1Forward-Looking StatementsData and projections contained in these materials are based on the inform.
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q(Mark One)QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the Quarterly Period Ended June 30,2024or TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIESEXCHANGE ACT OF 1934For the transition period from toCommission file number:1-6523Exact name of registrant as specified in its charter:Bank of America CorporationState or other jurisdiction of incorporation or organization:DelawareIRS Employer Identification No.:56-0906609Address of principal executive offices:Bank of America Corporate Center100 N.Tryon StreetCharlotte,North Carolina 28255Registrants telephone number,including area code:(704)386-5681Former name,former address and former fiscal year,if changed since last report:Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredCommon Stock,par value$0.01 per shareBACNew York Stock ExchangeDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrENew York Stock Exchange of Floating Rate Non-Cumulative Preferred Stock,Series EDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrBNew York Stock Exchange of 6.000%Non-Cumulative Preferred Stock,Series GGDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrKNew York Stock Exchange of 5.875%Non-Cumulative Preferred Stock,Series HH7.25%Non-Cumulative Perpetual Convertible Preferred Stock,Series LBAC PrLNew York Stock ExchangeDepositary Shares,each representing a 1/1,200th interest in a shareBML PrGNew York Stock Exchangeof Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 1Title of each classTrading Symbol(s)Name of each exchange on which registeredDepositary Shares,each representing a 1/1,200th interest in a shareBML PrHNew York Stock Exchange of Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 2Depositary Shares,each representing a 1/1,200th interest in a shareBML PrJNew York Stock Exchange of Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 4Depositary Shares,each representing a 1/1,200th interest in a shareBML PrLNew York Stock Exchange of Bank of America Corporation Floating RateNon-Cumulative Preferred Stock,Series 5Floating Rate Preferred Hybrid Income Term Securities of BAC CapitalBAC/PFNew York Stock Exchange Trust XIII(and the guarantee related thereto)5.63%Fixed to Floating Rate Preferred Hybrid Income Term SecuritiesBAC/PGNew York Stock Exchange of BAC Capital Trust XIV(and the guarantee related thereto)Income Capital Obligation Notes initially due December 15,2066 ofMER PrKNew York Stock ExchangeBank of America CorporationSenior Medium-Term Notes,Series A,Step Up Callable Notes,dueBAC/31BNew York Stock Exchange November 28,2031 of BofA Finance LLC(and the guaranteeof the Registrant with respect thereto)Depositary Shares,each representing a 1/1,000th interest in a share ofBAC PrMNew York Stock Exchange 5.375%Non-Cumulative Preferred Stock,Series KKDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrNNew York Stock Exchangeof 5.000%Non-Cumulative Preferred Stock,Series LLDepositary Shares,each representing a 1/1,000th interest in a share ofBAC PrONew York Stock Exchange4.375%Non-Cumulative Preferred Stock,Series NNDepositary Shares,each representing a 1/1,000th interest in a share ofBAC PrPNew York Stock Exchange4.125%Non-Cumulative Preferred Stock,Series PPDepositary Shares,each representing a 1/1,000th interest in a share ofBAC PrQNew York Stock Exchange4.250%Non-Cumulative Preferred Stock,Series QQDepositary Shares,each representing a 1/1,000th interest in a shareBAC PrSNew York Stock Exchangeof 4.750%Non-Cumulative Preferred Stock,Series SSIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T(232.405of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit such files).Yes No Indicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or an emerging growthcompany.See the definitions of“large accelerated filer,”“accelerated filer,”“smaller reporting company,”and“emerging growth company”in Rule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting company Emerging growth company If an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Exchange Act Rule 12b-2).Yes No On July 29,2024,there were 7,759,577,413 shares of Bank of America Corporation Common Stock outstanding.Bank of America Corporation and SubsidiariesJune 30,2024Form 10-QINDEXPart I.Financial InformationItem 1.Financial StatementsPageConsolidated Statement of Income49Consolidated Statement of Comprehensive Income49Consolidated Balance Sheet50Consolidated Statement of Changes in Shareholders Equity51Consolidated Statement of Cash Flows52Notes to Consolidated Financial Statements53Note 1 Summary of Significant Accounting Principles53Note 2 Net Interest Income and