ALTRIA GROUP INC
For the period ended Mar 31, 2025. Filed Apr 29, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed Apr 29, 2025
MO$76.12-1.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0000764180-24-000102
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-04-29.
0000764180-25-000049
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 436 previous paragraphs and 382 current paragraphs.
229 unchanged; 103 reworded; 49 added; 89 removed; 15 previous and 1 current paragraphs rearranged.
Tables are not compared: 16 previous and 14 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (49)
Current report
U.S. adult tobacco consumers remained under pressure throughout the first quarter of 2025 largely due to the compounding effects of high prices exceeding overall wage growth and historically high levels of consumer credit and delinquency rates, which are beginning to moderate. Although inflation rates moderated in the first quarter of 2025, increased prices and anticipation of higher prices from increased tariffs may further pressure adult tobacco consumers. We have not yet seen a material impact on adult tobacco consumer purchasing behavior from the impact of tariffs and tariff speculation. We will continue to monitor these and other conditions that impact adult tobacco consumer discretionary income and purchasing behaviors, including overall tobacco product expenditures, mix between premium and discount brand purchases, and adoption of smoke-free products; however, we expect discretionary income pressures will continue to influence adult tobacco consumers’ purchase behaviors through 2025. In addition, we are monitoring the effects of tariffs on our businesses, including prices and the availability and quality of raw materials and ingredient and component parts for production. While we expect higher tariffs to impact our costs in 2025, we do not expect the impact to be material based on presently available information on tariffs.
Current report
Tobacco companies are subject to broad and evolving regulatory and legislative frameworks that could have a material impact on our businesses. For example, the FDA proposed a tobacco product standard that would establish a maximum nicotine level in cigarettes and certain other combustible tobacco products significantly lower than the average concentration in these products on the market today with the aim of making such products minimally or non-addictive. The proposed rule, if not withdrawn, may proceed through the rulemaking process.
Current report
(1)Prior period amounts have been recast to conform with current period presentation for amortization of intangibles, which we did not previously identify as a special item and we now exclude from our adjusted financial measures. See Non-GAAP Financial Measures below.
Current report
Beginning in the first quarter of 2025, we changed our treatment of our amortization of intangibles that we previously included in our adjusted results, including adjusted net earnings and adjusted diluted EPS, and now treat this expense as a special item and exclude it from our adjusted results. Amortization of definite-lived intangibles is significantly impacted by the timing, frequency and size of acquisitions, each with unique facts and circumstances, which could result in amortization charges that could be inconsistent in size and timing. Net revenues generated from these definite-lived intangible assets during the periods presented, if applicable, are included in our adjusted financial measures.
Current report
Goodwill and Other Intangible Assets Impairment Testing
Current report
E-Vapor Reporting Unit Goodwill
Current report
At December 31, 2024, the estimated fair value of the e-vapor reporting unit exceeded its carrying value by approximately 28% ($0.3 billion). As further discussed in Note 4, we determined the estimated fair value of the e-vapor reporting unit as of March 31, 2025 was below its carrying value and recorded a non-cash goodwill impairment of $873 million for the three months ended March 31, 2025 in our condensed consolidated statements of earnings. As of March 31, 2025, after recording the goodwill impairment, the carrying value of goodwill within the e-vapor reporting unit was $895 million. In addition, the carrying value of the e-vapor reporting unit’s net assets (including the effect of intercompany debt), which was negative, approximated its estimated fair value.
Current report
Additionally, in determining these significant assumptions, we made judgments regarding our expectations for the future state of the e-vapor category and NJOY’s business, including the (i) timing and extent of effective enforcement against illicit flavored disposable e-vapor products; (ii) timing and likelihood of regulatory authorizations of e-vapor products, including of NJOY’s products; (iii) timing of the commercialization of NJOY e-vapor products in the United States; (iv) long-term growth of the e-vapor category; and (v) conversion rates of illicit flavored disposable e-vapor consumers to lawful e-vapor products and, specifically, NJOY’s e-vapor products. Fair value calculations are sensitive to changes in these estimates and assumptions, some of which relate to broader macroeconomic conditions and governmental actions outside of our control.
Current report
Although our discounted cash flow analyses are based on assumptions that we consider reasonable using the best available information as of March 31, 2025, we used significant judgment in determining future cash flows. In addition to the judgments discussed above, the following factors also have the potential to impact our assumptions and, therefore, our impairment conclusions: general macroeconomic conditions; governmental actions, including FDA regulatory actions and inaction; changes in the e-vapor category growth (decline) rates as a result of changing adult tobacco consumer preferences; success of planned new product extensions; competitive activity; unfavorable outcomes with respect to litigation proceedings, including actions brought against us alleging patent infringement; and income and excise taxes. For further discussion of these factors, see Operating Results by Business Segment - Business Environment below.
Current report
While our management believes that the estimated fair value of the e-vapor reporting unit at March 31, 2025 is reasonable, if the assumptions or judgments regarding the expectations for the future state of the e-vapor category and NJOY’s business discussed above fail to materialize as anticipated or if the discount rate used to estimate the fair value increases, we could have additional non-cash impairments of our e-vapor reporting unit goodwill in future periods, which could be material. A hypothetical 1% increase to the discount rate used to estimate the fair value of the e-vapor reporting unit would have resulted in an additional goodwill impairment charge of approximately $275 million in the first quarter of 2025.
Current report
Skoal Trademark Indefinite-Lived Intangible Asset
Current report
For further discussion of goodwill and other intangible assets, including the impairment of the e-vapor reporting unit goodwill in the first quarter of 2025, see Note 4.
Current report
Investment in Cronos
Current report
The fair value of our investment in Cronos is based on unadjusted quoted prices in active markets for Cronos’s common shares and is classified in Level 1 of the fair value hierarchy. At March 31, 2025, the fair value of our investment in Cronos was less than its carrying value by approximately $25 million, or approximately 8%. Based on our evaluation of the duration and magnitude of the fair value decline, our evaluation of Cronos’s financial condition (including its strong cash position) and near- term prospects, and our intent and ability to hold our investment in Cronos until recovery, we concluded that the decline in fair value of our investment in Cronos below its carrying value is temporary and, therefore, no impairment was recorded. At April 24, 2025, the fair value of our investment in Cronos was less than its carrying value by approximately $18 million or approximately 6%.
Current report
We will continue to monitor our investment in Cronos. If we were to conclude that the decline in fair value is other than temporary, we would determine and recognize, in the period identified, the impairment of our investment.
Current report
(1)Prior period amounts have been recast to conform with current period presentation for amortization of intangibles, which we did not previously identify as a special item and we now exclude from our adjusted financial measures. See Non-GAAP Financial Measures above.
Current report
▪Acquisition-related items: We recorded net pre-tax charges of $54 million for the three months ended March 31, 2025, primarily due to expenses related to the ITC exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE in the United States. These charges include insurance recoveries from insurance contracts associated with the acquisition of NJOY Holdings (“NJOY Transaction”). For further information on the ITC’s determination, see E-vapor Product Litigationin Note 14. We recorded these items for the three months ended March 31, 2025 as follows:
Current report
(1) Included in our all other category.
