Altria(US:MO)2025-07-30 11:22PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents Altria Group, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of earnings, comprehensive earnings, stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, significant transactions, and financial position Condensed Consolidated Balance Sheets | Metric | June 30, 2025 (in millions) | December 31, 2024 (in millions) | | :----- | :-------------------------- | :------------------------------ | | Total Assets | $32,332 | $35,177 | | Total Liabilities | $35,538 | $37,365 | | Total Stockholders' Equity (Deficit) | $(3,206) | $(2,188) | | Cash and cash equivalents | $1,287 | $3,127 | | Goodwill | $6,072 | $6,945 | Condensed Consolidated Statements of Earnings | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | Change (in millions) | % Change | | :----- | :----------------------------------------- | :----------------------------------------- | :------------------- | :------- | | Net revenues | $11,361 | $11,785 | $(424) | (3.6)% | | Gross profit | $7,099 | $6,955 | $144 | 2.1% | | Operating income | $5,018 | $5,207 | $(189) | (3.6)% | | Net earnings | $3,455 | $5,932 | $(2,477) | (41.8)% | | Basic and diluted EPS | $2.04 | $3.41 | $(1.37) | (40.2)% | - The significant decrease in net earnings and EPS for the six months ended June 30, 2025, was primarily due to the absence of the $2.7 billion gain on the sale of IQOS System commercialization rights recorded in 2024 and an $873 million impairment of e-vapor reporting unit goodwill in 2025164752 Condensed Consolidated Statements of Comprehensive Earnings | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | Change (in millions) | % Change | | :----- | :----------------------------------------- | :----------------------------------------- | :------------------- | :------- | | Net earnings | $3,455 | $5,932 | $(2,477) | (41.8)% | | Other comprehensive earnings (losses), net of deferred income taxes | $(431) | $390 | $(821) | (210.5)% | | Comprehensive earnings | $3,024 | $6,322 | $(3,298) | (52.2)% | Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Six Months Ended June 30, 2025 and 2024 | Metric | December 31, 2024 (in millions) | June 30, 2025 (in millions) | Change (in millions) | | :----- | :------------------------------ | :-------------------------- | :------------------- | | Balances, Total Stockholders' Equity (Deficit) | $(2,188) | $(3,206) | $(1,018) | | Net earnings | $3,455 | N/A | N/A | | Other comprehensive earnings (losses) | $(431) | N/A | N/A | | Cash dividends declared | $(3,446) | N/A | N/A | | Repurchases of common stock | $(600) | N/A | N/A | Condensed Consolidated Statements of Stockholders' Equity (Deficit) for the Three Months Ended June 30, 2025 and 2024 | Metric | March 31, 2025 (in millions) | June 30, 2025 (in millions) | Change (in millions) | | :----- | :--------------------------- | :-------------------------- | :------------------- | | Balances, Total Stockholders' Equity (Deficit) | $(3,460) | $(3,206) | $254 | | Net earnings | $2,378 | N/A | N/A | | Other comprehensive earnings (losses) | $(140) | N/A | N/A | | Cash dividends declared | $(1,721) | N/A | N/A | | Repurchases of common stock | $(274) | N/A | N/A | Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | Change (in millions) | | :----------------- | :----------------------------------------- | :----------------------------------------- | :------------------- | | Net cash provided by (used in) operating activities | $2,925 | $2,802 | $123 | | Net cash provided by (used in) investing activities | $(79) | $2,279 | $(2,358) | | Net cash provided by (used in) financing activities | $(4,693) | $(6,966) | $2,273 | | Cash, cash equivalents and restricted cash at end of period | $1,311 | $1,836 | $(525) | - The significant change in investing activities is primarily due to the $2,353 million proceeds from the ABI Transaction in the first six months of 2024, which did not recur in 202525351 - The decrease in cash used in financing activities is mainly attributable to lower common stock repurchases ($600 million in 2025 vs $2,410 million in 2024) and the issuance of $997 million in long-term debt in 20252836 Notes to Condensed Consolidated Financial Statements Note 1. Background and Basis of Presentation This note outlines Altria's corporate structure, including its wholly-owned subsidiaries (PM USA, Middleton, USSTC, Helix, NJOY) and investments (Horizon, ABI, Cronos); it also details share repurchase programs, with a new $1.0 billion program authorized in January 2025, and confirms the unaudited interim financial statements conform to GAAP - Altria's wholly-owned