have resulted from the arbitration.

▪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 in 2015 and its related sale of certain cigarette brands to ITG (the “ITG transferred brands”). PM USA filed motions to enforce the ~~state settlement agreements~~State Settlement Agreements in Florida, Minnesota, Texas and Mississippi in connection with various positions that R.J. Reynolds and ITG took with regard to the ITG transferred brands. After various court decisions in each of those states that were favorable to PM USA, those motions to

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enforce have now been resolved either through settlement or exhaustion of appeals. In May 2022, PM USA filed a motion to compel arbitration under the MSA regarding certain positions that R.J. Reynolds and ITG took with regard to the ITG transferred brands. In June 2022, the matter was resolved through mutual agreement of the parties. Despite these resolutions, PM USA continues to dispute the accuracy of certain submissions made by R.J. Reynolds and ITG concerning the calculation of certain payments relating to the ITG transferred brands and may pursue such claims.

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. Further proceedings remain outstanding, and a final judgment has not yet ~~issued a decision.~~

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been issued.

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 ~~Altria’s~~our condensed consolidated statement of earnings for the first quarter of 2021 as a reduction toin cost of sales.

Federal Government’s Lawsuit: In 1999, the ~~United States~~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 seven of the eight “sub-schemes” to defraud that the government had alleged. Specifically, the court found that:

▪defendants falsely denied, distorted and minimized the significant adverse health consequences of smoking;

▪defendants hid from the public that cigarette smoking and nicotine are addictive;

▪defendants falsely denied that they control the level of nicotine delivered to create and sustain addiction;

▪defendants falsely marketed and promoted “low tar/light” cigarettes as less harmful than full-flavor cigarettes;

▪defendants falsely denied that they intentionally marketed to youth;

▪defendants publicly and falsely denied that ETS is hazardous to non-smokers; and

▪defendants suppressed scientific research.

The court did not impose monetary penalties on defendants, but ordered the following relief: (i) an injunction against “committing any act of racketeering” relating to the manufacturing, marketing, promotion, health consequences or sale of cigarettes in the United States; (ii) an injunction against participating directly or indirectly in the management or control of the Council for Tobacco Research, the Tobacco Institute, or the Center for Indoor Air Research, or any successor or affiliated entities of each; (iii) an injunction against “making, or causing to be made in any way, any material false, misleading, or deceptive statement or representation or engaging in any public relations or marketing endeavor that is disseminated to the United States public and that misrepresents or suppresses information concerning cigarettes;” (iv) 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; (v) 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; (vi) the disclosure on defendants’ public document websites and in the Minnesota document repository of all documents produced to the government in the lawsuit or produced in any future court or administrative action concerning smoking and health until the third quarter of 2021, with certain additional requirements as to documents withheld from production under a claim of privilege or confidentiality; (vii) the disclosure of disaggregated marketing data to the government in the same form and on the same schedule as defendants now follow in disclosing such data to the FTC for a period of 10 years; (viii) certain restrictions on the sale or transfer by defendants of any cigarette brands, brand names, formulas or cigarette businesses within the ~~U.S.;~~United States; and (ix) payment of the government’s costs in bringing the action.

Following several years of appeals relating to the content of the corrective statements remedy described above, in October 2017, the district court approved the parties’ proposed consent order implementing corrective statements in newspapers and on television. The corrective statements began appearing in newspapers and on television in the fourth quarter of 2017. In April 2018, the parties reached agreement on the implementation details of the corrective statements on websites and onserts. The

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corrective statements began appearing on websites in the second quarter of 2018 and the onserts began appearing in the fourth quarter of 2018.

In 2014 and 2019, ~~Altria and PM USA~~we recorded provisions totaling approximately $36 million for the estimated costs of implementing the corrective communications remedy.

The requirements related to corrective statements at point-of-sale remain outstanding. In May 2014, the district court ordered further briefing on the issue, which was completed in June 2014. In May 2018, the parties submitted a joint status report and additional briefing on point-of-sale signage to the district court. In May 2019, the district court ordered a hearing on the point-of-sale signage issue. The hearing was subsequently vacated due to the parties reaching an agreement in principle regarding the placement of corrective statements at point-of-sale. A hearing for the district court to consider and approve any settlement and consent decree proposed by the parties is ~~currently scheduled~~set for ~~June~~July 2022.

In June 2020, the ~~United States~~U.S. government filed a motion with the district court asking for clarification as to whether the court-ordered injunction that applies to cigarettes also applies to HeatSticks, a heated tobacco product used with the IQOS electronic device. In August 2020, ~~Altria and PM USA~~we filed an opposition to the government’s motion and, in the alternative, a motion to

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modify the injunction to make clear it does not apply to HeatSticks. The district court heard arguments on the motions in July 2022 and has not yet issued any decisions. Regardless of the district court’s decisions on the pending motions, the government has indicated it will not oppose a modification to the injunction that permits PM USA to use the Modified Risk Tobacco Product claim authorized by the ~~United States Food and Drug Administration~~FDA for HeatSticks.

E-vapor Product Litigation

As of ~~October~~July 25, ~~2021, Altria and/or its subsidiaries, including PM USA, were named as~~2022, we are defendants in 5358 class action lawsuits relating to JUUL e-vapor products. JUUL is an additional named defendant in each of these lawsuits. The theories of recovery include violation of RICO, fraud, failure to warn, design defect, negligence and unfair trade practices. Plaintiffs seek various remedies, including compensatory and punitive damages and an injunction prohibiting product sales. The 5358 class action lawsuits include 2832 cases involving plaintiffs whose claims were previously included in other class action complaints but were refiled as separate stand-alone class actions for procedural and other ~~reasons~~.reasons. NaN of the class action lawsuits are pending in Canada.

~~Altria and/or its subsidiaries, including PM USA,~~We also have been named as defendants in other lawsuits involving JUUL e-vapor products, including ~~2,548~~2,957 individual lawsuits ~~350~~and 1,015 “third party” lawsuits, which include school districts, state and local governments and tribal and healthcare organization lawsuits. JUUL is an additional named defendant in each of these lawsuits.

~~The majority of the individual and class action lawsuits mentioned above were filed in federal court.~~ In October 2019, the ~~United States~~U.S. Judicial Panel on Multidistrict Litigation ordered the coordination or consolidation of ~~these~~the federal individual and class action lawsuits mentioned above in the U.S. District Court for the Northern District of California for pretrial purposes.

~~Altria and its subsidiaries~~We filed motions to dismiss certain claims in the class action and school district cases, including the federal RICO claim. In October 2020, the U.S. District Court for the Northern District of California granted the motion to dismiss the RICO class action claim without prejudice. Although it otherwise denied the motion, the court found that plaintiffs had not sufficiently alleged standing or causation with respect to their claim under California law. The court also granted the motion to dismiss the RICO claim in the cases filed by various school districts, but denied the motion in all other respects. The court gave plaintiffs the opportunity to amend their complaints to attempt to cure the deficiencies the court identified and plaintiffs filed their amended complaints in November 2020. In January 2021, ~~Altria and its subsidiaries~~we filed a renewed motion to dismiss the RICO claim, which the court denied in April 2021. In ~~December 2020,~~June 2022, the court granted plaintiffs’ motion to certify a nationwide class based on state law claims against JUUL and RICO claims against Altria and other defendants. Altria and the other defendants have filed petitions with the U.S. ~~District~~ Court of Appeals for the ~~Northern District~~Ninth Circuit seeking discretionary review of ~~California and~~ the ~~parties selected 20 personal injury plaintiffs to be adjudicated as bellwether cases and in July 2021, the~~class certification order.

The court has set trial dates for 5 cases pending in the Multidistrict Litigation. The first ~~4 of such cases to commence in~~trial is currently scheduled for November 2022.

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.

JUUL also is named in a significant number of additional individual and class action lawsuits to which ~~neither Altria nor any of its subsidiaries is~~we are not currently named.

NaN of the “third party” lawsuits noted above against ~~Altria and/or its subsidiaries~~us and JUUL ~~as an additional named defendant,~~ were initiated, individually, by the attorneys general of Alaska, Hawaii and Minnesota alleging violations of state consumer protection and other similar laws. We filed motions to dismiss each of these three lawsuits and the motions were denied in February 2022, May 2021 and June 2021, respectively. However, in the Alaska lawsuit, although the trial court declined to dismiss most of the plaintiff’s claims, the trial court did dismiss plaintiff’s public nuisance claim. The trial courts in the Alaska, Hawaii and Minnesota lawsuits have set the trials for April 2024, February 2024 and March 2023, respectively. JUUL is also named in other attorneys general lawsuits toin which ~~neither Altria nor any~~we

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are not currently named. As of July 25, 2022, JUUL settled 14 such ~~lawsuit~~lawsuits by, in each case, agreeing to ~~(i) pay~~a monetary payment (on average approximately ~~$40 million~~$20 million) and ~~(ii)~~to certain restrictions on its sales and marketing activities.

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, Altria Client Services LLC, PMI and its affiliate, Philip Morris Products S.A., in the ~~United States~~U.S. District Court for the Eastern District of ~~Virginia. The lawsuit asserts~~Virginia asserting claims of patent infringement based on the sale of the IQOS electronic device and HeatSticks in the United States. Plaintiffs seek various remedies, including preliminary and permanent injunctive relief, treble damages and attorneys’ fees. Altria and PMI ~~have been~~were previously dismissed from the ~~lawsuit. In June 2020, the remaining defendants filed a motion to dismiss certain of~~lawsuit, and plaintiffs’ claims against the other defendants have been stayed.

PM USA, Altria Client Services LLC and ~~also~~Philip Morris Products S.A. filed counterclaims against ~~the~~ plaintiffs ~~for~~alleging patent infringement by R.J. Reynolds’ e-vapor products. In June 2022, PM USA and Altria Client Services LLC reached an agreement with R.J. Reynolds resulting in dismissal of various patents owned by the remaining defendants. The case was stayed in December 2020 due to the COVID-19 pandemic; however, the stay was lifted with respect to defendants’ counterclaims in February 2021 and a trial is currently scheduled for April 2022.their counterclaims.

Also in April 2020, a related patent infringement action was filed against the same defendants by the same plaintiffs, as well as R.J. Reynolds, with the ~~United States~~U.S. International Trade Commission (“ITC”)~~. There, the plaintiffs also allege patent infringement,~~, but the remedies sought ~~include~~included a prohibition on the importation of the IQOS electronic device, HeatSticks and component parts into the United States and on the sale of any such products previously imported into the United States. No damages are recoverable in the proceedings before the ITC. In ~~May 2021, an administrative law judge found that the~~ ~~IQOS~~ ~~electronic device and~~ ~~HeatSticks~~ ~~infringe plaintiffs’ patents and recommended to the ITC a ban on the importation of the~~ ~~IQOS~~ ~~electronic device,~~ ~~HeatSticks~~ ~~and the infringing components into the United States. In~~ September 2021, the ITC ~~affirmed the administrative law judge’s initial determination and~~ issued a limited exclusion order barring the importation of the IQOS electronic device,

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HeatSticks and the infringing components into the United States and a cease and desist order barring domestic sales, marketing and distribution of these imported products. The orders ~~will become~~became effective on November 29, 2021 unless rejected by the Biden Administration prior to that date. Defendants may appeal the orders to the United States Court of Appeals for the Federal Circuit; however, any ban on importation or on the sale, marketing and distribution of previously imported product is unlikely to be stayed pending the conclusion of the appeal. Due to this litigation, in October 2021,2021. Consequently, PM USA ~~announced plans to begin removing~~removed the IQOS electronic device and HeatSticks from the ~~marketplace as it awaits~~marketplace. In December 2021, defendants appealed the ~~outcome~~orders to the U.S. Court of ~~administrative review.~~Appeals for the Federal Circuit and, in January 2022, the court denied defendants’ motion to stay the orders pending the conclusion of the appeal.

An additional unrelated patent infringement case regarding the IQOS electronic device was filed in November 2020 in the ~~United States~~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 ~~August~~December 2021, ~~plaintiff filed a~~the U.S. District Court denied plaintiff’s motion to amend the ~~complaint.~~complaint and plaintiff appealed this ruling to the U.S. Court of Appeals for the Federal Circuit, which appeal remains pending.

Antitrust Litigation

In April 2020, the FTC issued an administrative complaint against Altria and JUUL alleging that ~~Altria’s~~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”). If the FTC’s challenge is successful, the FTC may order a broad range of remedies, including divestiture of ~~Altria’s~~our minority investment in JUUL, rescission of the transaction and all associated agreements, a requirement of FTC approval of future agreements related to the development, manufacture, distribution or sale of e-vapor products and prohibition against any officer or director of either Altria or JUUL serving on the other party’s board of directors or attending meetings of the other party’s board of ~~directors. The administrative trial was held before an~~directors and notice to the FTC in advance of certain corporate actions, including acquisitions, mergers or certain corporate restructurings. In February 2022, the administrative law judge dismissed the FTC’s complaint and, also in ~~June 2021. The post-trial briefing was completed in October 2021. The~~February 2022, FTC complaint counsel appealed the administrative law judge’s decision to the FTC. Oral argument with respect to the appeal is ~~subject to review by~~currently scheduled for September 2022. Altria can appeal any adverse ruling the FTC onissues following its ~~own motion or at the request of any party. The FTC then issues its ruling, which may be appealed~~review to any ~~United States~~U.S. Court of Appeals.

Also as of ~~October~~July 25, ~~2021, 16~~2022, 17 putative class action lawsuits have been filed against Altria and JUUL in the ~~United States~~U.S. District Court for the Northern District of California. The lawsuits initially named, in addition to the two companies, certain senior executives and certain members of the board of directors of both companies as defendants; however, those individuals currently or formerly affiliated with Altria were later dismissed. In November 2020 these lawsuits were consolidated into 3 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, divestiture of ~~Altria’s~~our minority investment in JUUL and rescission of the transaction. ~~Altria~~We filed a motion to dismiss these lawsuits in January 2021. In August 2021, the ~~United States~~U.S. District Court for the Northern District of California denied ~~Altria’s~~our motion to dismiss except with respect to plaintiffs’ claims for injunctive and equitable relief. However, plaintiffs were granted the opportunity to replead such claims by the trial court, which plaintiffs did in September 2021. In January 2022, the trial court ordered that the direct-purchaser plaintiffs’ claims against JUUL be sent to arbitration pursuant to

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an arbitration provision in JUUL’s online purchase agreement. The court granted plaintiffs’ leave to replead the complaint with new direct-purchaser plaintiffs, which plaintiffs did in February 2022, substituting in 4 new plaintiffs.

In November 2020, ~~Altria~~we exercised ~~its~~our rights to convert ~~its~~our non-voting JUUL shares to voting shares. ~~However, pending the outcome of the FTC administrative complaint, Altria~~We do not currently ~~does not~~ intend to exercise ~~its~~our additional governance rights obtained upon ~~the~~ conversion, including the right to elect directors to JUUL’s board or to vote ~~its~~our JUUL shares other than as a passive investor. ~~For further discussion of Altria’s rights in the event of share conversion, see Note 4.~~ ~~Investments in Equity Securities - Investment in JUUL~~.

Shareholder Class Action and Shareholder Derivative Lawsuits

Shareholder Class ~~Action:~~Action: In October and December 2019, 2 purported Altria shareholders filed putative class action lawsuits against Altria, Howard A. Willard III, ~~Altria’s~~our former Chairman and Chief Executive Officer, and William F. Gifford, Jr., ~~Altria’s~~our former Vice Chairman and Chief Financial Officer and current Chief Executive Officer, in the ~~United States~~U.S. District Court for the Eastern District of New York. In December 2019, the court consolidated the 2 lawsuits into a single proceeding. The consolidated lawsuit was subsequently transferred to the ~~United States~~U.S. District Court for the Eastern District of Virginia. The lawsuit asserts claims under Sections 10(b) and 20(a) and under Rule 10b-5 of the Exchange Act. In April 2020, JUUL, its founders and some of its current and former executives were added to the lawsuit. The claims allege false and misleading statements and omissions relating to ~~Altria’s~~our investment in JUUL. Plaintiffs seek various remedies, including damages and attorneys’ fees. In July 2020, the defendants filed motions to dismiss plaintiffs’ claims, which the district court denied in March 2021. In the fourth quarter of 2021, plaintiffs and defendants agreed upon a class action settlement under which, among other things, (i) all claims asserted against Altria and the other named defendants are resolved without any liability or wrongdoing attributed to them personally or to Altria and (ii) Altria will pay the class an aggregate amount of $90 million, which amount includes attorneys’ fees. The class is defined to include persons and entities who purchased or otherwise acquired shares of Altria between October 25, 2018 through April 2, 2020, subject to certain exclusions. The trial court preliminarily approved the settlement in December 2021 and granted final approval in March 2022. 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:~~Lawsuits: In August 2020, 2 purported Altria shareholders filed separate derivative lawsuits in the ~~United States~~U.S. District Court for the Northern District of California on behalf of themselves and Altria, against Mr. Willard, Mr. Gifford, JUUL and certain of ~~its~~our executives and officers. These derivative lawsuits relate to ~~Altria’s~~

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our investment in JUUL, and assert 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. In March 2021, the ~~United States~~U.S. District Court for the Northern District of California granted defendants’ motion to transfer both lawsuits to the ~~United States~~U.S. District Court for the Eastern District of Virginia. NaN additional federal derivative lawsuits were filed in October 2020, January 2021 and March 2021, respectively, in the ~~United States~~U.S. District Court for the Eastern District of Virginia against Mr. Willard, Mr. Gifford, Mr. Crosthwaite, certain members of ~~Altria’s~~our Board of Directors, JUUL, its founders and some of its current and former executives. These suits assert various claims, including breach of fiduciary duty, unjust enrichment, waste of corporate assets and violations of certain federal securities laws. The remedies sought in these lawsuits include damages, disgorgement of profits, reformation of ~~Altria’s~~our corporate governance and internal procedures, and attorneys’ fees. In April 2021, the court consolidated the 5 cases pending in the Eastern District of Virginia into a single ~~action.~~case.

~~State Shareholder Derivative Lawsuits:~~NaN derivative lawsuits have been filed in Virginia state courts against Mr. Willard, Mr. Gifford, Mr. Crosthwaite ~~(Altria’s~~(our former Chief Growth Officer and JUUL’s current Chief Executive Officer), certain members of ~~Altria’s~~our Board of Directors, JUUL, its founders and some of its current and former executives. The lawsuits were filed in September 2020, May 2021, June 2021, July 2021, August 2021 and August 2021, respectively. The lawsuits assert various claims, including breach of fiduciary duty, and seek remedies similar to those sought by plaintiffs in the cases pending in federal court in the Eastern District of Virginia. In successive orders from July 2021, ~~and~~ September 2021 and January 2022, the court consolidated ~~the first 4~~5 of these 6 state derivative cases into a single ~~action.~~consolidated case.

Altria and other parties to the federal and state derivative actions have reached an agreement in principle to resolve these actions through the execution of a memorandum of understanding. The parties are in the process of negotiating formal settlement documentation. The derivative settlement will be subject to court approval.

Certain Other Tobacco-Related Litigation

“Lights/Ultra Lights” Cases and Other Smoking and Health Class ~~Actions:~~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 ~~its~~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,

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dismissed class action allegations, reversed prior class certification decisions or have entered judgment in favor of PM USA. As of ~~October~~July 25, ~~2021,~~2022, 2 “Lights/Ultra Lights” class actions are pending in U.S. state ~~court.~~courts. Neither case is active.

As of ~~October~~July 25, ~~2021,~~2022, 1 smoking and health case alleging personal injury or seeking court-supervised programs or ongoing medical monitoring 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:~~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 but not limited to disgorgement. Defenses raised in these cases ~~include~~have included lack of causation, assumption of the risk, comparative fault and/or contributory negligence, and statutes of limitations. As of ~~October~~July 25, ~~2021,~~2022, there is 1no such case pending against ~~USSTC.~~UST and/or its tobacco subsidiaries.

Environmental Regulation

Altria and ~~its~~our former subsidiaries ~~(and 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 ~~U.S.:~~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. ~~Subsidiaries (and~~Altria and our former ~~subsidiaries) of Altria~~subsidiaries are involved in several ~~matters~~cost recovery/contribution cases subjecting them to potential costs of remediation and natural resource damages under Superfund or other laws and regulations. ~~Altria’s subsidiaries~~We expect to continue to make capital and other expenditures in connection with environmental laws and regulations.

~~Altria provides~~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 ~~subsidiaries of Altria~~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, and is not expected to have, a material adverse effect on ~~Altria’s~~our condensed consolidated results of operations, capital expenditures, financial position or cash flows.

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Guarantees and Other Similar Matters

In the ordinary course of business, ~~certain subsidiaries of Altria~~we have agreed to indemnify a limited number of third parties in the event of future litigation. At ~~September~~June 30, ~~2021, Altria and certain of its subsidiaries~~2022, we (i) had ~~$48~~$46 million of unused letters of credit obtained in the ordinary course of ~~business;~~business and (ii) were contingently liable for guarantees related to ~~their~~our own performance, including ~~$24~~$19 million for surety ~~bonds; and (iii) had a redeemable noncontrolling interest of $39 million~~bonds recorded on ~~its~~our condensed consolidated balance sheet. In addition, from time to time, ~~subsidiaries of Altria~~we issue lines of credit to affiliated entities. These items have not had, and are not expected to have, a significant impact on ~~Altria’s~~our liquidity.

Under the terms of a distribution agreement between Altria and PMI (the “Distribution Agreement”), entered into as a result of ~~Altria’s~~our 2008 spin-off of ~~its~~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. ~~Altria does~~We do not have a related liability recorded on ~~its~~our condensed consolidated balance sheet at ~~September~~June 30, ~~2021~~2022 as the fair value of this indemnification is insignificant. PMI has agreed not to seek indemnification with respect to the IQOS patent litigation discussed above under ~~Certain Other Tobacco-Related Litigation -~~ IQOS Litigation, excluding the patent infringement case filed with the ~~United States~~U.S. District Court for the Northern District of Georgia.

PM USA has issued guarantees relating to ~~Altria’s~~our obligations under ~~its~~our outstanding debt securities, borrowings under ~~its~~our $3.0 billion Credit Agreement and amounts outstanding under ~~its~~our commercial paper program. For further discussion, see Note 9. Debt.

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Note ~~13.~~12. New Accounting Guidance Not Yet Adopted

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


Standards	Description	Effective Date for Public Entity	Effect on Financial Statements
ASU ~~2020-06~~ 2021-08 Business Combinations (Topic 805): Accounting for ~~Convertible Instruments~~Contract Assets and Contract Liabilities from Contracts ~~in an Entity~~’~~s Own Equity~~with Customers	The guidance ~~simplifies the accounting~~updates how an entity recognizes and measures contract assets and contract liabilities acquired in a business combination. Acquirers will now account for ~~certain financial instruments with characteristics of liabilities and equity, including convertible instruments and~~related revenue contracts in ~~an entity’s own equity. Key provisions of~~accordance with Topic 606 as if it had originated the ~~guidance include reducing the number of accounting models, simplifying the earnings per share calculations and expanding the disclosures related to convertible instruments.~~contract.	The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, ~~2021.~~2022.	~~Altria’s adoption~~We are in the process of evaluating the impact of this guidance on our consolidated financial statements and related disclosures.
ASU 2022-03 Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions	The guidance clarifies that a contractual restriction on the sale of an equity security is not ~~expected~~considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The amendments also specify required disclosures for equity securities subject to contractual sale restrictions.	The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023.	We do not expect this guidance to have a material impact on ~~its~~our consolidated financial statements and related disclosures.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

~~Description of the Company~~

When used in this Quarterly Report on Form 10-Q (“Form 10-Q”), the terms “Altria,” ~~“we”~~“we,” “us” and “our” refer to either (i) Altria Group, Inc. and its consolidated subsidiaries ~~unless~~or (ii) Altria Group, Inc. only and not its consolidated subsidiaries, as appropriate in the ~~context requires otherwise.~~

Altria’s Vision by 2030 is to responsibly lead the transition of adult smokers to a smoke-free future (“Vision”). Altria is focused on moving adult smokers away from cigarettes by taking action to transition adult smokers to potentially less harmful choices.

~~For a description of Altria, see~~ ~~Background~~ ~~in Note 1.~~ ~~Background and Basis of Presentation~~ ~~to the condensed consolidated financial statements in Part I, Item 1. Financial Statements of this Form 10-Q (“Item 1”).~~context.

~~For a detailed description of Altria’s reportable segments, see Note 9.~~ ~~Segment Reporting~~ ~~to the condensed consolidated financial statements in Item 1 (“Note 9”).~~

~~Executive Summary~~

In this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) section, ~~Altria refers~~we refer to the following “adjusted” financial measures: adjusted operating companies income (loss) (“OCI”); adjusted OCI margins; adjusted net earnings attributable to Altria; adjusted diluted earnings per share attributable to Altria; and adjusted effective tax rates. These adjusted 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 adjusted financial measures should thus be considered as supplemental in nature and not considered in isolation or as a

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substitute for the related financial information prepared in accordance with GAAP. ~~Except as noted in the~~ ~~2021 Forecasted Results~~ section below, when Altria provides a non-GAAP measure in this Form 10-Q, it also provides a reconciliation of that non-GAAP financial measure to the most directly comparable GAAP financial measure. OCI for the segments is defined as operating income before general corporate expenses and amortization of intangibles. For a further description of these non-GAAP financial measures, see the Non-GAAP Financial Measures section below.

~~Ste. Michelle Transaction~~

Executive Summary

Our Business

~~On July 8, 2021, UST~~We have a leading portfolio of tobacco products for U.S. tobacco consumers age 21+. Our Vision by 2030 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.

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.

Our smoke-free portfolio includes ownership of U.S. Smokeless Tobacco Company LLC (“~~UST”) entered into a share purchase agreement pursuant to which it agreed to sell its subsidiary, International Wine & Spirits Ltd. (“IWS”~~USSTC”), ~~which includes Ste. Michelle Wine Estates Ltd.~~the leading global moist smokeless tobacco (“~~Ste. Michelle”~~MST”) manufacturer, and Helix Innovations LLC (“Helix”), a rapidly growing manufacturer of oral nicotine pouches. We also enhance our smoke-free product portfolio with exclusive U.S. commercialization rights to the IQOS Tobacco Heating System and Marlboro HeatSticks, and an ~~entity controlled by~~equity investment ~~funds managed by Sycamore Partners Management, L.P.~~ in ~~an all-cash transaction~~JUUL Labs, Inc. (“JUUL”).

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

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

Trends and Developments

In this MD&A section, we discuss factors that have impacted our business as of ~~approximately $1.2 billion and~~ the ~~assumption~~date of this Form 10-Q. In addition, we are aware of certain ~~liabilities~~trends and developments that could, individually or in the aggregate, have a material impact on our business, including the value of ~~IWS~~our equity investments, in the future. In this Trends and ~~its subsidiaries (the “Ste. Michelle Transaction”). UST completed the sale of IWS on October 1, 2021. For further discussion, see Note 3.~~Developments ~~Assets Held for Sale~~ ~~to the condensed consolidated financial statements in Item 1 (“Note 3”).~~

~~COVID-19 Pandemic~~

~~The COVID-19 pandemic has led to adverse impacts~~section, we focus on the ~~U.S. and global economies and continues to create economic uncertainty even as COVID-19 vaccines have been and continue to be administered~~potential

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effects on our business resulting from the recent rise in ~~2021 and~~ the ~~U.S. and global economies have begun to operate with reduced restrictions on consumer movements and business operations. Although much uncertainty still surrounds~~rate of inflation, the pandemic (including its duration, the impact of COVID-19 variants and ultimate overall impact on U.S and global economies, Altria and its subsidiaries’ operations and those of its investees), Altria continues to monitor the macroeconomic riskscontinuing effects of the COVID-19 pandemic, ~~(including~~the Russian invasion of Ukraine and recent regulatory actions.