Current report
(2)Recorded as general corporate expense, net of $22 million in insurance recoveries. Total costs incurred to date associated with the ITC determination and patent infringement lawsuits related to the NJOY Transaction were $137 million, which were offset by insurance recoveries of $47 million. These total amounts include $61 million of costs offset by $25 million of insurance recoveries recorded in 2024.
Current report
Additionally, we recorded a non-cash, pre-tax charge of $25 million for the three months ended March 31, 2025 for the increase in the fair value of the contingent payments associated with the NJOY Transaction. This charge was recorded as general corporate expense and included in marketing, administration and research costs in our condensed consolidated statements of earnings. For further information, see Contingent Paymentsin Note 7. Financial Instruments.
Current report
▪Amortization of Intangibles: We recorded pre-tax amortization expense of definite-lived intangible assets of $37 million and $27 million for the three months ended March 31, 2025 and 2024, respectively, in marketing, administration and research costs in our condensed consolidated statements of earnings.
Current report
▪Asset Impairment, Exit and Implementation Costs: We recorded a non-cash impairment charge of $873 million to reduce the carrying value of the e-vapor reporting unit goodwill to its estimated fair value for the three months ended March 31, 2025 in our all other category. There is no income tax benefit associated with the impairment of the e-vapor reporting unit goodwill as the impairment is non-deductible for tax purposes. For further discussion, see Note 4.
Current report
Marketing, administration and research costs decreased $18 million (3.0%), due primarily to lower general corporate expenses, partially offset by higher tobacco and health and certain other litigation items. The lower general corporate expenses were due primarily to transaction costs associated with the ABI Transaction in 2024, partially offset by acquisition-related items in 2025 discussed above.
Current report
We estimate that, when adjusted for calendar differences and trade inventory movements, total estimated domestic cigarette industry volume declined by 9% in the first quarter of 2025. PM USA reported domestic cigarette volumes declined by 13.7% in the first quarter of 2025 versus the first quarter of 2024. When adjusted for calendar differences and trade inventory movements, PM USA volumes for the first quarter of 2025 declined by an estimated 12% versus the first quarter of 2024. In the first quarter, Marlboro share of the total cigarette category was 41.0%, a decrease of 1.0 share point versus the first quarter of 2024 and 0.3 share points sequentially. Marlboro share performance is discussed further in the Operating Results - Smokeable Products Segment below.
Current report
Throughout the first quarter of 2025, U.S. adult tobacco consumers remained under pressure largely due to the continued compounding effects of high prices exceeding overall wage growth, especially among low income consumers. Although the year-over-year increases in the rate of inflation moderated in the first quarter of 2025, high prices on every day expenses, such as groceries and housing, continued to constrain consumers’ disposable income. While gas prices in the first quarter of 2025 were lower than in the prior year, the average price remained above $3.00 per gallon. In addition, consumer credit and delinquency rates remain at historically high levels, and potential tariff activity induced consumer fear of price hikes and rising inflation. Throughout the first quarter of 2025, this speculation drove a decline of nearly 13% in consumer sentiment versus the fourth quarter of 2024 to the lowest levels since 2022. We will continue to monitor the additional pressure that tariff-related price increases may have on adult tobacco consumer purchase behavior.
Current report
In January 2025, the U.S. District Court for the Eastern District of Texas found in favor of cigarette manufacturers that had challenged the final rule on the basis that the FDA exceeded its statutory authority by requiring cigarette packaging and advertising to contain 11 specific warnings when it only had the authority to require nine. In its ruling, the court granted a preliminary injunction staying the FDA’s enforcement of the rule against all cigarette manufacturers pending further litigation. In March 2025, the FDA appealed that decision to the U.S. Court of Appeals for the Fifth Circuit.
Current report
In December 2024, PM USA and several Georgia co-plaintiffs filed suit against the FDA in the U.S. District Court for the Southern District of Georgia, challenging the final rule on substantive and procedural grounds. Briefing is ongoing, and a hearing on PM USA’s request to enjoin the rule was held in April 2025.
Current report
Various excise tax increases are under consideration or have been proposed. For example, in April 2025, the Indiana state legislature passed a budget proposal that, if signed by the governor of Indiana, would increase the state’s cigarette excise tax to $2 per pack and increase the state’s excise taxes on both e-vapor and oral nicotine products, in each case effective July 1, 2025. Additionally, in April 2025, the Washington state legislature passed a bill that, if signed by the governor of Washington, would subject oral nicotine pouches to the same state taxes currently applicable to other tobacco products, effective January 1, 2026.
Current report
Current geopolitical and macroeconomic conditions (including tariffs, inflation, high interest rates, labor shortages, supply and demand imbalances and international armed conflict) and adverse weather events have caused and continue to cause 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, wood tips used in our cigar products and aluminum used in our packaging). As consumer demand increases for innovative smoke-free products and decreases for combustible and MST products, the volume of raw materials, ingredients and component parts required for the production of combustible and MST products has decreased. Reduced demand for raw materials, ingredients and component parts may reduce supply and availability of raw materials, ingredients and component parts as suppliers divert resources to other products or cease producing these products. Furthermore, challenging economic conditions can create the risk that our suppliers, distributors, logistics providers or other third-party partners suffer financial or operational difficulties, which may impact their ability to provide us with or distribute finished product, raw materials and component parts and services in a timely manner or at all. If we are unable to identify alternate sources of raw materials, ingredients and component parts for our operating companies’ products, we could be exposed to supply risk.
Current report
(1) Reported and adjusted OCI margins are calculated as reported and adjusted OCI, respectively, divided by revenues net of excise taxes.
Current report
Net revenues, which include excise taxes billed to customers, decreased $284 million (5.8%), due primarily to lower shipment volume ($775 million), partially offset by higher pricing ($491 million), which includes lower promotional investments.
Current report
▪Effective January 19, 2025, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) and L&M by $0.17 per pack. PM USA decreased the list price of Marlboro Black by $0.28 per pack. PM USA also increased the list price of all its other premium cigarette brands by $0.22 per pack.
Current report
▪Effective April 13, 2025, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) and L&M by $0.20 per pack. PM USA also increased the list price of all its other premium cigarette brands by $0.25 per pack.
Current report
▪Effective April 20, 2025, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.14 per five-pack.
Current report
(1) Reported and adjusted OCI margins are calculated as reported and adjusted OCI, respectively, divided by revenues net of excise taxes.
Current report
Net revenues, which include excise taxes billed to customers, was essentially unchanged, as higher pricing ($58 million), which includes higher promotional investments, was mostly offset by lower shipment volume and a higher percentage ofon! shipment volume relative to MST (“volume/mix”) ($55 million).
Current report
Reported OCI was essentially unchanged, as lower volume/mix ($57 million), was mostly offset by higher pricing, which includes higher promotional investments.
Current report
Adjusted OCI was unchanged, as higher pricing, which includes higher promotional investments, was mostly offset by lower volume/mix.