Noninterest Income54Note 3 Derivatives55Note 4 Securities63Note 5 Outstanding Loans and Leases and Allowance for Credit Losses66Note 6 Securitizations and Other Variable Interest Entities77Note 7 Goodwill and Intangible Assets81Note 8 Leases82Note 9 Securities Financing Agreements,Collateral and Restricted Cash82Note 10 Commitments and Contingencies84Note 11 Shareholders Equity87Note 12 Accumulated Other Comprehensive Income(Loss)87Note 13 Earnings Per Common Share88Note 14 Fair Value Measurements88Note 15 Fair Value Option95Note 16 Fair Value of Financial Instruments97Note 17 Business Segment Information97Glossary102Acronyms104Item 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsExecutive Summary3Recent Developments3Financial Highlights4Supplemental Financial Data6Business Segment Operations10Consumer Banking10Global Wealth&Investment Management14Global Banking16Global Markets18All Other20Managing Risk21Capital Management21Liquidity Risk25Credit Risk Management28Consumer Portfolio Credit Risk Management29Commercial Portfolio Credit Risk Management33Non-U.S.Portfolio39Allowance for Credit Losses40Market Risk Management42Trading Risk Management42Interest Rate Risk Management for the Banking Book44Mortgage Banking Risk Management46Climate Risk46Complex Accounting Estimates47Non-GAAP Reconciliations48Item 3.Quantitative and Qualitative Disclosures about Market Risk48Item 4.Controls and Procedures481 Bank of AmericaPart II.Other InformationItem 1.Legal Proceedings105Item 1A.Risk Factors105Item 2.Unregistered Sales of Equity Securities and Use of Proceeds105Item 5.Other Information105Item 6.Exhibits106Signature106Item 2.Managements Discussion and Analysis of Financial Condition and Results of OperationsBank of America Corporation(the“Corporation”)and its management may makecertain statements that constitute“forward-looking statements”within the meaning ofthe Private Securities Litigation Reform Act of 1995.These statements can beidentified by the fact that they do not relate strictly to historical or current facts.Forward-looking statements often use words such as“anticipates,”“targets,”“expects,”“hopes,”“estimates,”“intends,”“plans,”“goals,”“believes,”“continue”andother similar expressions or future or conditional verbs such as“will,”“may,”“might,”“should,”“would”and“could.”Forward-looking statements represent the Corporationscurrent expectations,plans or forecasts of its future results,revenues,liquidity,netinterest income,provision for credit losses,expenses,efficiency ratio,capitalmeasures,strategy,deposits,assets,and future business and economic conditionsmore generally,and other future matters.These statements are not guarantees offuture results or performance and involve certain known and unknown risks,uncertainties and assumptions that are difficult to predict and are often beyond theCorporations control.Actual outcomes and results may differ materially from thoseexpressed in,or implied by,any of these forward-looking statements.You should not place undue reliance on any forward-looking statement and shouldconsider the following uncertainties and risks,as well as the risks and uncertaintiesmore fully discussed under Item 1A.Risk Factors of the Corporations 2023 AnnualReport on Form 10-K and in any of the Corporations subsequent Securities andExchange Commission filings:the Corporations potential judgments,orders,settlements,penalties,fines and reputational damage,which are inherently difficult topredict,resulting from pending,threatened or future litigation and regulatoryinvestigations,proceedings and enforcement actions,of which the Corporation issubject to in the ordinary course of business,including matters related to ourprocessing of unemployment benefits for California and certain other states,thefeatures of our automatic credit card payment service,the adequacy of theCorporations anti-money laundering and economic sanctions programs,theprocessing of electronic payments and related fraud and the rates paid on uninvestedcash in investment advisory accounts that is swept into interest-paying bank deposits,which are in various stages;the possibility that the Corporations future liabilities maybe in excess of its recorded liability and estimated range of possible loss for litigation,and regulatory and government actions;the possibility that the Corporation could faceincreased claims from one or more parties involved in mortgage securitizations;theCorporations ability to resolve representations and warranties repurchase and relatedclaims;the risks related to the discontinuation of reference rates,including increasedexpenses and litigation and the effectiveness of hedging strategies;uncertaintiesabout the financial stability and growth rates of non-U.S.jurisdictions,the