We continue to monitor the evolving macroeconomic and geopolitical landscape. High rates of inflation continued in the second quarter of 2022, driven by increasing global energy, commodity and food prices, which were further exacerbated by other factors, including supply and demand imbalances, labor shortages and inflation) and continues to carefully evaluate potential outcomes and work to mitigate risks. Specifically, Altria remains focused on any potential impact to its liquidity, operations, supply and distribution chains and on economic conditions. In termsthe Russian invasion of ~~Altria’s liquidity, despite some volatility in commercial paper markets in 2020, Altria has not experienced a material adverse impact to its liquidity.~~

As with so many other companies throughout the U.S. and globally, Altria’s operations have been affected by the COVID-19 pandemic. To date, Altria believes its tobacco businesses have not experienced any material adverse effects associated with governmental actions to restrict consumer movement or business operations, but continues to monitor these factors. Altria has implemented remote working for many employees and aligned with the social distancing protocols recommended by public health authorities for employees working at Altria facilities. Altria continues to believe that remote working due toUkraine. High inflation, high gas prices, rising interest rates, the COVID-19 pandemic ~~has had minimal~~and the end of federal government stimulus could impact ~~on productivity. Also, Altria’s critical information technology systems have remained operational. Although Altria’s~~our business by negatively impacting adult tobacco ~~businesses previously suspended operations temporarily at several of~~consumers’ disposable income and future purchasing behavior. We expect fluctuations in discount product share for cigarettes and MST products as price sensitive adult tobacco consumers react to their manufacturing facilities in March 2020, the businesses resumed operations at those facilities under enhanced safety protocols in April 2020 and all manufacturing facilities are currently operational under enhanced safety protocols. Altria continueseconomic conditions. We continue to monitor the ~~risks associated with facility disruptions and workforce availability as a result~~effect of ~~uncertainty related to the COVID-19 pandemic.~~

Altria’s suppliers and those within its distribution chain continue to be subject to potential facility closures, remote working protocols and labor shortages. To date, Altria has not experienced any material disruptions to its supply chains or distribution systems, but is continuing to monitor these ~~factors. Altria continues to monitor the risk that the business of one or more suppliers, distributors or any other entities within its supply and distribution chains may be disrupted.~~

In September 2021, the President of the United States issued an Executive Order charging the Occupational Safety and Health Administration (“OSHA”) with developing an emergency temporary standard requiring almost all employers mandate certain COVID-19 vaccination and testing requirements in the workplace. This mandate could have an adverse impact on worker availability at Altria’s subsidiaries’ or investees’ manufacturing, salesforce and administrative operations, or in their distribution and supply chains.

Altria believes that the COVID-19 pandemic altered adult tobacco consumer behaviors and purchasing patterns, particularly in the earlier stages of the pandemic. While the number of adult tobacco consumer trips to the store remain below pre-pandemic levels and tobacco expenditures per trip remain elevated, the environment continues to evolve as the effects of government stimulus have lessened and consumer mobility returns to more normal levels. Although Altria’s tobacco businesses have not experienced a material adverse impact to date by the COVID-19 pandemic, there is continued uncertainty as to how the COVID-19 pandemic (including changes in COVID-19-related restrictions and guidelines) may impact adult tobacco consumers in the future. Altria continues to monitor the macroeconomic risks of the COVID-19 pandemic (including risks associated with the timing and extent of vaccine administration and the impact of COVID-19 variants), and their effectdynamics on adult tobacco consumers ~~including stay-at-home practices~~ and ~~disposable income, which may be further impacted by unemployment rates and inflation. Altria also continues to monitor adult tobacco consumers’~~their purchasing behaviors, including overall tobacco product expenditures, mix between premium and discount brand purchases and adoption of smoke-free products. Increases in inflation also have a direct and adverse impact on our Master Settlement Agreement (“MSA”) expense and other direct and indirect costs. We expect inflation to continue at increased levels in 2022, and the extent of any effects on adult tobacco consumer purchasing behavior depends in part on the magnitude and duration of such increase. See Operating Results by Business Segment - Tobacco Space - Business Environment for additional information on evolving trends in the tobacco industry and the impacts to our business from increased inflation.

Volatility in domestic and global economies and disruptions in the supply and distribution chains continued in the second quarter of 2022, resulting from several factors, including the on-going impacts of the COVID-19 pandemic and the Russian invasion of Ukraine. While our operating companies focus on the manufacture and sale of tobacco products in the United States and have little direct exposure to Russia and Ukraine, we have experienced negative effects on the cost and availability of certain raw materials and component parts for our products. We continue to work to mitigate the potential negative impacts of these macroeconomic and geopolitical dynamics on our businesses through, among other actions, proactive engagement with current and potential suppliers and distributors, the development of alternative sourcing strategies, long-term supply contracts, evolution of our safety, health and environmental protocols at our facilities and prudent oversight of our liquidity. See Operating Results by Business Segment - Tobacco Space - Business Environment for additional information on the supply chain and other impacts of the macroeconomic and geopolitical environment on our business.

Tobacco companies are subject to broad and evolving regulatory and legislative frameworks that could have a material impact on our business. For example, the U.S. Food and Drug Administration (“FDA”) has stated its intention to issue proposed product standards regarding menthol in cigarettes and characterizing flavors in cigars in the near future and, in June 2022, the Biden Administration published plans for future potential regulatory actions that include the FDA’s plans to develop a proposed product standard that would establish a maximum nicotine level for cigarettes and certain other combusted tobacco products. See Operating Results by Business Segment - Tobacco Space - Business Environment for additional information on the nature, scope and potential impacts of regulatory and legislative developments.

In June 2022, the FDA issued marketing denial orders (“MDOs”) to JUUL ordering all of JUUL’s products currently marketed in the United States off the market. In July 2022, the FDA administratively stayed the MDOs on a temporary basis, citing its determination that there are scientific issues unique to the JUUL pre-market tobacco applications (“PMTA”) that warrant additional agency review. This administrative stay temporarily suspends the MDOs and JUUL’s products currently remain on the market. See Operating Results by Business Segment - Tobacco Space - Business Environment - FSPTCA and FDA Regulation - FDA Regulatory Actions - Electronic Nicotine Delivery System Products for additional information regarding the MDOs. We considered, among other factors, the impact of the FDA’s actions in conducting our quarterly quantitative valuation of our investment in JUUL at June 30, 2022. As a result, we recorded a non-cash, pre-tax unrealized loss of $1.2 billion for the three months ended June 30, 2022. We will continue to monitor developments with the FDA’s additional review, among other factors, in our quarterly quantitative valuations of JUUL.

ABI’s business also continues to be impacted by macroeconomic and geopolitical factors. ABI has been impacted by supply chain constraints across certain markets, foreign exchange rate fluctuations, inflation and commodity cost headwinds. ABI has a joint venture with exposure to Russia and Ukraine, which it fully impaired in the first quarter of 2022 and has announced plans to sell. Additionally, the macroeconomic and geopolitical factors have contributed to significant changes in certain foreign exchange rates, including the Euro to U.S. dollar exchange rate, resulting in the fair value of our investment in ABI declining below its carrying value by $1.1 billion at June 30, 2022, which we concluded was temporary.

See Note 3. Investments in Equity Securities to our condensed consolidated financial statements in Part I, Item 1. Financial Statements of this Form 10-Q (“Item 1”) and Critical Accounting Policies and Estimates for additional information on our equity investments.

We continue to monitor the increased risk of cyber attacks as a result of the Russian invasion of Ukraine. We have implemented heightened cybersecurity monitoring of our systems and those of our critical suppliers designed to address the evolving threat landscape.

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~~Anheuser-Busch InBev SA/NV (“ABI”) continued to be impacted by~~While the ~~COVID-19 pandemic, including~~reduction in the effects of COVID-19 variants, supply-chain constraints across certain markets, transactional foreign exchange and commodity cost headwinds. During the first nine months of 2021, ABI’s share price continued to fluctuate, ultimately resulting in a lower share price at September 30, 2021 compared to December 31, 2020. As discussed in ~~Note 4. Investment in Equity Securities~~ ~~to the condensed consolidated financial statements in Item 1 (“Note 4~~”), in preparing Altria’s financial statements for the period ended September 30, 2021, Altria concluded that the full recovery to the carrying value will take longer than previously expected, therefore, the decline in fair value of ~~its~~our equity investment in ~~ABI at September 30, 2021 was other than temporary. In determining that the decline in fair value was other than temporary, Altria considered the continued impact~~JUUL has had a material adverse effect on our financial results, to date, we have not experienced any material adverse effects on our business or our ability to achieve our Vision as a result of the ~~COVID-19 pandemic on ABI’s global business along with several other factors.~~trends and developments discussed above. As ~~a result, Altria recorded to income (losses) from equity investments in its condensed consolidated statements of earnings (losses) a non-cash, pre-tax impairment charge of $6.2 billion for~~ the ~~nine~~trends and ~~three months ended September 30, 2021. Altria~~developments discussed above evolve and new ones emerge, we will continue to ~~monitor its investment in ABI, including~~evaluate the ~~impact of the COVID-19 pandemic~~potential impacts on ~~ABI’s~~our business and ~~market valuation.~~

Altria has considered the impact of the COVID-19 pandemic on the business of JUUL Labs, Inc. (“JUUL”), including its sales, distribution, operations, supply chain and liquidity, in conducting its periodic impairment assessment and quantitative valuations. JUUL’s operations were negatively impacted in 2020 by the COVID-19 pandemic due to stay-at-home practices and government-mandated restrictions. While the impact was considered in Altria’s quantitative valuations conducted in connection with the preparation of its financial statements for the nine months ended September 30, 2021 and during 2020, Altria does not believe the COVID-19 pandemic was a primary driver of the non-cash, pre-tax impairment charge recorded during 2020 or any quarterly changes in fair value recorded since the fourth quarter of 2020. Altria will continue to monitor the impact of the COVID-19 pandemic on JUUL’s business, including near-term supply chain constraints and component part shortages, in Altria’s quarterly quantitative valuations of JUUL.

Altria has considered the impact of the COVID-19 pandemic on the business of Cronos Group Inc. (“Cronos”), including its sales, distribution, operations, supply chain and liquidity. During 2020 and the first nine months of 2021, Cronos has been adversely impacted by the COVID-19 pandemic, due in part to government actions limiting access to retail stores in the United States and Canada, including the recording in 2020 of an impairment charge on certain goodwill and intangible assets. However, the continued rollout of vaccines in the United States and Canada has resulted in the easing of COVID-19 related restrictions in most of the United States and Canada during the third quarter of 2021. Altria will continue to monitor the impact of COVID-19 pandemic on Cronos’ business, including near-term supply chain challenges, and market valuation.

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our Vision.

Consolidated Results of Operations for the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022

The changes in net earnings ~~(losses)~~ attributable to Altria and diluted earnings ~~(losses)~~ per share (“EPS”) attributable to Altria for the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, from the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, were due primarily to the following:

(in millions, except per share data) Net Earnings (Losses) Diluted EPS
For the nine months ended September 30, 2020 $ 2,543 $ 1.36
2020 Implementation and acquisition-related costs 314 0.17
2020 Tobacco and health and certain other litigation items 57 0.03
2020 Impairment of JUUL equity securities 2,600 1.40
2020 ABI-related special items 544 0.29
2020 Cronos-related special items 143 0.08
2020 COVID-19 special items 37 0.02
2020 Tax items 38 0.02
Subtotal 2020 special items 3,733 2.01
2021 NPM Adjustment Items 57 0.03
2021 Implementation, acquisition and disposition-related costs (95) (0.05)
2021 Tobacco and health and certain other litigation items (113) (0.06)
2021 ABI-related special items (4,828) (2.60)
2021 Cronos-related special items (205) (0.11)
2021 Loss on early extinguishment of debt (496) (0.27)
2021 Tax items 5 —
Subtotal 2021 special items (5,675) (3.06)
Fewer shares outstanding — 0.02
Change in tax rate (18) (0.01)
Operations 268 0.14
For the nine months ended September 30, 2021 $ 851 $ 0.46
2021 Reported Net Earnings (Losses) $ 851 $ 0.46
2020 Reported Net Earnings (Losses) $ 2,543 $ 1.36
% Change (66.5) % (66.2) %
2021 Adjusted Net Earnings and Adjusted Diluted EPS $ 6,526 $ 3.52
2020 Adjusted Net Earnings and Adjusted Diluted EPS
$ 6,276 $ 3.37
% Change 4.0 % 4.5 %


(in millions, except per share data)	Net Earnings			Diluted EPS
For the six months ended June 30, 2021	$	3,573		$	1.93
2021 NPM Adjustment Items	(24)			(0.01)
2021 Asset impairment, exit, implementation, acquisition and disposition-related costs	43			0.02
2021 Tobacco and health and certain other litigation items	33			0.02
2021 JUUL changes in fair value	100			0.05
2021 ABI-related special items	(71)			(0.04)
2021 Cronos-related special items	116			0.06
2021 Loss on early extinguishment of debt	496			0.27
2021 Income tax items	3			—
Subtotal 2021 special items	696			0.37
2022 NPM Adjustment Items	45			0.02
2022 Asset impairment, exit, implementation, acquisition and disposition-related costs	(7)			—
2022 Tobacco and health and certain other litigation items	(44)			(0.02)
2022 JUUL changes in fair value	(1,255)			(0.70)
2022 ABI-related special items	(42)			(0.02)
2022 Cronos-related special items	(167)			(0.09)
2022 Income tax items	(9)			—
Subtotal 2022 special items	(1,479)			(0.81)
Fewer shares outstanding	—			0.05
Change in tax rate	(1)			—
Operations	61			0.03
For the six months ended June 30, 2022	$	2,850		$	1.57

2022 Reported Net Earnings	$	2,850		$	1.57
2021 Reported Net Earnings	$	3,573		$	1.93
% Change	(20.2)		%	(18.7)		%

2022 Adjusted Net Earnings and Adjusted Diluted EPS	$	4,329		$	2.38
2021 Adjusted Net Earnings and Adjusted Diluted EPS	$	4,269		$	2.30
% Change	1.4		%	3.5		%

For a discussion of special items and other business drivers affecting the comparability of statements of earnings ~~(losses)~~ amounts and reconciliations of adjusted earnings attributable to Altria and adjusted diluted EPS attributable to Altria, see the Consolidated Operating Results section below.

▪Fewer Shares Outstanding: Fewer shares outstanding were due ~~primarily~~ to shares we repurchased ~~by Altria~~ under ~~its~~our share repurchase ~~program in 2021.~~

▪~~Change in Tax Rate:~~ ~~The change in the tax rate (which excludes the impact of special items shown in the table above) was driven primarily by higher state tax expense and foreign tax rate differential.~~program.

▪Operations: The increase of ~~$268~~$61 million in operations (which excludes the impact of special items shown in the table above) was due primarily to ~~the following:~~

•higher OCI ~~from the smokeable products segment;~~

•~~favorable net periodic benefit income, excluding service cost;~~ and

•~~higher income from Altria’s equity investment in ABI.~~ lower interest and other debt expense, net.

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

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Consolidated Results of Operations for the Three Months Ended ~~September~~June 30, ~~2021~~2022

The changes in net earnings ~~(losses)~~ attributable to Altria and diluted EPS attributable to Altria for the three months ended ~~September~~June 30, ~~2021,~~2022, from the three months ended ~~September~~June 30, ~~2020,~~2021, were due primarily to the following:

(in millions, except per share data) Net Earnings (Losses) Diluted EPS
For the three months ended September 30, 2020 $ (952) $ (0.51)
2020 Implementation and acquisition-related costs 8 —
2020 Tobacco and health and certain other litigation items 25 0.01
2020 Impairment of JUUL equity securities 2,600 1.40
2020 ABI-related special items 405 0.22
2020 Cronos-related special items 142 0.08
2020 Tax items (13) (0.01)
Subtotal 2020 special items 3,167 1.70
2021 NPM Adjustment Items 33 0.02
2021 Implementation, acquisition and disposition-related costs (52) (0.03)
2021 Tobacco and health and certain other litigation items (80) (0.04)
2021 JUUL changes in fair value 100 0.05
2021 ABI-related special items (4,899) (2.65)
2021 Cronos-related special items (89) (0.05)
2021 Tax items 8 —
Subtotal 2021 special items (4,979) (2.70)
Fewer shares outstanding — 0.01
Change in tax rate 26 0.01
Operations 16 0.01
For the three months ended September 30, 2021 $ (2,722) $ (1.48)
2021 Reported Net Earnings (Losses) $ (2,722) $ (1.48)
2020 Reported Net Earnings (Losses) $ (952) $ (0.51)
% Change (100)%+ (100)%+
2021 Adjusted Net Earnings and Adjusted Diluted EPS $ 2,257 $ 1.22
2020 Adjusted Net Earnings and Adjusted Diluted EPS
$ 2,215 $ 1.19
% Change 1.9 % 2.5 %


(in millions, except per share data)	Net Earnings			Diluted EPS
For the three months ended June 30, 2021	$	2,149		$	1.16

2021 Asset impairment, exit, implementation, acquisition and disposition-related costs	6			—
2021 Tobacco and health and certain other litigation items	7			—
2021 JUUL changes in fair value	(100)			(0.05)
2021 ABI-related special items	29			0.02
2021 Cronos-related special items	186			0.10
2021 Income tax items	9			—
Subtotal 2021 special items	137			0.07

2022 Asset impairment, exit, implementation, acquisition and disposition-related costs	(2)			—
2022 Tobacco and health and certain other litigation items	(35)			(0.02)
2022 JUUL changes in fair value	(1,155)			(0.64)
2022 ABI-related special items	(89)			(0.05)
2022 Cronos-related special items	(106)			(0.06)
2022 Income tax items	(4)			—
Subtotal 2022 special items	(1,391)			(0.77)
Fewer shares outstanding	—			0.03
Change in tax rate	3			—
Operations	(7)			—
For the three months ended June 30, 2022	$	891		$	0.49

2022 Reported Net Earnings	$	891		$	0.49
2021 Reported Net Earnings	$	2,149		$	1.16
% Change	(58.5)		%	(57.8)		%

2022 Adjusted Net Earnings and Adjusted Diluted EPS	$	2,282		$	1.26
2021 Adjusted Net Earnings and Adjusted Diluted EPS	$	2,286		$	1.23
% Change	(0.2)		%	2.4		%

▪Fewer Shares Outstanding: Fewer shares outstanding were due ~~primarily~~ to shares we repurchased ~~by Altria~~ under ~~its~~our share repurchase ~~program in 2021.~~

▪~~Change in Tax Rate:~~ ~~The change in the tax rate (which excludes the impact of special items shown in the table above) was driven primarily by dividends associated with Altria’s equity investment in ABI.~~

▪~~Operations:~~ ~~The increase of $16 million in operations (which excludes the impact of special items shown in the table above) was due primarily to the following:~~

•~~higher income from Altria’s equity investment in ABI;~~

•~~favorable net periodic benefit income, excluding service cost; and~~

•~~lower interest and other debt expense, net;~~

~~partially offset by:~~

▪~~lower OCI.~~program.

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

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~~2021~~2022 Forecasted Results

~~Altria narrows its guidance for 2021~~We expect our 2022 full-year adjusted diluted EPS to be in a range of ~~$4.58~~$4.79 to ~~$4.62,~~$4.93, representing a growth rate of 5%4% to 6%7% over ~~its 2020~~our 2021 full-year adjusted diluted EPS ~~base~~ of ~~$4.36,~~$4.61, as shown in the first table below. While the ~~2021~~2022 full-year adjusted diluted EPS guidance accounts for a range of scenarios, the external environment remains dynamic. ~~Altria~~We will continue to monitor conditions related to (i) the economy, ~~(including unemployment rates and~~including the impact of increased ~~inflation),~~inflation, rising interest rates and global supply chain disruptions, (ii) the impact of current and future COVID-19 variants and mitigation strategies, (iii) adult tobacco consumer dynamics, including ~~stay-at-home practices,~~tobacco usage occasions, available disposable income, purchasing patterns and adoption of smoke-free products, ~~(iii)~~(iv) regulatory and legislative ~~(including excise tax)~~ developments and ~~(iv)~~(v) the ~~timing and extent~~impacts of ~~COVID-19 vaccine administration and~~ the ~~impact~~Russian invasion of ~~COVID-19 variants.~~Ukraine.

~~Altria’s 2021~~Our 2022 full-year adjusted diluted EPS guidance range includes planned investments in support of ~~its~~our Vision, ~~to responsibly lead the transition of adult smokers to a smoke-free future,~~ such as (i) ~~marketplace investments to expand the availability and awareness~~enhancement of ~~Altria’s smoke-free products, (ii) costs associated with building an industry-leading~~our digital consumer engagement ~~platform that enhances data collection and insights in support of adult tobacco consumer transition to smoke-free products and (iii)~~system, (ii) increased smoke-free product research, development and ~~development expense. This forecasted growth rate excludes~~regulatory preparation expenses and (iii) marketplace activities in support of our smoke-free products. The guidance range also includes anticipated inflationary increases in MSA expenses and direct and indirect materials costs and our current expectation that PM USA will not have access to the ~~(income) expense items~~ IQOS system in ~~the second table below.~~2022.

~~Altria continues to expect its 2021 full-year adjusted effective tax rate will be in a range~~

Table of ~~24.5% to 25.5%.~~Contents


Reconciliation of ~~2020~~2021 Reported Diluted EPS to ~~2020~~2021 Adjusted Diluted EPS
~~2020~~2021 Reported diluted EPS	$	~~2.40~~ 1.34
NPM Adjustment Items	(0.03)
Asset impairment, exit, implementation, acquisition and ~~acquisition-related~~disposition-related costs	~~0.18~~0.05
Tobacco and health and certain other litigation items	~~0.03~~
~~Impairment of JUUL equity securities~~	~~1.40~~
~~JUUL changes in fair value~~	~~(0.05)~~0.07
ABI-related special items	~~0.32~~2.66



Cronos-related special items	~~0.03~~0.25
~~COVID-19 special items~~Loss on early extinguishment of debt	~~0.02~~0.27
~~Tax items~~	~~0.03~~
~~2020~~2021 Adjusted diluted EPS	$	~~4.36~~4.61

The following (income) expense items are excluded from ~~Altria’s 2021~~our 2022 forecasted adjusted diluted EPS growth rate:


(Income) Expense Excluded from ~~2021~~2022 Forecasted Adjusted Diluted EPS
NPM Adjustment Items	$	~~(0.03)~~(0.02)
~~Implementation, acquisition and disposition-related costs~~	~~0.05~~
Tobacco and health and certain other litigation items	~~0.06~~0.02
JUUL changes in fair value
0.70
ABI-related special items	~~2.60~~0.02
Cronos-related special items	~~0.11~~
~~Loss on early extinguishment of debt~~	~~0.27~~0.09

	$	~~3.06~~0.81

For a discussion of certain income and expense items excluded from the forecasted results above, see the Consolidated Operating Results section below.

~~Altria’s~~Our full-year adjusted diluted EPS ~~guidance and full-year~~ forecast ~~for its adjusted effective tax rate exclude~~excludes the impact of certain income and expense items, including those items noted in the Non-GAAP Financial Measures section below, that our management believes are not part of underlying operations. ~~Altria’s~~Our management cannot estimate on a forward-looking basis the impact of these items on ~~its~~our reported diluted EPS ~~or its reported effective tax rate~~ because these items, which could be significant, may be unusual or infrequent, are difficult to predict and may be highly variable. As a result, ~~Altria does~~we do not provide a corresponding GAAP measure for, or reconciliation to, ~~its~~our adjusted diluted EPS ~~guidance or its adjusted effective tax rate~~ forecast.

Non-GAAP Financial Measures

While ~~Altria reports its~~we report our financial results in accordance with GAAP, ~~its~~our management reviews OCI, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate the performance of, and allocate resources to, our segments. Our management also reviews certain financial results, including OCI, OCI margins, net earnings ~~(losses)~~ attributable to Altria and diluted EPS, on an adjusted basis, which excludes certain income and expense items that our management believes are not part of underlying operations. These items may include,

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for example, loss on early extinguishment of debt, restructuring charges, asset impairment charges, acquisition-related and disposition-related costs, ~~COVID-19 special items,~~ equity investment-related special items (including any changes in fair value of ~~the~~our equity investment recorded using the fair value option and any changes in the fair value of related warrants and preemptive rights), certain income tax items, charges associated with tobacco and health and certain other litigation items, and resolutions of certain non-participating manufacturer (“NPM”) adjustment disputes under the ~~1998 Master Settlement Agreement~~MSA (such dispute resolutions are referred to as “NPM Adjustment Items”). ~~Altria’s~~Our management does not view any of these special items to be part of ~~Altria’s~~our underlying results as they may be highly variable, may be unusual or infrequent, are difficult to predict and can distort underlying business trends and results. ~~Altria’s~~Our management also reviews income tax rates on an adjusted basis. ~~Altria’s~~Our adjusted effective tax rate may exclude certain income tax items from ~~its~~our reported effective tax rate.

~~Altria’s~~Our management believes that adjusted financial measures provide useful additional insight into underlying business trends and results, and provide a more meaningful comparison of year-over-year results. ~~Adjusted~~Our management uses adjusted financial measures ~~are used by management~~ and regularly ~~provided~~provides these to ~~Altria’s~~our chief operating decision maker ~~(the “CODM”~~(“CODM”) for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets. These adjusted financial measures are not required by, or calculated in accordance with GAAP and may not be calculated the same as similarly titled measures used by other companies. These adjusted 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. Except as noted in the 2022 Forecasted Results section above, when we provide a non-GAAP measure in this Form 10-Q, we also provide a reconciliation of that non-GAAP financial measure to the most directly comparable GAAP financial measure.

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Discussion and Analysis

Critical Accounting Policies and Estimates

Altria’s critical accounting policies and estimates are discussed in its Annual Report on Form 10-K for the year ended December 31, 2020 (the “2020 Form 10-K”); there have been no material changes to these critical accounting policies and estimates, except as noted below.

Investment in ABI

At ~~September~~June 30, ~~2021, Altria’s~~2022, our equity investment in ABI consisted of 185 million restricted shares of ABI (the “Restricted Shares”) and 12 million ordinary shares of ABI. The fair value of ~~Altria’s~~our equity investment in ABI is based onon: (i) unadjusted quoted prices in active markets for ABI’s ordinary shares and ~~at September 30, 2021,~~ 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.

~~In October 2019,~~ We can convert the Restricted Shares to ordinary shares at our discretion. Therefore, the fair value of ~~Altria’s~~each Restricted Share is based on the value of an ordinary share.