Current report
We have restated prior period retail share performance data and estimated industry volume to reflect the inclusion of synthetic oral nicotine pouch products. Prior to 2025, our reported oral tobacco segment retail share performance data excluded synthetic oral nicotine pouch products. Throughout 2024 and into the first quarter of 2025, we have been tracking the quarterly sequential growth of synthetic oral nicotine pouch products in various traditional tobacco retailers. Based on the consistency of this trend, beginning in the first quarter of 2025 our reported oral tobacco products segment retail share performance data and category industry volume estimates have been updated to include synthetic oral nicotine pouch products.
Current report
The following table summarizes our oral tobacco products segment’s retail restated share performance:
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Removed paragraphs (89)
Previous report
Vision and 2028 Goals
Previous report
Corporate
Previous report
▪Deliver a mid-single digits adjusted diluted EPS compounded annual growth rate in 2028 from our base in 2022;
Previous report
▪Target a debt-to-Consolidated EBITDA ratio of approximately 2.0x;
Previous report
▪Maintain our leadership position in the U.S. tobacco space; and
Previous report
▪Maintain a total adjusted OCI margin of at least 60% in each year through 2028 while investing behind innovative smoke-free products.
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U.S. Smoke-Free Portfolio
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▪Grow U.S. smoke-free volumes by at least 35% from our 2022 base of 800 million units by 2028; and
Previous report
▪Approximately double our U.S. smoke-free net revenues to $5 billion by 2028 from our 2022 base, with $2 billion sourced from innovative smoke-free products.
Previous report
Long-Term Growth
Previous report
▪Compete internationally in the top innovative oral tobacco markets and develop a pathway to participate in heated tobacco and e-vapor markets; and
Previous report
▪Enter non-nicotine categories with broad commercial distribution of at least five products by 2028.
Previous report
See Operating Results by Business Segment and Liquidity and Capital Resources for additional information on total adjusted OCI margin and debt-to-Consolidated EBITDA, respectively.
Previous report
Optimize & Accelerate Initiative
Previous report
On October 30, 2024, our Board of Directors (“Board of Directors” or “Board”) approved a multi-phase Optimize & Accelerate initiative (“Initiative”) designed to modernize our ways of working as we accelerate our progress toward our Vision and 2028 Goals. Through the Initiative, we plan to increase our organization’s speed, efficiency and effectiveness by centralizing work, streamlining and standardizing processes, further using generative artificial intelligence and automation, and outsourcing certain transactional tasks. We expect the design and detailed plans for all phases of the Initiative to be substantially complete in 12 to 18 months.
Previous report
As part of the Initiative, we intend to establish an Accelerated Business Solutions organization within Altria Client Services LLC. This organization will be responsible for driving efficiency and process improvement across our companies in partnership with external service providers.
Previous report
We expect the initial phases of the Initiative will deliver at least $600 million in cumulative cost savings over the next five years, which we plan to reinvest in our businesses in support of our Vision and 2028 Goals. The cumulative cost savings exclude our estimated total pre-tax charges for these initial phases of approximately $100 million to $125 million (excluding any non-cash impact that may result from pension settlement and curtailment accounting), which we intend to treat as special items and exclude from our adjusted diluted EPS. Substantially all of these charges will result in cash expenditures and will consist of employee separations, new technology, business advisory services and other costs. Although we are still evaluating certain aspects of the initial phases of the Initiative, for which the associated costs are not yet deemed probable and reasonably estimable, we expect to record the majority of the charges related to the initial phases of the Initiative by the end of the first half of 2025, with the initial charges being recorded beginning in the fourth quarter of 2024. As we further develop and finalize detailed plans for the additional phases of the Initiative, we plan to update estimated related costs and cumulative cost savings as such amounts become probable and reasonably estimable.
Previous report
We continue to monitor the discretionary income pressure adult tobacco consumers have experienced during the first three quarters of 2024 as a result of the cumulative impact of inflation. Wage increases have failed to keep up with rising prices, and we have observed increases in debt delinquencies. In September 2024, the annual rate of inflation softened to 2.4%. Although inflation rates remained lower in 2024 than prior years, increased prices continued to pressure adult tobacco consumer discretionary income. These pressures influenced the discount segment retail share growth within the cigarette industry year-over-year. We will continue to monitor conditions that impact adult tobacco consumer discretionary income and overall purchasing behaviors, including overall tobacco product expenditures, mix between premium and discount brand purchases and adoption of smoke-free products. We expect discretionary income pressures will continue to influence adult tobacco consumers’ purchase behaviors in the remainder of 2024. Inflation also has a direct and adverse impact on our direct and indirect costs.
Previous report
Tobacco companies are subject to broad and evolving regulatory and legislative frameworks that could have a material impact on our business. For example, the FDA has submitted for final review proposed product standards regarding menthol in cigarettes and characterizing flavors in cigars. The FDA has announced that it would delay a decision on the menthol ban indefinitely, and the date for any final action on either proposal is to be determined. In addition, 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 combustible tobacco products. In California, where a ban on flavored nicotine products went into effect in late 2022, we continue to observe indications of unintended negative consequences of the ban, such as adult tobacco consumer adoption of counterfeit and unregulated products.
Previous report
For further details, see the Consolidated Operating Results and Operating Results by Business Segment sections below.
Previous report
Depreciation, Amortization, Impairment Testing and Asset Valuation
Previous report
We believe if there is further acceleration in the decline in sales volume for Skoal that results in material revenue declines, there may be a material adverse effect on the significant assumptions used in performing our valuation. For example, a hypothetical 1% increase to the discount rate or a 1% decrease in the perpetual growth rate used in our quantitative assessment as of June 30, 2024, would have resulted in an additional pre-tax impairment to the Skoal trademark of approximately $300 million and $120 million, respectively, in the second quarter of 2024.
Previous report
E-vapor Reporting Unit: On June 1, 2024, we finalized our purchase price allocation for the acquisition of NJOY Holdings (“NJOY Transaction”), resulting in a carrying value of $1.8 billion for our e-vapor reporting unit’s goodwill. We continue to monitor several factors that could impact the carrying value of our e-vapor reporting unit’s goodwill, including the following:
Previous report
▪Altria and certain of our affiliates, including NJOY, are defendants in lawsuits alleging patent infringement based on the sale of NJOY ACE. Remedies being sought by the plaintiffs vary and include an exclusion order that would prohibit the importation of NJOY ACE into the United States, an injunction on sales of NJOY ACE, and damages. We are vigorously defending this litigation and have developed other strategies we believe would allow NJOY ACE to remain on the market or limit sales disruption of NJOY ACE in the event of certain adverse litigation outcomes.
Previous report
▪Additionally, sales of illicit flavored disposable e-vapor products continue to increase with limited effective enforcement against these products, contributing to declines in pod-based e-vapor product volume, which has negatively impacted NJOY’s volume growth in 2024.
Previous report
If we experience unfavorable outcomes with respect to the patent infringement lawsuits and our related strategies, or if continued illicit e-vapor product sales or other factors result in a significantly different long-term outlook for NJOY’s volume growth rates versus projections used to estimate the fair value at the time we finalized our purchase price allocation for the NJOY acquisition, it could result in a material non-cash impairment of our e-vapor reporting unit’s goodwill in future periods.