subsidiaries include leading manufacturers of combustible products (PM USA, Middleton) and smoke-free products (USSTC, Helix, NJOY)31 - A new $1.0 billion share repurchase program was authorized in January 2025, expected to be completed by December 31, 2025, with $400 million remaining at June 30, 202534 | Share Repurchase Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :----------------------------- | :----------------------------- | | Total number of shares repurchased (millions) | 10.4 | 54.1 | | Aggregate cost of shares repurchased (millions) | $600 | $2,410 | | Average price per share | $57.71 | $44.50 | Note 2. Revenues from Contracts with Customers Altria disaggregates net revenues by product type and records receivables net of cash discounts; deferred revenue is recognized when payments are received in advance of product shipment, typically satisfied within three days; an allowance for returned goods, primarily for USSTC's MST products, is recorded as a reduction to revenues | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Receivables | $241 | $177 | | Deferred revenue | $213 | $215 | - The company records an allowance for returned goods, primarily for USSTC's MST products with limited shelf life, based on historical volume and return rates41 Note 3. Supplier Financing Altria facilitates a voluntary supplier financing program through a third-party intermediary; outstanding obligations under this program are recorded in accounts payable and included in operating activities | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Confirmed outstanding obligations | $152 | $128 | Note 4. Goodwill and Other Intangible Assets, net Goodwill decreased by $873 million to $6,072 million at June 30, 2025, primarily due to a non-cash impairment of the e-vapor reporting unit goodwill in Q1 2025; other intangible assets, net, also slightly decreased; the company performs annual impairment reviews and more frequent assessments if triggering events occur | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Goodwill | $6,072 | $6,945 | | Other intangible assets, net | $12,900 | $12,973 | - A non-cash goodwill impairment of $873 million was recorded for the e-vapor reporting unit in Q1 2025, primarily due to lower projected volume and revenue following the ITC's exclusion order on NJOY ACE5152 - In Q2 2024, a non-cash, pre-tax impairment of $354 million was recorded for the Skoal trademark due to its estimated fair value falling below carrying value55 Note 5. Exit and Implementation Costs Altria initiated a multi-phase "Optimize & Accelerate" initiative in October 2024 to modernize operations, expecting total pre-tax charges of approximately $125 million; as of June 30, 2025, $98 million in charges have been incurred, primarily for employee separation and implementation costs - The "Optimize & Accelerate" initiative, launched in October 2024, aims to increase organizational speed, efficiency, and effectiveness57 - Total estimated pre-tax charges for the initiative are approximately $125 million, with $98 million incurred as of June 30, 2025, consisting of $36 million for employee separation and $62 million for implementation costs58 | (in millions) | Balances at December 31, 2024 | Charges (Six Months Ended June 30, 2025) | Cash paid (Six Months Ended June 30, 2025) | Balances at June 30, 2025 | | :------------ | :---------------------------- | :--------------------------------------- | :----------------------------------------- | :------------------------ | | Exit Costs | $35 | $1 | $(5) | $31 | | Implementation Costs | $22 | $29 | $(33) | $18 | | Total | $57 | $30 | $(38) | $49 | Note 6. Investments in Equity Securities Altria holds significant equity investments in ABI (approx 8.1% ownership) and Cronos (approx 40.8% ownership), accounted for under the equity method; income from these investments was unfavorable for the six months ended June 30, 2025, compared to 2024, primarily due to the 2024 gain from the ABI Transaction | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | ABI | $7,837 | $7,880 | | Cronos | $306 | $315 | | Total | $8,143 | $8,195 | | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :----------------------------- | :----------------------------- | | (Income) losses from investments in equity securities | $(291) | $(414) | | ABI | $(273) | $(434) | | Cronos | $(18) | $20 | - The 2024 ABI Transaction involved the sale of 38.3 million ABI ordinary shares for approximately $2.4 billion in gross proceeds, resulting in a pre-tax gain of $103 million6669 Note 7. Financial Instruments Altria manages foreign currency exchange risk on its ABI investment using