The fair value of our equity investment in ABI at December 31, 2021 and March 31, 2022 was $11.9 billion for both periods, which exceeded its carrying value of $11.1 billion and $11.3 billion by approximately 7% and 5%, respectively. In the second quarter of 2022, the fair value of our equity investment in ABI declined and at June 30, 2022 was below its carrying value ~~and at September 30, 2021 had not recovered.~~ ~~In preparing its financial statements for~~by $1.1 billion or approximately 9%. Accounting guidance requires the ~~period ended September 30, 2021,~~ ~~Altria evaluated~~evaluation of the following factors ~~related to~~when determining if the decline in fair value ~~decline, including the impact on the fair value of ABI’s shares during the COVID-19 pandemic, which has negatively impacted ABI’s business. Altria evaluated~~is other than temporary: (i) the duration and magnitude of the fair value ~~decline at September 30, 2021, ABI’s~~decline; (ii) the financial condition and near-term prospects of the investee; and ~~Altria’s~~(iii) the investor’s intent and ability to hold its equity investment until full recovery to its carrying value in ~~ABI until recovery~~. the near-term. In preparing ~~its~~our financial statements for the period ended ~~September~~June 30, 2022, we evaluated these factors, including the macroeconomic and geopolitical factors that have resulted in significant changes in certain foreign exchange rates. We determined that the primary driver of the decline in fair value below the carrying value, which began during the second quarter of 2022, was the significant changes in foreign exchange rates, including the Euro to U.S. dollar exchange rate, and not a decline in ABI’s Euro-based share price. From the time that we recorded the non-cash pre-tax impairment charge of $6.2 billion in the third quarter of 2021, ~~Altria~~ABI’s Euro-based share price has increased 5% as of June 30, 2022. Additionally, ABI has delivered consistent business and earnings performance over the past several quarters demonstrating its ability to continue to execute its strategies and navigate challenges. We concluded at June 30, 2022 that the decline in fair value of its investment in ABI at September 30, 2021 was other than temporary. As a result, Altria recorded a non-cash, pre-tax impairment charge of $6.2 billion for the nine and three months ended September 30, 2021 to income (losses) from equity investments in its condensed consolidated statements of earnings (losses). This impairment charge reflected the difference between the fair value using ABI’s share price at September 30, 2021 and the carrying value of Altria’sour equity investment in ABI ~~at September 30, 2021, prior to recording the impairment charge. This conclusion was based on the following factors:~~

▪~~the fair value of Altria’s investment in ABI had been~~ below its carrying value ~~since October 2019~~was temporary and, ~~had not fully recovered. At its lowest point in March 2020, the fair value of Altria’s investment in ABI~~therefore, no impairment was below its carrying value by approximately 52% and at December 31, 2020 had recovered to approximately 17%. During the first nine months of 2021, ABI’s share price continued to fluctuate, ultimately resulting in a share price decline of 18% since December 31, 2020. At September 30, 2021, prior to recording the impairment charge, the fair value of Altria’s investment in ABI was below its carrying value by approximately 35%;

▪the fair value of Altria’s investment in ABI historically exceeded its carrying value since October 2016 (when Altria obtained its ownership interest in ABI) with the exception of certain periods starting in September 2018 and since October 2019. Altria was optimistic about a near-term recovery because ABI’s share price demonstrated significant recovery, including during 2019, the second half of 2020 and the first half of 2021. However, during the third quarter of 2021, the decline in ABI’s share price resumed and, at September 30, 2021, the share price was lower than at December 31, 2020, erasing much of the recovery experienced in the second half of 2020 and first half of 2021;

▪ABI’s share price continued to decline following the release of ABI’s second quarter of 2021 earnings report in which ABI’s performance in the first half of 2021 improved meaningfully versus the same period in 2020. Despite ABI’s

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second quarter of 2021 results, which also included top-line growth ahead of the pre-pandemic levels from the second quarter of 2019 as well as the reaffirmation of its 2021 outlook, ABI’s income growth was impacted by, among other things, transactional foreign exchange and commodity cost headwinds; and

▪the industry disruption and volatility associated with the COVID-19 pandemic, including the impact of COVID-19 variants and related cost headwinds, have continued. While Altria continues to believe that ABI’s share price performance is not reflective of its underlying long-term equity value, and ABI’s share price will recover, Altria now believes that it will take longer than previously expected as Altria believes that COVID-19 variants, supply-chain constraints across certain markets, transactional foreign exchange and commodity cost headwinds mayrecorded. We continue ~~to impact ABI’s near-term financial results and share price performance.~~

~~Although Altria recorded an impairment charge on its investment in ABI during the nine and three months ended September 30, 2021, Altria continues~~ to have confidence in ABI’s (i) long-term strategies, (ii) premium global brands, (iii) experienced management team and (iv) capability to successfully navigate its near-term challenges. Altria further expects that the adverse impacts related to the COVID-19 pandemic that have negatively impacted ABI’s global business are transitory, but now also anticipates that the full recovery to the carrying value will take longer than previously expected. During October 2021, ABI’s share price continued to fluctuate and at OctoberAt July 25, ~~2021,~~2022, the fair value of ~~Altria’s~~our equity investment in ABI ~~approximated~~was below its carrying ~~value. Altria~~value by $0.9 billion or approximately 8%.

We will continue to monitor ~~its~~our equity investment in ~~ABI,~~ABI. If we were to conclude that the decline in fair value was other than temporary, we would determine and recognize, in the period identified, the impairment of our equity investment, which could result in a material adverse effect on our consolidated financial position or earnings.

Investment in JUUL

At June 30, 2022, the estimated fair value of our investment in JUUL was $450 million, as compared with $1.6 billion at March 31, 2022.

In June 2022, the FDA issued MDOs to JUUL ordering all of JUUL’s products currently marketed in the United States off the market. In July 2022, the FDA administratively stayed the MDOs on a temporary basis, citing its determination that there are scientific issues unique to the JUUL PMTAs that warrant additional review. This administrative stay temporarily suspends the MDOs and JUUL’s products currently remain on the market.

The decrease in the estimated fair value of our investment in JUUL at June 30, 2022 was primarily driven by (i) a decrease in the likelihood of a favorable outcome from the FDA for JUUL’s products, which are currently marketed in the United States that have received MDOs and are now under additional administrative review, (ii) a decrease in the likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, which could result in JUUL seeking protection under bankruptcy or other insolvency law, and (iii) projections of higher operating expenses resulting in lower long-term operating margins.

In determining the fair value of our investment in JUUL in the second quarter of 2022, we made certain judgments, estimates and assumptions, the most significant of which were likelihood of certain potential regulatory and liquidity outcomes, sales volume, operating margins, discount rates and perpetual growth rates. All significant inputs used in the valuation are classified in Level 3 of the fair value hierarchy. Additionally, in determining these significant assumptions, we made judgments regarding the: (i) likelihood of certain potential regulatory actions impacting the e-vapor category and specifically whether the FDA will ultimately authorize JUUL’s products, which have received MDOs and are now under additional administrative review; (ii) likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, the absence of which could result in JUUL seeking protection under bankruptcy or other insolvency law; (iii) risk created by the number and types of legal cases

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pending against JUUL; (iv) expectations for the future state of the e-vapor category, including competitive dynamics; and (v) timing of international expansion plans. Due to these uncertainties, our future cash flow projections of JUUL are based on a range of scenarios that consider certain potential regulatory, liquidity and market outcomes.

Although our discounted cash flow analyses were based on assumptions that our management considered reasonable and were based on the best available information at the time that the analyses were developed, there is significant judgment used in determining future cash flows. If the following factors, in isolation, significantly deviate from current expectations, we believe that they have the potential to materially impact our significant assumptions of the likelihood of certain potential regulatory and liquidity outcomes, sales volume, operating margins, discount rates and perpetual growth rates, thus potentially materially decrease our valuation of our investment in JUUL:

▪unfavorable regulatory and legislative developments at the international, federal, state and local levels such as (i) final determination by the FDA on the JUUL MDOs, which are now under additional administrative review (which could result in the removal of products from the U.S. market) or (ii) FDA denying future tobacco product applications for JUUL’s flavored e-vapor products, which are currently not permitted in the market without FDA authorization;

▪JUUL’s inability to maintain adequate liquidity necessary to fund projected cash needs, the absence of which could result in JUUL seeking protection under bankruptcy or other insolvency law;

▪a successful challenge by the U.S. Federal Trade Commission (“FTC”) in its administrative complaint against Altria and JUUL, discussed further in Note 11. Contingencies to our condensed consolidated financial statements in Item 1 (“Note 11”);

▪unfavorable financial and market performance, including substantial changes in competitive dynamics; and

▪delay in timing of international expansion plans.

If the following factors, in isolation, significantly deviate from current expectations, we believe that they have the potential to materially impact our significant assumptions of the likelihood of certain potential regulatory and liquidity outcomes, sales volume, operating margins, discount rates and perpetual growth rates, thus potentially materially increase our valuation of our investment in JUUL:

▪favorable regulatory and legislative developments at the international, federal, state and local levels such as FDA authorization of (i) existing JUUL products that have received MDOs from the FDA and that are now under additional administrative review or (ii) future tobacco product applications for JUUL’s flavored e-vapor products, which are currently not permitted in the market without FDA authorization;

▪JUUL’s ability to maintain adequate financing to fund projected cash needs;

▪favorable developments related to litigation; and

▪favorable financial and market performance, including substantial changes in competitive dynamics.

While our management believes that the recorded value of our investment in JUUL at June 30, 2022 represents our best estimate of the fair value of the investment, JUUL’s actual performance in the short term or long term could be significantly different from forecasted performance due to changes in the factors noted above. Additionally, the value of our investment in JUUL could be significantly impacted by changes in the discount rate, which could be caused by numerous factors, including changes in market inputs, as well as risks specific to JUUL, including the ~~impact~~outcome of the ~~COVID-19 pandemic~~FDA’s additional review of the JUUL PMTAs that have received MDOs and ~~subsequent recovery on ABI’s business~~favorable or unfavorable developments related to JUUL’s liquidity and ~~market valuation. For further discussion of Altria’s investment in ABI, see Note 4.~~litigation environment.

Investment in Cronos

The fair value of ~~Altria’s~~our equity method investment in Cronos is based on unadjusted quoted prices in active markets for Cronos’s common shares and was classified in Level 1 of the fair value hierarchy. ~~In September~~The fair value and carrying value of our equity method investment in Cronos at December 31, 2021 was $617 million.

At March 31, 2022, the fair value of ~~Altria’s~~our equity method investment in Cronos exceeded its carrying value by $55 million or approximately 10%. In the second quarter of 2022, the fair value of our equity method investment in Cronos declined below its carrying ~~value. At September~~value and had not recovered as of June 30, ~~2021,~~2022. Accounting guidance requires the evaluation of the following factors when determining if the decline in fair value of Altria’s equity method investment in Cronos was below its carrying value by $14 million or approximately 2%. Altria has evaluated the factors related to the fair value decline. Based on Altria’s evaluation ofis other than temporary: (i) the duration and magnitude of the fair value ~~decline at September~~decline; (ii) the financial condition and near-term prospects of the investee; and (iii) the investor’s intent and ability to hold its equity method investment until full recovery to its carrying value in the near-term. In preparing our financial statements for the period ended June 30, ~~2021, Altria concluded~~2022, we evaluated these factors and determined that there was not sufficient evidence to conclude that the ~~decline~~impairment was temporary. As a result, we recorded a non-cash, pre-tax impairment charge of $107 million for the six and three months ended June 30, 2022, which was recorded in (income) losses from equity investments in our condensed consolidated statement of earnings. The impairment charge reflects the difference between the fair value of ~~its~~our equity method investment in Cronos ~~below its~~ using Cronos’s share price and the Canadian dollar to U.S. dollar exchange rate at June 30, 2022 and the

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carrying value ~~is temporary and, therefore, no~~of our equity method investment in Cronos at June 30, 2022. At June 30, 2022, prior to recording the impairment ~~was recorded. At October 25, 2021,~~charge, the fair value of ~~Altria’s~~our equity method investment in Cronos was ~~below~~less than its carrying value by ~~$26 million or~~ approximately 3%20%.

~~Altria will continue to monitor its~~ After recording the impairment charge, the fair value and carrying value of our equity method investment in Cronos ~~including~~at June 30, 2022 were both $437 million. We will continue to assess the ~~impact~~fair value of ~~the COVID-19 pandemic on Cronos’s business and market valuation. If Altria were~~our equity method investment in Cronos to ~~conclude that the~~determine if any decline in fair value below its carrying value is other than temporary, Altria would determine and recognize, in the period identified, the impairment of its equity method investment, which could result in a material adverse effect on Altria’s consolidated financial position or earnings. temporary.

For further discussion of ~~Altria’s investment~~our investments in ABI, JUUL and Cronos, see Note 3. Investments in Equity Securities to our condensed consolidated financial statements in Item 1 (“Note 43”).

~~Federal Excise Taxes~~

Congress is currently considering legislation that would significantly increase the federal excise tax for all tobacco products and create a new tax for e-vapor products and other products containing nicotine that are not currently subject to a tobacco federal excise tax. Additionally, e-vapor products and oral nicotine products not currently taxed would be subject to a federal excise tax that would vary based on the nicotine content.

Altria uses an income approach to estimate (i) the fair values of its goodwill and intangible assets when conducting its annual review of goodwill and indefinite-lived intangible assets for potential impairment (more frequently if events occur that would require an interim review) and (ii) the fair value of its investment in JUUL, when accounting for its equity method investment in JUUL under the fair value option. Altria believes that an excise tax on cigars, moist smokeless tobacco products (“MST”), e-vapor products and oral nicotine pouches at the current proposed rates could have a material adverse impact on the significant assumptions used in performing these valuations, including volume, operating margins and income.

At this time, it is unclear (i) whether proposed tobacco and nicotine taxes will be included in any final legislation and (ii) what the amounts of any such taxes that would be included, if enacted. If the proposed tobacco and nicotine federal excise taxes on cigars, MST and e-vapor products are included in any final legislation at the rates that are currently proposed, it could result in a material non-cash impairment of the
~~Skoal~~ ~~trademark and a material decrease in the fair value of its investment in JUUL, either of which would have a material adverse effect on Altria’s consolidated financial position or earnings.~~

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Consolidated Operating Results


		For the Nine Months Ended September 30,				For the Three Months Ended September 30,					For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
Net revenues:
Net Revenues:										Net Revenues:
Smokeable products	Smokeable products	$	17,275	$	17,522	$	5,975	$	6,313	Smokeable products	$	11,138	$	11,300	$	5,873	$	6,050
Oral tobacco products	Oral tobacco products	1,945		1,901		626		640		Oral tobacco products	1,278		1,319		665		693
Wine	Wine	494		434		177		157		Wine	—		317		—		167
All other	All other	44		(8)		8		13		All other	19		36		5		26
Net revenues	Net revenues	$	19,758	$	19,849	$	6,786	$	7,123	Net revenues	$	12,435	$	12,972	$	6,543	$	6,936
Excise taxes on products:
Excise Taxes on Products:										Excise Taxes on Products:
Smokeable products	Smokeable products	$	3,620	$	3,950	$	1,218	$	1,407	Smokeable products	$	2,181	$	2,402	$	1,137	$	1,281
Oral tobacco products	Oral tobacco products	98		98		32		33		Oral tobacco products	61		66		32		35
Wine	Wine	14		14		5		5		Wine	—		9		—		5
All other	All other	1		1		—		—		All other	—		1		—		1
Excise taxes on products	Excise taxes on products	$	3,733	$	4,063	$	1,255	$	1,445	Excise taxes on products	$	2,242	$	2,478	$	1,169	$	1,322
Operating income:
Operating Income:										Operating Income:
OCI:	OCI:									OCI:
Smokeable products	Smokeable products	$	7,901	$	7,609	$	2,753	$	2,789	Smokeable products	$	5,321	$	5,148	$	2,762	$	2,776
Oral tobacco products	Oral tobacco products	1,269		1,297		405		436		Oral tobacco products	837		864		430		472
Wine	Wine	21		(347)		(24)		19		Wine	—		45		—		27
All other	All other	(56)		(63)		(30)		(7)		All other	(20)		(26)		(15)		(12)
Amortization of intangibles	Amortization of intangibles	(53)		(54)		(18)		(17)		Amortization of intangibles	(35)		(35)		(18)		(18)
General corporate expenses	General corporate expenses	(255)		(150)		(135)		(60)		General corporate expenses	(114)		(120)		(54)		(59)

Operating income	Operating income	$	8,827	$	8,292	$	2,951	$	3,160	Operating income	$	5,989	$	5,876	$	3,105	$	3,186

As discussed further in Note ~~9, the~~8. Segment Reporting to our condensed consolidated financial statements in Item 1 (“Note 8”), our CODM reviews OCI to evaluate the performance of, and allocate resources to, ~~the~~our segments. ~~Management~~Our management believes it is appropriate to disclose this measure to help investors analyze the business performance and trends of ~~the various~~our business segments.

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The following table provides a reconciliation of adjusted net earnings ~~(losses)~~ attributable to Altria and adjusted diluted EPS attributable to Altria for the ~~nine~~six months ended ~~September~~June 30:


(in millions of dollars, except per share data)	(in millions of dollars, except per share data)	Earnings (Losses) before Income Taxes		Provision (Benefit) for Income Taxes		Net Earnings (Losses)		Net Earnings (Losses) Attributable to Altria		Diluted EPS		(in millions of dollars, except per share data)	Earnings before Income Taxes		Provision for Income Taxes		Net Earnings		Net Earnings Attributable to Altria		Diluted EPS
2021 Reported		$	1,544	$	693	$	851	$	851	$	0.46
2022 Reported												2022 Reported	$	4,278	$	1,428	$	2,850	$	2,850	$	1.57
NPM Adjustment Items	NPM Adjustment Items	(76)		(19)		(57)		(57)		(0.03)		NPM Adjustment Items	(60)		(15)		(45)		(45)		(0.02)
Implementation, acquisition and disposition-related costs		117		22		95		95		0.05
Asset impairment, exit, implementation, acquisition and disposition-related costs												Asset impairment, exit, implementation, acquisition and disposition-related costs	9		2		7		7		—
Tobacco and health and certain other litigation items	Tobacco and health and certain other litigation items	148		35		113		113		0.06		Tobacco and health and certain other litigation items	58		14		44		44		0.02

JUUL changes in fair value												JUUL changes in fair value	1,255		—		1,255		1,255		0.70
ABI-related special items	ABI-related special items	6,111		1,283		4,828		4,828		2.60		ABI-related special items	53		11		42		42		0.02
Cronos-related special items	Cronos-related special items	200		(5)		205		205		0.11		Cronos-related special items	175		8		167		167		0.09

Loss on early extinguishment of debt		649		153		496		496		0.27
Tax items		—		5		(5)		(5)		—
2021 Adjusted for Special Items		$	8,693	$	2,167	$	6,526	$	6,526	$	3.52
Income tax items												Income tax items	—		(9)		9		9		—
2022 Adjusted for Special Items												2022 Adjusted for Special Items	$	5,768	$	1,439	$	4,329	$	4,329	$	2.38

2020 Reported		$	4,349	$	1,817	$	2,532	$	2,543	$	1.36

Implementation and acquisition-related costs		415		101		314		314		0.17
2021 Reported												2021 Reported	$	4,846	$	1,275	$	3,571	$	3,573	$	1.93
NPM Adjustment Items												NPM Adjustment Items	(32)		(8)		(24)		(24)		(0.01)
Asset impairment, exit, implementation, acquisition and disposition-related costs												Asset impairment, exit, implementation, acquisition and disposition-related costs	56		13		43		43		0.02
Tobacco and health and certain other litigation items	Tobacco and health and certain other litigation items	76		19		57		57		0.03		Tobacco and health and certain other litigation items	43		10		33		33		0.02
Impairment of JUUL equity securities		2,600		—		2,600		2,600		1.40
JUUL changes in fair value												JUUL changes in fair value	100		—		100		100		0.05
ABI-related special items	ABI-related special items	689		145		544		544		0.29		ABI-related special items	(89)		(18)		(71)		(71)		(0.04)
Cronos-related special items	Cronos-related special items	144		1		143		143		0.08		Cronos-related special items	111		(5)		116		116		0.06
COVID-19 special items		50		13		37		37		0.02
Tax items		—		(38)		38		38		0.02
2020 Adjusted for Special Items		$	8,323	$	2,058	$	6,265	$	6,276	$	3.37

Loss on early extinguishment of debt												Loss on early extinguishment of debt	649		153		496		496		0.27
Income tax items												Income tax items	—		(3)		3		3		—
2021 Adjusted for Special Items												2021 Adjusted for Special Items	$	5,684	$	1,417	$	4,267	$	4,269	$	2.30

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The following table provides a reconciliation of adjusted net earnings ~~(losses)~~ attributable to Altria and adjusted diluted EPS attributable to Altria for the three months ended ~~September~~June 30:


(in millions of dollars, except per share data)	(in millions of dollars, except per share data)	Earnings (Losses) before Income Taxes		Provision (Benefit) for Income Taxes		Net Earnings (Losses)		Net Earnings (Losses) Attributable to Altria		Diluted EPS		(in millions of dollars, except per share data)	Earnings before Income Taxes		Provision for Income Taxes		Net Earnings		Net Earnings Attributable to Altria		Diluted EPS
2021 Reported		$	(3,302)	$	(582)	$	(2,720)	$	(2,722)	$	(1.48)
NPM Adjustment Items		(44)		(11)		(33)		(33)		(0.02)
Implementation, acquisition and disposition-related costs		61		9		52		52		0.03
2022 Reported												2022 Reported	$	1,605	$	714	$	891	$	891	$	0.49

Asset impairment, exit, implementation, acquisition and disposition-related costs												Asset impairment, exit, implementation, acquisition and disposition-related costs	2		—		2		2		—
Tobacco and health and certain other litigation items	Tobacco and health and certain other litigation items	105		25		80		80		0.04		Tobacco and health and certain other litigation items	46		11		35		35		0.02
JUUL changes in fair value	JUUL changes in fair value	(100)		—		(100)		(100)		(0.05)		JUUL changes in fair value	1,155		—		1,155		1,155		0.64
ABI-related special items	ABI-related special items	6,200		1,301		4,899		4,899		2.65		ABI-related special items	112		23		89		89		0.05
Cronos-related special items	Cronos-related special items	89		—		89		89		0.05		Cronos-related special items	114		8		106		106		0.06

Tax items		—		8		(8)		(8)		—
2021 Adjusted for Special Items		$	3,009	$	750	$	2,259	$	2,257	$	1.22
Income tax items												Income tax items	—		(4)		4		4		—
2022 Adjusted for Special Items												2022 Adjusted for Special Items	$	3,034	$	752	$	2,282	$	2,282	$	1.26

2020 Reported		$	(324)	$	632	$	(956)	$	(952)	$	(0.51)
2021 Reported												2021 Reported	$	2,909	759		$	2,150	$	2,149	$	1.16

Implementation and acquisition-related costs		12		4		8		8		—
Asset impairment, exit, implementation, acquisition and disposition-related costs												Asset impairment, exit, implementation, acquisition and disposition-related costs	8		2		6		6		—
Tobacco and health and certain other litigation items	Tobacco and health and certain other litigation items	34		9		25		25		0.01		Tobacco and health and certain other litigation items	8		1		7		7		—
Impairment of JUUL equity securities		2,600		—		2,600		2,600		1.40
JUUL changes in fair value												JUUL changes in fair value	(100)		—		(100)		(100)		(0.05)
ABI-related special items	ABI-related special items	513		108		405		405		0.22		ABI-related special items	39		10		29		29		0.02
Cronos-related special items	Cronos-related special items	143		1		142		142		0.08		Cronos-related special items	181		(5)		186		186		0.10

Tax items		—		13		(13)		(13)		(0.01)
2020 Adjusted for Special Items		$	2,978	$	767	$	2,211	$	2,215	$	1.19

Income tax items												Income tax items	—		(9)		9		9		—
2021 Adjusted for Special Items												2021 Adjusted for Special Items	$	3,045	$	758	$	2,287	$	2,286	$	1.23

The following special items affected the comparability of statements of earnings ~~(losses)~~ amounts for the ~~nine~~six and three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020:~~2021:

▪NPM Adjustment Items: For a discussion of NPM Adjustment Items and a breakdown of these items by segment, see Health Care Cost Recovery Litigation in Note ~~12.~~11 ~~Contingencies~~ ~~to the condensed consolidated financial statements in Item 1 (~~“~~Note 12”)~~ and NPM Adjustment Items in Note 9,8, respectively.

▪Asset Impairment, Exit, Implementation, Acquisition and Disposition-Related Costs:Pre-tax implementation, acquisition and disposition-related charges were $117 million and $61 million for the nine and three months ended September 30, 2021, respectively. Pre-tax implementation and acquisition-related costs were $415 million and $12 million for the nine and three months ended September 30, 2020, respectively. For a discussion of ~~implementation, acquisition and disposition-related~~acquisition-related costs in our oral tobacco products segment for the six months ended June 30, 2021, see Note 9.8.

▪Tobacco and Health and Certain Other Litigation Items: For a discussion of tobacco and health and certain other litigation items and a breakdown of these costs by segment, see Note 1211 and Tobacco and Health and Certain Other Litigation Items in Note 9,8, respectively.

▪~~Impairment of JUUL Equity Securities:~~ For the nine and three months ended September 30, 2020, Altria recorded a non-cash, pre-tax impairment charge of $2,600 million, reported as impairment of JUUL equity securities in its condensed consolidated statements of earnings (losses). A full tax valuation allowance was recorded in 2020 attributable to the tax benefit associated with the impairment charge. For further discussion, see Note 4 and Note 11. ~~Income Taxes~~ ~~to the condensed consolidated financial statements in Item 1 (“Note 11”).~~

▪JUUL Changes in Fair Value: ~~For the three months ended September 30, 2021, Altria~~We recorded a non-cash, pre-tax unrealized ~~gain of $100 million, reported as~~ (income) losses from equity investments in ~~its~~our condensed consolidated statements of earnings ~~(losses)~~ as a result of changes in the estimated fair value of ~~Altria’s~~our investment in ~~JUUL. A~~JUUL consisting of the following:


	For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	2022		2021		2022		2021
(Income) losses from equity investments	$	1,255	$	100	$	1,155	$	(100)

We recorded corresponding ~~adjustment was made~~adjustments to the JUUL tax valuation ~~allowance. At September 30, 2021, the estimated fair value of Altria’s investment~~allowance in ~~JUUL was $1,705 million, unchanged from its December 31, 2020 estimated fair value.~~ 2022 and 2021.

For further discussion, see Note 4.

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▪ABI-Related Special Items: ~~Altria’s~~We recorded net pre-tax losses of $53 million from ~~its~~our equity investment in ABI for the ~~nine and three~~six months ended ~~September~~June 30, ~~2021 included~~2022, consisting primarily of ABI’s non-cash impairment charge related to its investment in a joint venture with direct exposure to Russia and Ukraine, partially offset by net mark-to-market gains on certain ABI financial instruments associated with its share commitments.

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We recorded net pre-tax ~~charges~~losses of ~~$6,111~~$112 million ~~and $6,200 million, respectively, substantially all of which related to an impairment of Altria’s equity investment in ABI. For further discussion, see Note 4.~~

~~Altria’s losses~~ from ~~its~~our equity investment in ABI for the ~~nine~~three months ended ~~September~~June 30, ~~2020 included net pre-tax charges of $689 million,~~2022, consisting primarily of ~~(i)~~ABI’s non-cash impairment charge related to its investment in a joint venture with direct exposure to Russia and Ukraine.

We recorded net pre-tax income of $89 million from our equity investment in ABI for the six months ended June 30, 2021, consisting primarily of ABI’s completion of the issuance of a minority stake in its U.S.-based metal container operations and net mark-to-market ~~losses~~gains on certain ABI financial instruments associated with its share commitments, ~~(ii) completion of the sale of its Australia subsidiary and (iii) goodwill impairment~~partially offset by charges associated with ~~its Africa businesses.~~early bond terminations by ABI.

~~Altria’s losses~~We recorded net pre-tax charges of $39 million from ~~its~~our equity investment in ABI for the three months ended ~~September~~June 30, ~~2020 included net pre-tax charges of $513 million,~~2021, consisting primarily of ~~ABI’s completion of the sale of its Australia subsidiary and goodwill impairment~~ charges associated with ~~its Africa businesses.~~early bond terminations by ABI.

These amounts include ~~Altria’s~~our respective share of the amounts recorded by ABI and ~~may also include~~ additional adjustments related to (i) conversion from international financial reporting standards to GAAP and (ii) adjustments to ~~Altria’s~~our investment required under the equity method of accounting.

▪Cronos-Related Special Items: ~~For the nine and three months ended September 30, 2021 and 2020, Altria~~We recorded net pre-tax (income) expense consisting of the following:


		For the Nine Months Ended September 30,				For the Three Months Ended September 30,					For the Six Months Ended June 30,				For the Three Months Ended June 30,
(in millions)	(in millions)	2021		2020		2021		2020		(in millions)	2022		2021		2022		2021
(Gain) loss on Cronos-related financial instruments (1)	(Gain) loss on Cronos-related financial instruments (1)	$	128	$	202	$	135	$	105	(Gain) loss on Cronos-related financial instruments (1)	$	14	$	(7)	$	4	$	103
(Income) losses from equity investments (2)	(Income) losses from equity investments (2)	72		(58)		(46)		38		(Income) losses from equity investments (2)	161		118		110		78
Total Cronos-related special items - (income) expense	Total Cronos-related special items - (income) expense	$	200	$	144	$	89	$	143	Total Cronos-related special items - (income) expense	$	175	$	111	$	114	$	181

(1)Amounts are related to the non-cash change in the fair value of the warrant and certain anti-dilution protections (the “Fixed-price Preemptive Rights”) acquired in the Cronos transaction.

(2)Amounts include ~~Altria’s~~our share of special items recorded by Cronos and ~~may also include~~additional adjustments, ~~to Altria’s investment~~if required under the equity method of ~~accounting.~~accounting, related to our investment in Cronos including the $107 million non-cash, pre-tax impairment of our investment in Cronos in the second quarter of 2022.

We recorded corresponding adjustments to the Cronos tax valuation allowance in 2022 and 2021 relating to the special items.

For further discussion, see Note ~~4 and Note 5.~~ ~~Financial Instruments~~ ~~to the condensed consolidated financial statements in Item 1.~~3.