Previous report
For further discussion of these factors, see Note 14. Contingencies to our condensed consolidated financial statements in Item 1 (“Note 14”) and Operating Results by Business Segment - Business Environment below. For information on the NJOY Transaction, see Note 2. Acquisition of NJOYto our condensed consolidated financial statements in Item 1 (“Note 2”).
Previous report
▪NPM Adjustment Items: For a discussion of NPM Adjustment Items and a breakdown of these items by segment, see Health Care Cost Recovery Litigation in Note 14 and NPM Adjustment Itemsin Note 11, respectively.
Previous report
▪Acquisition, disposition and integration-related items: We recorded a pre-tax gain of $2.7 billion upon the assignment of the IQOS Tobacco Heating System (“IQOS System”) commercialization rights to Philip Morris International Inc. (“PMI”) in April 2024, for the nine months ended September 30, 2024. For a discussion of the sale of the IQOS System commercialization rights, see Note 5.
Previous report
We recorded pre-tax expenses of $187 million and $44 million for the nine and three months ended September 30, 2024, respectively, related to the NJOY Transaction. For further information on the costs incurred for the NJOY Transaction, see Note 2.
Previous report
▪Asset Impairment: We recorded a non-cash, pre-tax impairment of the Skoal trademark of $354 million for the nine months ended September 30, 2024 in our oral tobacco products segment. For further discussion, see Note 5.
Previous report
▪Loss on Disposition of JUUL Equity Securities: We recorded a non-cash, pre-tax loss of $250 million related to the disposition of our JUUL equity securities for the nine months ended September 30, 2023 as (income) losses from investments in equity securities in our condensed consolidated statement of earnings. We recorded a corresponding adjustment to the JUUL tax valuation allowance in 2023.
Previous report
We recorded net pre-tax losses of $54 million and $82 million from our investment in ABI for the nine and three months ended September 30, 2023, respectively, consisting primarily of mark-to-market losses on certain ABI financial instruments associated with its share commitments.
Previous report
▪Cronos-Related Special Items: We recorded pre-tax losses of $30 million, substantially all of which related to our share of special items recorded by Cronos for the nine months ended September 30, 2023. We recorded a corresponding adjustment to the Cronos tax valuation allowance.
Previous report
We recorded income tax items of $29 million, for the nine and three months ended September 30, 2023, due primarily to tax expense associated with a tax basis adjustment related to our investment in ABI.
Previous report
Cost of sales decreased $118 million (2.5%), due primarily to lower shipment volume in our smokeable products segment, partially offset by higher per unit settlement charges and higher manufacturing costs in our smokeable products segment and higher NJOY shipment volume.
Previous report
Marketing, administration and research costs increased $16 million (0.8%), due primarily to higher investment spending in support of our Vision (including 2024 NJOY costs), partially offset by lower general corporate expenses. The lower general corporate expenses were due primarily to lower charges to resolve certain JUUL-related litigation and the 2023 settlement of the shareholder derivative lawsuits, partially offset by higher acquisition-related costs primarily associated with the NJOY Transaction and transaction costs from the ABI Transaction. See Note 14 for a discussion of litigation items.
Previous report
Interest and other debt expense, net increased $24 million (3.2%), due primarily to 2023 interest income associated with the sale of the IQOS System commercialization rights, partially offset by 2023 interest expense and fees for the term loan facility associated with the NJOY Transaction. For further discussion regarding the sale of the IQOS System commercialization rights, see Note 5.
Previous report
Provision for income taxes increased $533 million (25.1%), due primarily to higher earnings before income taxes, partially offset by favorable tax items as discussed above.
Previous report
Adjusted net earnings of $6,637 million decreased $102 million (1.5%), due primarily to lower adjusted OCI. Adjusted diluted EPS of $3.84 increased by 1.6%, due to fewer shares outstanding, partially offset by lower adjusted net earnings.
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Reworded paragraphs (103)
Previous wording
We have a leading portfolio of tobacco products for U.S. tobacco consumers age 21+. Our Vision is to responsibly lead the transition of adult smokers to a smoke-free future (“Vision”). We are Moving Beyond Smoking™, leading the way in moving adult smokers away from cigarettes by taking action to transition millions to potentially less harmful choices - believing it is a substantial opportunity for adult tobacco consumers, our businesses and society.
Current wording
We have a leading portfolio of tobacco products for U.S. tobacco consumers age 21+. Our Vision is to responsibly lead the transition of adult smokers to a smoke-free future (“Vision”). We are Moving Beyond Smoking™, leading the way in moving adult smokers away from cigarettes by taking action to transition millions to potentially less harmful choices - believing it is a substantial opportunity for adult tobacco consumers, our businesses and society. As we execute on our Vision, we established our 2028 Enterprise Goals (“2028 Goals”) to provide our investors with specific metrics to measure our progress. For further discussion of our 2028 Goals, see our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”).
Previous wording
In smoke-free products, we own U.S. Smokeless Tobacco Company LLC (“USSTC”), the leading global moist smokeless tobacco (“MST”) manufacturer, Helix Innovations LLC (“Helix”), a leading manufacturer of oral nicotine pouches, and NJOY, LLC (“NJOY”), an e-vapor manufacturer with a commercialized product portfolio fully covered by marketing granted orders (“MGO”) from the U.S. Food and Drug Administration (“FDA”). Additionally, we have a majority-owned joint venture, Horizon Innovations LLC, for the U.S. marketing and commercialization of heated tobacco stick products. As of this filing, there are no products in the U.S. marketplace from the joint venture.
Current wording
In smoke-free products, we own U.S. Smokeless Tobacco Company LLC (“USSTC”), the leading global moist smokeless tobacco (“MST”) manufacturer, Helix Innovations LLC (“Helix”), a leading manufacturer of oral nicotine pouches, and NJOY, LLC (“NJOY”), a manufacturer of tobacco and menthol e-vapor products covered by marketing granted orders (“MGO”) from the U.S. Food and Drug Administration (“FDA”). In January 2025, the U.S. International Trade Commission (“ITC”) issued an exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE (NJOY’s pod-based e-vapor product) in the United States, which became effective on March 31, 2025. For further discussion, see Note 14. Contingencies to our condensed consolidated financial statements in Item 1 (“Note 14”). Additionally, we have a majority-owned joint venture, Horizon Innovations LLC (“Horizon”), for the U.S. marketing and commercialization of heated tobacco stick products. As of this Form 10-Q, Horizon had no products in the U.S. marketplace.
Previous wording
Our investments in equity securities include Anheuser-Busch InBev SA/NV (“ABI”), the world’s largest brewer, and Cronos Group Inc. (“Cronos”), a leading Canadian cannabinoid company. In March 2024, we sold a portion of our investment in ABI (“ABI Transaction”). We used the proceeds from the sale to fund accelerated share repurchase (“ASR”) transactions for our common stock. For further information on the ABI Transaction and the ASR transactions, see Note 6. Investments in Equity Securities to our condensed consolidated financial statements in Item 1 (“Note 6”) and Note 1. Background and Basis of Presentation to our condensed consolidated financial statements in Item 1 (“Note 1”), respectively.