Euro-denominated long-term notes as net investment hedges; the fair value of total long-term debt decreased from $22,741 million at December 31, 2024, to $22,979 million at June 30, 2025; contingent payments related to the NJOY Transaction are recognized at fair value, with changes impacting earnings | (in millions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Carrying value of total long-term debt | $24,720 | $24,926 | | Fair value of total long-term debt | $22,979 | $22,741 | - Pre-tax (gains) losses from net investment hedges were $403 million for the six months ended June 30, 2025, compared to $(98) million in 202475 - Contingent payments for the NJOY Transaction, tied to FDA authorizations for menthol, blueberry, and watermelon pod products, had a balance of $45 million at June 30, 202578 Note 8. Benefit Plans Net periodic benefit cost (income) for pension plans was $(11) million for the six months ended June 30, 2025, an improvement from $(35) million in 2024; postretirement plans showed a cost of $6 million, compared to $15 million in 2024; Altria made $9 million in pension plan contributions and anticipates up to $20 million more in 2025 | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :----------------------------- | :----------------------------- | | Net periodic benefit cost (income) - Pension | $(11) | $(35) | | Net periodic benefit cost (income) - Postretirement | $6 | $15 | - Employer contributions of $9 million were made to pension plans during the first six months of 2025, with additional contributions of up to $20 million anticipated for the remainder of 202580 Note 9. Earnings per Share Basic and diluted EPS for the six months ended June 30, 2025, were $2.04, down from $3.41 in the prior year, reflecting lower net earnings partially offset by fewer weighted-average shares outstanding | (in millions, except per share data) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------- | :----------------------------- | :----------------------------- | | Net earnings | $3,455 | $5,932 | | Earnings for basic and diluted EPS | $3,445 | $5,918 | | Weighted-average shares for basic and diluted EPS | 1,687 | 1,738 | | Basic and diluted earnings per share | $2.04 | $3.41 | Note 10. Other Comprehensive Earnings/Losses Accumulated other comprehensive losses, net of deferred income taxes, attributable to Altria increased from $(2,400) million at December 31, 2024, to $(2,831) million at June 30, 2025; this change was primarily driven by other comprehensive losses related to ABI and currency translation adjustments | (in millions) | Balances, December 31, 2024 | Balances, June 30, 2025 | Change (in millions) | | :------------ | :-------------------------- | :---------------------- | :------------------- | | Accumulated Other Comprehensive Losses | $(2,400) | $(2,831) | $(431) | | Other comprehensive earnings (losses) before reclassifications, net of deferred income taxes | $(412) | N/A | N/A | | Amounts reclassified to net earnings, net of deferred income taxes | $(19) | N/A | N/A | - The increase in accumulated other comprehensive losses was mainly due to ABI-related items and currency translation adjustments8284 Note 11. Segment Reporting Altria's reportable segments are smokeable products and oral tobacco products; segment operating companies income (OCI) is used by the CODM for performance evaluation; for the six months ended June 30, 2025, smokeable products OCI increased, while oral tobacco products OCI significantly increased due to the absence of the Skoal trademark impairment in 2025 - Reportable segments are smokeable products (cigarettes, machine-made large cigars) and oral tobacco products (MST, oral nicotine pouches)85 | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (in millions) | % Change | | :------------ | :----------------------------- | :----------------------------- | :------------------- | :------- | | Net revenues: Smokeable products | $9,979 | $10,401 | $(422) | (4.1)% | | Net revenues: Oral tobacco products | $1,407 | $1,362 | $45 | 3.3% | | OCI: Smokeable products | $5,399 | $5,246 | $153 | 2.9% | | OCI: Oral tobacco products | $931 | $532 | $399 | 75.0% | | OCI: All other | $(1,122) | $(172) | $(950) | (552.3)% | - The significant increase in oral tobacco products OCI for the six months ended June 30, 2025, was primarily due to the non-cash impairment of the Skoal trademark ($354 million) recorded in 2024, which did not recur in 202588319 Note 12. Debt Altria's total long-term debt decreased slightly to $24.7 billion at June 30, 2025, from $24.9 billion at December 31, 2024; the company repaid $1,607 million in senior unsecured notes and