▪Loss on Early Extinguishment of Debt:~~During the first quarter of 2021, Altria~~ We recorded pre-tax losses of $649 million for the for the six months ended June 30, 2021, as a result of the ~~completed~~completion of debt tender offers and redemption for certain of ~~certain~~our long-term senior unsecured ~~notes.~~notes as discussed in Note 9. Debt to our condensed consolidated financial statements in Item 1 (“Note 9”).

Six Months Ended June 30, 2022 Compared with Six Months Ended June 30, 2021

Net revenues, which include excise taxes billed to customers, decreased $537 million (4.1%), due primarily to the sale of our wine business in October 2021 and lower net revenues in the smokeable products and oral tobacco products segments.

Cost of sales decreased $336 million (9.6%), due primarily to lower shipment volume in our smokeable products segment and the sale of our wine business, partially offset by higher per unit settlement charges.

Excise taxes on products decreased $236 million (9.5%), due primarily to lower shipment volume in our smokeable products segment.

Marketing, administration and research costs decreased $78 million (6.9%), due primarily to the sale of our wine business, acquisition-related costs in 2021 in our oral tobacco products segment and lower spending associated with IQOS and MarlboroHeatSticks, partially offset by higher costs in our smokeable products segment.

Operating income increased $113 million (1.9%), due primarily to higher operating results in our smokeable products segment, partially offset by the sale of our wine business and lower operating results in our oral tobacco products segment.

Interest and other debt expense, net decreased $42 million (7.0%), due primarily to lower interest costs as a result of debt maturities and refinancing activities in 2021 and lower interest costs on our Euro denominated debt resulting from the strengthening of the U.S. dollar versus the Euro.

(Income) losses from equity investments decreased $1,355 million (100%+), due primarily to non-cash, unrealized losses resulting from the changes in the estimated fair value of our investment in JUUL in 2022 and lower income from our equity investment in ABI, which included a negative impact from special items.

Our income tax rate increased 7.1 percentage points to 33.4%. For further discussion, see Note 10. ~~Debt~~Income Taxes to ~~the~~our condensed consolidated financial statements in Item 1 (“Note 10”).

▪~~COVID-19 Special Items:~~ ~~For the nine months ended September 30, 2020, Altria recorded net pre-taxcharges totaling $50 million directly related to disruptions caused by or efforts to mitigate the impact of the COVID-19 pandemic. For further discussion and a breakdown of these costs by segment, see~~ ~~COVID-19 Special Items~~ ~~in Note 9.~~

▪~~Tax Items:~~ Tax items for the nine months ended September 30, 2020 included net tax expense of $38 million, due primarily to tax expense of $17 million for a tax basis adjustment to Altria’s investment in ABI and net tax expense of $12 million for adjustments resulting from amended returns and audit adjustments related to prior years. Tax items for the three months ended September 30, 2020 included tax benefits of $13 million, due primarily to tax benefits of $17 million for a tax basis adjustment of Altria’s investment in ABI.

~~Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020~~

Net revenues, which include excise taxes billed to customers, decreased $91 million (0.5%), due primarily to lower net revenues in the smokeable products segment, partially offset by higher net revenues in the wine and oral tobacco products segments and the financial services business.

Cost of sales decreased $561 million (9.5.%), due primarily to the inventory-related charges in the wine segment in 2020 (as discussed in Note 9), lower shipment volume in the smokeable products segment, NPM Adjustment Items in 2021 and COVID-19 special items in 2020, partially offset by higher per unit settlement charges, higher manufacturing costs and higher shipment volume in the wine segment.

~~Excise taxes on products decreased $330 million (8.1%), due primarily to lower shipment volume in the smokeable products segment.~~

Marketing, administration and research costs increased $265 million (16.7%), due primarily to higher general corporate expenses, higher spending in the oral tobacco products (including higher acquisition-related costs - as discussed in Note 9) and

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~~smokeable products segments, the charge associated with the Ste. Michelle Transaction and higher spending associated with the retail expansion~~Reported net earnings attributable to Altria of ~~IQOS~~ ~~and~~ ~~Marlboro HeatSticks~~.

~~Operating income increased $535~~$2,850 million ~~(6.5%~~decreased $723 million (20.2%), due primarily to ~~higher operating~~unfavorable results ~~in the wine and smokeable products segments,~~from our equity investments, partially offset by ~~higher general corporate expenses and lower operating results in the oral tobacco products segment.~~

Net periodic benefit income, excluding service cost, increased by $94 million (100.0%+), due primarily to lower interest cost resulting from a decrease in discount rates and amendments to its salaried retiree healthcare plans during the second quarter of 2021. For further discussion, see Note 6. ~~Benefit Plans~~ ~~to the condensed consolidated financial statements in Item 1 (“Note 6”).~~

Income (losses) from equity investments, which decreased $5,483 million (100.0%+), were negatively impacted by unfavorable special items from Altria’s equity investments in ABI (primarily due to the impairment of Altria’s equity investment in ABI in 2021) and Cronos (as shown above).

~~Altria’s income tax rate increased 3.1 percentage points to 44.9%. For further discussion, see Note 11.~~

~~Reported net earnings (losses) attributable to Altria of $851 million decreased $1,692 million (66.5%), due primarily to higher losses from equity investments and~~ the loss on early extinguishment of debt ~~partially offset by the 2020 impairment of JUUL equity securities,~~in 2021, higher operating income and lower ~~loss on Cronos-related financial instruments~~interest and ~~favorable net periodic benefit income, excluding service cost.~~other debt expense, net. Reported basic and diluted EPS attributable to Altria of ~~$0.46,~~$1.57 each decreased by ~~66.4% and 66.2%~~18.7%, ~~respectively,~~ due to lower reported net earnings ~~(losses)~~ attributable to Altria, partially offset by fewer shares outstanding.

Adjusted net earnings attributable to Altria of ~~$6,526~~$4,329 million increased ~~$250~~$60 million ~~(4.0%~~(1.4%), due primarily to higher ~~smokeable products segment~~ OCI ~~favorable net periodic benefit income, excluding service cost,~~ and ~~higher income from Altria’s investment in ABI, partially offset by a higher income tax rate.~~lower interest and other debt expense, net. Adjusted diluted EPS attributable to Altria of ~~$3.52~~$2.38 increased by ~~4.5%~~3.5%, due to fewer shares outstanding and higher adjusted net earnings attributable to ~~Altria and fewer shares outstanding.~~Altria.

Three Months Ended ~~September~~June 30, ~~2021~~2022 Compared with Three Months Ended ~~September~~June 30, ~~2020~~2021

Net revenues, which include excise taxes billed to customers, decreased ~~$337~~$393 million ~~(4.7%~~(5.7%), due primarily to lower net revenues in the smokeable products segment, the sale of our wine business in October 2021 and lower net revenues in the oral tobacco products segment.

Cost of sales decreased ~~$103~~$174 million ~~(5.3%~~(9.2%), due primarily to lower shipment volume in ~~the~~our smokeable products segment and ~~NPM Adjustment Items in 2021,~~the sale of our wine business, partially offset by higher per unit settlement charges and higher manufacturing costs.

Excise taxes on products decreased ~~$190~~$153 million ~~(13.1%~~(11.6%), due primarily to lower shipment volume in ~~the~~our smokeable products segment.

Marketing, administration and research costs increased ~~$165~~$15 million ~~(29.6%~~(2.7%), due primarily to higher ~~general corporate expenses,~~costs in our smokeable products segment (including higher tobacco and health and certain other litigation items), partially offset by the ~~charge associated with the Ste. Michelle Transaction, higher~~sale of our wine business and lower spending associated with ~~the retail expansion of~~ IQOSand Marlboro HeatSticks~~and higher spending in the oral tobacco products segment.~~.

Operating income decreased ~~$209~~$81 million ~~(6.6%~~(2.5%), due primarily to lower operating results in ~~all reportable~~our oral tobacco and smokeable products segments and ~~higher general corporate expenses.~~the sale of our wine business.

Interest and other debt expense, net decreased ~~$44~~$15 million ~~(14.2%~~(5.1%), due primarily to lower interest costs ~~in 2021 as a result~~on our Euro denominated debt resulting from the strengthening of the U.S. dollar versus the Euro and debt ~~refinancing activities and interest income associated with NPM Adjustment Items~~maturities in 2021.

~~Net periodic benefit income, excluding service cost, increased by $60~~(Income) losses from equity investments decreased $1,338 million (100.0%+), due primarily to ~~lower interest cost~~non-cash, unrealized losses resulting from ~~a decrease in discount rates and amendments to its salaried retiree healthcare plans during~~ the ~~second quarter of 2021. For further discussion, see Note 6.~~

Income (losses) from equity investments, which decreased $5,443 million (100.0%+), were negatively impacted by unfavorable special items from Altria’s equity investment in ABI (primarily due to the impairment of Altria’s equity investment in ABI in 2021), partially offset by an increasechange in the estimated fair value of ~~Altria’s~~our investment in JUUL in 2022 and ~~Cronos’s~~lower income from our equity investment in ABI, primarily due to special ~~items (as shown above).~~items.

~~Altria’s~~Our income tax rate increased ~~212.7~~18.4 percentage points to ~~17.6%~~44.5%. For further discussion, see Note ~~11.~~10.

Reported net earnings ~~(losses)~~ attributable to Altria of ~~$(2,722)~~$891 million decreased ~~$1,770~~$1,258 million ~~(100.0%+~~(58.5%), due primarily to ~~higher losses~~unfavorable results from our equity investments and lower operating income, partially offset by the ~~2020 impairment of JUUL equity securities, favorable net periodic benefit income, excluding service cost, and lower interest and other debt expense, net.~~loss on Cronos-related instruments in 2021. Reported basic and diluted EPS attributable to Altria of ~~$(1.48),~~$0.49, each decreased by ~~100.0%+~~57.8%, due to lower reported net earnings ~~(losses)~~ attributable to Altria, partially offset by fewer shares outstanding.

Adjusted net earnings attributable to Altria of ~~$2,257~~$2,282 million ~~increased $42~~decreased $4 million ~~(1.9%~~(0.2%)~~, due primarily to higher income from Altria’s equity investment in ABI, favorable net periodic income, excluding service cost, a lower income tax rate and~~

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~~lower interest and other debt expense, net, partially offset by lower OCI.~~. Adjusted diluted EPS attributable to Altria of ~~$1.22~~$1.26 increased by ~~2.5%~~2.4%, due to ~~higher adjusted net earnings attributable to Altria and~~ fewer shares outstanding.

Operating Results by Business Segment

Tobacco Space

Business Environment

Summary

The ~~U.S.~~United States tobacco industry faces a number of business and legal challenges that have adversely affected and may adversely affect ~~the~~our business and ~~sales volume of Altria’s tobacco subsidiaries and investees and Altria’s~~our consolidated results of operations, cash flows or financial ~~position.~~position or our ability to achieve our Vision. These challenges, some of which are discussed in more detail in Note ~~12,~~11 and in Part I, Item 1A. Risk Factors of our ~~2020 Form 10-K, in Part II, Item 1A. Risk Factors of our Quarterly~~Annual Report on Form ~~10-Q~~10-K for the ~~period~~year ended ~~June 30,~~December 31, 2021 (“~~Second Quarter~~ 2021 Form ~~10-Q”~~10-K”) ~~and in Part II, Item 1A. Risk Factors of this Form 10-Q,~~, include:

▪pending and threatened litigation and bonding requirements;

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

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

▪bans and restrictions on tobacco use imposed by governmental entities and private establishments and employers;

▪other federal, state and local government actions, including:

▪restrictions on the sale of certain tobacco products, the sale of tobacco products by certain retail establishments, the sale of tobacco products with characterizing flavors and the sale of tobacco products in certain package sizes;

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▪additional restrictions on the advertising and promotion of tobacco products;

▪other actual and proposed tobacco-related legislation and regulation; and

▪governmental investigations;

▪reductions in cigarette and MST products consumption levels due to growth of innovative tobacco products;

▪increased efforts by tobacco control advocates and other private sector entities (including retail establishments) to further restrict the availability and use of tobacco products;

▪changes in adult tobacco consumer purchase behavior, which is influenced by various factors such as ~~economic~~macroeconomic conditions (including inflation), excise taxes and price gap relationships, may result in adult tobacco consumers switching to discount products or other lower-priced tobacco products;

▪the highly competitive nature of all tobacco categories, including ~~without limitation,~~ competitive disadvantages related to cigarette price increases attributable to the settlement of certain litigation and the proliferation of innovative tobacco products, ~~including~~such as e-vapor and oral nicotine pouch products;

▪illicit trade in tobacco products; and

▪potential adverse changes in prices, availability and quality of tobacco, other raw materials and ~~components;~~component parts, including as a result of changes in macroeconomic and

▪~~the COVID-19 pandemic.~~ geopolitical conditions.

In addition to and in connection with the foregoing, evolving adult tobacco consumer preferences ~~are continuing~~continue to impact the tobacco industry. ~~Altria’s tobacco subsidiaries~~We believe that a significant number of adult tobacco consumers switch among tobacco categories, use multiple forms of tobacco products and try innovative tobacco products, such as e-vapor products and oral nicotine pouches. Adult smokers continue to transition from cigarettes to exclusive use of smoke-free tobacco product alternatives, which aligns with ~~Altria’s~~our Vision.

Until the second half of 2019, the e-vapor category experienced significant growth, and the number of adults who exclusively used e-vapor products also increased during that time, which, along with growth in oral nicotine pouches, negatively impacted consumption levels and sales volume of cigarettes and MST. Over the past two years, the legislative and regulatory activities discussed below negatively impacted growth in the e-vapor category. While these activities continue to impact the e-vapor category, the category has recently been experiencing a moderate rate of growth and has become increasingly competitive.

Oral nicotine pouch retail share of the total oral tobacco category has grown significantly over the past year from 7.7% year to date as of September 30, 2020 to 14.5% year to date as of September 30, 2021. The oral nicotine pouch category is also becoming increasingly competitive.

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We are monitoring the introduction of unregulated synthetic nicotine products, which may lead to further competition for regulated tobacco products, including oral nicotine pouches and e-vapor products, and may result in underage use of these unregulated products.

Altria and its tobacco subsidiaries believe the innovative tobacco products categories (in particular, e-vapor) will continue to be dynamic due to adult tobacco consumer exploration of a variety of tobacco product options, adult consumer perceptions of the relative risks of smoke-free products compared to cigarettes, FDA determinations on product applications and legislative actions.

In the nine months ended September 30, 2021, we estimate that, when adjusted for trade inventory movements, calendar differences and other factors, domestic cigarette industry volume declined by 5%. Altria expects 2021 cigarette industry volume trends to continue to be most influenced by (i) changes to adult smoker stay-at-home practices, disposable income, purchasing patterns and adoption of smoke-free products, (ii) the economy (including unemployment rates, the impact of increased inflation and gasoline prices), (iii) fiscal stimulus, (iv) cross-category movement, (v) the timing and extent of COVID-19 vaccine administration and the impact of COVID-19 variants, (vi) adult smoker purchasing behavior of those who receive the vaccine and (vii) regulatory and legislative (including excise tax) developments.

Economic conditions also impact adult tobacco consumer purchase behavior. Prior economic downturns have resulted in adult tobacco consumers choosing discount products and other lower-priced tobacco products. Although the economic impact resulting from the COVID-19 pandemic has not meaningfully increased the growth of discount and lower priced tobacco products, in part due to stimulus payments, adult tobacco consumers may increasingly choose these products if economic conditions do not continue to improve. See ~~Executive Summary~~ ~~in Item 7 above for further discussion.~~

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

Over the past two years, the legislative and regulatory activities discussed below negatively impacted growth in the e-vapor category. Despite the challenges these activities have created and continue to create in the marketplace, the e-vapor category experienced moderate growth in 2021 and remains competitive in 2022.

Oral nicotine pouch retail share of the total oral tobacco category grew significantly over the prior year from 13.6% for the six months ended June 30, 2021 to 20.1% for the six months ended June 30, 2022. The oral nicotine pouch category continues to be increasingly competitive. In addition, oral nicotine pouch growth has primarily sourced from cigarette and smokeless tobacco consumers.

We are monitoring the sale and distribution of synthetic nicotine products, including in the form of e-vapor products and oral nicotine pouches. As a result of recent amendments to the U.S. Food, Drug and Cosmetic Act, synthetic nicotine products are now subject to FDA regulatory oversight, as discussed further below. We believe FDA regulatory actions, which may be subject to legal challenges, will further impact the competitive environment.

We believe the innovative tobacco product categories will continue to be dynamic due to competition, adult tobacco consumer exploration of a variety of tobacco product options, adult tobacco consumer perceptions of the relative risks of smoke-free products compared to cigarettes, FDA determinations on product applications and legislative actions.

For the six months ended June 30, 2022, we estimate that, when adjusted for trade inventory movements and other factors, domestic cigarette industry volume declined by 7.5%. We expect 2022 cigarette industry volume trends to continue to be most influenced by (i) disposable income, purchasing patterns and adoption of smoke-free products, (ii) macroeconomic conditions (including increased inflation and gasoline prices, partially offset by low unemployment and wage inflation), (iii) cross-category movement, (iv) the potential impact of COVID-19 variants and (v) regulatory and legislative (including excise tax) developments.

Macroeconomic conditions (including a high inflationary environment) can also impact adult tobacco consumer purchasing behavior. For example, economic downturns have coincided with adult tobacco consumers modifying purchase behavior at retail, potentially reducing the amount of their regular brand purchases or selecting discount products and other lower priced tobacco brands. Beginning in January 2022, the Omicron variant of COVID-19 impacted consumer purchasing behavior, resulting in a short-term decrease in retail trips and tobacco sales volume. In addition, gas prices increased due in part to the Russian invasion of Ukraine. Increases in inflation as a result of macroeconomic and geopolitical conditions put pressure on discretionary income as the Consumer Price Index reached a 40 year high in the six months ended June 30, 2022. These economic headwinds were partially offset by positive wage inflation, increases in federal tax refund payments, and low unemployment in comparison to the six months ended June 30, 2021. We believe that adult tobacco consumers adapted their purchasing patterns across a variety of goods and services to compensate for the pressures on disposable income. We expect

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fluctuations in discount product share for cigarettes and MST products as price sensitive adult tobacco consumers react to their economic conditions.

FSPTCA and FDA Regulation

▪The Regulatory Framework: The FSPTCA, its implementing regulations and its 2016 deeming regulations establish broad FDA regulatory authority over all tobacco products and, among other provisions:

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

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

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

▪authorize the FDA to impose tobacco product standards that are appropriate for the protection of the public health; and

▪equip the FDA with a variety of investigatory and enforcement tools, including the authority to inspect product manufacturing and other facilities.

The FSPTCA also bans descriptors such as “light,” “low” or “mild” when used as descriptors of modified risk, unless expressly authorized by the FDA. In connection with a 2016 lawsuit initiated by ~~John~~ Middleton, ~~Co. (“Middleton”),~~ the U.S. Department of Justice, on behalf of the FDA, informed Middleton that the FDA does not intend to bring an enforcement action against Middleton for the use of the term “mild” in the trademark “Black & Mild.” Consequently, Middleton dismissed its lawsuit without prejudice. If the FDA were to change its position at some later date, Middleton would have the opportunity to bring another lawsuit.

In March 2022, the U.S. Congress expanded the statutory definition of tobacco products to include products containing nicotine derived from any source, including synthetic nicotine. We advocated for FDA regulatory oversight of synthetic nicotine products. The amendment became effective in April 2022. See Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement below for additional information on the effects of the statutory change.

▪Final Tobacco Marketing Rule: As required by the FSPTCA, in March 2010, the FDA promulgated a wide range of advertising and promotion restrictions for cigarettes and smokeless tobacco(1) products (the “Final Tobacco Marketing Rule”). The May 2016 deeming regulations amended the Final Tobacco Marketing Rule to expand specific provisions to all tobacco products, including cigars, pipe tobacco and e-vapor and oral nicotine products containing tobacco-derived nicotine or other tobacco ~~derivatives, but do not include any component or part that is not made or derived from tobacco.~~derivatives.

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

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

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

~~(1)~~“Smokeless tobacco,” as used in this section of this Form 10-Q, refers to smokeless tobacco products first regulated by the FDA in 2009, including MST. It excludes oral nicotine pouches, which were first regulated by the FDA in 2016.

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

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

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

Subject to certain limitations arising from legal challenges, the Final Tobacco Marketing Rule took effect in June 2010 for cigarettes and smokeless tobacco products, ~~and~~ in August 2016 for all other tobacco products, including e-vapor and oral nicotine pouch products containing tobacco-derived nicotine, and in April 2022 for tobacco products, including e-vapor and oral nicotine pouch products, that contain synthetic nicotine.

▪Rulemaking and Guidance: From time to time, the FDA issues proposed regulations and guidance, which may be issued in draft or final form, generally involve public comment and may include scientific review. The FDA also may request comments on broad topics through an Advanced Notice of Proposed Rulemaking (“ANPRM”). ~~Altria’s tobacco subsidiaries~~We actively engage with the FDA to develop and implement the FSPTCA’s regulatory framework, including submission of comments to various FDA policies and proposals and participation in public hearings and engagement sessions.

(1)“Smokeless tobacco,” as used in this section of this Form 10-Q, refers to smokeless tobacco products first regulated by the FDA in 2009, including MST.It excludes oral nicotine pouches, which were first regulated by the FDA in 2016.

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The FDA’s implementation of the FSPTCA and related regulations and guidance also may have an impact on enforcement efforts by ~~U.S.~~ states, territories and localities of their laws and regulations as well as of the State Settlement Agreements discussed below (see State Settlement Agreements below). Such enforcement efforts may adversely affect ~~the~~our ability ~~of Altria’s tobacco subsidiaries and investees~~ to market and sell regulated tobacco products in those states, territories and ~~localities.~~localities and impact the value of our investment in JUUL.

▪FDA’s Comprehensive Plan for Tobacco and Nicotine Regulation: In July 2017, the FDA announced a “Comprehensive Plan for Tobacco and Nicotine Regulation” (“Comprehensive Plan”) designed to strike a balance between regulation and encouraging the development of innovative tobacco products that may be less risky than cigarettes. Since then, the FDA has issued additional information about its Comprehensive Plan in response to concerns associated with the rise in the use of e-vapor products by youth and the potential youth appeal of flavored tobacco products (see Underage Access and Use of Certain Tobacco Products below). As part of the Comprehensive Plan, the FDA:

▪issued ANPRMs relating to potential product standards for nicotine in cigarettes, flavors in all tobacco products (including menthol in cigarettes and characterizing flavors in all cigars); and, for e-vapor products, to protect against known public health risks such as concerns about youth exposure to liquid nicotine;

▪took actions to restrict youth access to e-vapor products; and

▪reconsidered the processes used by the FDA to review certain reports and new product ~~applications; and~~

▪~~revisited the timelines (previously extended by the FDA) to submit applications for tobacco products first regulated by the FDA in 2016.~~applications.

▪Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement: The FSPTCA permits the sale of tobacco products ~~commercially marketed~~on the market as of February 15, 2007 and not subsequently modified (“Grandfathered Products”) and new or modified products authorized through the ~~pre-market tobacco product application (“PMTA”),~~PMTA, Substantial Equivalence (“SE”) or SE Exemption pathways. Subsequent FDA rules also provide a Supplemental PMTA pathway designed to increase the efficiency of submission and review for modified versions of previously authorized products.

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

▪~~all tobacco products on the market as of February 15, 2007, and not subsequently modified, are~~ Grandfathered Products ~~and~~are exempt from the pre-market authorization requirement;

▪cigarette and smokeless tobacco products that were modified or first introduced into the market between February 15, 2007 and March 22, 2011 are generally considered “Provisional Products” for which SE reports were required to be filed by March 22, 2011. These reports must demonstrate that the product has the same characteristics as a product on the market as of February 15, 2007 or to a product previously determined to be substantially equivalent, or has different characteristics but does not raise different questions of public health; ~~and~~

▪tobacco products that were first regulated by the FDA in 2016, including cigars, e-vapor products and oral nicotine pouches that are not Grandfathered Products, are generally products for which either an SE report or PMTA needed to be filed by September 9, ~~2020.~~2020; and

▪tobacco products containing nicotine from any source other than tobacco (e.g., synthetic nicotine) that were on the market between March 15, 2022 and April 14, 2022 and are not Grandfathered Products are generally products for which a manufacturer must have filed a PMTA by May 14, 2022. A manufacturer was permitted to keep such a product on the market until July 13, 2022 provided that a PMTA was filed by May 14, 2022. Thereafter, unless the FDA granted the product a marketing order, the product is unlawful and subject to the FDA’s enforcement discretion.

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

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manufacturer could receive (i) a “not substantially equivalent” determination, (ii) a denial of a PMTA or (iii) a marketing order withdrawal by the FDA on one or more products, which would require the removal of the product or products from the market. ~~Such~~In addition, new scientific data continues to be developed relating to innovative tobacco products, which could impact FDA’s determination as to whether a product is, or continues to be, appropriate for the protection of public health and could, therefore, result in the removal of one or more products from the market. Any such actions affecting our or JUUL’s products could have a material adverse impact on ~~the~~our business and our consolidated results of operations, ~~of our tobacco subsidiaries and investees, and the~~ cash flows or financial position, ~~of Altria and its tobacco subsidiaries,~~ including ~~adversely affecting~~an adverse impact on the value of ~~Altria’s~~our investment in ~~JUUL.~~JUUL (due to the impact on JUUL’s business).

~~Provisional~~ Products Regulated in 2009: Most cigarette and smokeless tobacco products currently marketed by ~~Philip Morris~~PM USA ~~Inc. (“PM USA”)~~ and ~~U.S. Smokeless Tobacco Company LLC (“USSTC”)~~USSTC are “Provisional ~~Products”. Altria’s subsidiaries~~Products.” PM USA and USSTC timely submitted SE reports for these Provisional ~~Products. PM USA~~Products and ~~USSTC~~ have received SE determinations on certain Provisional Products. Those products that were found by the FDA to be not substantially equivalent (certain smokeless tobacco products) had been discontinued for business reasons prior to the FDA’s determinations; therefore, those determinations did not impact business results. PM USA and USSTC have other Provisional Products that continue to be subject to the FDA’s pre-market review process. In the meantime, they can continue marketing these products unless the FDA determines that a specific Provisional Product is not substantially equivalent.

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In addition, the FDA has communicated that it will not review a certain subset of Provisional Product SE reports and that the products that are the subject of those reports can continue to be legally marketed without further FDA review. PM USA and USSTC have Provisional Products included in this subset of products.

While ~~Altria’s cigarette~~we believe PM USA’s and ~~smokeless tobacco subsidiaries believe their~~USSTC’s current Provisional Products meet the statutory requirements of the FSPTCA, ~~they~~we cannot predict how the FDA will ultimately apply law, regulation and guidance to their various SE reports. Should ~~Altria’s cigarette and smokeless tobacco subsidiaries~~PM USA or USSTC receive unfavorable determinations on any SE reports currently pending with the FDA, ~~they~~we believe ~~they~~PM USA and USSTC can replace the vast majority of ~~their respective~~these product volumes with other FDA authorized products or with Grandfathered Products.

~~Non-Provisional Products~~: Cigarette and smokeless tobacco products introduced into the market or modified after March 22, 2011 are “Non-Provisional Products” and must receive a marketing order from the FDA prior to being offered for sale. Marketing orders for Non-Provisional Products may be obtained by filing an SE report, PMTA or using another pre-market pathway established by the FDA. ~~Altria’s cigarette~~PM USA and ~~smokeless tobacco subsidiaries~~USSTC may not be able to obtain a marketing order for non-provisional products because the FDA may determine that any such product does not meet the statutory requirements for approval.

Products Regulated in 2016: Manufacturers of products first regulated by the FDA in 2016, including cigars, oral nicotine pouches and e-vapor products, that were on the market as of August 8, 2016 and not subsequently modified must have filed an SE report or PMTA by the filing deadline of September 9, 2020 in order for their products to remain on the market. These products can remain on the market during FDA review through court-allowed, case-by-case discretion, so long as the report or application was timely filed with the FDA. Due to the large number of applications received by September 9, 2020, the FDA did not complete its review of all submitted applications by September 9, ~~2021; although~~2021. In May 2022, the FDA represented that it ~~has issued various~~had resolved more than 99% of the timely applications it had received, with most resulting in marketing denial orders ~~on over 90%~~(“MDOs”). A number of the ~~applications and issued~~ marketing ~~granted~~denial orders ~~on a few applications for tobacco flavor e-vapor products.~~are subject to litigation challenges initiated by the affected manufacturers. For those products still under FDA review, it is uncertain when and for how long the FDA may permit continued marketing and sale of those products pursuant to its case-by-case discretion. For products (new or modified) not on the market as of August 8, 2016, manufacturers must file an SE report or PMTA and receive FDA authorization prior to marketing and selling the product.