risk thatthose jurisdictions may face difficulties servicing their sovereign debt,and relatedstresses on financial markets,currencies and trade,and the Corporations exposuresto such risks,including direct,indirect and operational;the impact of U.S.and global interest rates,inflation,currency exchange rates,economic conditions,trade policies and tensions,including tariffs,and potentialgeopolitical instability;the impact of the interest rate,inflationary,macroeconomic,banking and regulatory environment on the Corporations assets,business,financialcondition and results of operations;the impact of adverse developments affecting theU.S.or global banking industry,including bank failures and liquidity concerns,resulting in worsening economic and market volatility,and regulatory responsesthereto;the possibility that future credit losses may be higher than currently expecteddue to changes in economic assumptions,customer behavior,adverse developmentswith respect to U.S.or global economic conditions and other uncertainties,includingthe impact of supply chain disruptions,inflationary pressures and labor shortages oneconomic conditions and our business;potential losses related to the Corporationsconcentration of credit risk;the Corporations ability to achieve its expense targets andexpectations regarding revenue,net interest income,provision for credit losses,netcharge-offs,effective tax rate,loan growth or other projections;variances to theunderlying assumptions and judgments used in estimating banking book net interestincome sensitivity;adverse changes to the Corporations credit ratings from the majorcredit rating agencies;an inability to access capital markets or maintain deposits orborrowing costs;estimates of the fair value and other accounting values,subject toimpairment assessments,of certain of the Corporations assets and liabilities;theestimated or actual impact of changes in accounting standards or assumptions inapplying those standards;uncertainty regarding the content,timing and impact ofregulatory capital and liquidity requirements;the impact of adverse changes to totalloss-absorbing capacity requirements,stress capital buffer requirements and/or globalsystemically important bank surcharges;the potential impact of actions of the Board ofGovernors of the Federal Reserve System on the Corporations capital plans;theeffect of changes in or interpretations of income tax laws and regulations;the impactof implementation and compliance with U.S.and international laws,regulations andregulatory interpretations,including,but not limited to,recovery and resolutionplanning requirements,Federal Deposit Insurance Corporation assessments,theVolcker Rule,fiduciary standards,derivatives regulations and potential changes toloss allocations between financial institutions and customers,including for lossesincurred from the use of our products and services,including electronic payments andpayment of checks,that were authorized by the customer but induced by fraud;theimpact of failures or disruptions in or breaches of the Corporations operations orinformation systems,or those of third parties,including as a result of cybersecurityincidents;the risks related to the development,implementation,use and managementof emerging technologies,including artificial intelligence and machine learning;therisks related to the transition and physical impacts of climate change;our ability toachieve environmental,social and governance goals and commitments or the impactof any changes in the Corporations sustainability strategy or commitments generally;the impact of uncertain political conditions or any future federal governmentBank of America 2shutdown and uncertainty regarding the federal governments debt limit or changes infiscal,monetary or regulatory policy;the emergence or continuation of widespreadhealth emergencies or pandemics;the impact of natural disasters,extreme weatherevents,military conflicts(including the Russia/Ukraine conflict,the conflict in theMiddle East,the possible expansion of such conflicts and potential geopoliticalconsequences),terrorism or other geopolitical events;and other matters.Forward-looking statements speak only as of the date they are made,and theCorporation undertakes no obligation to update any forward-looking statement toreflect the impact of circumstances or events that arise after the date the forward-looking statement was made.Notes to the Consolidated Financial Statements referred to in ManagementsDiscussion and Analysis of Financial Condition and Results of Operations(MD&A)areincorporated by reference into the MD&A.Certain prior-period amounts have beenreclassified to conform to current-period presentation.Throughout the MD&A,theCorporation uses