issued $1.0 billion in new notes in Q1 2025, increasing the weighted-average coupon interest rate to approximately 4.5% - Total long-term debt was $24.7 billion at June 30, 2025, down from $24.9 billion at December 31, 202495 - In Q1 2025, $1.0 billion in U.S. dollar denominated senior unsecured notes were issued, and $1,607 million in notes were repaid in Q2 20259596 - The weighted-average coupon interest rate on total long-term debt increased to approximately 4.5% at June 30, 2025, from approximately 4.3% at December 31, 2024340 Note 13. Income Taxes The income tax rate for the six months ended June 30, 2025, was 28.0%, up from 24.5% in 2024, primarily due to the non-deductible impairment of e-vapor reporting unit goodwill and state tax expense; the 2024 rate included a benefit from the partial release of a valuation allowance related to the ABI Transaction | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :----------------------------- | :----------------------------- | | Earnings before income taxes | $4,801 | $7,855 | | Provision for income taxes | $1,346 | $1,923 | | Income tax rate | 28.0% | 24.5% | - The higher income tax rate in 2025 was primarily due to the non-deductible impairment of the e-vapor reporting unit goodwill and state tax expense98 - The 2024 income tax rate benefited from the partial release of a valuation allowance against a deferred tax asset associated with JUUL losses, due to the capital gain on the ABI Transaction99 Note 14. Contingencies Altria and its subsidiaries face various legal proceedings, including tobacco-related litigation (smoking and health, health care cost recovery, e-vapor cases) and other matters; the company records provisions for probable and estimable losses, but generally cannot estimate possible losses for pending cases; significant e-vapor patent infringement litigation involving NJOY ACE resulted in an ITC exclusion order effective March 31, 2025 - Altria and its subsidiaries are defendants in numerous legal proceedings, including individual smoking and health cases (195 pending), health care cost recovery actions (1 pending), and e-vapor cases (24 pending as of July 28, 2025)102113 - An ITC exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE in the U.S. became effective March 31, 2025, due to patent infringement; Altria has appealed this decision159160 | (in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------ | :----------------------------- | :----------------------------- | | Accrued liability for tobacco and health and certain other litigation items at beginning of period | $96 | $346 | | Pre-tax charges for tobacco and health and certain other litigation | $40 | $38 | | Payments | $(46) | $(263) | | Accrued liability at end of period | $95 | $151 | Note 15. New Accounting Guidance Not Yet Adopted This note describes new accounting guidance applicable to Altria but not yet adopted, including ASU No 2023-09 on Income Tax Disclosures (effective 2025) and ASU Nos 2024-03 and 2025-01 on Income Statement Expense Disaggregation Disclosures (effective 2026/2027) - ASU No 2023-09 (Income Taxes) will require expanded income tax disclosures, effective for fiscal years beginning after December 15, 2024181 - ASU Nos 2024-03 and 2025-01 (Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures) will require additional disclosures about specific types of expenses, effective for fiscal years beginning after December 15, 2026181 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Altria's financial condition and results of operations, discussing key business trends, consolidated and segment-level performance, liquidity, capital resources, critical accounting estimates, non-GAAP financial measures, and significant risk factors Executive Summary - Altria's vision is "Moving Beyond Smoking™" by transitioning adult smokers to a smoke-free future and exploring new growth opportunities185 - The company's portfolio includes leading combustible brands (Marlboro, Black & Mild) and smoke-free brands (Copenhagen, Skoal, on!, NJOY)186187188 - U.S. adult tobacco consumers face discretionary income pressures due to inflation, leading to increased discount brand share (31.2% in Q2 2025, up 1.9 share points YoY) and a shift to smoke-free products190191 - Flavored disposable e-vapor products, largely unregulated, represent over 60% of the e-vapor category, posing a significant challenge193 Non-GAAP Financial Measures - Non-GAAP measures (adjusted OCI, net earnings, diluted EPS) exclude special items like asset impairment, acquisition/disposition costs, and amortization of intangibles to provide insight into underlying business trends204 - Effective Q1 2025, amortization of intangibles is now treated as a special item and excluded from adjusted financial measures, a change from prior periods205 Discussion and Analysis Critical Accounting Estimates Altria's critical accounting estimates include goodwill and other intangible assets impairment testing, with a $873 million e-vapor goodwill impairment in Q1 2025 and potential future impairment for the Skoal trademark - A non-cash goodwill impairment of $873 million was recorded for the e-vapor reporting unit in Q1 2025, driven by lower projected volume and revenue due to the NJOY ACE import and sale prohibition20952 - The fair value of the e-vapor reporting unit was estimated using an income approach with discount rates ranging from 12.0% to 15.0%, sensitive to regulatory and market outcomes210 - A hypothetical 1% increase in the discount rate for the e-vapor reporting unit would have resulted in an additional $275 million goodwill impairment in Q1 2025213 - The Skoal trademark, which had an estimated fair value exceeding its carrying value by approximately 7% at December 31, 2024, remains susceptible to future impairment if sales volume declines are higher than currently estimated214215 Consolidated Operating Results For the six months ended June 30, 2025, reported net revenues decreased by 3.6% to $11,361 million and net earnings by 41.8% to $3,455 million due to the IQOS gain absence and e-vapor impairment, while adjusted net earnings increased by 4.3% to $4,522 million and adjusted diluted EPS by 7.2% to $2.67 | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | % Change | | :----- | :----------------------------------------- | :----------------------------------------- | :------- | | Net Revenues | $11,361 | $11,785 | (3.6)% | | Operating Income | $5,018 | $5,207 | (3.6)% | | Net Earnings | $3,455 | $5,932 | (41.8)% | | Diluted EPS | $2.04 | $3.41 | (40.2)% | | Adjusted Net Earnings | $4,522 | $4,334 | 4.3% | | Adjusted Diluted EPS | $2.67 | $2.49 | 7.2% | - The significant decline in reported net earnings and EPS was largely due to the $2.7 billion gain on IQOS System commercialization rights in 2024 and the $873 million e-vapor goodwill impairment in 2025221228 - Adjusted net earnings and diluted EPS increased due to higher OCI and a lower adjusted tax rate, partially offset by lower income from the ABI equity investment and higher interest expense229 Operating Results by Business Segment Business Environment The U.S. tobacco industry faces ongoing challenges from litigation, FDA regulations, illicit e-vapor trade, excise tax increases, and macroeconomic conditions, impacting sales volumes and market dynamics - The FSPTCA grants the FDA broad regulatory authority over tobacco products, including pre-market review pathways, advertising restrictions, and potential product standards (e.g., maximum nicotine levels, flavor bans)237241267 - Illicit flavored disposable e-vapor products represent over 60% of the e-vapor category, evading regulatory processes and negatively impacting lawful businesses193290 - Tobacco products are subject to substantial and increasing excise taxes at federal, state, and local levels, which adversely impact sales volumes and encourage shifts to lower-priced or illicit products269273 - Supply chain disruptions, geopolitical instability, and climate change can increase costs or reduce the supply/quality of tobacco and other raw materials, posing risks to manufacturing and profitability294296 Operating Results This section details the operating results for Altria's Smokeable Products and Oral Tobacco Products segments, including net revenues, OCI, shipment volumes, and retail share performance, highlighting the impact of pricing actions, industry trends, and competitive dynamics Smokeable Products Segment For the six months ended June 30, 2025, smokeable products net revenues decreased by 4.1% to $9,979 million due to an 11.9% decline in cigarette shipment volume, while reported OCI increased by 2.9% to $5,399 million driven by pricing, with Marlboro's retail share decreasing to 41.0% | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | % Change | | :----- | :----------------------------------------- | :----------------------------------------- | :------- | | Net revenues | $9,979 | $10,401 | (4.1)% | | Reported OCI | $5,399 | $5,246 | 2.9% | | Adjusted OCI | $5,465 | $5,278 | 3.5% | | Cigarettes Shipment Volume (sticks in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | % Change | | :-------------------------------------------- | :----------------------------- | :----------------------------- | :----- | :------- | | Marlboro | 