Current wording
Our investments in equity securities include Anheuser-Busch InBev SA/NV (“ABI”), the world’s largest brewer, and Cronos Group Inc. (“Cronos”), a leading Canadian cannabinoid company.
Previous wording
In this MD&A section, we discuss factors that have impacted our business as of the date of this Form 10-Q. In addition, we are aware of and address certain trends and developments that could, individually or in the aggregate, have a material impact on our business, including the value of our investments in equity securities, in the future. We focus in this Trends and Developments section on the discretionary income pressures on adult tobacco consumers, illicit disposable e-vapor products and recent regulatory actions and their effects or potential effects on our business.
Current wording
In this section of MD&A, we discuss certain factors that have impacted our businesses as of the date of this Form 10-Q. In addition, we are aware of and address certain trends and developments that could, individually or in the aggregate, have a material impact on our businesses, including the value of our investments in equity securities, in the future. In this section, we focus on the discretionary income pressures on adult tobacco consumers, illicit flavored disposable e-vapor products, the ITC orders on NJOY ACE, recent regulatory actions and tariffs and their effects or potential effects on our businesses. Other trends and developments are discussed elsewhere in MD&A.
Previous wording
Product assortment, regulation and enforcement continue to evolve in the e-vapor category. In June 2024, the FDA issued MGOs to NJOY for four of its menthol e-vapor products. For the 12 months ended September 30, 2024, we estimate the e-vapor category grew by approximately 30% versus the prior 12-month period, driven by the growth of illicit flavored disposable products. We estimate the disposable segment now represents 65% of the e-vapor category. The primary impacts of this trend have been an increase in the rate of cross-category movement among adult cigarette smokers, contributing to higher than expected domestic cigarette industry volume declines as well as declines in pod-based product volume within the e-vapor category. In response to the proliferation of illicit disposable e-vapor products, states and the federal government took various regulatory and enforcement actions in the first three quarters of 2024. Select states have established e-vapor product registries based on pre-market tobacco product application (“PMTA”) submissions or MGOs. In June 2024, the federal government created a multi-agency task force in an effort to combat the illegal marketing and sale of e-vapor products in the United States. We have also noted the emergence of products using nicotine analogues designed to imitate the effects of nicotine and evade the FDA regulatory framework for tobacco products. Additionally, we continue to see increased illicit activity across multiple tobacco categories, including nicotine pouch products and cigarettes that are available to U.S. consumers.
Current wording
Product assortment, regulation and enforcement continue to evolve in the e-vapor category. For the 12 months ended March 31, 2025, we estimate the e-vapor category grew by approximately 30% versus the prior 12-month period, driven by the growth of illicit flavored disposable e-vapor products. We estimate that illicit products now represent more than 60% of the e-vapor category. In response to the proliferation of illicit disposable e-vapor products, states and the federal government took various regulatory and enforcement actions throughout the year in 2024, but these actions have failed to slow this trend. Select states have established e-vapor product registries based on pre-market tobacco product application (“PMTA”) submissions or MGOs. Additionally, we continue to see increased illicit activity across multiple tobacco categories, including nicotine pouch products and cigarettes. Throughout 2024 and into the first quarter of 2025, various synthetic oral nicotine pouch products emerged in traditional tobacco retailers. We continue to track the overall dynamics across multiple tobacco categories as well as competitive threats to our brands.
Previous wording
For further discussion of goodwill and other intangible assets, see Note 5. Goodwill and Other Intangible Assets, net to our condensed consolidated financial statements in Item 1 (“Note 5”).
Current wording
As discussed above in Our Business, the ITC orders related to NJOY ACE became effective March 31, 2025. As a result, we performed an interim impairment assessment for the e-vapor reporting unit and recorded a non-cash impairment of our e-vapor reporting unit goodwill. For further discussion, see Note 4. Goodwill and Other Intangible Assets, net to our condensed consolidated financial statements in Item 1 (“Note 4”).
Previous wording
See Operating Results by Business Segment - Business Environmentfor additional information on the trends and developments discussed above.
Current wording
See Operating Results by Business Segment - Business Environment for additional information on the trends and developments discussed above.
Previous wording
ABI’s business is exposed to foreign exchange rate fluctuations, inflation and commodity price movements which may impact financial performance from time to time. We will continue to monitor these conditions and other factors as they could affect our equity earnings, our other comprehensive earnings/losses and the dividends that we receive from ABI, and the fair value of our investment in ABI. See Note 6 for additional information on our investment in ABI.
Current wording
ABI’s business is exposed to foreign exchange rate fluctuations, inflation, commodity price movements and other macroeconomic factors that could impact financial performance from time to time. We will continue to monitor these conditions and other factors as they could affect our equity earnings, our other comprehensive earnings/losses and the dividends that we receive from ABI, and the fair value of our investment in ABI. For additional information on our investment in ABI, see Note 6. Investments in Equity Securities to our condensed consolidated financial statements in Item 1 (“Note 6”).
Previous wording
The trends and developments discussed above have not had a material adverse impact on our condensed consolidated financial statements, but we continue to monitor these trends and developments and potential financial impacts. Additionally, we do not believe that these trends and developments have materially impacted our ability to achieve our Vision. As the trends and developments discussed above evolve and new ones emerge, we will continue to evaluate the potential impacts on our businesses, investments and Vision.
Current wording
With the exception of the impact of the ITC orders on NJOY, the trends and developments above have not had a material adverse impact on our businesses. We do not believe the trends and developments discussed above have materially impacted our ability to achieve our Vision. As the trends and developments evolve and new ones emerge, we will continue to evaluate the potential impacts on our businesses, investments and Vision.
Previous wording
For a discussion of special items and other business drivers affecting the comparability of statements of earnings amounts and reconciliations of adjusted earnings and adjusted diluted EPS, see the Consolidated Operating Results section below.
Current wording
For a discussion of special items and other business drivers affecting the comparability of statements of earnings amounts and reconciliations of adjusted earnings and adjusted diluted EPS, see Consolidated Operating Results below.
Previous wording
▪Operations: The decrease of $137 million in operations (which excludes the impact of special items shown in the table above) was due primarily to lower OCI.
Current wording
▪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 lower state tax expense.
Previous wording
▪Operations: The increase of $65 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI.
Current wording
▪Operations: The increase of $11 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI, partially offset by lower income from our equity investment in ABI and lower net periodic benefit income, excluding service cost.
Previous wording
For further details, see the Consolidated Operating Results and Operating Results by Business Segment sections below.
Current wording
For further details, see Consolidated Operating Results and Operating Results by Business Segment below.