certain acronyms and abbreviations which are defined in theGlossary.Executive SummaryBusiness OverviewThe Corporation is a Delaware corporation,a bank holding company(BHC)and afinancial holding company.When used in this report,“Bank of America,”“theCorporation,”“we,”“us”and“our”may refer to Bank of America Corporationindividually,Bank of America Corporation and its subsidiaries,or certain of Bank ofAmerica Corporations subsidiaries or affiliates.Our principal executive offices arelocated in Charlotte,North Carolina.Through our various bank and nonbanksubsidiaries throughout the U.S.and in international markets,we provide a diversifiedrange of banking and nonbank financial services and products through four businesssegments:Consumer Banking,Global Wealth&Investment Management(GWIM),Global Banking and Global Markets,with the remaining operations recorded in AllOther.We operate our banking activities primarily under the Bank of America,NationalAssociation(Bank of America,N.A.or BANA)charter.At June 30,2024,theCorporation had$3.3 trillion in assets and a headcount of approximately 212,000employees.As of June 30,2024,we served clients through operations across the U.S.,itsterritories and more than 35 countries.Our retail banking footprint covers all majormarkets in the U.S.,and we serve approximately 69 million consumer and smallbusiness clients with approximately 3,800 retail financial centers,approximately15,000 ATMs,and leading digital banking platforms()withapproximately47 million active users,including approximately 39 million active mobile users.Weoffer industry-leading support to approximately four million small business households.Our GWIM businesses,with client balances of$4.0 trillion,provide tailored solutionsto meet client needs through a full set of investment management,brokerage,banking,trust and retirement products.We are a global leader in corporate andinvestment banking and trading across a broad range of asset classes servingcorporations,governments,institutions and individuals around the world.The Corporations website is ,and the Investor Relationsportion of our website is https:/.We use our website todistribute company information,including as a means of disclosing material,non-public information and for complying with our disclosure obligations under RegulationFD.We routinely post and make accessible financial and other information,includingenvironmental,social and governance(ESG)information,regarding the Corporationon our website.Investors should monitor our website,including the Investor Relationsportion,in addition to our press releases,U.S.Securities and Exchange Commission(SEC)filings,public conference calls and webcasts.Notwithstanding the foregoing,the information contained on our website as referenced in this paragraph is notincorporated by reference into this Quarterly Report on Form 10-Q.Recent DevelopmentsCapital ManagementOn June 26,2024,the Board of Governors of the Federal Reserve System(FederalReserve)announced the results of the 2024 Comprehensive Capital Analysis andReview(CCAR)supervisory stress tests.Based on the results,our stress capitalbuffer(SCB)is expected to be 3.2 percent,and the Common equity tier 1(CET1)minimum requirement will be 10.7 percent when finalized.The new SCB will beeffective from October 1,2024 through September 30,2025.On July 24,2024,the Corporations Board of Directors(the Board)authorized a$25 billion common stock repurchase program,effective August 1,2024,to replacethe Corporations existing program,which will expire on the same date.For moreinformation,see Capital Management CCAR and Capital Planning on page 21.TheBoard also declared a quarterly common stock dividend of$0.26 per share,anincrease of eight percent compared to the prior dividend,payable on September 27,2024 to shareholders of record as of September 6,2024.For more information on our capital resources and regulatory developments,seeCapital Management beginning on page 21.3 Bank of AmericaFinancial HighlightsTable 1Summary Income Statement and Selected Financial DataThree Months Ended June 30Six Months Ended June 30(Dollars in millions,except per share information)2024202320242023Income statement Net interest income$13,702$14,158$27,734$28,606 Noninterest income11,675 11,039 23,461 22,849 Total revenue,net of interest expense25,377 25,197 51,195 51,455 Provision for credit losses1,508 1,125 2,827 2,056 Noninterest expense16,309 16,038 33,546 32,276 Income before income taxes7,560 8,034 14,822 17,123 Income tax expense663 626 1,251 1,554 Net income6,897 7,408 13,571 15,569 Preferred stock dividends315 306 847 811 Net income applicable to common shareholders$6,582$7,102$12,724$14,758 Per common share information Earnings$0.83$0.88$1.60$1.83 Diluted