(1) Altria’s investment in Cronos at December 31, 2021 consisted of Altria’s equity method investment in Cronos ($617 million), the Cronos warrant ($14 million) and the Fixed-price Preemptive Rights ($1 million) (collectively, “Investment in Cronos”). The Investment in Cronos at December 31, 2020 consisted of Altria’s equity method investment in Cronos ($1,010 million), the Cronos warrant ($139 million) and the Fixed-price Preemptive Rights ($24 million). See below for further discussion.


	For Altria’s Year Ended December 31,
	2021 (1)				2020 (2)				2019 (3)
(in millions)	ABI		Other Investments		ABI		Other Investments		ABI		Other Investments
Net revenues	$	52,864	$	1,313	$	48,294	$	37	$	54,187	$	21
Gross profit	$	30,653	$	757	$	28,438	$	(31)	$	33,735	$	10
Earnings (losses) from continuing operations	$	7,434	$	(800)	$	4,265	$	99	$	10,530	$	1,117
Net earnings (losses)	$	7,434	$	(800)	$	4,266	$	98	$	10,530	$	1,117
Net earnings (losses) attributable to equity investments	$	5,780	$	(798)	$	3,323	$	100	$	9,189	$	1,117


	At September 30,
	2021 (1)				2020 (2)
(in millions)	ABI		Other Investments		ABI		Other Investments
Current assets	$	21,593	$	1,882	$	28,672	$	1,394
Long-term assets	$	190,082	$	1,049	$	185,106	$	525
Current liabilities	$	33,540	$	451	$	34,884	$	143
Long-term liabilities	$	105,973	$	2,277	$	117,400	$	12
Convertible Preferred Stock	$	—	$	715	$	—	$	—
Noncontrolling interests	$	11,356	$	(3)	$	8,459	$	(3)

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

The fair value of Altria’s equity investment in ABI is based on (i) unadjusted quoted prices in active markets for ABI’s ordinary shares and was classified in Level 1 of the fair value hierarchy and (ii) observable inputs other than Level 1 prices, such as quoted prices for similar assets for the Restricted Shares, and was classified in Level 2 of the fair value hierarchy. Altria can convert its Restricted Shares to ordinary shares at its discretion. Therefore, the fair value of each Restricted Share is based on the value of an ordinary share.

In October 2019, the fair value of Altria’s equity investment in ABI declined below its carrying value. At December 31, 2020, the fair value of Altria’s equity investment in ABI was $13.8 billion (carrying value of $16.7 billion), which was less than its carrying value by approximately 17%. In preparing its financial statements for the period ended December 31, 2020, Altria evaluated the factors related to the fair value decline, including the impact on the fair value of ABI’s shares during the COVID-19 pandemic, which negatively impacted ABI’s business. Altria evaluated the duration and magnitude of the fair value decline, ABI’s financial condition and near-term prospects and Altria’s intent and ability to hold its investment in ABI until recovery. Altria concluded that the decline in fair value of its equity investment in ABI below its carrying value at December 31, 2020 was temporary and, therefore, no impairment was recorded at that time.

Following the consideration of the same factors, Altria, in preparing its financial statements for the period ended September 30, 2021, concluded that the decline in fair value of its equity investment in ABI below its carrying value at September 30, 2021 was other than temporary. As a result, Altria recorded a non-cash, pre-tax impairment charge of $6.2 billion during the third quarter of 2021, which was recorded to (income) losses from equity investments in its consolidated statements of earnings (losses). This impairment charge reflects the difference between the fair value of Altria’s investment in ABI using ABI’s share price at September 30, 2021 and the carrying value of Altria’s equity investment in ABI at September 30, 2021. While Altria considers the impacts related to the COVID-19 pandemic that have negatively impacted ABI’s global business to be transitory, Altria determined, as of the third quarter of 2021, that the full recovery to carrying value would take longer than previously expected. This was evidenced by the resumption of declines in fair value during the third quarter of 2021, following positive share price momentum during the first half of 2021. At September 30, 2021, prior to recording the impairment charge, the fair value of Altria’s investment in ABI was below the carrying value by approximately 35%, which represented an additional 18% reduction in ABI’s share price since December 31, 2020. After recording the impairment charge, the fair value and carrying value of Altria’s equity investment in ABI at September 30, 2021 were $11.2 billion.