Helix ~~Innovations LLC (“Helix”)~~ submitted PMTAs for on! oral nicotine pouches in May 2020. As of July 25, 2022, the FDA has not issued marketing order decisions for any on! products. JUUL submitted PMTAs ~~to the FDA~~ for its e-vapor device and the related tobacco and menthol flavors in July 2020. ~~As of October 25, 2021,~~In June 2022, the FDA ~~has not~~ issued ~~marketing order decisions~~MDOs to JUUL for ~~any~~all of JUUL’s products currently marketed in the United States. These MDOs are currently stayed. See ~~on!~~FDA Regulatory Actions - Electronic Nicotine Delivery System Products ~~or JUUL products.~~below for further discussion. In addition, as of ~~October~~July 25, ~~2021,~~2022, Middleton has received market orders or exemptions that cover over ~~98%~~99% of its ~~cigar product volume and has pending timely filed SE reports for its remaining~~ cigar product volume.

In December 2013, ~~Altria’s subsidiaries~~we entered into a series of agreements with Philip Morris International Inc. (“PMI”), including an agreement that grants ~~Altria~~us an exclusive right to commercialize certain of PMI’s heated tobacco products in the United States, subject to FDA authorization of the applicable products. PMI submitted a PMTA and a modified risk tobacco product (“MRTP”) application with the FDA for its electronically heated tobacco products comprising the IQOS Tobacco Heating System. The IQOS devices heat, but do not burn tobacco. In April 2019, the FDA authorized the PMTA for the IQOS Tobacco Heating System and in July 2020, the FDA authorized the marketing of this system as ~~a modified risk tobacco product (“MRTP”)~~an MRTP with a reduced exposure claim. ~~The~~ ~~IQOS~~ ~~electronic device heats but does not burn tobacco.~~ In December 2020, the FDA authorized the PMTA for IQOS 3, an updated version of the IQOS~~electronic device. The MRTP authorization for~~ devices, and in March 2022 authorized the ~~original~~marketing of the IQOS ~~electronic~~3 device ~~currently does not apply to the~~ ~~IQOS~~ 3~~device. PMI submitted~~as an MRTP ~~application for~~with the ~~IQOS~~ ~~3 electronic device in March 2021, which is currently under review by the FDA.~~same reduced exposure claim.

In September 2021, in connection with a patent dispute, the ~~United States~~U.S. International Trade Commission (“ITC”) issued a cease and desist order, effective as of November 29, 2021, banning (i) the importation of the IQOS ~~electronic device,~~devices, Marlboro HeatSticks and infringing components into the

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United States and (ii) the sale, marketing and distribution of such imported products in the United States. As a result, PM USA ~~announced plans to begin removing~~removed the ~~product~~products from the marketplace. For a further discussion of the ITC decision, see Note ~~12.~~11.

In October 2021, the FDA authorized the marketing and sale of four of USSTC’s Verve oral nicotine products, including Green Mint and Blue Mint varieties, representing the first flavored product authorizations issued by the FDA for newly deemed innovative products. These products are not currently marketed or sold.

Post-Market Surveillance: Manufacturers that receive product authorizations through the PMTA process must ~~submit~~adhere to the FDA post-market ~~records~~record keeping and ~~reports,~~reporting requirements, as detailed in market ~~orders.~~orders and in the final PMTA rule that went into effect in November 2021. This includes notification of all marketing activities. The IQOS Tobacco Heating System is subject to this post-market surveillance requirement. The FDA may amend requirements of a market order or withdraw the market order based on this information if, among other reasons, it determines that the continued marketing of the products is no longer appropriate for the protection of the public health.

Effect of Adverse FDA Determinations: FDA review time frames have varied. It is therefore difficult to predict the duration of FDA reviews of SE reports or PMTAs. Failure of manufacturers to submit applications by the applicable deadline, an

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unfavorable determination on an application, or the withdrawal by the FDA of a prior marketing order or other changes in FDA regulatory requirements could result in the removal of products from the market. These manufacturers would have the option of marketing products that have received FDA pre-market authorization or Grandfathered Products. A “not substantially equivalent” determination, a denial of a PMTA or a marketing order withdrawal by the FDA on one or more products (which would require the removal of the product or products from the market) could have a material adverse impact on ~~the~~our business and our consolidated results of operations, ~~of our tobacco subsidiaries and investees, and the~~ cash flows or financial position, ~~of Altria and its tobacco subsidiaries,~~ including ~~adversely affecting~~an adverse impact on the value of ~~Altria’s~~our investment in ~~JUUL.~~JUUL (due to the impact on JUUL’s business). Also, an adverse FDA ~~determination~~determinations on ~~one or more~~ innovative tobacco products could impede our ability to achieve our Vision.

▪FDA Regulatory Actions

▪Graphic Warnings: In March 2020, the FDA issued a final rule requiring 11 textual warnings accompanied by color graphics depicting certain negative health consequences of smoking on cigarette packaging and advertising. ~~As a result of a March 2021 court order related to the COVID-19 pandemic and subsequent court orders resulting from a lawsuit brought by R.J. Reynolds Tobacco Company and others against the FDA, the~~The final rule ~~will be~~is currently set to become effective ~~October 11, 2022.~~on July 8, 2023. PM USA and other cigarette manufacturers have filed lawsuits challenging the final rule on substantive and procedural grounds.

In the preamble to the final rule, the FDA stated that it would not exempt Marlboro HeatSticks, a heated tobacco product used with the IQOS ~~electronic device,~~devices, as part of the rulemaking, but would consider the Marlboro HeatSticks marketing order, and other marketing orders, on a case-by-case basis. To date, the FDA has not taken any action to exempt Marlboro HeatSticks from the graphic health warnings requirements.

▪Underage Access and Use of Certain Tobacco Products: The FDA announced regulatory actions in September 2018 to address underage access and use of e-vapor products. ~~Altria has~~We have engaged with the FDA on this topic and ~~has~~have reaffirmed to the FDA ~~its~~our ongoing and long-standing commitment to preventing underage use. For example, during 2019, ~~Altria~~we advocated raising the minimum legal age to purchase all tobacco products to 21 at the federal and state levels to further address underage use, which is now federal law. See Federal, State and Local Legislation to Increase the Legal Age to Purchase Tobacco Products below for further discussion. In addition, through our retailer incentive program, stores representing over 70% of PM USA’s cigarette volume have implemented point-of-sale age validation technology.

Additionally, ~~in March 2019,~~ the FDA issued ~~draft~~final guidance ~~further proposing restrictions to address underage e-vapor use. This guidance, which the FDA finalized in January 2020 and then revised~~ in April 2020, ~~states~~stating that ~~the FDA~~it intends to prioritize enforcement action against certain product categories, including cartridge-based, flavored e-vapor products and products targeted to minors.

▪~~Flavored~~ Electronic Nicotine Delivery System ~~(“ENDS”)~~ Products: ~~Some e-vapor product manufacturers~~In June 2022, the FDA issued MDOs to JUUL ordering all of JUUL’s products currently marketed in the United States off the market. JUUL filed a petition for review of the MDOs with the U.S. Court of Appeals for the D.C. Circuit. JUUL subsequently moved the D.C. Circuit for a temporary administrative stay of the MDOs, which the court granted to provide sufficient opportunity for the court to consider JUUL’s emergency motion for a stay pending the court’s consideration of JUUL’s challenge to the MDOs. In July 2022, the FDA administratively stayed the MDOs on a temporary basis, citing its determination that there are scientific issues unique to the JUUL PMTAs that warrant additional review. This administrative stay temporarily suspends the MDOs and JUUL’s products currently remain on the market. The proceedings in the U.S. Court of Appeals for ~~flavored tobacco products.~~ the D.C. Circuit are being held in abeyance pending completion of the FDA’s additional review, and JUUL has withdrawn its motion for an emergency stay with respect to the MDOs, without prejudice to refiling at a later date. In light of these developments, the D.C. Circuit dissolved the administrative stay it had previously granted and directed the parties to file motions to govern further proceedings within 14 days of FDA’s completion of its additional review process.

▪As of ~~October~~July 25, ~~2021,~~2022, many manufacturers of ~~these manufacturers~~flavored e-vapor products received ~~marketing denial orders~~MDOs for failure to provide sufficiently strong product-specific scientific evidence to demonstrate that the benefit of their products to adult smokers overcomes the risk that their products pose to youth. The FDA has communicated in these ~~marketing denial orders~~MDOs that vapor products with non-tobacco flavors present unique questions relevant to the FDA’s “Appropriate for the Protection of Public Health” standard and that successful applications ~~will~~ require strong, product-specific evidence. A number of these manufacturers are appealing the ~~marketing denial orders~~MDOs for their products. ~~If the FDA does not ultimately allow for the reintroduction of flavors other than tobacco, it could adversely affect the value of Altria’s investment in JUUL.~~

Some ENDS manufacturers, including some that have received marketing denial orders, have indicated their intention to market ENDS products containing synthetically-derived nicotine, which is not currently FDA-regulated. If these products are sold in higher volumes, and marketed outside of FDA oversight, it could adversely affect the value of

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~~Altria’s investment in JUUL, have a material adverse effect on Altria’s consolidated financial position or earnings and impede our ability to achieve our Vision.~~

▪Potential Product Standards

▪Nicotine in Cigarettes and Other Combustible Tobacco Products: In March 2018, the FDA issued an ANPRM seeking comments on the potential public health benefits and any possible adverse effects of lowering nicotine in combustible cigarettes to non-addictive or minimally addictive levels. Among other issues, the FDA sought comments on (i) whether smokers would compensate by smoking more cigarettes to obtain the same level of nicotine as with their current product and (ii) whether the proposed rule would create an illicit trade of cigarettes containing nicotine at levels higher than a non-addictive threshold that may be established by the FDA. The FDA also sought comments on

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whether a nicotine product standard should apply to other combustible tobacco products, including cigars. ~~Were~~In June 2022, the ~~FDA~~Biden Administration published its Spring 2022 Unified Regulatory Agenda, which includes the FDA’s plans to ~~develop and finalize~~propose, by May 2023, a product standard ~~for~~that would establish a maximum nicotine level in cigarettes and other combustible ~~products, and if~~tobacco products. Any proposed product standard would proceed through the standard was appealed and upheld in the courts, it could have a material adverse effect on the business, consolidated results of operations, cash flows or financial position of Altria and its tobacco subsidiaries.rulemaking process, which will take multiple years to complete.

▪Flavors in Tobacco Products: ~~As discussed above under~~ ~~FDA’s Comprehensive Plan for Tobacco and Nicotine Regulation~~,the FDA indicated that it is considering proposing rulemaking for a product standard that would seek to ban menthol in combustible tobacco products, including cigarettes and cigars, and that it intends to propose a product standard that would ban characterizing flavors in all cigars, including Grandfathered Products and those that have received SE determinations from the FDA - an intention reiterated in the FDA’s January 2020 guidance. In ~~March 2018,~~April 2022, the FDA issued an ANPRM seeking comments on the role, if any, that flavors (including menthol) in tobacco products may play in attracting youth and in helping some smokers switch to potentially less harmful forms of nicotine delivery. In the context of litigation, in April 2021, the FDA issued a response to a 2013 citizen petition requesting that the FDA prohibittwo proposed product standards: (i) banning menthol as a characterizing flavor in cigarettes. In the response, the FDA announced it intends to develop and propose two product standards within one year that would (i) ban menthol as a characterizing flavor in cigarettes and (ii) ~~ban~~banning all characterizing flavors (including menthol) in cigars. ~~While~~We plan to engage with the FDA ~~has yet~~through the rulemaking process, including by submitting comments during the notice-and-comment period. We believe the rulemaking process will take multiple years to ~~define “characterizing flavors” with respect to cigars, most of Middleton’s cigar products contain added flavors and may be subject to any action by the~~complete. The FDA ~~to ban~~could propose an additional product standard for flavors in ~~cigars.~~

~~If any such product standards become final~~innovative tobacco products, including e-vapor products and are appealed and upheld in the courts, it could have a material adverse effect on the business of our tobacco subsidiaries and investees, and the consolidated results of operations, cash flows or financial position of Altria and its tobacco subsidiaries, including adversely affecting the value of Altria’s investment in JUUL.oral nicotine products.

▪~~NNN~~N-nitrosonornicotine (“NNN”) in Smokeless Tobacco: In January 2017, the FDA proposed a product standard for ~~N-nitrosonornicotine (“NNN”)~~NNN levels in finished smokeless tobacco products.

▪If any one or more of the ~~proposed rule, in present form,~~foregoing potential product standards were to become final and was appealed and upheld in the courts, it could have a material adverse effect on ~~the~~our business and our consolidated results of operations, cash flows or financial position, including, an adverse effect on the carrying value of ~~Altria and USSTC.~~our assets such as our cigar trademarks or our investment in JUUL (due to the impact on JUUL’s business).

▪Good Manufacturing Practices: The FSPTCA requires that the FDA promulgate good manufacturing practice regulations (referred to by the FDA as “Requirements for Tobacco Product Manufacturing Practice”) for tobacco product manufacturers, but does not specify a timeframe for such regulations. Compliance with any such regulations could result in increased costs, which could have a material adverse effect on ~~the~~our business and our consolidated results of operations, cash flows or financial position, ~~of Altria, its tobacco subsidiaries and its investees,~~ including ~~adversely affecting~~an adverse effect on the value of ~~Altria’s~~our investment in ~~JUUL.~~JUUL (due to the impact on JUUL’s business).

▪Impact on Our Business; Compliance Costs and User Fees: FDA regulatory actions under the FSPTCA could have a material adverse effect on ~~the~~our business and our consolidated results of operations, cash flows or financial position ~~of Altria and its tobacco subsidiaries~~ in various ways. For example, actions by the FDA could:

▪impact the consumer acceptability of tobacco products;

▪delay, discontinue or prevent the sale or distribution of existing, new or modified tobacco products;

▪limit adult tobacco consumer choices;

▪impose restrictions on communications with adult tobacco consumers;

▪create a competitive advantage or disadvantage for certain tobacco companies;

▪impose additional manufacturing, labeling or packaging requirements;

▪impose additional restrictions at retail;

▪result in increased illicit trade in tobacco products; and/or

▪otherwise significantly increase the cost of doing business.

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The failure to comply with FDA regulatory requirements, even inadvertently, and FDA enforcement actions also could have a material adverse effect on ~~the~~our business ofand our ~~tobacco subsidiaries and investees, and the~~ consolidated results of operations, cash flows or financial position, ~~of Altria and its tobacco subsidiaries,~~ including ~~adversely affecting~~an adverse effect on the value of ~~Altria’s~~our investment in ~~JUUL.~~JUUL (due to the impact on JUUL’s business).

The FSPTCA imposes user fees on cigarette, cigarette tobacco, smokeless tobacco, cigar and pipe tobacco manufacturers and importers to pay for the cost of regulation and other matters. The FSPTCA does not impose user fees on e-vapor or oral nicotine pouch manufacturers. The cost of the FDA user fee is allocated first among tobacco product categories subject to FDA user fees and then among manufacturers and importers within each respective category based on their relative market shares, all as prescribed by the FSPTCA and FDA regulations. Payments for user fees are adjusted for several factors, including market share and industry volume. ~~For a discussion of the impact of the FDA user fee payments on Altria, see~~See ~~Debt~~Liquidity and ~~Liquidity~~Capital Resources - Payments Under State Settlement Agreements and FDA Regulation ~~below.~~below for a discussion of our FDA user fee payments. In addition, compliance with the FSPTCA’s regulatory requirements has resulted, and will continue to result, in additional ~~costs for Altria’s tobacco businesses.~~costs. The amount of additional compliance and related costs has not been material in any given quarter or year to date period but could become material, either individually or in the ~~aggregate, to one or more of Altria’s tobacco subsidiaries.~~aggregate.

▪Investigation and Enforcement: The FDA has a number of investigatory and enforcement tools available to it, including document requests and other required information submissions, facility inspections, facility closures, examinations and investigations, injunction proceedings, monetary penalties, product withdrawal and recall orders, and product seizures. Investigations or enforcement actions could result in significant costs or otherwise have a material adverse effect on ~~the~~our business ofand our ~~tobacco subsidiaries and investees, and the~~ consolidated results of operations, cash flows or financial position, ~~of Altria and its tobacco subsidiaries,~~ including ~~adversely affecting~~an adverse effect on the value of ~~Altria’s~~our investment in ~~JUUL.~~JUUL (due to the impact on JUUL’s business).

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Excise Taxes

Tobacco products are subject to substantial excise taxes in the ~~U.S.~~United States. Significant increases in tobacco-related taxes or fees have been proposed or enacted (including with respect to e-vapor products) and are likely to continue to be proposed or enacted at the federal, state and local levels within the ~~U.S.~~United States. The frequency and magnitude of excise tax increases can be influenced by various factors, including the composition of executive and legislative bodies.

During 2021, the U.S. Congress ~~is currently considering~~considered legislation that would have significantly ~~increase~~increased the federal excise tax for all tobacco products and ~~create~~created a new tax for e-vapor products and other products containing nicotine that are not currently subject to a tobacco federal excise ~~tax. Additionally, e-vapor~~tax (“novel tobacco products”). The U.S. House of Representatives removed the proposal to increase the federal excise tax on tobacco products currently subject to the tax from the legislation it was considering, but retained the proposed nicotine tax for novel tobacco products. The U.S. Senate debated the legislation and ~~oral~~removed the nicotine ~~products not currently taxed would~~tax for novel tobacco products; however, as of July 25, 2022, the legislation is still pending before the Senate and could be subject to ~~a federal excise~~further tax ~~that would vary based on the nicotine content.~~related amendments.

Federal, state and local cigarette excise taxes have increased substantially over the past two decades, far outpacing the rate of inflation. Between the end of 1998 and ~~October~~July 25, ~~2021,~~2022, the weighted-average state cigarette excise tax increased from $0.36 to $1.89 per pack. As of ~~October~~July 25, ~~2021, one~~2022, no state ~~Maryland,~~ has enacted new legislation increasing cigarette excise taxes in ~~2021.~~2022, but various increases are under consideration or have been proposed.

A majority of states currently tax MST using an ad valorem method, which is calculated as a percentage of the price of the product, typically the wholesale price. This ad valorem method results in more tax being paid on premium products than is paid on lower-priced products of equal weight. ~~Altria’s subsidiaries~~We support legislation to convert ad valorem taxes on MST to a weight-based methodology because, unlike the ad valorem tax, a weight-based tax subjects cans of equal weight to the same tax. As of ~~October~~July 25, ~~2021,~~2022, the federal government, 23 states, Puerto Rico, Philadelphia, Pennsylvania and Cook County, Illinois have adopted a weight-based tax methodology for MST.

An increasing number of states and localities also are imposing excise taxes on e-vapor and oral nicotine pouches. As of ~~October~~July 25, ~~2021,~~2022, 30 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-vapor products. These taxes are calculated in varying ways and may differ based on the e-vapor product form. Similarly, 1112 states and the District of Columbia have enacted legislation to tax oral nicotine pouches. ~~Tax increases could have an adverse impact on the sales of these products.~~

Tax increases are expected to continue to have an adverse impact on ~~product~~ sales of ~~Altria’s tobacco subsidiaries and JUUL~~our products through lower consumption levels and the potential shift in adult tobacco consumer purchases from ~~the~~ premium to ~~the~~ non-premium or discount ~~segments,~~cigarettes, to lower taxed tobacco products, or to counterfeit and contraband products. Lower sales volume and reported share performance of ~~Altria’s tobacco subsidiaries’~~our products could have a material adverse effect on ~~Altria’s~~our consolidated financial position or earnings. In addition, substantial excise ~~taxes~~tax increases on e-vapor and oral nicotine products, may negatively impact adult smokers’ transition to these products, which could ~~impede~~adversely affect our ability to achieve our ~~Vision.~~

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our investment in JUUL (due to the impact on JUUL’s business).

International Treaty on Tobacco Control

The World Health Organization’s Framework Convention on Tobacco Control (the “FCTC”) entered into force in February 2005. As of ~~October~~July 25, ~~2021,~~2022, 181 countries, as well as the European ~~Community,~~Union, have become parties to the FCTC. While the ~~U.S.~~United States is a signatory of the FCTC, it is not currently a party to the agreement, as the agreement has not been submitted to, or ratified by, the ~~United States~~U.S. Senate. The FCTC is the first international public health treaty and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation. The treaty recommends (and in certain instances, requires) signatory nations to enact legislation that would address various tobacco-related issues.

There are a number of proposals currently under consideration by the governing body of the FCTC, some of which call for substantial restrictions on the manufacture, marketing, distribution and sale of tobacco products. It is not possible to predict the outcome of these proposals or the impact of any FCTC actions on legislation or regulation in the ~~U.S.,~~United States, either indirectly or as a result of the ~~U.S.~~United States becoming a party to the FCTC, or whether or how these actions might indirectly influence FDA regulation and enforcement.

State Settlement Agreements

As discussed in Note ~~12,~~11, during 1997 and 1998, PM USA and other major domestic cigarette manufacturers entered into the State Settlement Agreements. These settlements require participating manufacturers to make substantial annual payments, which are adjusted for several factors, including inflation, operating income, market share and industry volume. Increases in inflation can increase our financial liability under the State Settlement Agreements. The State Settlement Agreements’ inflation calculations require us to apply the higher of 3% or the ~~United States~~U.S. Bureau of Labor Statistics’ Consumer Price Index for All Urban Consumers (“CPI-U”) percentage rate as published in January of each year. ~~For~~As of December 2021, the inflation calculation was approximately 7% based on the latest CPI-U ~~data, the inflation calculation may be above 3%, but Altria does not believe~~data; however, the increase ~~would~~in the annual payments did not have a material

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impact on our financial position. We believe that inflation will continue at increased levels in 2022, but do not expect the corresponding increase in annual payments to result in a material financial impact. However, we will continue to monitor the impact of increased inflation on the macroeconomic environment and our businesses.

For a discussion of the impact of the State Settlement Agreements on ~~Altria,~~us, see ~~Debt~~Liquidity and ~~Liquidity~~Capital Resources - Payments Under State Settlement Agreements and FDA Regulation below and Note ~~12.~~11. The State Settlement Agreements also place numerous requirements and restrictions on participating manufacturers’ business operations, including prohibitions and restrictions on the advertising and marketing of cigarettes and smokeless tobacco products. Among these are prohibitions of outdoor and transit brand advertising, payments for product placement and free sampling (except in adult-only facilities). The State Settlement Agreements also place restrictions on the use of brand name sponsorships and brand name non-tobacco products and prohibitions on targeting youth and the use of cartoon characters. In addition, the State Settlement Agreements require companies to affirm corporate principles directed at reducing underage use of cigarettes; impose requirements regarding lobbying activities; ~~mandate public disclosure of certain industry documents;~~ limit the industry’s ability to challenge certain tobacco control and underage use laws; and provide for the dissolution of certain tobacco-related organizations and place restrictions on the establishment of any replacement organizations.

In November 1998, USSTC entered into the Smokeless Tobacco Master Settlement Agreement (the “STMSA”) with the attorneys general of various states and ~~U.S.~~United States territories to resolve the remaining health care cost reimbursement cases initiated against USSTC. The STMSA required USSTC to adopt various marketing and advertising restrictions. USSTC is the only smokeless tobacco manufacturer to sign the STMSA.

Other International, Federal, State and Local Regulation and Governmental and Private Activity

▪International, Federal, State and Local Regulation: ~~A number of~~Various states and localities have enacted or proposed legislation that imposes restrictions on tobacco products (including cigarettes, smokeless tobacco, cigars, e-vapor products and oral nicotine pouches), such as legislation that (i) prohibits the sale of all tobacco products or certain tobacco categories, such as e-vapor, (ii) prohibits the sale of tobacco products with characterizing flavors, such as menthol cigarettes and flavored e-vapor products, (iii) requires the disclosure of health information separate from or in addition to federally mandated health warnings and (iv) restricts commercial speech or imposes additional restrictions on the marketing or sale of tobacco products. The legislation varies in terms of the type of tobacco products, the conditions under which such products are or would be restricted or prohibited, and exceptions to the restrictions or prohibitions. For example, a number of proposals involving characterizing flavors would prohibit smokeless tobacco products with characterizing flavors without providing an exception for mint- or wintergreen-flavored products. As of ~~October~~July 25, ~~2021, three~~2022, multiple states and localities are considering legislation to ban flavors in one or more tobacco products, and six states (California, Massachusetts, New Jersey, Utah, New York and Illinois) and the District of Columbia have passed such legislation. Some of these states, such as New York, Utah and Illinois, exempt certain products that have received FDA market authorization through the PMTA pathway.

The legislation in California bans the sale of most tobacco products with characterizing flavors, including menthol, mint and wintergreen. Following enactment of the flavor ban in August 2020, several registered California voters filed a referendum against the legislation. In January 2021 the requisite number of registered California voters signed a petition to place the question of whether the legislation should be affirmed or overturned on the next statewide general election ballot, which will

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likely take place in November 2022, unless a special statewide election is called earlier. As a result, the implementation of the legislation is delayed until after a vote on the referendum occurs.

Massachusetts passed legislation capping the amount of nicotine in e-vapor products. Similar legislation is pending in ~~one~~three other ~~state.~~states.

Restrictions on e-vapor and oral nicotine pouch products also have been instituted or proposed internationally. ~~For example, India and Singapore have instituted bans on e-vapor products.~~

~~Altria’s tobacco subsidiaries~~We have challenged and will continue to challenge certain federal, state and local legislation and other governmental action, including through litigation. It is possible, however, that legislation, regulation or other governmental action could be enacted or implemented that could have a material adverse impact on ~~the~~our business and ~~volume of~~ our ~~tobacco subsidiaries and investees, and the~~ consolidated results of operations, cash flows or financial position, ~~of Altria and its tobacco subsidiaries,~~ including ~~adversely affecting~~an adverse impact on the value of ~~Altria’s~~our investment in ~~JUUL.~~JUUL (due to the impact on JUUL’s business). Such action also could negatively impact adult smokers’ transition to these products, which could adversely affect our ability to achieve our Vision.

▪Federal, State and Local Legislation to Increase the Legal Age to Purchase Tobacco Products: After a number of states and localities proposed and enacted legislation to increase the minimum age to purchase all tobacco products, including e-vapor products, in December 2019, the federal government passed legislation increasing the minimum age to purchase all tobacco products, including e-vapor products, to 21 nationwide. As of ~~October~~July 25, ~~2021, 39~~2022, 41 states, the District of Columbia and Puerto Rico have enacted laws increasing the legal age to purchase tobacco products to 21. Although an increase in the minimum age to purchase tobacco products may have a negative impact on our sales volume, ~~of our tobacco businesses,~~ as discussed above under

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Underage Access and Use of Certain Tobacco Products, ~~Altria supported~~we support raising the minimum legal age to purchase all tobacco products to 21 at the federal and state levels, reflecting ~~its~~our longstanding commitment to combat underage tobacco use.

▪Health Effects of Tobacco Products, Including E-vapor Products: Reports with respect to the health effects of smoking have been publicized for many years, including various reports by the U.S. Surgeon General. In 2019, there were public health advisories concerning vaping-related lung injuries and deaths and ~~more recently,~~ there have been health concerns raised about potential increased risks associated with COVID-19 among smokers and vapers. ~~Altria and its tobacco subsidiaries~~We believe that the public should be guided by the messages of the U.S. Surgeon General and public health authorities worldwide in making decisions concerning the use of tobacco products, including e-vapor products.

Most jurisdictions within the ~~U.S.~~United States have restricted smoking in public places and some have restricted vaping in public places. Some public health groups have called for, and various jurisdictions have adopted or proposed, bans on smoking and vaping in outdoor places, in private apartments and in cars transporting children. It is not possible to predict the results of ongoing scientific research or the types of future scientific research into the health risks of tobacco exposure and the impact of such research on legislation and regulation.

