v3.26.1
Financial Instruments
 3 Months Ended
Mar. 31, 2026
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Financial Instruments Financial Instruments
Our investment in ABI, whose functional currency is the Euro, exposes us to foreign currency exchange risk on the carrying value of our investment. To manage this risk, we may designate Euro denominated unsecured long-term notes (“foreign currency denominated debt”) and certain foreign exchange contracts, including cross-currency swap contracts and forward contracts (collectively, “foreign currency contracts”), as net investment hedges of our investment in ABI. At March 31, 2026 and December 31, 2025, we had no outstanding foreign currency contracts.
The aggregate carrying value and fair value of our total long-term debt were as follows:
(in millions)March 31, 2026December 31, 2025
Carrying value$24,602 $25,709 
Fair value22,727 24,303 
Foreign currency denominated debt included in long-term debt:
Carrying value2,595 2,638 
Fair value2,545 2,619 
The fair value of our total long-term debt is based on observable market information derived from a third-party pricing source and is classified in Level 2 of the fair value hierarchy.
Net Investment Hedging
We recognize changes in the carrying value of the foreign currency denominated debt due to changes in the Euro to U.S. dollar exchange rate in accumulated other comprehensive losses related to ABI. We recognized pre-tax (gains) losses of our net investment hedges of $(43) million and $139 million for the three months ended March 31, 2026 and 2025, respectively.
Contingent Payments
In 2023, we acquired NJOY Holdings, Inc. (“NJOY Transaction”). The total consideration for the NJOY Transaction included the fair value of up to $500 million in additional cash payments contingent on receipt of U.S. Food and Drug Administration (“FDA”) authorizations with respect to NJOY ACE menthol ($250 million, paid in 2024 following FDA authorization), blueberry ($125 million) and watermelon ($125 million) pod products.
The changes in the liability associated with contingent payments were as follows:
For the Three Months Ended March 31, 2026For the Year Ended December 31, 2025
(in millions)
Balance at January 1$45 $20 
Change in the fair value of contingent payments (1)
— 25 
Balance at end of period$45 $45 
(1) These pre-tax charges were recorded in the first quarter of 2025 in marketing, administration and research costs in our condensed consolidated statements of earnings and related to NJOY ACE blueberry and watermelon pod products.
We recognized the liability for contingent payments related to the NJOY Transaction at its estimated fair value as of the acquisition date. We recognize subsequent changes to the fair value in earnings until the contingency is resolved. In determining the estimated fair value, we made certain judgments, estimates and assumptions, the most significant of which was the likelihood of certain potential regulatory outcomes. We classified the liability for contingent payments in Level 3 of the fair value hierarchy.