Previous wording
We report our financial results in accordance with GAAP. However, our management also reviews certain financial results, including OCI, OCI margins, net earnings and diluted EPS, on an adjusted basis, which excludes certain income and expense items that our management believes are not part of underlying operations. These items may include, for example, loss on early extinguishment of debt, restructuring charges, asset impairment charges, acquisition, disposition and integration-related items, equity investment-related special items, certain income tax items, charges associated with tobacco and health and certain other litigation items, and resolutions of certain non-participating manufacturer (“NPM”) adjustment disputes under the Master Settlement Agreement (“NPM Adjustment Items”). In addition, our management reviews the ratio of debt-to-Consolidated EBITDA, which we use as a factor to determine our ability to access the capital markets and make investments in pursuit of our Vision. Consolidated EBITDA is calculated in accordance with our Credit Agreement (defined below in Liquidity and Capital Resources) and includes certain adjustments. Our management does not view any of these special items to be part of 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. Our management also reviews income tax rates on an adjusted basis, which may exclude certain income tax items from our reported effective tax rate.
Current wording
We report our financial results in accordance with GAAP. However, our management also reviews certain financial results, including OCI, OCI margins, net earnings and diluted EPS, on an adjusted basis, which excludes certain income and expense items that our management believes are not part of underlying operations. These items may include, for example, loss on early extinguishment of debt, restructuring charges, asset impairment charges, acquisition, disposition and integration-related items, equity investment-related special items, certain income tax items, charges associated with tobacco and health and certain other litigation items, resolutions of certain non-participating manufacturer (“NPM”) adjustment disputes under the Master Settlement Agreement (“NPM Adjustment Items”) and amortization expense associated with definite-lived intangible assets (“amortization of intangibles”). In addition, our management reviews the ratio of debt-to-Consolidated EBITDA, which we use as a factor to determine our ability to access the capital markets and make investments in pursuit of our Vision. Consolidated EBITDA is calculated in accordance with our Credit Agreement (defined below in Liquidity and Capital Resources) and includes certain adjustments. Our management does not view any of these special items to be part of 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. Our management also reviews income tax rates on an adjusted basis, which may exclude certain income tax items from our reported effective tax rate.
Previous wording
Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”); there have been no updates to these critical accounting estimates, except as noted below.
Current wording
Our critical accounting policies and estimates are discussed in our 2024 Form 10-K; there have been no updates to these critical accounting estimates, except as noted below.
Previous wording
We conduct a required annual review of goodwill and indefinite-lived intangible assets for potential impairment, and more frequently if an event occurs or circumstances change that would require an interim quantitative impairment assessment. There have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required as of September 30, 2024. We will perform our annual impairment testing during the fourth quarter of 2024.
Current wording
We conduct a required annual review of goodwill and indefinite-lived intangible assets for potential impairment, and more frequently if an event occurs or circumstances change that would require an interim quantitative impairment assessment.
Previous wording
At June 30, 2024, we used an income approach to estimate the fair value of the Skoal trademark. In performing the discounted cash flow analysis, we made various judgments, estimates and assumptions, the most significant of which were volume, revenue, income, operating margins, perpetual growth rate and discount rate.
Current wording
We used an income approach to estimate the fair value of the e-vapor reporting unit. Due to the uncertainties discussed below, our discounted cash flows are based on a range of scenarios that consider certain potential regulatory and market outcomes. In performing the discounted cash flow analysis, we made various judgments, estimates and assumptions, the most significant of which were volume, revenue, income, operating margins, perpetual growth rate and discount rates. The discount rates used in performing the valuation ranged from 12.0% to 15.0%.
Previous wording
Skoal Impairment: At December 31, 2023, the estimated fair value of the Skoal trademark exceeded its carrying value of $3.9 billion by approximately 6% ($0.2 billion). Sales volumes of MST products, including Skoal, have been negatively impacted due in part to evolving adult tobacco consumer preferences, which has resulted in consumers increasingly moving across tobacco categories. In connection with the preparation of our financial statements for the period ended June 30, 2024, we evaluated the accelerated growth of innovative tobacco products, including oral nicotine pouches, and the related increase in competitive activity among tobacco categories, which have contributed to reductions in sales volumes for MST products, including Skoal. We concluded that the expected impact from the sales volume declines on the Skoal trademark represented a triggering event, and as a result of this conclusion, we performed an interim impairment assessment as of June 30, 2024. As a result of (i) lower projected revenue and income due to lower volume assumptions, (ii) a decrease in the perpetual growth rate to 0% (1% at October 1, 2023 valuation) and (iii) an increase in the discount rate to 11.5% (11.0% at October 1, 2023 valuation), we determined the estimated fair value of the Skoal trademark was below its carrying value and recorded a non-cash, pre-tax impairment of $354 million during the second quarter of 2024 in our condensed consolidated statements of earnings. Our estimate of the fair value and carrying value of the Skoal trademark at June 30, 2024 was $3.6 billion, after recording the impairment.
Current wording
At December 31, 2024, the estimated fair value of the Skoal trademark exceeded its carrying value by approximately 7% ($0.3 billion). MST products, including Skoal, continued to be negatively impacted due in part to evolving adult tobacco consumer preferences, which have continued to contribute to reductions in sales volumes for MST products, including Skoal. For further discussion, see Operating Results by Business Segment - Business Environment below.
Previous wording
Our management believes that the estimated fair value of the Skoal trademark at June 30, 2024 was reasonable and no events or circumstances exist indicating an impairment at September 30, 2024. If Skoal’s actual revenue and income or long-term outlook are significantly different from forecasted performance used to estimate the fair value or if the discount rate used to estimate the fair value increases, we could have an additional non-cash impairment, which could be material, to the Skoal trademark in future periods.
Current wording
If the decline in sales volume for Skoal is higher than currently estimated and results in material revenue declines, we believe there may be a material adverse effect on the significant assumptions used in performing our valuation. We believe that the estimated fair value of the Skoal trademark at December 31, 2024 was reasonable and no events or circumstances existed indicating an impairment at March 31, 2025. If Skoal’s actual revenue and income or long-term outlook are significantly unfavorable compared to forecasted performance used to estimate the fair value or if the discount rate used to estimate the fair value increases, we could have material non-cash impairments of the Skoal trademark in future periods. Based on the 2024 annual impairment test, a hypothetical 1% increase to the discount rate used would have resulted in a pre-tax impairment charge to the Skoal intangible asset of approximately $85 million.
Previous wording
The following special items affected the comparability of statements of earnings amounts for the nine and three months ended September 30, 2024 and 2023:
Current wording
The following special items affected the comparability of statements of earnings amounts for the three months ended March 31, 2025 and 2024:
Previous wording
▪ABI-Related Special Items: We recorded net pre-tax income of $39 million from our investment in ABI for the nine months ended September 30, 2024, which consists primarily of a gain related to the ABI Transaction, partially offset by mark-to-market losses on certain ABI financial instruments associated with its share commitments. For further information on the gain related to the ABI Transaction, see Note 6.
Current wording
▪ABI-Related Special Items: We recorded net pre-tax income of $86 million from our investment in ABI for the three months ended March 31, 2024, which consists primarily of a gain related to our sale of a portion of our investment in ABI (“ABI Transaction”), net of transaction costs. For further information on the gain related to the ABI Transaction, see Note 6.
Previous wording
▪Income Tax Items: We recorded income tax items of $41 million for the nine months ended September 30, 2024, due primarily to an income tax benefit from the partial release of a valuation allowance on JUUL-related losses, partially offset by interest expense on tax reserves recorded in prior years. The valuation allowance release was due to our capital gain on the ABI Transaction. For further discussion, see Note 13. Income Taxes to our condensed consolidated financial statements in Item 1.