27,436 | 31,289 | (3,853) | (12.3)% | | Total cigarettes | 30,270 | 34,348 | (4,078) | (11.9)% | | Cigarettes Retail Share | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Percentage Point Change | | :---------------------- | :----------------------------- | :----------------------------- | :---------------------- | | Marlboro | 41.0% | 42.0% | (1.0) | | Total cigarettes | 45.1% | 46.3% | (1.2) | - Reported domestic cigarette shipment volume decreased 11.9% for the six months ended June 30, 2025, primarily due to industry decline, growth of flavored disposable e-vapor products, and discretionary income pressures309 Oral Tobacco Products Segment For the six months ended June 30, 2025, oral tobacco products net revenues increased by 3.3% to $1,407 million despite a 2.9% volume decrease, with reported OCI significantly up 75.0% to $931 million due to the absence of the 2024 Skoal impairment, and the U.S. nicotine pouch category growing to 50.6% share | Metric | Six Months Ended June 30, 2025 (in millions) | Six Months Ended June 30, 2024 (in millions) | % Change | | :----- | :----------------------------------------- | :----------------------------------------- | :------- | | Net revenues | $1,407 | $1,362 | 3.3% | | Reported OCI | $931 | $532 | 75.0% | | Adjusted OCI | $935 | $886 | 5.5% | | Oral Tobacco Shipment Volume (cans in millions) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change | % Change | | :-------------------------------------------- | :----------------------------- | :----------------------------- | :----- | :------- | | Copenhagen | 185.6 | 203.0 | (17.4) | (8.6)% | | Skoal | 65.6 | 74.2 | (8.6) | (11.6)% | | on! | 91.4 | 74.5 | 16.9 | 22.7% | | Total oral tobacco products | 374.0 | 385.3 | (11.3) | (2.9)% | | Oral Tobacco Retail Share | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Percentage Point Change | | :------------------------ | :----------------------------- | :----------------------------- | :---------------------- | | Copenhagen | 16.4% | 19.8% | (3.4) | | Skoal | 6.3% | 7.8% | (1.5) | | on! | 8.7% | 7.5% | 1.2 | | Total oral tobacco products | 33.9% | 37.7% | (3.8) | - The U.S. nicotine pouch category grew to 50.6% of the U.S. oral tobacco category, an increase of 9.4 share points year-over-year for the six months ended June 30, 2025328 Liquidity and Capital Resources Altria relies on subsidiary cash flows, commercial paper, and a $3.0 billion revolving credit agreement for liquidity, with net cash from operating activities increasing to $2,925 million and a debt-to-Consolidated EBITDA ratio of 2.0 at June 30, 2025 - Altria's liquidity sources include subsidiary cash flows, commercial paper, a $3.0 billion revolving credit agreement, and access to credit markets333 - Net cash provided by operating activities increased to $2,925 million for the first six months of 2025, up from $2,802 million in 2024, primarily due to lower payments for State Settlement Agreements, litigation, excise taxes, and income taxes349 | Metric | For the Twelve Months Ended June 30, 2025 (in millions) | | :----- | :---------------------------------------------------- | | Debt | $24,720 | | Consolidated EBITDA | $12,538 | | Debt / Consolidated net earnings | 2.8 | | Debt / Consolidated EBITDA | 2.0 | - Estimated annual charges to cost of sales for State Settlement Agreements and FDA user fees are $3.0 billion on average for the next three years343 New Accounting Guidance Not Yet Adopted This section refers to Note 15 for details on new accounting guidance not yet adopted - The company refers to Note 15 for a discussion of issued accounting guidance applicable to, but not yet adopted by, Altria353 Contingencies This section refers to Note 14 for a discussion of contingencies - The company refers to Note 14 for a discussion of contingencies, including legal proceedings354 Supplemental Guarantor Financial Information PM USA, a wholly-owned subsidiary, fully and unconditionally guarantees Altria's outstanding debt securities and credit facilities, with this section providing summarized financial information for the Parent and Guarantor, including conditions for guarantee release - PM USA, a 100% owned subsidiary, fully and unconditionally guarantees Altria's obligations under its outstanding debt securities, credit agreement, and commercial paper program355 - The guarantees could be voided or subordinated if PM USA was insolvent or received less than reasonably equivalent value at the time of incurring the obligations357 - PM USA will be released from its obligations upon payment in full of the guaranteed debt or if Altria's long-term senior unsecured debt rating by