▪Other Legislation or Governmental Initiatives: In addition to the actions discussed above, other regulatory initiatives affecting the tobacco industry have been adopted or are being considered at the federal level and in a number of state and local jurisdictions. For example, during the COVID-19 pandemic, state and local governments required additional health and safety requirements of all businesses, including tobacco manufacturing and other facilities. State and local governments also mandated the temporary closure of some businesses. While many restrictions have eased, it is possible that tobacco manufacturing and other facilities and the facilities of our suppliers, our suppliers’ suppliers and our trade partners could be subject to additional government-mandated temporary closures and restrictions. In September 2021, the President of the United States issued an Executive Order charging OSHA with developing an emergency temporary standard requiring almost all employers to mandate certain COVID-19 vaccination and testing requirements in the workplace. This mandate could have an adverse impact on worker availability at Altria’s subsidiaries’ or investees’ manufacturing, salesforce and administrative operations, or in their distribution and supply chains.

~~Additionally,~~ in recent years, legislation has been introduced or enacted at the state or local level to subject tobacco products to various reporting requirements and performance standards; establish educational campaigns relating to tobacco consumption or tobacco control programs or provide additional funding for governmental tobacco control activities; restrict the sale of tobacco products in certain retail establishments and the sale of tobacco products in certain package sizes; prohibit the sale of tobacco products based on environmental concerns; impose responsibility on manufacturers for the disposal, recycling or other treatment of post-consumer goods such as plastic packaging; require tax stamping of smokeless tobacco products; require the use of state tax stamps using data encryption technology; and further restrict the sale, marketing and advertising of cigarettes and other tobacco products. Such legislation may be subject to constitutional or other challenges on various grounds, which may or may not be successful. In addition, if the COVID-19 pandemic resurges, state and local governments may reimpose additional health and safety requirements for all businesses, which could result in the potential temporary closure of certain businesses and/or facilities. It is possible that tobacco manufacturing and other facilities and the facilities of our and JUUL’s suppliers, our and JUUL’s suppliers’ suppliers and our and JUUL’s trade partners could be subject to additional government-mandated temporary closures and restrictions.

It is not possible to predict what, if any, additional legislation, regulation or other governmental action will be enacted or implemented (and, if challenged, upheld) relating to the manufacturing, design, packaging, marketing, advertising, sale or use of tobacco products, or the tobacco industry generally. It is possible, however, that legislation, regulation or other governmental action could be enacted or implemented that could have a material adverse impact on ~~the~~our business and ~~volume of~~

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our ~~tobacco subsidiaries and investees, and the~~ consolidated results of operations, cash flows or financial position, ~~of Altria and its tobacco subsidiaries,~~ including ~~adversely affecting~~an adverse impact on the value of ~~Altria’s~~our investment in ~~JUUL.~~JUUL (due to the impact on JUUL’s business).

▪Governmental Investigations: From time to time, ~~Altria, its subsidiaries and investees~~we are subject to governmental investigations on a range of matters. For example: (i) the ~~U.S. Federal Trade Commission (the “FTC”)~~FTC issued a Civil Investigative Demand (“CID”) to ~~Altria~~us while conducting its antitrust review of ~~Altria’s~~our investment in JUUL seeking information regarding, among other things, ~~Altria’s~~our role in the resignation of JUUL’s former chief executive officer and the hiring by JUUL of any current or former Altria director, executive or employee (see Note 1211 for a description of the FTC’s administrative complaint against ~~Altria~~us and JUUL); (ii) the U.S. Securities and Exchange Commission (“SEC”) commenced an investigation relating to ~~Altria’s~~our acquisition, disclosures and accounting controls in connection with the JUUL investment; and (iii) the New York State Office of the Attorney General and the Commonwealth of Massachusetts Office of the Attorney General, separately, issued ~~a subpoena~~independent subpoenas to ~~Altria~~us seeking documents relating to ~~Altria’s~~our investment in and provision of services to JUUL. Additionally, JUUL is currently under investigation by various federal and state agencies, including the SEC, the FDA and the FTC, and state attorneys general. Such investigations vary in scope but at least some appear to include JUUL’s marketing practices, particularly as such practices relate to youth, and ~~Altria~~we may be asked in the context of those investigations to provide information concerning ~~its~~our investment in JUUL or relating to ~~its~~our marketing of Nu Mark LLC e-vapor products.

Private Sector Activity on ~~E-Vapor~~Tobacco Products

A number of retailers, including national chains, have discontinued the sale of all tobacco products and others have discontinued the sale of e-vapor products. Reasons for the discontinuation include ~~reported illnesses related~~change in corporate policy and, with respect to e-vapor ~~product use~~products, include reported illnesses and the uncertain regulatory environment. It is possible that if this private sector activity becomes more widespread it could ~~adversely affect the value of Altria’s investment in JUUL and~~ have a material adverse effect on ~~Altria’s~~our business and our consolidated results of operations, cash flows or financial position, ~~or earnings.~~including an adverse impact on the value of our investment in JUUL (due to the impact on JUUL’s business).

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Illicit Trade in Tobacco Products

Illicit trade in tobacco products can have an adverse impact on ~~the businesses of Altria, its tobacco subsidiaries~~our business and ~~investees.~~JUUL’s business. Illicit trade can take many forms, including the sale of counterfeit tobacco products; the sale of tobacco products in the ~~U.S.~~United States that are intended for sale outside the country; the sale of untaxed tobacco products over the Internet and by other means designed to avoid the collection of applicable taxes; and diversion into one taxing jurisdiction of tobacco products intended for sale in another. Counterfeit tobacco products, for example, are manufactured by unknown third parties in unregulated environments. Counterfeit versions of our ~~tobacco subsidiaries’~~ and ~~investees’~~JUUL’s products can negatively affect adult tobacco consumer experiences with and opinions of those brands. Illicit trade in tobacco products also harms law-abiding wholesalers and retailers by depriving them of lawful sales and undermines the significant investment ~~Altria’s tobacco subsidiaries and investees~~we have made in legitimate distribution channels. Moreover, illicit trade in tobacco products results in federal, state and local governments losing tax revenues. Losses in tax revenues can cause such governments to take various actions, including increasing excise ~~taxes;~~taxes, imposing legislative or regulatory requirements, that may adversely impact Altria’s consolidated results of operations and cash flows, including adversely affecting the value of Altria’s investment in JUUL, and the businesses of its tobacco subsidiaries and investees; or asserting claims against manufacturers of tobacco products or members of the trade channels through which such tobacco products are distributed and ~~sold.~~sold, each of which may have a material adverse effect on our business and our consolidated results of operations, cash flows or financial position, including an adverse impact on the value of our investment in JUUL (due to the impact on JUUL’s business).

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

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

Shifts in crops (such as those driven by economic conditions and adverse weather patterns), government restrictions and mandated prices, production control programs, economic trade sanctions, import duties and tariffs, international trade disruptions, inflation, geopolitical instability, climate and environmental changes and disruptions due to man-made or natural disasters may increase the cost or reduce the supply or quality of tobacco, ~~or other raw materials or ingredients or component parts used to manufacture our companies’ and our investees’ products. Any significant change in the price, availability or quality of tobacco,~~ other raw materials, ingredients or component parts used to manufacture our ~~products and those of our investees~~products. Any significant change in such factors could restrict our ~~subsidiaries’ and investees’~~ ability to continue manufacturing and marketing existing products or impact adult consumer product acceptability and ~~adversely affect~~have a material adverse effect on our ~~subsidiaries’ and investees’~~ profitability and ~~businesses.~~business.

~~With respect to tobacco, as~~As with other agricultural commodities, ~~crop~~tobacco price, quality and availability can be influenced by variations in weather patterns, including those caused by climate ~~change. Additionally, the price~~change, and ~~availability of tobacco leaf can be influenced by economic~~macroeconomic conditions and imbalances in supply and ~~demand. Economic conditions, including the economic effects of the COVID-19 pandemic, are unpredictable, which,~~demand, among other ~~factors, may result in changes in the patterns of demand for agricultural products and the cost~~factors. For varieties of tobacco only available in limited geographies, government-mandated prices and production ~~which could impact~~control programs, political instability or government prohibitions on the import or export of tobacco in certain countries pose additional risks to price, availability and quality. The unavailability or unacceptability of any particular variety of tobacco leaf ~~prices and~~necessary to manufacture our products could impair our ability to continue marketing existing products or impact adult tobacco ~~supply.~~consumer product acceptability. In addition, as consumer demand increases for smoke-free products and decreases for combustible products, the volume of

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tobacco leaf required for production may decrease. The reduced demand for tobacco leaf may result in the reduced supply and availability of domestic tobacco as growers divert resources to other ~~crops.~~crops, which could result in increased costs to us.

~~Tobacco production in certain countries also is subject to a variety~~Current macroeconomic conditions and geopolitical instability (including historically high inflation, higher than normal gas prices, labor shortages, the continued impact of controls, including government-mandated prices and production control programs. Moreover, certain types of tobacco are only available in limited geographies, including geographies experiencing political instability or government prohibitions on the ~~import or export of tobacco, and loss of their availability could impair our subsidiaries’ ability to continue marketing existing products or impact adult tobacco consumer product acceptability.~~

~~The~~ COVID-19 pandemic ~~also may~~and the Russian invasion of Ukraine) are causing worldwide disruptions and delays to supply chains and commercial markets, which limit access to, and increase the cost of, raw materials, ingredients and component parts (for example, tobacco leaf and resins and aluminum used in our packaging). We are implementing various strategies to help secure sufficient supplies of raw materials, ingredients and component parts for production.

In addition, government taxes, restrictions and prohibitions on the sale and use of certain products may limit access to, and increase the costs of, raw materials and component parts and, ~~personal protective equipment as~~potentially, impede our ability to sell certain of our products. For example, additional taxes on the use of certain single-use plastics have been proposed by the U.S. Congress, which, if passed, could increase the costs of, and ~~global suppliers may temporarily shut down facilities or use different production schedules with lower productivity~~impair our ability to, source certain materials used in ~~order~~the packaging for our products.

We work to ~~address exposure to the virus or as a result~~mitigate these risks by maintaining inventory levels of ~~a government mandate. In addition, current labor market dynamics indicate labor shortages, with employers in a number of industries having difficulty employing workers. These shortages have led to~~ certain ~~increases in~~tobacco varieties that cover several years, purchasing raw ~~material, ingredient~~materials, ingredients and component ~~part prices~~parts from disperse geographic regions throughout the world and ~~may lead to disruptions in the supply chain; however, to~~entering into long-term contracts with some of our tobacco growers. To date, the impact on us of changes in the price, availability and quality of tobacco, other raw materials, ingredients and component parts has not been ~~immaterial. The~~material. However, the effects of the ~~COVID-19 pandemic~~current macroeconomic and ~~labor market dynamics outlined above~~geopolitical conditions on prices, availability and quality of such items may continue, after the pandemic wanes as a result of the developing commercial and economic environment, including increased government spending. This environment has led to an increased rate of inflation that, to date, has not hadwhich could have a material adverse effect on our business and our consolidated results of operations, cash flows or financial position.

JUUL may experience similar impacts to its business due to the factors discussed above. Any such changes could have an adverse impact on the value of our ~~businesses, revenues or profitability.~~investment in JUUL.

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Timing of Sales

In the ordinary course of business, ~~our tobacco subsidiaries~~we are subject to many influences that can impact the timing of sales to customers, including the timing of holidays and other annual or special events, the timing of promotions, customer incentive programs and customer inventory programs, as well as the actual or speculated timing of pricing actions and tax-driven price increases.

Operating Results

Smokeable Products Segment

Financial Results

The following table summarizes operating results, includes reported and adjusted OCI margins, and provides a reconciliation of reported OCI to adjusted OCI for ~~the~~our smokeable products segment:


		Operating Results																	Operating Results
		For the Nine Months Ended September 30,								For the Three Months Ended September 30,									For the Six Months Ended June 30,								For the Three Months Ended June 30,
(in millions)	(in millions)	2021			2020			Change		2021			2020			Change		(in millions)	2022			2021			Change		2022			2021			Change
Net revenues	Net revenues	$	17,275		$	17,522		(1.4)	%	$	5,975		$	6,313		(5.4)	%	Net revenues	$	11,138		$	11,300		(1.4)	%	$	5,873		$	6,050		(2.9)	%
Excise taxes	Excise taxes	(3,620)			(3,950)					(1,218)			(1,407)					Excise taxes	(2,181)			(2,402)					(1,137)			(1,281)
Revenues net of excise taxes	Revenues net of excise taxes	$	13,655		$	13,572				$	4,757		$	4,906				Revenues net of excise taxes	$	8,957		$	8,898				$	4,736		$	4,769

Reported OCI	Reported OCI	$	7,901		$	7,609		3.8	%	$	2,753		$	2,789		(1.3)	%	Reported OCI	$	5,321		$	5,148		3.4	%	$	2,762		$	2,776		(0.5)	%

NPM Adjustment Items	NPM Adjustment Items	(53)			—					(21)			—					NPM Adjustment Items	(60)			(32)					—			—
Tobacco and health and certain other litigation items	Tobacco and health and certain other litigation items	72			73					29			34					Tobacco and health and certain other litigation items	50			43					38			8
COVID-19 special items		—			41					—			—
Adjusted OCI	Adjusted OCI	$	7,920		$	7,723		2.6	%	$	2,761		$	2,823		(2.2)	%	Adjusted OCI	$	5,311		$	5,159		2.9	%	$	2,800		$	2,784		0.6	%

Reported OCI margins (1)	Reported OCI margins (1)	57.9		%	56.1		%	1.8 pp		57.9		%	56.8		%	1.1 pp		Reported OCI margins (1)	59.4		%	57.9		%	1.5 pp		58.3		%	58.2		%	0.1 pp
Adjusted OCI margins (1)	Adjusted OCI margins (1)	58.0		%	56.9		%	1.1 pp		58.0		%	57.5		%	0.5 pp		Adjusted OCI margins (1)	59.3		%	58.0		%	1.3 pp		59.1		%	58.4		%	0.7 pp

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

~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 Compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021

Net revenues, which include excise taxes billed to customers, decreased ~~$247~~$162 million (1.4%), due primarily to lower shipment volume ($~~1,539~~1,161 million), partially offset by higher pricing ($~~1,284~~981 million).

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, which includes lower promotional investments.

Reported OCI increased ~~$292~~$173 million ~~(3.8%~~(3.4%), due primarily to higher pricing, ~~($1,273 million),~~which includes lower promotional investments, and higher NPM Adjustment Items ~~in 2021~~ ($~~53 million) and COVID-19 special items in 2020 ($41~~28 million), partially offset by lower shipment volume ($~~923~~706 million), higher costs ($72 million) and higher per unit settlement ~~charges and higher marketing, administration and research costs ($27 million).~~charges.

Adjusted OCI increased ~~$197~~$152 million ~~(2.6%~~(2.9%), due primarily to higher pricing, which includes lower promotional investments, partially offset by lower shipment volume, higher costs and higher per unit settlement ~~charges and higher marketing, administration and research costs.~~charges.

Three Months Ended ~~September~~June 30, ~~2021~~2022 Compared with Three Months Ended ~~September~~June 30, ~~2020~~2021

Net revenues, which include excise taxes billed to customers, decreased ~~$338~~$177 million ~~(5.4%~~(2.9%), due primarily to lower shipment volume ($~~925~~757 million), partially offset by higher pricing ($570 million), which includes lower promotional investments.

Reported OCI decreased ~~$36~~$14 million ~~(1.3%~~(0.5%), due primarily to lower shipment volume ($~~546~~460 million) ~~and~~, higher costs ($59 million), higher per unit settlement charges ~~partially offset by higher pricing ($567 million), which includes lower promotional investments and NPM Adjustment Items in 2021 ($21 million).~~

~~Adjusted OCI decreased $62 million (2.2%), due primarily to lower shipment volume~~ and higher ~~per unit settlement charges,~~tobacco and health and certain other litigation items ($30 million), partially offset by higher pricing, which includes lower promotional investments.

Adjusted OCI increased $16 million (0.6%), due primarily to higher pricing, which includes lower promotional investments, partially offset by lower shipment volume, higher costs and higher per unit settlement charges.

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Shipment Volume and Retail Share Results

The following table summarizes ~~the~~our smokeable products ~~segment~~segment’s shipment volume performance:


		Shipment Volume									Shipment Volume
		For the Nine Months Ended September 30,				For the Three Months Ended September 30,					For the Six Months Ended June 30,				For the Three Months Ended June 30,
(sticks in millions)	(sticks in millions)	2021	2020	Change		2021	2020	Change		(sticks in millions)	2022	2021	Change		2022	2021	Change
Cigarettes:	Cigarettes:									Cigarettes:
Marlboro	Marlboro	63,122	67,890	(7.0)	%	21,368	24,258	(11.9)	%	Marlboro	38,325	41,754	(8.2)	%	20,035	22,339	(10.3)	%
Other premium	Other premium	3,180	3,496	(9.0)	%	1,042	1,231	(15.4)	%	Other premium	1,954	2,138	(8.6)	%	1,017	1,157	(12.1)	%
Discount	Discount	5,068	6,205	(18.3)	%	1,640	2,130	(23.0)	%	Discount	2,847	3,428	(16.9)	%	1,457	1,810	(19.5)	%
Total cigarettes	Total cigarettes	71,370	77,591	(8.0)	%	24,050	27,619	(12.9)	%	Total cigarettes	43,126	47,320	(8.9)	%	22,509	25,306	(11.1)	%
Cigars:	Cigars:									Cigars:
Black & Mild	Black & Mild	1,356	1,317	3.0	%	424	468	(9.4)	%	Black & Mild	865	932	(7.2)	%	432	453	(4.6)	%
Other	Other	5	8	(37.5)	%	1	3	(66.7)	%	Other	2	4	(50.0)	%	1	3	(66.7)	%
Total cigars	Total cigars	1,361	1,325	2.7	%	425	471	(9.8)	%	Total cigars	867	936	(7.4)	%	433	456	(5.0)	%
Total smokeable products	Total smokeable products	72,731	78,916	(7.8)	%	24,475	28,090	(12.9)	%	Total smokeable products	43,993	48,256	(8.8)	%	22,942	25,762	(10.9)	%

Note: Cigarettes shipment volume includes Marlboro; Other premium brands, such as Virginia Slims, Parliament, Benson & Hedges and Nat’s; and Discount brands, which include L&M, Basic and Chesterfield. Cigarettes volume includes units sold as well as promotional units, but excludes units sold for distribution to Puerto Rico, and units sold in U.S. Territories, to overseas military and by Philip Morris Duty Free Inc., none of which, individually or in the aggregate, is material to ~~the~~our smokeable products segment.

The following table summarizes cigarettes retail share performance:


		Retail Share											Retail Share
		For the Nine Months Ended September 30,					For the Three Months Ended September 30,						For the Six Months Ended June 30,					For the Three Months Ended June 30,
		2021		2020		Percentage Point Change	2021		2020		Percentage Point Change		2022		2021		Percentage Point Change	2022		2021		Percentage Point Change
Cigarettes:	Cigarettes:											Cigarettes:
Marlboro	Marlboro	43.2	%	42.8	%	0.4	43.2	%	43.2	%	—	Marlboro	42.6	%	43.0	%	(0.4)	42.7	%	43.1	%	(0.4)
Other premium	Other premium	2.3		2.3		—	2.3		2.3		—	Other premium	2.3		2.3		—	2.3		2.3		—
Discount	Discount	3.5		4.0		(0.5)	3.4		3.8		(0.4)	Discount	3.3		3.6		(0.3)	3.2		3.5		(0.3)
Total cigarettes	Total cigarettes	49.0	%	49.1	%	(0.1)	48.9	%	49.3	%	(0.4)	Total cigarettes	48.2	%	48.9	%	(0.7)	48.2	%	48.9	%	(0.7)

Note: Retail share results for cigarettes are based on data from IRI/Management Science Associates, Inc., a tracking service that uses a sample of stores and certain wholesale shipments to project market share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes. For other trade classes selling cigarettes, retail share is based on shipments from wholesalers to retailers through the Store Tracking Analytical Reporting System (“STARS”). This service is not designed to

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capture sales through other channels, including the internet, direct mail and some illicitly tax-advantaged outlets. It is IRI’s standard practice to periodically refresh its services, which could restate retail share results that were previously released in this service.

For a discussion of volume trends and factors that impact volume and retail share performance, see Tobacco Space - Business Environment above.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 Compared with the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021

~~The~~Our smokeable products segment’s reported domestic cigarettes shipment volume decreased ~~8.0%~~8.9%, driven primarily by the industry’s decline rate and retail share losses (both of ~~decline,~~which were impacted by macroeconomic pressures on adult tobacco consumers’ disposable income) and trade inventory movements, ~~calendar differences and~~partially offset by other factors. When adjusted for trade inventory movements ~~calendar differences~~ and other factors, ~~the~~our smokeable products segment’s reported domestic cigarettes shipment volume decreased by an estimated ~~5%. When adjusted for trade inventory movements, calendar differences and other factors, total estimated domestic cigarette industry volume decreased by an estimated 5%.~~

Shipments of premium cigarettes accounted for 92.9% and 92.0% of the smokeable products segment’s reported domestic cigarettes shipment volume for the nine months ended September 30, 2021 and 2020, respectively.

~~Total cigarettes industry discount category retail share increased 0.3 share points to 25.2%.~~

~~Three Months Ended September 30, 2021 Compared with the Three Months Ended September 30, 2020~~

The smokeable products segment’s reported domestic cigarettes shipment volume decreased 12.9%, driven primarily by the industry’s rate of decline and trade inventory movements. When adjusted for trade inventory movements, the smokeable products segment’s reported domestic cigarettes shipment volume decreased by an estimated 7%9%. When adjusted for trade inventory movements and other factors, total estimated domestic cigarette industry volume decreased by an estimated ~~6.5%~~7.5%.

Shipments of premium cigarettes accounted for ~~93.2%~~93.4% and ~~92.3%~~92.8% of our smokeable products segment’s reported domestic cigarettes shipment volume for the six months ended June 30, 2022 and 2021, respectively.

Our smokeable products segment’s reported cigar shipment volume decreased 7.4%, driven by trade inventory movements, macroeconomic pressures on adult tobacco consumers’ disposable income and other factors.

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Marlboro retail share of the total cigarette category decreased 0.4 share points to 42.6%, primarily due to increased macroeconomic pressures on adult tobacco consumers’ disposable income.

Total cigarette industry discount retail share increased 1.2 share point to 26.4%, primarily due to increased macroeconomic pressures on adult tobacco consumers’ disposable income.

Three Months Ended June 30, 2022 Compared with Three Months Ended June 30, 2021

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 11.1%, driven primarily by the industry’s decline rate and retail share losses (both of which were impacted by macroeconomic pressures on adult tobacco consumers’ disposable income) and trade inventory movements, partially offset by other factors. When adjusted for trade inventory movements, our smokeable products segment’s reported domestic cigarettes shipment volume decreased by an estimated 10%. When adjusted for trade inventory movements and other factors, total estimated domestic cigarette industry volume decreased by an estimated 8.5%.

Shipments of premium cigarettes accounted for 93.5% and 92.8% of our smokeable products segment’s reported domestic cigarettes shipment volume for the three months ended ~~September~~June 30, 2022 and 2021, respectively.

Our smokeable products segment’s reported cigar shipment volume decreased 5.0%, driven by macroeconomic pressures on adult tobacco consumers’ disposable income, trade inventory movements and ~~2020, respectively.~~other factors.

Marlboro retail share of the total cigarette category decreased 0.4 share points to 42.7%, primarily due to increased macroeconomic pressures on adult tobacco consumers’ disposable income. Marlboro retail share increased 0.1 share point from the first quarter of 2022.

Total ~~cigarettes~~cigarette industry discount retail share increased 1.3 share points to 26.4%, primarily due to increased macroeconomic pressures on adult tobacco consumers’ disposable income. Total cigarette industry discount category retail shares was unchanged from the first quarter of 2022.

For a discussion regarding the cigarette industry discount retail share ~~increased 0.6 share points sequentially to 25.3%.~~dynamics in 2022 and the economic conditions, including a high inflationary environment, that impact adult tobacco consumer purchasing behavior, see Operating Results by Business Segment - Tobacco Space - Business Environment - Summary above.

Pricing Actions

PM USA and Middleton executed the following pricing and promotional allowance actions during 2022 and 2021:

▪Effective May 22, 2022, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.17 per five-pack.

▪Effective April 24, 2022, PM USA increased the list price of Marlboro, L&M, Basic and Chesterfield by $0.15 per pack. PM USA also increased the list price of all its other cigarette brands by $0.20 per pack.

▪Effective January 9, 2022, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.13 per five-pack.

▪Effective December 12, 2021, PM USA increased the list price of Marlboro, L&M and ~~2020:~~Chesterfield by $0.15 per pack. In addition, PM USA increased the list price of all of its other cigarette brands by $0.20 per pack.

▪Effective August 15, 2021, PM USA increased the list price of Marlboro, L&M and Chesterfield by $0.14 per pack. In addition, PM USA increased the list price of all of its other cigarette brands by $0.17 per pack.

▪Effective January 24, 2021, PM USA increased the list price on all of its cigarette brands by $0.14 per pack.

▪Effective January 10, 2021, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.07 per five-pack.

In addition:

▪Effective ~~November 1, 2020,~~July 17, 2022, PM USA increased the list price on all of its cigarette brands by ~~$0.13~~$0.15 per pack.

▪~~Effective June 21, 2020, PM USA increased the list price on all of its cigarette brands by $0.11 per pack.~~

▪~~Effective February 16, 2020, PM USA increased the list price on all of its cigarette brands by $0.08 per pack.~~

▪~~Effective January 12, 2020, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.08 per five-pack.~~

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Oral Tobacco Products Segment

Financial Results

The following table summarizes operating results, includes reported and adjusted OCI margins, and provides a reconciliation of reported OCI to adjusted OCI for ~~the~~our oral tobacco products segment:


		Operating Results																	Operating Results
		For the Nine Months Ended September 30,								For the Three Months Ended September 30,									For the Six Months Ended June 30,								For the Three Months Ended June 30,
(in millions)	(in millions)	2021			2020			Change		2021			2020			Change		(in millions)	2022			2021			Change		2022			2021			Change
Net revenues	Net revenues	$	1,945		$	1,901		2.3	%	$	626		$	640		(2.2)	%	Net revenues	$	1,278		$	1,319		(3.1)	%	$	665		$	693		(4.0)	%
Excise taxes	Excise taxes	(98)			(98)					(32)			(33)					Excise taxes	(61)			(66)					(32)			(35)
Revenues net of excise taxes	Revenues net of excise taxes	$	1,847		$	1,803				$	594		$	607				Revenues net of excise taxes	$	1,217		$	1,253				$	633		$	658

Reported OCI	Reported OCI	$	1,269		$	1,297		(2.2)	%	$	405		$	436		(7.1)	%	Reported OCI	$	837		$	864		(3.1)	%	$	430		$	472		(8.9)	%
Acquisition-related costs		37			6					—			4
COVID-19 special items		—			9					—			—
Asset impairment, exit, implementation, acquisition and disposition-related costs																		Asset impairment, exit, implementation, acquisition and disposition-related costs	—			37					—			—
Adjusted OCI	Adjusted OCI	$	1,306		$	1,312		(0.5)	%	$	405		$	440		(8.0)	%	Adjusted OCI	$	837		$	901		(7.1)	%	$	430		$	472		(8.9)	%

Reported OCI margins (1)	Reported OCI margins (1)	68.7		%	71.9		%	(3.2) pp		68.2		%	71.8		%	(3.6) pp		Reported OCI margins (1)	68.8		%	69.0		%	(0.2) pp		67.9		%	71.7		%	(3.8) pp
Adjusted OCI margins (1)	Adjusted OCI margins (1)	70.7		%	72.8		%	(2.1) pp		68.2		%	72.5		%	(4.3) pp		Adjusted OCI margins (1)	68.8		%	71.9		%	(3.1) pp		67.9		%	71.7		%	(3.8) pp

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

~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 Compared with ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~

~~Net revenues, which include excise taxes billed to customers, increased $44 million (2.3%), due primarily to higher pricing ($72 million), which includes higher promotional investments in~~ ~~on!, partially offset by lower shipment volume ($29 million), including unfavorable shipment volume mix between the segment’s MST and oral nicotine pouch products.~~

Reported OCI decreased $28 million (2.2%) due primarily to higher costs ($51 million), which includes higher acquisition-related costs and COVID-19 special items in 2020, and lower shipment volume ($45 million), including unfavorable shipment volume mix), partially offset by higher pricing ($72 million), which includes higher promotional investments in ~~on!~~.