Current wording
▪Income Tax Items: We recorded income tax items of $71 million, for the three months ended March 31, 2024, due primarily to an income tax benefit from the partial release of a valuation allowance on our losses related to our former investment in JUUL Labs, Inc. (“JUUL”). The valuation allowance release was due to our capital gain on the ABI Transaction.
Previous wording
Net revenues, which include excise taxes billed to customers, decreased $464 million (2.5%), due primarily to lower net revenues in our smokeable products segment, partially offset by higher net revenues in our oral tobacco products segment.
Current wording
Net revenues, which include excise taxes billed to customers, decreased $317 million (5.7%), due primarily to lower net revenues in our smokeable products segment.
Previous wording
Cost of sales decreased $42 million (2.7%), due primarily to lower shipment volume in our smokeable products segment, partially offset by higher per unit settlement charges in our smokeable products segment and higher NJOY shipment volume.
Current wording
Cost of sales decreased $167 million (11.6%), due primarily to lower shipment volume and lower per unit settlement charges in our smokeable products segment, partially offset by higher NJOY costs.
Previous wording
Excise taxes on products decreased $324 million (10.7%), due to lower shipment volume in our smokeable products segment.
Current wording
Excise taxes on products decreased $119 million (13.9%), due to lower shipment volume in our smokeable products segment.
Previous wording
Operating income decreased $392 million (4.5%), due primarily to lower OCI (which includes a non-cash impairment of the Skoal trademark in our oral tobacco product segment), partially offset by lower general corporate expenses.
Current wording
Operating income decreased $886 million (33.1%), due primarily to lower OCI (which includes a non-cash impairment of the e-vapor reporting unit goodwill and acquisition-related items in 2025 in our all other category), partially offset by lower general corporate expenses.
Previous wording
(Income) losses from investments in equity securities, which were favorable $425 million (100+%), were positively impacted by the 2023 loss on the disposition of our JUUL equity securities and favorable results from our investment in ABI (due primarily to our gain on the ABI Transaction.)
Current wording
(Income) losses from investments in equity securities were unfavorable $152 million (51.5%), due primarily to lower income from our equity investment in ABI (due primarily to our gain on the ABI Transaction in 2024 and lower ownership interest), partially offset by favorable Cronos-related special items.
Previous wording
Reported net earnings of $8,225 million increased $2,155 million (35.5%), due primarily to the gain on the sale of the IQOS System commercialization rights, favorable results from our investments in equity securities and favorable income tax items, partially offset by lower operating income. Reported basic and diluted EPS of $4.75, each increased by 39.7% due to higher reported net earnings and fewer shares outstanding.
Current wording
Reported net earnings of $1,077 million decreased $1,052 million (49.4%), due primarily to lower operating income, unfavorable results from our investments in equity securities and unfavorable income tax items, partially offset by lower state income tax expense. Reported basic and diluted EPS of $0.63, each decreased by 47.9% due to lower reported net earnings, partially offset by fewer shares outstanding.
Previous wording
Adjusted net earnings of $2,357 million increased $82 million (3.6%), due primarily to higher adjusted OCI. Adjusted diluted EPS of $1.38 increased by 7.8%, due to fewer shares outstanding and higher adjusted net earnings.
Current wording
Adjusted net earnings of $2,089 million increased $43 million (2.1%), due primarily to higher OCI and a lower adjusted tax rate, partially offset by lower income from our equity investment in ABI and lower net periodic benefit income, excluding service cost. Adjusted diluted EPS of $1.23 increased by 6.0%, due to fewer shares outstanding and higher adjusted net earnings.
Previous wording
The U.S. tobacco industry faces a number of business and legal challenges that have materially adversely affected and may continue to materially adversely affect our business, results of operations, cash flows or financial position or our ability to achieve our Vision. These challenges, some of which are discussed in more detail in Note 14, and in Part I, Item 1A. Risk Factors of our 2023 Form 10-K, include:
Current wording
The U.S. tobacco industry faces a number of business and legal challenges that have materially adversely affected and may continue to materially adversely affect our business, results of operations, cash flows or financial position or our ability to achieve our Vision. These challenges, some of which are discussed in more detail in Note 14, and in Part I, Item 1A. Risk Factors in our 2024 Form 10-K, include:
Previous wording
▪restrictions and requirements imposed by the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”) and restrictions and requirements (and related enforcement actions) that have been, and in the future will be, imposed by the FDA;
Current wording
▪restrictions and requirements imposed by the FSPTCA and restrictions and requirements (and related enforcement actions) that have been, and in the future will be, imposed by the FDA;
Previous wording
▪changes in adult tobacco consumer purchase behavior, which is influenced by various factors such as macroeconomic conditions (including inflation), excise taxes and price gap relationships, each of which may result in adult tobacco consumers switching to lower-priced tobacco products and lower shipment volumes;
Current wording
▪changes in adult tobacco consumer purchase behavior, which is influenced by various factors such as macroeconomic conditions (including inflation and tariffs), the proliferation of illicit disposable e-vapor products, excise taxes and product price gap relationships, each of which has resulted and may in the future result in adult tobacco consumers switching to lower-priced tobacco products and lower shipment volumes;
Previous wording
In addition to and in connection with the foregoing, evolving adult tobacco consumer preferences continue to impact the tobacco industry, including negatively impacting cigarette and MST shipment volumes. 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 tobacco consumers continue to transition from cigarettes and MST to exclusive use of innovative smoke-free tobacco product alternatives, which aligns with our Vision.
Current wording
In addition to and in connection with the foregoing, evolving adult tobacco consumer preferences continue to impact the tobacco industry, including negatively impacting cigarette and MST shipment volumes. 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. As innovative smoke-free products evolve to better address the preferences of adult tobacco consumers, these consumers continue to transition from cigarettes and MST products to exclusive use of innovative smoke-free tobacco product alternatives, which aligns with our Vision.
Previous wording
For the 12 months ended September 30, 2024, we estimate the e-vapor category grew approximately 30% versus the prior 12-month period, driven by the growth of illicit flavored disposable products. We estimate the disposable segment now represents 65% of the e-vapor category. We estimate that cross-category movement to illicit disposable e-vapor products, which we discuss in more detail below, contributed to cigarette industry volume declines in a range of 2% to 3% over the last 12 months. These illicit disposable e-vapor products are largely distributed through non-traditional retail channels (including e-commerce and vape retail channels), making them more difficult to track. In addition, we believe illicit cigarettes are becoming more prevalent in the United States, based on the results of discarded pack studies we have conducted in select geographies. We believe the FDA’s inaction, lack of enforcement and slow pace of smoke-free product authorizations enables bad actors to disregard regulation.