At December 31, 2021, the carrying value of Altria’s equity investment in ABI exceeded its share of ABI’s net assets attributable to equity holders of ABI by approximately $5.1 billion. Substantially all of this difference is comprised of goodwill and other indefinite-lived intangible assets (consisting primarily of trademarks).

In December 2018, Altria made an investment in JUUL for $12.8 billion and received a 35% economic interest in JUUL through non-voting shares, which were convertible at Altria’s election into voting shares (“Share Conversion”), and a security convertible into additional non-voting or voting shares, as applicable, upon settlement or exercise of certain JUUL convertible securities (the “JUUL Transaction”). At December 31, 2021, Altria had a 35% ownership interest in JUUL, consisting of 42 million voting shares.

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

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

Altria also agreed to non-competition obligations generally requiring that it participate in the e-vapor business only through JUUL. However, Altria has the option to be released from its non-compete obligation (i) in the event JUUL is prohibited by federal law from selling e-vapor products in the U.S. for a continuous period of at least 12 months (subject to tolling of this period in certain circumstances), (ii) if the carrying value of Altria’s investment in JUUL is not more than 10% of its initial carrying value of $12.8 billion or (iii) if Altria is no longer providing JUUL services as of December 20, 2024.

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

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

▪restructure JUUL’s current seven-member board of directors to a nine-member board that will include independent board members. The new structure will include: (i) three independent directors (one of whom will be designated by Altria and two of whom will be designated by JUUL stockholders other than Altria) unanimously certified as independent by a nominating committee, which will include at least one Altria designee, (ii) two directors designated by Altria, (iii) three directors designated by JUUL stockholders other than Altria and (iv) the JUUL Chief Executive Officer; and

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

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


(in millions)	Investment Balance
Balance at December 31, 2019	$	—
Transfers into Level 3 fair value	1,605
Unrealized gains (losses) included in (income) losses from equity investments	100
Balance at December 31, 2020	1,705
Unrealized gains (losses) included in (income) losses from equity investments	—
Balance at December 31, 2021	$	1,705

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

▪For the year ended December 31, 2021, Altria recorded no change in the estimated fair value of its investment in JUUL. During the year ended December 31, 2021, the estimated fair value was primarily impacted by Altria’s projections of lower JUUL revenues in the U.S. over time due to lower JUUL volume assumptions offset by (i) the effect of passage of time on the projected cash flows and (ii) a decrease in the discount rate due to change in market factors. The estimated fair value of Altria’s investment in JUUL was $1.7 billion at December 31, 2021 and 2020.

▪Altria recorded a non-cash pre-tax unrealized gain of $100 million for the fourth quarter and year ended December 31, 2020 as a result of an increase in the estimated fair value of its investment in JUUL. The increase in fair value was primarily driven by the effect of passage of time on the projected cash flows, as there were no material changes in the significant assumptions.

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

Given the existence of this impairment indicator, Altria performed a quantitative valuation of its investment in JUUL during the third quarter of 2020 and recorded a non-cash, pre-tax impairment charge of $2.6 billion for the year ended December 31, 2020, reported as impairment of JUUL equity securities in its consolidated statements of earnings (losses). The impairment charge was driven by Altria’s projections of lower JUUL revenues over time due to lower pricing assumptions and delays in JUUL achieving previously forecasted operating margin performance. These drivers were the result of (i) JUUL’s revised international expansion plans and (ii) the evolving U.S. e-vapor category and associated competitive dynamics.

▪In the third quarter of 2019, Altria performed a qualitative assessment for impairment indicators and concluded that impairment indicators existed. These indicators included significant adverse changes in both the e-vapor regulatory environment and the industry in which JUUL operates. While there was no single determinative event or factor, Altria considered in totality the following indicators of impairment: the increased likelihood of a United States Food and Drug Administration (“FDA”) compliance policy prohibiting the sale of certain flavored e-vapor products in the U.S. market without a pre-market authorization; various e-vapor bans put in place by certain states and cities in the U.S. and in certain international markets, coupled with the increased potential for additional bans in the future; and the impact of heightened adverse publicity, including news reports and public health advisories concerning vaping-related lung injuries and deaths. Altria determined that the third-quarter 2019 impairment charge was due primarily to lower e-vapor sales volume assumptions in the U.S. and international markets and a delay in achieving operating margin performance as compared to the assumptions at the time of the JUUL Transaction, which resulted in a non-cash pre-tax impairment charge of $4.5 billion.