Adjusted OCI was essentially unchanged as lower volume, including unfavorable shipment volume mix, and higher costs were mostly offset by higher pricing, which includes higher promotional investments in ~~on!. Adjusted OCI margins declined by 2.1 percentage point to 70.7%, due to changes in shipment volume mix between the segment’s MST and oral nicotine pouch products.~~

~~Three Months Ended September 30,~~ 2021 ~~Compared with Three Months Ended September 30, 2020~~

Net revenues, which include excise taxes billed to customers, decreased ~~$14~~$41 million ~~(2.2%~~(3.1%), due primarily to lower shipment volume ~~($33 million), including unfavorable~~ and a higher percentage of on! shipment volume ~~mix,~~relative to MST versus 2021 (“volume/mix” - $66 million), partially offset by higher pricing ($2029 million), which includes higher promotional investments in on!.

Reported OCI decreased ~~$31~~$27 million (3.1%), due primarily to lower volume/mix ($69 million) and higher costs ($19 million), partially offset by acquisition-related costs in 2021 ($37 million) and higher pricing, which includes higher promotional investments in on!.

Adjusted OCI decreased $64 million (7.1%), due primarily to lower shipment volume ($35 million), including unfavorable shipment volume mix and higher costs ($13 million), including lower acquisition-related costs, partially offset by higher pricing, which includes higher promotional investments in ~~on!~~.

~~Adjusted OCI decreased $35 million (8.0%), due primarily to lower shipment volume, including unfavorable shipment volume~~ volume/mix and higher costs, partially offset by higher pricing, which includes higher promotional investments in on!on!.

Three Months Ended June 30, 2022 Compared with Three Months Ended June 30, 2021

~~Adjusted OCI margins declined by 4.3 percentage points~~Net revenues, which include excise taxes billed to ~~68.2%~~customers, decreased $28 million (4.0%), due primarily to ~~changes~~lower volume/mix ($44 million), partially offset by higher pricing ($19 million), which includes higher promotional investments in ~~shipment volume mix between the segment’s MST and oral nicotine pouch products.~~ on!.

~~Table of Contents~~Reported and adjusted OCI decreased $42 million (8.9%), due primarily to lower volume/mix and higher costs ($13 million), partially offset by higher pricing, which includes higher promotional investments in on!.

Shipment Volume and Retail Share Results

The following table summarizes our oral tobacco products ~~segment~~segment’s shipment volume performance:


		Shipment Volume									Shipment Volume
		For the Nine Months Ended September 30,				For the Three Months Ended September 30,					For the Six Months Ended June 30,				For the Three Months Ended June 30,
(cans and packs in millions)	(cans and packs in millions)	2021	2020	Change		2021	2020	Change		(cans and packs in millions)	2022	2021	Change		2022	2021	Change
Copenhagen	Copenhagen	378.4	395.0	(4.2)	%	121.4	131.1	(7.4)	%	Copenhagen	238.3	257.0	(7.3)	%	123.1	134.1	(8.2)	%
Skoal	Skoal	148.2	157.2	(5.7)	%	47.7	52.3	(8.8)	%	Skoal	90.8	100.5	(9.7)	%	46.9	52.3	(10.3)	%
Other (includes Red Seal and on!)		87.7	65.0	34.9	%	29.7	23.3	27.5	%
on!										on!	38.6	22.1	74.7	%	20.3	12.9	57.4	%
Other										Other	34.4	35.9	(4.2)	%	17.7	18.3	(3.3)	%
Total oral tobacco products	Total oral tobacco products	614.3	617.2	(0.5)	%	198.8	206.7	(3.8)	%	Total oral tobacco products	402.1	415.5	(3.2)	%	208.0	217.6	(4.4)	%

Note: Oral tobacco products shipment volume includes cans and packs sold, as well as promotional units, but excludes international volume, which is currently not material to ~~the~~our oral tobacco products segment. New types of oral tobacco products, as well as new packaging configurations of existing oral tobacco products, may or may not be equivalent to existing MST products on a can-for-can basis. To calculate volumes of cans and packs shipped, one pack of snus or one can of oral nicotine pouches, irrespective of the number of pouches in the pack or can, is assumed to be equivalent to one can of MST.

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


		Retail Share											Retail Share
		For the Nine Months Ended September 30,					For the Three Months Ended September 30,						For the Six Months Ended June 30,					For the Three Months Ended June 30,
		2021		2020		Percentage Point Change	2021		2020		Percentage Point Change		2022		2021		Percentage Point Change	2022		2021		Percentage Point Change
Copenhagen	Copenhagen	29.8	%	32.1	%	(2.3)	29.2	%	31.8	%	(2.6)	Copenhagen	27.6	%	30.0	%	(2.4)	27.2	%	29.8	%	(2.6)
Skoal	Skoal	12.7		14.1		(1.4)	12.5		13.7		(1.2)	Skoal	11.6		12.8		(1.2)	11.5		12.7		(1.2)
Other (includes Red Seal and on!)		5.4		3.9		1.5	6.1		4.5		1.6
on!												on!	4.5		1.8		2.7	4.9		2.0		2.9
Other												Other	3.1		3.3		(0.2)	3.1		3.2		(0.1)
Total oral tobacco products	Total oral tobacco products	47.9	%	50.1	%	(2.2)	47.8	%	50.0	%	(2.2)	Total oral tobacco products	46.8	%	47.9	%	(1.1)	46.7	%	47.7	%	(1.0)

Note: Our oral tobacco products segment’s retail share results exclude international volume, which is currently not material. Retail share results for oral tobacco products are based on data from IRI InfoScan, a tracking service that uses a sample of stores to project market share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes on the number of cans and packs sold. Oral tobacco products is defined by IRI as MST, snus and oral nicotine pouches. New types of oral tobacco products, as well as new packaging configurations of existing oral tobacco products, may or may not be equivalent to existing MST products on a can-for-can basis. For example, one pack of snus or one can of oral nicotine pouches, irrespective of the number of pouches in the pack or can, is assumed to be equivalent to one can of MST. Because this service represents retail share performance only in key trade channels, it should not be considered a precise measurement of actual retail share. It is IRI’s standard practice to periodically refresh its InfoScan services, which could restate retail share results that were previously released in this service.

For a discussion of volume trends and factors that impact volume and retail share performance, see Tobacco Space - Business Environment above.

~~Nine~~Six Months Ended ~~September~~June 30, ~~2021~~2022 Compared with the ~~Nine~~Six Months Ended ~~September~~June 30, ~~2020~~2021

~~The~~Our oral tobacco products segment’s reported domestic shipment volume decreased ~~0.5%~~3.2%, driven primarily by trade inventory movements, retail share losses ~~(primarily due to~~and the ~~growth of oral nicotine pouches) and calendar differences,~~industry’s decline rate, partially offset by ~~industry growth~~other factors. The retail share losses and ~~trade inventory movements.~~industry’s decline rate were impacted by macroeconomic pressures on adult tobacco consumers’ disposable income. When adjusted for trade inventory movements, ~~and calendar differences, the~~our oral tobacco products segment’s reported domestic shipment volume decreased by an estimated ~~0.5%~~1%.

Total oral tobacco products category industry volume ~~increased~~decreased by an estimated 3%0.5% over the six months ended ~~September~~June 30, ~~2021,~~2022, driven by macroeconomic pressures on adult tobacco consumers’ disposable income and other factors, partially offset by growth in oral nicotine pouches.

~~Retail share losses in the oral tobacco products segment, including~~ ~~Copenhagen, were due to the growth of oral nicotine pouches.~~

~~Three Months Ended September 30, 2021 Compared with the Three Months Ended September 30, 2020~~

The oral tobacco products segment’s reported domestic shipment volume decreased 3.8%, driven primarily by retail share losses (primarily due to the growth of oral nicotine pouches) and trade inventory movements, partially offset by industry growth, calendar differences and other factors. When adjusted for trade inventory movements and calendar differences, the oral tobacco products segment’s reported domestic shipment volume decreased by an estimated 2.5%.

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~~The~~Our oral tobacco products segment’s retail share was ~~47.8%~~46.8%, and Copenhagen continued to be the leading oral tobacco brand with a retail share of ~~29.2%~~27.6%. ~~Share~~Retail share losses in ~~the~~our oral tobacco products segment ~~including~~ ~~Copenhage~~n, were due primarily to macroeconomic pressures on adult tobacco consumers’ disposable income for MST products, partially offset by the growth of oral nicotine pouches.

Total U.S. oral tobacco category share for on! ~~was 3.0% in the third quarter,~~nicotine pouches grew to 4.5%, an increase of ~~1.0~~2.7 percentage ~~point sequentially~~points.

Three Months Ended June 30, 2022 Compared with Three Months Ended June 30, 2021

Our oral tobacco products segment’s reported domestic shipment volume decreased 4.4%, driven primarily by retail share losses, trade inventory movements and the industry’s decline rate, partially offset by other factors. The retail share losses and industry’s decline rate were impacted by macroeconomic pressures on adult tobacco consumers’ disposable income. When adjusted for trade inventory movements, our oral tobacco products segment’s reported domestic shipment volume decreased by an ~~increase of 1.9~~estimated 2.5%.

Our oral tobacco products segment’s retail share decreased 0.2 percentage points from the ~~end~~prior quarter to 46.7%, and Copenhagen continued to be the leading oral tobacco brand with a retail share of ~~2020.~~27.2%. Share losses in our oral tobacco products segment were due primarily to macroeconomic pressures on adult tobacco consumers’ disposable income resulted in share declines for MST products, partially offset by the growth of oral nicotine pouches.

AsTotal U.S. oral tobacco category share for on! nicotine pouches grew to 4.9%, an increase of ~~September 30, 2021, Helix had broadened the U.S. distribution~~2.9 percentage points, driven by increased adoption of on! ~~to over 110,000 stores.~~, increased brand awareness and higher levels of investment.

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Pricing Actions

USSTC executed the following pricing actions during ~~2021~~2022 and ~~2020:~~2021:

▪Effective May 24, 2022, USSTC increased the list price on its Copenhagen, Skoal and Red Seal brands by $0.09 per can. USSTC also increased the list price on its Husky brand by $0.12 per can.

▪Effective February 22, 2022, USSTC increased the list price on its Copenhagen, Skoal and Red Seal brands by $0.08 per can. USSTC also increased the list price on its Husky brand by $0.12 per can.

▪Effective October 26, 2021, USSTC increased the list price on its Copenhagen and Skoal brands by $0.08 per can. USSTC also increased the list price on its Husky brand by $0.12 per can. In addition, USSTC decreased the price on its Red Seal brand by $0.17 per can.

▪Effective June 29, 2021, USSTC increased the list price on its Skoal Blend products by $0.46 per can. USSTC also increased the list price on its Red Seal and Copenhagen brands and the balance of its Skoal products by $0.05 per can. In addition, USSTC decreased the price on its Husky brand by $1.65 per can.

▪Effective March 2, 2021, USSTC increased the list price on its Skoal Blend products by $0.16 per can. USSTC also increased the list price on its Husky, Red Seal and Copenhagen brands and the balance of its Skoal products by $0.08 per can.

In addition:

▪Effective ~~October 20, 2020,~~July 26, 2022, USSTC increased the list price on its Copenhagen popular price products by $0.13 per can. USSTC also decreased the list price on select Copenhagen brands by $0.11 per can. In addition, USSTC increased the list price on its Skoal ~~Blend products by $0.15 per can. USSTC also increased the list price on its~~and ~~Husky~~ ~~and~~ Red Seal~~brands and its~~ ~~Copenhagen~~ ~~and~~ ~~Skoal~~ ~~popular price products by $0.08 per can. In addition, USSTC increased the list price on the balance of its~~ ~~Copenhagen~~ ~~and~~ ~~Skoal~~ ~~products by $0.07 per can.~~

▪~~Effective July 21, 2020, USSTC increased the list price on its~~ ~~Skoal~~ ~~Blend products by $0.15 per can. USSTC also increased the list price on its~~ ~~Husky~~, ~~Red Seal~~ ~~and~~ ~~Copenhagen~~ brands and the balance of its ~~Skoal~~Copenhagen ~~products~~brands by ~~$0.07 per can.~~

▪~~Effective February 18, 2020, USSTC increased the list price on its~~ ~~Skoal~~ ~~X-TRA products by $0.56 per can. USSTC also increased the list price on its~~ ~~Skoal~~ ~~Blend products by $0.16 cents~~$0.09 per can and increased the list price on its Husky, ~~Red Seal~~ ~~and~~ ~~Copenhagen~~ ~~brands and the balance of its~~ ~~Skoal~~ ~~products~~ brand by ~~$0.07~~$0.12 per can.

Liquidity and Capital Resources

~~Wine Segment~~

~~Operating Results~~

~~Financial Results and Shipment Volume~~

~~The following table summarizes operating results, includes reported and adjusted OCI margins, and provides a reconciliation of reported OCI to adjusted OCI for the wine segment:~~

Operating Results
For the Nine Months Ended September 30, For the Three Months Ended September 30,
(in millions) 2021 2020 Change 2021 2020 Change
Net revenues $ 494 $ 434 13.8 % $ 177 $ 157 12.7 %
Excise taxes (14) (14) (5) (5)
Revenues net of excise taxes $ 480 $ 420 $ 172 $ 152
Reported OCI (Loss) $ 21 $ (347) 100.0%+ $ (24) $ 19 (100.0)%+
Implementation and disposition-related costs 52 395 51 1
Adjusted OCI $ 73 $ 48 52.1 % $ 27 $ 20 35.0 %
Reported OCI margins (1)
4.4 % (82.6) % 87.0 pp (14.0) % 12.5 % (26.5) pp
Adjusted OCI margins (1)
15.2 % 11.4 % 3.8 pp 15.7 % 13.2 % 2.5 pp

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

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~~Nine Months Ended September 30, 2021 Compared with Nine Months Ended September 30, 2020~~

~~Net revenues, which include excise taxes billed to customers, increased $60 million (13.8%), due to higher shipment volume, improved mix and higher pricing.~~

Reported OCI increased $368 million (100%+), due primarily to 2020 inventory-related charges discussed in Note 9 (included in implementation costs and charged to cost of sales), higher shipment volume, improved mix and higher pricing, partially offset by disposition-related charges recorded in the third quarter of 2021 related to the Ste. Michelle Transaction.

~~Adjusted OCI increased $25 million (52.1%), due primarily to higher shipment volume, improved mix and higher pricing.~~

~~For the nine months ended September 30, 2021, Ste. Michelle’s reported wine shipment volume increased 5.1% to 5,446 thousand cases.~~

~~Three Months Ended September 30, 2021 Compared with Three Months Ended September 30, 2020~~

~~Net revenues, which include excise taxes billed to customers, increased $20 million (12.7%), due primarily to improved mix and higher pricing.~~

~~Reported OCI decreased $43 million (100.0%+), due primarily to disposition-related charges related to the Ste. Michelle Transaction, partially offset by higher pricing and improved mix.~~

~~Adjusted OCI increased $7 million (35.0%), due primarily to higher pricing and improved mix.~~

~~For the three months ended September 30, 2021, Ste. Michelle’s reported wine shipment volume decreased 2.6% to 1,836 thousand cases.~~

~~Financial Review~~

~~Cash Provided by/Used in Operating Activities~~

During the first nine months of 2021, net cash provided by operating activities was $5,742 million compared with $5,844 million during the first nine months of 2020. This decrease was due primarily to higher settlement and income tax payments, partially offset by lower excise tax payments due to lower volume.

Altria had a working capital deficit at September 30, 2021 and December 31, 2020. Altria’s management believes that Altria has the ability to fund working capital deficits with cash provided by operating activities and borrowings through its access to credit and capital markets, as discussed in the ~~Debt and Liquidity~~ ~~section below.~~

~~Cash Provided by/Used in Investing Activities~~

During the first nine months of 2021, net cash used in investing activities was $42 million compared with $107 million during the first nine months of 2020. This decrease was due primarily to lower capital expenditures.

Capital expenditures for 2021 are expected to be in the range of $150 million to $200 million, a reduction from the previous range of $200 million to $250 million, and are expected to be funded from operating cash flows.

~~Cash Provided by/Used in Financing Activities~~

During the first nine months of 2021, net cash used in financing activities was $7,668 million compared with $3,713 million during the first nine months of 2020. This change was due primarily to the following:

▪repayment of $5.0 billion of Altria senior unsecured notes in connection with the 2021 debt tender offers and redemption and the premiums and fees in connection with the debt tender offers described below and in Note 10;

▪~~proceeds of $2.0 billion from the issuance of long-term senior unsecured notes in 2020;~~

▪~~repayment of $1.5 billion in full of Altria senior unsecured notes at scheduled maturity in May 2021;~~

▪~~repurchases of common stock in 2021;~~

▪~~higher dividends paid in 2021; and~~

▪~~purchase of the remaining 20% interest in Helix;~~

~~partially offset by:~~

▪~~proceeds of $5.5 billion from the issuance of long-term senior unsecured notes used to repurchase and redeem senior unsecured notes in connection with the 2021 debt tender offers and redemption; and~~

▪~~repayment of $1.0 billion in full of Altria senior unsecured notes at scheduled maturity in January 2020.~~

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~~Debt and Liquidity~~

~~Source of Funds~~ ~~- Altria is~~ a holding ~~company. As a result, its~~company that is primarily dependent on the capital resources of our subsidiaries to satisfy our liquidity requirements. Our access to the operating cash flows of ~~its~~our wholly owned subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany ~~loans~~loans. At June 30, 2022, our significant wholly owned subsidiaries were not limited by ~~its subsidiaries.~~contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests. In addition, ~~Altria receives~~we receive cash dividends on ~~its~~our interest in ABI and will continue to do so as long as ABI pays dividends.

At June 30, 2022, we had $2.6 billion of cash and cash equivalents. In addition to having access to the operating cash flows of our wholly owned subsidiaries, our capital resources include access to credit markets in the form of commercial paper, availability under our $3.0 billion senior unsecured 5-year revolving credit agreement (as amended, the “Credit Agreement”), which we use for general corporate purposes, and access to credit markets through the issuance of long-term senior unsecured notes. For additional information, see Capital Markets and Other Matters below.

In addition to funding current operations, we primarily use our net cash from operating activities for payment of dividends, share repurchases under our share repurchase programs, repayment of debt, acquisitions of or investments in businesses and assets, and capital expenditures.

We believe our cash and cash equivalents balance, along with our future cash flows from operations, capacity for borrowings under the Credit Agreement and access to credit markets, provide sufficient liquidity to meet the needs of our business operations and to satisfy our projected cash requirements for the next 12 months and the foreseeable future.

Capital Markets and Other Matters

Credit Ratings - ~~Altria’s~~Our cost and terms of financing and ~~its~~our access to commercial paper markets may be impacted by applicable credit ratings. The impact of credit ratings on the cost of borrowings under the Credit Agreement ~~(as defined below)~~ is discussed in Note ~~10.~~9.

At ~~September~~June 30, ~~2021,~~2022, the credit ratings and outlook for ~~Altria’s~~our indebtedness by major credit rating agencies were:

Short-term Debt

Long-term Debt

Outlook

Moody’s Investors Service, Inc. (“Moody’s”)

P-2

Stable

Standard & Poor’s Financial Services LLC (“S&P”)

A-2

BBB

Stable

Fitch Ratings Inc.

BBB

Stable

Credit Lines - From time to time, ~~Altria has~~we have short-term borrowing needs to meet ~~its~~our working capital requirements arising from the timing of annual MSA payments, quarterly income tax payments and quarterly dividend payments, and generally ~~uses its~~use our commercial paper program to meet those needs.

~~In August 2021, Altria entered into~~

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At June 30, 2022, we had availability under the Credit Agreement for borrowings of up to an ~~extension and amendment to its~~aggregate principal amount of $3.0 billion, ~~senior unsecured 5-year revolving~~and we were in compliance with the covenants in the Credit Agreement. We expect to continue to meet the covenants in the Credit Agreement. We monitor the credit ~~agreement (as amended, the “Credit Agreement”).~~quality of our bank group and are not aware of any potential non-performing credit provider in that group. For further discussion on short-term borrowings, see Note ~~10.~~9.

~~Any~~PM USA guarantees any commercial paper ~~issued by Altria~~that we issue and our borrowings under the Credit ~~Agreement are guaranteed by PM USA.~~Agreement. For further discussion, see Supplemental Guarantor Financial Information below and Note ~~10.~~

~~Financial Market Environment~~ - Altria believes it has adequate liquidity and access to financial resources to meet its anticipated obligations and ongoing business needs in the foreseeable future. Altria monitors the credit quality of its bank group and is not aware of any potential non-performing credit provider in that group.

~~Ste. Michelle Transaction~~ ~~- On October 1, 2021, UST received net cash proceeds of approximately $1.2 billion from the sale of its wine business.~~9.

Debt - At ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020, Altria’s~~2021, our total debt was ~~$28.1~~$27.7 billion and ~~$29.5~~$28.0 billion, respectively.

~~In May 2021, Altria repaid in full senior unsecured notes in the aggregate principal amount~~ We expect to retire $1.1 billion of ~~$1.5 billion at maturity.~~

~~In February 2021, Altria issued~~ long-term senior unsecured notes due in the aggregate principal amount of $5.5 billion (the “Notes”). The net proceeds from the Notes were used (i) to fund the purchase and redemption of certain unsecured notes and payment of related fees and expenses, as described below, and (ii) for other general corporate purposes.

During the first quarter of 2021, Altria (i) completed debt tender offers to purchase for cash certain of its long-term senior unsecured notes in the aggregate principal amount of $4,042 million and (ii) redeemed all of its outstanding 3.490% Notes dueAugust 2022 in an aggregate principal amount of $1.0 billion. As a result, for the nine months ended September 30, 2021, Altria recorded pre-tax losses on early extinguishment of debt of $649 million, which included premiums and fees of $623 million and the write-off of related unamortized debt discounts and debt issuance costs of $26 million.

As a result of the first quarter debt transactions, Altria reduced its near-term maturity towers and extended the weighted-average maturity of its debt. In addition, the weighted-average coupon interest rate on total long-term debt decreased to 4.0% at September 30, 2021 from 4.1% at December 31, 2020.

with available cash. For further details on long-term debt, ~~including the terms of the Notes, the debt tender offers and the redemption,~~ see Note ~~10.~~9.

Guarantees and Other Similar Matters - As discussed in Note ~~12, Altria and certain of its subsidiaries~~11, we had unused letters of credit obtained in the ordinary course of business and guarantees (including third-party guarantees) ~~and a redeemable noncontrolling interest~~ outstanding at ~~September~~June 30, ~~2021.~~2022. From time to time, ~~subsidiaries of Altria~~we also issue lines of credit to affiliated entities. In addition, as discussed below in Supplemental Guarantor Financial Information and in Note ~~10,~~9, PM USA has issued guarantees relating to ~~Altria’s~~our obligations under ~~its~~our outstanding debt securities, borrowings under the Credit Agreement and amounts outstanding under the commercial paper program. These items have not had, and are not expected to have, a significant impact on ~~Altria’s~~our liquidity. ~~For further discussion regarding Altria’s liquidity, see the~~ ~~Debt and Liquidity~~ ~~section above.~~

Payments Under State Settlement Agreements and FDA Regulation - As discussed ~~previously and~~ in Note ~~12,~~11, PM USA has entered into State Settlement Agreements with the states and territories of the United States that call for certain payments. In addition, PM USA, Middleton and USSTC are subject to quarterly user fees imposed by the FDA as a result of the FSPTCA. ~~Altria’s subsidiaries recorded $3.4 billion and $3.6 billion of charges to cost of sales for the nine months ended September 30,~~

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2021 and 2020, respectively, and $1.2 billion and $1.3 billion of charges to cost of sales for the three months ended September 30, 2021 and 2020, in connection with the State Settlement Agreements and FDA user fees. For further discussion of the resolutions of certain disputes with states and territories related to the NPM adjustment provision under the ~~1998 Master Settlement Agreement,~~MSA, see Health Care Cost Recovery Litigation - NPM Adjustment Disputes in Note ~~12.~~11.

Based on current agreements, ~~2020~~estimated market share, ~~and~~ estimated annual industry volume decline rates and inflation rates, the estimated amounts that ~~Altria’s subsidiaries~~we may charge to cost of sales for payments related to State Settlement Agreements and FDA user fees are ~~$4.5~~$4.3 billion on average for the next three years. These amounts exclude the potential impact of any NPM Adjustment Items.

The estimated amounts due under the State Settlement Agreements charged to cost of sales in each year ~~would~~are generally be paid in April of the following year. The amounts charged to cost of sales for FDA user fees are generally paid in the quarter in which the fees are incurred. We paid approximately $3.7 billion and $3.8 billion for the six months ended June 30, 2022 and 2021, respectively, in connection with the State Settlement Agreements and FDA user fees, primarily all of which was paid in the second quarter of each period. We recorded $2.1 billion and $2.2 billion of charges to cost of sales for the six months ended June 30, 2022 and 2021, respectively, and $1.1 billion and $1.2 billion of charges to cost of sales for the three months ended June 30, 2022 and 2021, respectively, in connection with the State Settlement Agreements and FDA user fees. As previously stated, the payments due under the terms of the State Settlement Agreements and FDA user fees are subject to adjustment for several factors, including volume, operating income, inflation and certain contingent events and, in general, are allocated based on each manufacturer’s market share. The future payment amounts discussed above are estimates, and actual payment amounts will differ to the extent underlying assumptions differ from actual future results. For further discussion on the potential impact of inflation on future payments, see Operating Results by Business Segment - Tobacco Space - State Settlement Agreements.

Litigation-Related Deposits and Payments - With respect to certain adverse verdicts currently on appeal, to obtain stays of judgments pending appeals, as of ~~September~~June 30, ~~2021,~~2022, PM USA had posted appeal bonds totaling ~~$45~~$50 million, which have been collateralized with restricted cash that is included in assets on ~~the~~our condensed consolidated balance sheet.

~~Although litigation~~Litigation is subject to uncertainty, and an adverse outcome or settlement of litigation could have a material adverse effect on ~~the~~our consolidated financial position, cash flows or results of operations ~~of PM USA, UST or Altria~~ in a particular fiscal quarter or fiscal year, as more fully disclosed in Note ~~12, management expects cash flow from operations, together with Altria’s access to capital markets, to provide sufficient liquidity to meet ongoing business needs.~~11.

Equity and Dividends

~~Dividends paid during~~During the first ~~nine~~six months of 2022 and 2021, ~~and 2020 were $4,787~~we paid dividends of $3,279 million and ~~$4,690~~$3,196 million, respectively, an increase of ~~2.1%~~2.6%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased ~~by Altria in 2021~~ under ~~its~~our share repurchase program.

In August 2021, the Board of Directors (the “Board of Directors” or “Board”) declared a 4.7% increase in the quarterly dividend rate to $0.90 per share of Altria common stock versus the previous rate of $0.86 per share. The Our current annualized dividend rate is $3.60 per share. ~~Altria maintains its~~We maintain our long-term objective of a dividend payout ratio target of approximately 80% of ~~its~~our adjusted diluted EPS. Future dividend payments remain subject to the discretion of ~~the Board.~~our Board of Directors (“Board of Directors” or “Board”).

In October 2021, the Board authorized a $1.5 billion expansion of Altria’s existing share repurchase program from $2.0 billion to $3.5 billion, partially funded by the net cash proceeds from the Ste. Michelle Transaction. Altria expects to complete the expanded program by December 31, 2022. The timing of share repurchases under this program depends upon marketplace conditions and other factors, and the program remains subject to the discretion of the Board. For a discussion of ~~Altria’s~~our share repurchase ~~programs,~~program, see Note 1. Background and Basis of Presentation to ~~the~~our condensed consolidated financial statements in Item 1 and Part II, Item 2. Unregistered Sales of Equity Securities and Use of Proceeds of this Form 10-Q.

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Financial Review

Cash Provided by/Used in Operating Activities

During the first six months of 2022, net cash provided by operating activities was $2,561 million compared with $2,679 million during the first six months of 2021. This decrease was due primarily to higher litigation payments and the sale of our wine business in October 2021.

We had a working capital deficit at June 30, 2022 and December 31, 2021. Our management believes that we have the ability to fund working capital deficits with cash provided by operating activities, borrowings under the Credit Agreement and access to credit markets.