Current wording
For the 12 months ended March 31, 2025, we estimate the e-vapor category grew approximately 30% versus the prior 12-month period, driven by the growth of illicit flavored disposable e-vapor products. We estimate that illicit products now represent more than 60% of the e-vapor category. These illicit disposable e-vapor products are largely distributed through non-traditional retail channels (including e-commerce and vape retail channels), making them more difficult to track. We believe the FDA’s inadequate enforcement and slow pace of smoke-free product authorizations enables bad actors to disregard regulation and illicit products to proliferate. Through our competitive intelligence tracking, we continue to monitor these growing trends and evaluate the impacts on the overall nicotine and tobacco categories.
Previous wording
The U.S. nicotine pouch category continued to grow significantly throughout the third quarter of 2024 to 43.9% of the U.S. oral tobacco category, an increase of 11.4 share points versus the third quarter of 2023. on! maintained year-over-year share momentum through the third quarter of 2024 to achieve 8.9% of the total oral tobacco category, an increase of 2.0 share points versus the third quarter of 2023 and an increase of 0.8 share points sequentially.
Current wording
The U.S. nicotine pouch category continued to grow significantly throughout the first quarter of 2025 to 49.1% of the U.S. oral tobacco category, an increase of 8.7 share points versus the first quarter of 2024. on! maintained year-over-year share momentum through the first quarter of 2025 to achieve 8.8% of the total oral tobacco category, an increase of 1.8 share points versus the first quarter of 2024 and an increase of 0.1 share point sequentially.
Previous wording
For the third quarter 2024, the traditional smokeless category (including MST and Snus) share of the total oral tobacco category declined to 56.1%, down 11.4 share points versus the third quarter of 2023. Copenhagen had an oral tobacco category share of 18.7% for the third quarter of 2024, a decrease of 4.3 share points when compared to the third quarter of 2023. We continue to track the growth of nicotine pouch volumes and the related impact on the size of the MST category. Decreases in the size of the MST category could impact the carrying value of our assets, such as our smokeless tobacco product trademarks. For example, in the second quarter of 2024, we recorded a non-cash, pre-tax impairment on the value of the Skoal trademark.
Current wording
For the first quarter 2025, the traditional smokeless category (including MST) share of the total oral tobacco category declined to 50.9%, down 8.7 share points versus the first quarter of 2024. Copenhagen had an oral tobacco category share of 16.9% for the first quarter of 2025, a decrease of 3.2 share points when compared to the first quarter of 2024. We continue to track the growth of nicotine pouch volumes and the related impact on the size of the MST category. Decreases in the size of the MST category could impact the carrying value of our assets, such as our smokeless tobacco product goodwill and trademarks. For example, in the second quarter of 2024, we recorded a non-cash, pre-tax impairment on the value of the Skoal trademark.
Previous wording
Discretionary income pressures on adult tobacco consumers have influenced discount brand share performance. For the third quarter of 2024, the discount share of the cigarette category reached 29.8%, an increase of 0.5 share points sequentially and an increase of 1.5 share points versus the third quarter of 2023. Marlboro share performance is discussed below in Operating Results - Smokeable Products Segment.
Current wording
Overall discretionary income pressures on adult tobacco consumers have increased discount brand share performance and negatively impacted the sales volumes of our companies’ premium brands. For the first quarter of 2025, the discount share of the cigarette category reached 30.9%, an increase of 0.6 share points sequentially and an increase of 1.8 share points versus the first quarter of 2024.
Previous wording
We continue to monitor changing conditions within our business environment and impacts on our businesses. Changes in these and other conditions could have a material adverse effect on our business, results of operations, cash flows or financial position.
Current wording
We continue to monitor the evolving regulatory, macroeconomic (including inflation and tariffs) and consumer dynamics within our business environment to assess potential impacts on our businesses. Changes in these and other conditions could have a material adverse effect on our business, results of operations, cash flows or financial position.
Previous wording
▪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.
Current wording
▪Final Tobacco Marketing Rule: As required by the FSPTCA, the FDA has promulgated a wide range of advertising and promotion restrictions for cigarettes and smokeless tobacco(1) products (the “Final Tobacco Marketing Rule”), which the FDA has subsequently amended 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 such as synthetic nicotine. The Final Tobacco Marketing Rule currently does not apply to products containing nicotine analogues.
Previous wording
▪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 Pre-existing Tobacco 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 possible FDA enforcement.
Current wording
▪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 Pre-existing Tobacco 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 subject to possible FDA enforcement.
Showing the first 40 of 103 pairs. Open the source sections for the rest.
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Current report — wording carried from elsewhere
Except for the factors leading us to perform a quantitative assessment for the e-vapor reporting unit as discussed below, there have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required as of March 31, 2025. We will perform our annual impairment testing during the fourth quarter of 2025.
Rearranged previous paragraphs (15)
Previous report — wording carried elsewhere
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Previous report — wording carried elsewhere
As we execute on our Vision, we established our 2028 Enterprise Goals (“2028 Goals”) to provide our investors with specific metrics to measure our progress. Our 2028 Goals are:
Previous report — wording carried elsewhere
▪A progressive dividend goal targeting mid-single digits dividend per share growth annually through 2028;
Previous report — wording carried elsewhere
Consolidated Results of Operations for the Nine Months Ended September 30, 2024
Previous report — wording carried elsewhere
The changes in net earnings and diluted EPS for the nine months ended September 30, 2024, from the nine months ended September 30, 2023, were due primarily to the following:
Previous report — wording carried elsewhere
For a discussion of special items and other business drivers affecting the comparability of statements of earnings amounts and reconciliations of adjusted earnings and adjusted diluted EPS, see the Consolidated Operating Results section below.
Previous report — wording carried elsewhere
▪Fewer Shares Outstanding: Fewer shares outstanding were due to shares we repurchased under our share repurchase programs.
Previous report — wording carried elsewhere
The following table provides a reconciliation of adjusted net earnings and adjusted diluted EPS for the nine months ended September 30:
Previous report — wording carried elsewhere
and Rhode Island (effective in September 2024)) have increased excise taxes in 2024. In addition, various increases are under consideration or have been proposed.
Previous report — wording carried elsewhere
Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023
Previous report — wording carried elsewhere
Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 8.6%, driven primarily by the industry’s decline rate (impacted by the growth of illicit e-vapor products and continued discretionary income pressures on adult tobacco consumers) and retail share losses, partially offset by trade inventory movements and calendar differences. When adjusted for trade inventory movements and calendar differences, our smokeable products segment domestic cigarette shipment volume decreased by an estimated 11.5%. When adjusted for trade inventory movements and calendar differences, total estimated domestic cigarette industry volume decreased by an estimated 9%.
Previous report — wording carried elsewhere
Total cigarettes industry discount category retail share was 29.8%, an increase of 1.5 share points versus the prior year and 0.5 share points sequentially, primarily due to continued discretionary income pressures on adult tobacco consumers.
Previous report — wording carried elsewhere
Our oral tobacco products segment’s retail share was 37.6%, as share declines for MST products were partially offset by oral nicotine pouch segment share growth.
Previous report — wording carried elsewhere
For the nine months ended September 30, 2024 NJOY retail share of consumables in the U.S. multi-outlet and convenience channel was 5.3%.
Previous report — wording carried elsewhere
Guarantor Subsidiaries”) are limited by contractual obligations on their ability to pay cash dividends or make other distributions with respect to their equity interests.