▪In the fourth quarter of 2019, Altria determined that a significant increase in the number of legal cases pending against JUUL in the fourth quarter of 2019, which included a variety of class action lawsuits and personal injury claims, as well as cases brought by state attorneys general and local governments, resulted in an additional indicator of impairment. Altria determined that the fourth-quarter 2019 impairment charge resulted substantially from increased discount rates applied to future cash flow projections, due to the significant risk created by the increase in the number of legal cases pending against JUUL and the expectation that the number of legal cases against JUUL will continue to increase, which resulted in an additional non-cash pre-tax impairment charge of $4.1 billion.

Altria uses an income approach to estimate the fair value of its investment in JUUL. The income approach reflects the discounting of future cash flows for the U.S. and international markets at a rate of return that incorporates the risk-free rate for the use of those funds, the expected rate of inflation and the risks associated with realizing future cash flows. Future cash flows were based on a range of scenarios that consider various potential regulatory and market outcomes.

In determining the estimated fair value of its investment in JUUL, in 2021, 2020 and 2019, Altria made various judgments, estimates and assumptions, the most significant of which were sales volume, operating margins, discount rates and perpetual growth rates. All significant inputs used in the valuation are classified in Level 3 of the fair value hierarchy. Additionally, in determining these significant assumptions, Altria made judgments regarding the (i) likelihood and extent of various potential regulatory actions and the continued adverse public perception impacting the e-vapor category and specifically JUUL, (ii) risk created by the number and types of legal cases pending against JUUL, (iii) expectations for the future state of the e-vapor category including competitive dynamics and (iv) timing of international expansion plans.

At December 31, 2021, Altria had a 41.8% ownership interest in Cronos, consisting of 156.6 million shares, which Altria accounts for under the equity method of accounting. Altria’s ownership percentage decreased from 43.5% at December 31, 2020 due to the issuance of additional shares by Cronos. Altria reports its share of Cronos’s results using a one-quarter lag because Cronos’s results are not available in time for Altria to record them in the concurrent period.

▪anti-dilution protections to purchase Cronos common shares, exercisable each quarter upon dilution, to maintain its ownership percentage. Certain of the anti-dilution protections provide Altria the ability to purchase additional Cronos common shares at a per share exercise price of Canadian dollar (“CAD”) $16.25 upon the occurrence of specified events (“Fixed-price Preemptive Rights”). Based on Altria’s assumptions as of December 31, 2021, Altria estimates the Fixed-price Preemptive Rights allows Altria to purchase up to an additional approximately 12 million common shares of Cronos; and

If exercised in full, the exercise prices for the warrant and Fixed-price Preemptive Rights are approximately CAD $1.6 billion and CAD $0.2 billion, respectively (approximately USD $1.3 billion and $0.2 billion, respectively, based on the CAD to USD exchange rate on January 24, 2022). At December 31, 2021, upon full exercise of the Fixed-price Preemptive Rights, to the extent such rights become available, and the warrant, Altria would own approximately 52% of the outstanding common shares of Cronos.

In September 2021, the fair value of Altria’s equity method investment in Cronos declined below its carrying value and has not recovered. Accounting guidance requires the evaluation of the following factors when determining if the decline in fair value is other than temporary: (i) the duration and magnitude of the fair value decline, (ii) the financial condition and near-term prospects of the investee and (iii) the investor’s intent and ability to hold its equity method investment until full recovery to its carrying value in the near-term. In preparing its financial statements for the year ended December 31, 2021, Altria evaluated these factors and determined that there is not sufficient evidence to conclude that the impairment is temporary. As a result, Altria recorded a non-cash, pre-tax impairment charge of $205 million for the year ended December 31, 2021, which was recorded to (income) losses from equity investments in its consolidated statement of earnings (losses). The impairment charge reflects the difference between the fair value of Altria’s equity method investment in Cronos using Cronos’s share price at December 31, 2021 and the carrying value of Altria’s equity method investment in Cronos at December 31, 2021. At December 31, 2021, prior to recording the impairment charge, the fair value of Altria’s equity method investment in Cronos was less than its carrying value by approximately 25%. After recording the impairment charge, the fair value and carrying value of Altria’s equity method investment in Cronos at December 31, 2021 were $617 million.