Cash Provided by/Used in Investing Activities

During the first six months of 2022, net cash used in investing activities was $150 million compared with $9 million during the first six months of 2021. This increase was due primarily to the purchase of certain intellectual property and higher capital expenditures.

Cash Provided by/Used in Financing Activities

During the first six months of 2022, net cash used in financing activities was $4,373 million compared with $5,749 million during the first six months of 2021. This decrease was due primarily to the following:

▪repayment of $1.5 billion in full of our senior secured notes at scheduled maturity in May 2021; and

▪2021 debt tender offers and redemption transactions, which included proceeds of $5.5 billion from the issuance of long-term senior unsecured notes used to repurchase and redeem $5.0 billion of our senior unsecured notes and payment of $0.6 billion for the premiums and fees;

partially offset by:

▪higher repurchases of common stock in 2022; and

▪higher dividends paid in 2022.

New Accounting Guidance Not Yet Adopted

See Note ~~13.~~12. New Accounting Guidance Not Yet Adopted to ~~the~~our condensed consolidated financial statements in Item 1 for a discussion of issued accounting guidance applicable to, but not yet adopted by, ~~Altria.~~us.

Contingencies

See Note 1211 for a discussion of contingencies.

Supplemental Guarantor Financial Information

PM USA (the “Guarantor”), which is a 100% owned subsidiary of Altria Group, Inc. (the “Parent”), has guaranteed the Parent’s obligations under its outstanding debt securities, borrowings under its Credit Agreement and amounts outstanding under its commercial paper program (the “Guarantees”). Pursuant to the Guarantees, the Guarantor fully and unconditionally guarantees, as primary obligor, the payment and performance of the Parent’s obligations under the guaranteed debt instruments (the “Obligations”), subject to release under certain customary circumstances as noted below.

The Guarantees provide that the Guarantor guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of the Obligations. The liability of the Guarantor under the Guarantees is absolute and unconditional irrespective of: any lack of validity, enforceability or genuineness of any provision of any agreement or instrument relating thereto; any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from any agreement or instrument relating thereto; any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the Obligations; or any other circumstance that might otherwise constitute a defense available to, or

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a discharge of, the Parent or the Guarantor.

Under applicable provisions of federal bankruptcy law or comparable provisions of state fraudulent transfer law, the Guarantees could be voided, or claims in respect of the Guarantees could be subordinated to the debts of the Guarantor, if, among other things, the Guarantor, at the time it incurred the Obligations evidenced by the Guarantees:

▪received less than reasonably equivalent value or fair consideration therefor; and

▪either:

▪was insolvent or rendered insolvent by reason of such occurrence;

▪was engaged in a business or transaction for which the assets of the Guarantor constituted unreasonably small capital; or

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▪intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.

In addition, under such circumstances, the payment of amounts by the Guarantor pursuant to the Guarantees could be voided and required to be returned to the Guarantor, or to a fund for the benefit of the Guarantor, as the case may be.

The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding with respect to the foregoing. Generally, however, the Guarantor would be considered insolvent if:

▪the sum of its debts, including contingent liabilities, was greater than the saleable value of its assets, all at a fair valuation;

▪the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

▪it could not pay its debts as they become due.

To the extent the Guarantees are voided as a fraudulent conveyance or held unenforceable for any other reason, the holders of the guaranteed debt obligations would not have any claim against the Guarantor and would be creditors solely of the Parent.

The obligations of the Guarantor under the Guarantees are limited to the maximum amount as will not result in the Guarantor’s obligations under the Guarantees constituting a fraudulent transfer or conveyance, after giving effect to such maximum amount and all other contingent and fixed liabilities of the Guarantor that are relevant under Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to the Guarantees. For this purpose, “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.

The Guarantor will be unconditionally released and discharged from the Obligations upon the earliest to occur of:

▪the date, if any, on which the Guarantor consolidates with or merges into the Parent or any successor;

▪the date, if any, on which the Parent or any successor consolidates with or merges into the Guarantor;

▪the payment in full of the Obligations pertaining to such Guarantees; and

▪the rating of the Parent’s long-term senior unsecured debt by S&P of A or higher.

The Parent is a holding company; therefore, its access to the operating cash flows of its wholly owned subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany loans by its subsidiaries. Neither the Guarantor nor other 100% owned subsidiaries of the Parent that are not guarantors of the debt (“Non-Guarantor Subsidiaries”) are limited by contractual obligations on their ability to pay cash dividends or make other distributions with respect to their equity interests.

The following tables include summarized financial information for the Parent and the Guarantor. Transactions between the Parent and the Guarantor (including investment and intercompany balances as well as equity earnings) have been eliminated. The Parent’s and the Guarantor’s intercompany balances with Non-Guarantor Subsidiaries have been presented separately. This summarized financial information is not intended to present the financial position or results of operations of the Parent or the Guarantor in accordance with GAAP.

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Summarized Balance Sheets

(in millions of dollars)


		Parent				Guarantor					Parent				Guarantor
		September 30, 2021		December 31, 2020		September 30, 2021		December 31, 2020			June 30, 2022		December 31, 2021		June 30, 2022		December 31, 2021
Assets	Assets									Assets
Due from Non-Guarantor Subsidiaries	Due from Non-Guarantor Subsidiaries	$	81	$	112	$	199	$	199	Due from Non-Guarantor Subsidiaries	$	125	$	25	$	240	$	240
Other current assets	Other current assets	3,076		4,896		962		734		Other current assets	2,705		4,635		823		874
Total current assets	Total current assets	$	3,157	$	5,008	$	1,161	$	933	Total current assets	$	2,830	$	4,660	$	1,063	$	1,114

Due from Non-Guarantor Subsidiaries	Due from Non-Guarantor Subsidiaries	$	4,790	$	4,790	$	—	$	—	Due from Non-Guarantor Subsidiaries	$	4,790	$	4,790	$	—	$	—
Other assets	Other assets	11,292		16,883		1,850		1,983		Other assets	11,742		11,195		1,734		1,764
Total non-current assets	Total non-current assets	$	16,082	$	21,673	$	1,850	$	1,983	Total non-current assets	$	16,532	$	15,985	$	1,734	$	1,764

Liabilities	Liabilities									Liabilities
Due to Non-Guarantor Subsidiaries	Due to Non-Guarantor Subsidiaries	$	1,232	$	1,169	$	756	$	656	Due to Non-Guarantor Subsidiaries	$	1,284	$	1,179	$	891	$	778
Other current liabilities	Other current liabilities	3,123		3,688		4,071		4,539		Other current liabilities	4,724		3,339		2,811		4,452
Total current liabilities	Total current liabilities	$	4,355	$	4,857	$	4,827	$	5,195	Total current liabilities	$	6,008	$	4,518	$	3,702	$	5,230

Total non-current liabilities	Total non-current liabilities	$	28,923	$	30,958	$	1,052	$	1,268	Total non-current liabilities	$	27,147	$	28,865	$	981	$	979

Summarized Statements of Earnings (Losses)

(in millions of dollars)


		For the Nine Months Ended September 30, 2021						For the Six Months Ended June 30, 2022
		Parent (1)		Guarantor		Parent (1)		Guarantor
Net revenues	Net revenues	$	—	$	16,517		Net revenues	$	—	$	10,620
Gross profit	Gross profit	—		8,425			Gross profit	—		5,674
Net earnings (losses)	Net earnings (losses)	(5,611)		5,514			Net earnings (losses)	(239)		3,719

(1) For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, net earnings (losses) include ~~$174~~$114 million of intercompany interest income from non-guarantor subsidiaries.

Cautionary Factors That May Affect Future Results

Forward-Looking and Cautionary Statements

~~We may from time to time make written or oral forward-looking~~This Form 10-Q contains statements ~~including earnings guidance~~concerning our expectations, plans, objectives, future financial performance and other statements ~~contained in filings with the SEC, reports to security holders, press releases and investor webcasts.~~that are not historical facts. You can identify these forward-looking statements by use of words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “will,” “estimates,” “forecasts,” “intends,” “projects,” “goals,” “objectives,” “guidance,” “targets” and other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans, estimates and assumptions. Achievement of future results is subject to risks, uncertainties and assumptions that may prove to be inaccurate. Should known or unknown risks or uncertainties materialize, or should underlying estimates or assumptions prove inaccurate, actual results could differ materially from those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements and whether to invest in or remain invested in ~~Altria’s~~our securities. In connection with the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995, we are identifying important factors that, individually or in the aggregate, could cause actual results and outcomes, including with respect to our ability to achieve our Vision, to differ materially from those contained in, or implied by, any forward-looking statements ~~made by Altria; any~~we made. Any such statement is qualified by reference to the following cautionary statements. We elaborate on these important factors and the risks we face throughout this Form 10-Q, particularly in ~~Item 1A~~the “Executive Summary” and ~~the~~ “Business Environment” ~~section~~

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sections preceding our discussion of the operating results of our

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segments above, and in our publicly filed reports, including our ~~2020 Form 10-K and our Second Quarter~~ 2021 Form ~~10-Q.~~10-K. These factors and risks include the following:

▪unfavorable litigation outcomes, including risks associated with adverse jury and judicial determinations, courts and arbitrators reaching conclusions at variance with our ~~our subsidiaries’~~ or any of our investees’ understanding of applicable law, bonding requirements in the jurisdictions that do not limit the dollar amount of appeal bonds, and certain challenges to bond cap statutes;

▪government (including the FDA) and private sector actions that impact adult tobacco consumer acceptability of, or access to, tobacco products;

▪tobacco product taxation, including lower tobacco product consumption levels and potential shifts in adult tobacco consumer purchases as a result of federal, state and local excise tax ~~increases;~~increases, and excise taxes on e-vapor and oral nicotine products and the impact on adult tobacco consumers’ transition to lower priced tobacco products;

▪unfavorable outcomes of any government investigations of ~~Altria,~~us or our ~~subsidiaries or~~ investees;

▪a successful challenge to our tax positions, an increase to the corporate income tax rate or other changes to federal or state tax laws;

▪the risks related to our and our investees’ international business operations, including failure to prevent violations of various ~~U.S.~~United States and foreign laws and regulations such as foreign privacy laws and laws prohibiting bribery and corruption;

▪the risks associated with health epidemics and pandemics, including the COVID-19 pandemic and similar outbreaks, such as their impact on our ~~financial performance~~ and ~~financial condition and on~~ our ~~subsidiaries’ and~~ investees’ ability to continue manufacturing and distributing products ~~including as a result of labor shortages,~~(directly or indirectly due to their impact on suppliers, distributors and ~~the~~distribution chain service providers) and their impact ~~of health epidemics and pandemics~~ on ~~general economic~~macroeconomic conditions ~~(including any resulting recession or other economic crisis)~~ and, in turn, adult tobacco consumer purchasing ~~behavior, which may be further adversely impacted by any reductions in, or eliminations of, government stimulus or unemployment payments;~~behavior;

▪the failure of our ~~tobacco subsidiaries~~ and our ~~investees~~investees’ efforts to compete effectively in their respective markets;

▪the growth of the e-vapor category and other innovative tobacco products, including oral nicotine pouches, contributing to reductions in cigarette and MST consumption levels and sales volume;

▪our ~~tobacco subsidiaries’ and our investees’ continued~~ ability to promote brand equity successfully; to anticipate and respond to evolving adult tobacco consumer preferences; to develop, manufacture, market and distribute products that appeal to adult ~~consumers (including, where appropriate, through arrangements with, and investments in third parties); to improve~~tobacco consumers; promote productivity; and to protect or enhance margins through cost savings and price increases;

▪~~changes, including in economic conditions (due to the COVID-19 pandemic or otherwise), that result in adult consumers choosing lower-priced brands, including discount brands;~~

▪~~the~~our unsuccessful commercialization of ~~adjacent~~innovative products or processes, ~~by our tobacco subsidiaries and investees,~~ including innovative tobacco products that may reduce the health risks associated with cigarettes and other traditional tobacco products, and that appeal to adult tobacco consumers;

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

▪significant changes in price, availability or quality of tobacco, other raw materials or component parts, including as a result of changes in macroeconomic, climate and geopolitical conditions, including the ~~COVID-19 pandemic;~~Russian invasion of Ukraine;

▪the risks, including FDA regulatory risks, related to ~~the~~our and our investees’ reliance ~~by our tobacco subsidiaries~~ on a few significant facilities and a small number of key suppliers, distributors and distribution chain service providers, and the risk of an extended disruption at a facility of, or of service by, a supplier, distributor or distribution chain service provider of our tobacco subsidiaries or ~~investees, including as a result of the COVID-19 pandemic;~~our investees;

▪required or voluntary product recalls or prohibition on the marketing or sale of our or any of our investees’ products as a result of various circumstances such as ~~product contamination or~~ FDA or other regulatory ~~action;~~action or product contamination;

▪the failure of our information systems or ~~service providers’~~the information systems of key suppliers or service providers to function as intended, or cyber attacks or security breaches;

▪our inability to attract and retain the best talent due to the impact of decreasing social acceptance of tobacco usage, tobacco control actions and other ~~factors;~~factors, including current labor market dynamics;

▪impairment losses as a result of the write down of intangible assets, including goodwill;

▪the adverse effect of acquisitions, investments, dispositions or other events on our credit rating;

▪our inability to acquire attractive businesses or make attractive investments on favorable terms, or at all, or to realize the anticipated benefits from an acquisition or investment and our inability to dispose of businesses or investments on favorable terms or at all;

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▪the risks related to disruption and uncertainty in the credit and capital markets, including risk of losing access to these markets, ~~both generally and at current prevailing rates,~~ which may adversely affect our earnings or dividend rate or both;

▪our inability to attract and retain investors due to the impact of decreasing social acceptance of tobacco usage or unfavorable environmental, social and governance ratings;

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▪the risk that any challenge to our investment in JUUL, if successful, could result in a broad range of resolutions, including divestiture of the investment or rescission of the transaction;

▪the risks generally related to our investments in JUUL and Cronos, including our inability to realize the expected benefits of our investments in the expected time frames, or at all, due to the risks encountered by our investees in their businesses, such as operational, competitive, compliance, litigation and reputational risks, and legislative and regulatory risks at the international, federal, state and local levels, including actions by the FDA, and adverse publicity; potential disruptions to our investees’ management or current or future plans and operations; domestic or international litigation developments, government investigations, tax disputes or otherwise; and impairment of our investment in Cronoslevels; and changes in the fair value of our investment in ~~JUUL;~~JUUL and impairment of our investment in Cronos;

▪the risks related to our inability to acquire a controlling interest in JUUL as a result of standstill restrictions or to control the material decisions of JUUL, restrictions on our ability to sell or otherwise transfer our shares of JUUL until December 20, 2024, and non-competition restrictions for the same time period subject to certain exceptions;

▪the ~~adverse effects of~~ risks ~~encountered by~~associated with our investment in ABI, ~~in its business,~~ including effects of the COVID-19 pandemic, foreign currency exchange rates and macroeconomic and geopolitical conditions, including the Russian invasion of Ukraine, on ABI’s business and the impact ~~of movements in ABI’s stock price~~ on our ~~equity investment in ABI, including on our reported~~ earnings from, and carrying value of, our investment in ~~ABI, which could result in additional impairments of our investment, and the dividends paid by ABI on the shares we own;~~ABI;

▪the risks related to our ownership percentage in ABI decreasing below certain levels, including additional tax liabilities, a reduction in the number of directors that we have the right to have appointed to the ABI board of directors and our potential inability to use the equity method of accounting for our investment in ABI;

▪the risk of ~~challenges~~a successful challenge to ~~the tax treatment of the consideration we received in the ABI/SABMiller business combination and~~ the tax treatment of our equity ~~investment;~~investment in ABI; and

▪the risks, including criminal, civil or tax liability, ~~for Altria,~~ related to ~~Altria’s~~our or Cronos’s failure to comply with applicable laws, including cannabis laws.

You should understand that it is not possible to predict or identify all factors and risks. Consequently, you should not consider the foregoing list to be complete. We do not undertake to update any forward-looking statement that we may make from time to time except as required by applicable law.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk

The fair value of ~~Altria’s~~our long-term debt, all of which is fixed-rate debt, is subject to fluctuations resulting primarily from changes in market interest rates. The following table provides the fair value of ~~Altria’s~~our long-term debt and the change in fair value based on a 1% increase or decrease in market interest rates at ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020:~~2021:


(in billions)	(in billions)	September 30, 2021		December 31, 2020		(in billions)	June 30, 2022		December 31, 2021
Fair value	Fair value	$	31.0	$	34.7	Fair value	$	24.0	$	30.5
Decrease in fair value from a 1% increase in market interest rates	Decrease in fair value from a 1% increase in market interest rates	2.8		2.7		Decrease in fair value from a 1% increase in market interest rates	1.8		2.7
Increase in fair value from a 1% decrease in market interest rates	Increase in fair value from a 1% decrease in market interest rates	3.3		3.1		Increase in fair value from a 1% decrease in market interest rates	2.1		3.2

Interest rates on borrowings under the Credit Agreement are expected to be based on the London Interbank Offered Rate, or a fallback benchmark rate determined based on prevailing market convention, plus a percentage based on the higher of the ratings of ~~Altria’s~~our long-term senior unsecured debt from Moody’s and S&P. The applicable percentage for borrowings under the Credit Agreement at June 30, 2022 was 1.0% based on ~~Altria’s~~our long-term senior unsecured debt ratings ~~at September~~on that date. At June 30, ~~2021 borrowings under the Credit Agreement was 1.0%. At September 30, 2021~~2022 and December 31, ~~2020, Altria~~2021, we had no borrowings under the Credit Agreement.

~~Equity Price Risk~~

The estimated fair values of the Fixed-price Preemptive Rights and the Cronos warrant are subject to equity price risk. The Fixed-price Preemptive Rights and warrant are recorded at fair value, which is estimated using Black-Scholes option-pricing models. The fair values of the Fixed-price Preemptive Rights and Cronos warrant are subject to fluctuations resulting from changes in the quoted market price of Cronos shares, the underlying equity security.

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The following table provides (i) fair values of the Fixed-price Preemptive Rights and Cronos warrants and (ii) the change in fair value based on a 10% increase or decrease in the quoted market price of Cronos shares at September 30, 2021 and December 31, 2020:

Fixed-price Preemptive Rights Cronos Warrant
(in millions) September 30, 2021 December 31, 2020 September 30, 2021 December 31, 2020
Fair values $ 3 $ 24 $ 32 $ 139
Change in fair value based on a 10% increase/decrease in the quoted market price of Cronos shares 1 6 11 28

Item 4. Controls and Procedures

~~Altria~~We carried out an evaluation, with the participation of ~~Altria’s~~our management, including ~~its~~Altria’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of ~~its~~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, Altria’s Chief Executive Officer and Chief Financial Officer concluded that ~~Altria’s~~our disclosure controls and procedures are effective.

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

Part II – OTHER INFORMATION

Item 1. Legal Proceedings

See Note 1211 for a discussion of legal proceedings pending against ~~Altria and its subsidiaries.~~us. See also Exhibits 99.1 and 99.2 to this Form 10-Q.

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Item 1A. Risk Factors

Information regarding Risk Factors appears in Part I, Item 1A. Risk Factors of our ~~2020 Form 10-K and in Part II, Item 1A. Risk Factors of our Second Quarter~~ 2021 Form ~~10-Q.~~10-K. Except as set forth below, there have been no material changes to the risk factors previously disclosed in our ~~2020 Form 10-K and in our Second Quarter~~ 2021 Form ~~10-Q.~~

~~Risks Related to Litigation, Legislative or Regulatory Action~~

~~A challenge to our tax positions, an increase~~10-K. We elaborate on these and other risks we face throughout this Form 10-Q, particularly in the ~~income tax rate or other changes to federal or state tax laws could adversely affect~~“Business Environment” section preceding our ~~earnings or cash flow~~.

~~Tax laws~~discussion of our operating results above in Part 1, Item 2. Management’s Discussion and ~~regulations, such as the 2017 Tax Cuts~~Analysis of Financial Condition and ~~Jobs Act, are complex and subject to varying interpretations. A successful challenge to one or more~~Results of Altria’s tax positions (which could give rise to additional liabilities, including interest and potential penalties), an increase in the corporate income tax rate or other changes to federal or state tax laws, including changes in how foreign investments are taxed, could adversely affect our earnings or cash flow.Operations.

Risks Related to Our Investments

The expected benefits of the JUUL transaction may not materialize in the expected manner or timeframe or at all.

The expected benefits of the JUUL transaction may not materialize in the expected manner or timeframe or at all, including due to the risks encountered by JUUL in its business, such as operational, competitive, regulatory and legislative risks at the international, federal, state and local levels, including actions by the FDA; adverse publicity due to underage use of e-vapor products and other factors; changes in JUUL’s relationships with employees, customers, suppliers, lenders and other third parties; potential disruptions to JUUL’s management or current or future plans and operations; adverse changes with respect to JUUL’s ability to satisfy its obligations under its debt arrangements and maintain adequate financing to fund its projected cash needs, which could result in JUUL seeking protection under bankruptcy or other insolvency law; or developments with respect to domestic or international litigation or investigations. JUUL and Altria ~~recorded an impairment charge~~and/or one or more of ~~$6.2 billion on its~~our subsidiaries, including PM USA, are named as defendants in various individual and class action lawsuits, including independent lawsuits initiated by certain state attorneys general. JUUL also is named in a significant number of additional individual and class action lawsuits to which neither Altria nor any of our subsidiaries is a party.

In preparing our financial statements for prior periods, we performed valuations of our investment in ~~ABI~~JUUL as a result of impairment indicators, determined that our investment in JUUL was impaired and recorded non-cash impairment charges in those periods totaling $11.2 billion. Since the time we recorded those impairments, we have elected to account for our equity method investment in JUUL under the fair value option. Under this option, we make various judgments, estimates and assumptions, including with respect to sales volume, operating margins, discount rates and perpetual growth rates, to estimate the fair value of our investment in JUUL, which is calculated quarterly. In June 2022, the FDA issued JUUL MDOs for all of JUUL’s products currently marketed in the United States. Although the MDOs are stayed on a temporary basis, the possibility of JUUL’s products being removed from the U.S. market and the likelihood and extent of JUUL being able to maintain adequate financing to fund projected cash needs negatively impacted the estimated fair value of our investment for the ~~nine~~quarter ended June 30, 2022.

If the FDA ultimately denies JUUL authorization to market its products in the United States, or if the outcomes in connection with any of the other risks or circumstances discussed above deviate significantly from then-current expectations, such outcomes could materially impact the judgments, estimates and ~~three months ended September 30, 2021.~~ assumptions we make in connection with our quarterly estimate of the fair value of our investment in JUUL. Accordingly, negative developments with respect to the risks or circumstances discussed above could adversely impact the fair value of our investment in JUUL, create volatility in our consolidated financial position or earnings, adversely impact our ability to recognize the expected benefits of the JUUL transaction in the expected timeframe or at all and adversely affect our ability to achieve our Vision.

If the carrying value of our investment in ~~ABI~~Cronos exceeds its fair value and the loss in value is other than temporary, the investment is considered impaired, which would result in ~~additional~~ impairment ~~losses.~~losses and could have a material adverse effect on our consolidated financial position or earnings.

~~As discussed~~In preparing our financial statements for the year ended December 31, 2021, we concluded that our equity method investment in ~~Note 4, since October 2019, the~~Cronos declined below its carrying value ~~of our investment in ABI has exceeded~~and that there was not sufficient evidence to conclude that the ~~fair value of our equity investment in ABI.~~impairment was temporary. In preparing our financial statements for the period ended ~~September~~June 30, ~~2021,~~2022, we concluded that ~~the decline in fair value of~~ our equity method investment in ~~ABI below its carrying value~~Cronos had declined further and that there was ~~other than temporary at September 30, 2021.~~not sufficient evidence to conclude that the impairment was temporary. As a result, we recorded a non-cash, pre-tax impairment ~~charge~~charges of ~~$6.2 billion for the nine~~$205 million and ~~three months ended September 30, 2021~~$107 million to ~~income (losses)~~(income) losses from equity investments in ~~Altria’s condensed~~our consolidated ~~statements~~statement of earnings (losses)~~. This impairment charge reflects~~ for the ~~difference between the fair value of our investment in ABI using ABI’s share price at September 30,~~year ended December 31, 2021 and the ~~carrying value of Altria’s equity investment in ABI at September~~quarter ended June 30, ~~2021. Additionally, if ABI~~2022, respectively. If Cronos is unable to successfully execute its business plans and strategies and the fair value of our investment in ~~ABI~~Cronos continues to decrease, it could result in additional impairment losses, which could have a material adverse effect on our consolidated financial position or earnings.

~~Table of Contents~~

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

In January 2021, ~~the~~our Board of Directors authorized a ~~new~~ $2.0 billion share repurchase program ~~which~~that it expanded to $3.5 billion in October ~~2021. Altria expects~~2021 (as expanded, the “January 2021 share repurchase program”), which we expect to complete ~~the expanded program~~ by December 31, 2022. The timing of share repurchases under this program depends upon marketplace conditions and other factors, and the program remains subject to the discretion of ~~the~~our Board.

~~Altria’s~~

Table of Contents

Our share repurchase activity for each of the three months in the period ended ~~September~~June 30, 2022, was as follows:

Period
Total Number of Shares Purchased (1)
Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs (2)
July 1-31, 2021 2,088,922 $ 47.30 2,088,922 $ 1,251,200,508
August 1-31, 2021 2,381,498 $ 48.20 2,373,425 $ 1,136,801,113
September 1-30, 2021 2,206,667 $ 49.51 2,205,774 $ 1,027,601,765
6,677,087 $ 48.35 6,668,121


Period	Total Number of Shares Purchased (1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs

April 1-30, 2022	2,406,063	$	54.01	2,406,063	$	1,118,821,253
May 1-31, 2022	2,728,913	$	53.37	2,727,604	$	973,237,881
June 1-30, 2022	4,927,146	$	46.89	4,925,697	$	742,277,850
	10,062,122	$	50.35	10,059,364

(1) The total number of shares purchased includes (a) shares purchased under the January 2021 share repurchase program ~~(which totaled 2,088,922 shares in July, 2,373,425 shares in August and 2,205,774 shares in September)~~ 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 ~~8,073 shares~~1,309 in ~~August~~May and ~~893 shares~~1,449 in ~~September)~~June).

~~(2)~~ This chart provides information for each of the three months in the period ended September 30. 2021; therefore, it does not reflect the October 2021 expansion of Altria’s share repurchase program discussed above.

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Table of Contents

Item 6. Exhibits


~~4.1~~						Extension and Amendment No. 2 to the Credit Agreement, effective August 18, 2021, among Altria Group, Inc., the lenders party thereto and JPMorgan Chase Bank, N.A. and Citibank, N.A., as administrative agents. Incorporated by reference to Altria Group, Inc.’s Current Report on Form 8-K filed on August 18, 2021 (File No. 1-08940).

22						Guarantor Subsidiary of the Registrant. Incorporated by reference to ~~Altria Group, Inc.’s~~Altria’s Quarterly Report on Form 10-Q for the period ended June 30, 2020 (File No. 1-08940).

31.1						Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2						Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1						Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2						Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1						Certain Litigation Matters.

99.2						Trial Schedule for Certain Cases.

101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH						XBRL Taxonomy Extension Schema.

101.CAL						XBRL Taxonomy Extension Calculation Linkbase.

101.DEF						XBRL Taxonomy Extension Definition Linkbase.

101.LAB						XBRL Taxonomy Extension Label Linkbase.

101.PRE						Taxonomy Extension Presentation Linkbase.

104						Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

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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

~~October~~July 28, ~~2021~~2022

8073


	Fair Value of Assets					Fair Value of Liabilities
(in millions)	Balance Sheet Classification	September 30, 2021		December 31, 2020		Balance Sheet Classification	September 30, 2021		December 31, 2020
Derivatives designated as hedging instruments:
Foreign currency contracts	Other current assets	$	—	$	—	Other accrued liabilities	$	—	$	87
Foreign currency contracts	Other assets	—		—		Other liabilities	—		—
Total		$	—	$	—		$	—	$	87

Derivatives not designated as hedging instruments:
Cronos warrant	Investments in equity securities	$	32	$	139
Fixed-price Preemptive Rights	Investments in equity securities	3		24
Total		$	35	$	163

Total derivatives		$	35	$	163		$	—	$	87