Altria(MO) - 2025 Q1 - Quarterly Report

Financial Performance - For the three months ended March 31, 2025, net earnings decreased by 49.4% to $1,077 million, and diluted EPS decreased by 47.9% to$ 0.63 compared to the same period in 2024 [193]. - Adjusted net earnings for Q1 2025 increased by 2.1% to $2,089 million, while adjusted diluted EPS rose by 6.0% to$ 1.23 compared to Q1 2024 [193]. - Net revenues for the three months ended March 31, 2025, decreased by $317 million (5.7%) to$ 5,259 million, primarily due to lower revenues in the smokeable products segment [218]. - Operating income for the same period decreased by $886 million (33.1%) to$ 1,788 million, largely due to lower OCI and the non-cash impairment of the e-vapor reporting unit goodwill [221]. - Reported net earnings for the three months ended March 31, 2025, were $1,077 million, a decrease of$ 1,052 million (49.4%) compared to the previous year [223]. - Adjusted net earnings increased by $43 million (2.1%) to$ 2,089 million, driven by higher OCI and a lower adjusted tax rate [224]. - Net cash provided by operating activities decreased to $2,720 million in Q1 2025 from$ 2,877 million in Q1 2024, primarily due to lower net revenues [346]. E-Vapor and Tobacco Products - The e-vapor category grew approximately 30% year-over-year, with illicit flavored disposable e-vapor products now representing over 60% of the category [187]. - The company recorded a non-cash impairment of $884 million related to the e-vapor reporting unit due to ITC orders on NJOY ACE effective March 31, 2025 [188]. - As of March 31, 2025, the e-vapor reporting unit recorded a non-cash goodwill impairment of$ 873 million, reducing its carrying value of goodwill to $895 million [203]. - In Q1 2025, PM USA reported a domestic cigarette volume decline of 13.7% compared to Q1 2024, with an estimated adjusted decline of 12% [229]. - The nicotine pouch category reached 49.1% of the U.S. oral tobacco category, increasing by 8.7 share points year-over-year [233]. - The traditional smokeless category's share declined to 50.9%, down 8.7 share points compared to Q1 2024, with Copenhagen's share at 16.9%, a decrease of 3.2 share points [234]. - Discount cigarette brands reached a 30.9% share in Q1 2025, up 1.8 share points from Q1 2024, reflecting increased pressure on premium brand sales [236]. Regulatory Environment - The proposed FDA tobacco product standard aims to establish a maximum nicotine level in cigarettes significantly lower than current averages, which could materially impact the business [189]. - The FDA's five-year strategic plan aims to enhance tobacco regulation and enforcement, addressing concerns about illicit products and market pathways [245]. - The FDA proposed a tobacco product standard in January 2025 to establish a maximum nicotine level in cigarettes and other combustible tobacco products, aiming to make them minimally or non-addictive [270]. - The FDA's proposed rule for tobacco product manufacturing practices could lead to increased compliance costs for manufacturers [271]. - The FDA has communicated that many manufacturers of flavored e-vapor products have received marketing denial orders (MDOs) for insufficient evidence demonstrating public health benefits [267]. - The DOJ and FDA announced a federal task force in June 2024 to combat illegal marketing and sale of e-vapor products, indicating increased regulatory scrutiny [299]. Market Dynamics - Discretionary income pressures on adult tobacco consumers are expected to continue influencing purchasing behaviors through 2025, despite a moderation in inflation rates [186]. - Adult tobacco consumers faced significant financial pressure, leading to a nearly 13% decline in consumer sentiment compared to Q4 2024 [235]. - Illicit trade in tobacco products continues to adversely impact sales volumes and market shares, undermining legitimate distribution channels [297]. - Tax increases are expected to adversely impact sales, leading to lower consumption levels and a potential shift from premium to non-premium tobacco products [280]. Financial Position and Debt - At March 31, 2025, the company had$ 4.7 billion in cash and cash equivalents, with access to a $3.0 billion senior unsecured revolving credit agreement [332]. - Total long-term debt increased to$ 26.1 billion as of March 31, 2025, up from $24.9 billion at the end of 2024 [337]. - The fair value of the company's long-term debt as of March 31, 2025, is$ 24.1 billion, an increase from $22.7 billion on December 31, 2024 [369]. - A 1% increase in market interest rates would result in a decrease in fair value of$ 1.8 billion as of March 31, 2025, compared to a decrease of $1.7 billion on December 31, 2024 [369]. Strategic Initiatives - The company continues to monitor evolving regulatory and macroeconomic conditions that could materially impact its business operations [237]. - The company emphasizes the importance of managing strategic transactions and the associated risks to achieve anticipated benefits [367]. - The company has not yet adopted new accounting guidance that may affect its financial statements [350].