S&P reaches A or higher362 | (in millions) | Parent (June 30, 2025) | Guarantor (June 30, 2025) | | :------------ | :--------------------- | :------------------------ | | Total current assets | $1,286 | $1,062 | | Total non-current assets | $14,525 | $1,242 | | Total current liabilities | $7,165 | $3,530 | | Total non-current liabilities | $25,220 | $516 | | Net earnings (losses) (Six Months Ended June 30, 2025) | $(274) | $3,825 | Cautionary Factors That May Affect Future Results This section highlights various forward-looking statements and important risk factors that could materially affect Altria's future results, including consumer preferences, competition, illicit e-vapor products, litigation, regulatory actions, tax increases, and supply chain disruptions - Key risks include inability to adapt to changing adult tobacco consumer preferences, intense competition, and the growth of illicit disposable e-vapor products370 - Unfavorable litigation outcomes, governmental investigations, and significant federal, state, and local regulatory actions (including FDA actions and inactions) pose substantial risks370 - Increases in tobacco product-related taxes and significant changes in price, availability, or quality of raw materials due to macroeconomic, climate, and geopolitical conditions are also critical risk factors370 Item 3. Quantitative and Qualitative Disclosures About Market Risk Altria is exposed to interest rate risk from fixed-rate long-term debt, where a hypothetical 1% increase in market interest rates would decrease fair value by $1.8 billion at June 30, 2025 | (in billions) | June 30, 2025 | December 31, 2024 | | :------------ | :------------ | :---------------- | | Fair value of long-term debt | $23.0 | $22.7 | | Decrease in fair value from a 1% increase in market interest rates | $1.8 | $1.7 | | Increase in fair value from a 1% decrease in market interest rates | $2.0 | $2.0 | - The company had no borrowings under its $3.0 billion Credit Agreement at June 30, 2025, with interest rates on potential borrowings based on Term Secured Overnight Financing Rate plus a percentage (1.0% at June 30, 2025)372 Item 4. Controls and Procedures Altria's management, including the CEO and CFO, evaluated and concluded the effectiveness of disclosure controls and procedures as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2025373 - No material changes in internal control over financial reporting occurred during the most recent fiscal quarter374 PART II - OTHER INFORMATION Item 1. Legal Proceedings This section refers to Note 14 for a discussion of legal proceedings pending against Altria - The company refers to Note 14 for a comprehensive discussion of legal proceedings375 Item 1A. Risk Factors This section states that there have been no material changes to the risk factors previously disclosed in the 2024 Form 10-K and First Quarter Form 10-Q - No material changes to previously disclosed risk factors in the 2024 Form 10-K and First Quarter Form 10-Q376 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Altria's Board authorized a new $1.0 billion share repurchase program in January 2025, with $400 million remaining as of June 30, 2025 - A new $1.0 billion share repurchase program was authorized in January 2025, with $400 million remaining as of June 30, 2025378 | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | | :----- | :------------------------------- | :--------------------------- | :--------------------------------------------------------------------------------------- | | April 1-30, 2025 | 1,714,864 | $57.83 | $576,688,888 | | May 1-31, 2025 | 1,385,047 | $58.86 | $495,371,436 | | June 1-30, 2099 | 1,609,639 | $59.25 | $400,000,010 | Item 5. Other Information No directors or officers adopted, modified, or terminated any Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025 - No Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted, modified, or terminated by directors or officers during Q2 2025379 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including descriptions of registered securities, performance incentive plans, certifications from the CEO and CFO, litigation matters, and XBRL data files - The exhibits include descriptions of registered securities, stock compensation plans, CEO/CFO certifications (Sarbanes-Oxley Act), and details on certain litigation matters381 Signature Signature The report was duly signed on behalf of Altria Group, Inc. by Salvatore Mancuso, Executive Vice President and Chief Financial Officer, on July 30, 2025 - The report was signed by Salvatore Mancuso, Executive Vice President and Chief Financial Officer, on July 30, 2025385