earnings0.83 0.88 1.59 1.82 Dividends paid0.24 0.22 0.48 0.44 Performance ratios Return on average assets 0.85%0.94%0.84%1.00%Return on average common shareholders equity 9.98 11.21 9.67 11.84 Return on average tangible common shareholders equity 13.57 15.49 13.15 16.42 Efficiency ratio64.26 63.65 65.53 62.73 June 30 2024December 31 2023Balance sheet Total loans and leases$1,056,785$1,053,732 Total assets3,257,996 3,180,151 Total deposits1,910,491 1,923,827 Total liabilities2,964,104 2,888,505 Total common shareholders equity267,344 263,249 Total shareholders equity293,892 291,646 For definitions,see Key Metrics on page 103.Return on average tangible common shareholders equity is a non-GAAP financial measure.For more information and a corresponding reconciliation to the most directly comparable financial measures defined by accounting principles generally accepted in theUnited States of America(GAAP),see Non-GAAP Reconciliations on page 48.Net income was$6.9 billion and$13.6 billion,or$0.83 and$1.59 per diluted share,forthe three and six months ended June 30,2024 compared to$7.4 billion and$15.6billion,or$0.88 and$1.82 per diluted share,for the same periods in 2023.Thedecrease in net income was primarily due to higher noninterest expense and provisionfor credit losses.Total assets increased$77.8 billion from December 31,2023 to$3.3 trillionprimarily driven by higher securities borrowed or purchased under agreements toresell and trading account assets to support Global Markets client activity.Total liabilities increased$75.6 billion from December 31,2023 to$3.0 trillionprimarily driven by higher securities loaned or sold under agreements to repurchase tosupport Global Markets client activity.Shareholders equity increased$2.2 billion from December 31,2023 primarily dueto net income,partially offset by returns of capital to shareholders through commonstock repurchases,common and preferred stock dividends,and preferred stockredemptions.Net Interest IncomeNet interest income decreased$456 million to$13.7 billion,and$872 million to$27.7billion for the three and six months ended June 30,2024 compared to the sameperiods in 2023.Net interest yield on a fully taxable-equivalent(FTE)basis decreased13 basis points(bps)to 1.93 percent and 17 bps to 1.96 percent for the same periods.The decreases were primarily driven by higher deposit costs,partially offset by higherasset yields and higher net interest income related to Global Markets activity.Formore information on net interest yield and FTE basis,see Supplemental FinancialData on page 6,and for more information on interest rate risk management,seeInterest Rate Risk Management for the Banking Book on page 44.(1)(1)(2)(1)(1)(2)Bank of America 4Noninterest IncomeTable 2Noninterest IncomeThree Months Ended June 30Six Months Ended June 30(Dollars in millions)2024202320242023Fees and commissions:Card income$1,581$1,546$3,044$3,015 Service charges1,507 1,364 2,949 2,774 Investment and brokerage services4,320 3,839 8,507 7,691 Investment banking fees1,561 1,212 3,129 2,375 Total fees and commissions8,969 7,961 17,629 15,855 Market making and similar activities3,298 3,697 7,186 8,409 Other income(592)(619)(1,354)(1,415)Total noninterest income$11,675$11,039$23,461$22,849 Noninterest income increased$636 million to$11.7 billion and$612 million to$23.5billion for the three and six months ended June 30,2024 compared to the sameperiods in 2023.The following highlights the significant changes.Service charges increased$143 million and$175 million primarily driven by highertreasury service charges.Investment and brokerage services increased$481 million and$816 millionprimarily driven by higher asset management fees due to higher average equitymarket valuations and positive assets under management(AUM)flows,partiallyoffset by the impact of lower AUM pricing.Investment banking fees increased$349 million and$754 million primarily due tohigher debt and equity issuance fees.Market making and similar activities decreased$399 million and$1.2 billionprimarily driven by lower trading revenue from macro products in Fixed Income,Currencies and Commodities(FICC).The decreases were partially offset by highertrading revenue in Equities.Provision for Credit LossesThe provision for credit losses increased$383 million to$1.5 billion and$771 millionto$2.8 billion for the three and six months ended June 30,2024 compared to thesame periods in 2023.The provision for credit losses for the current-year periods wasprimarily driven by credit card loans and the commercial real estate office portfolio,partially offset by an improved macroeconomic outlook.For more information on theprovision for credit losses,see Allowance for Credit Losses on page 40.Noninterest ExpenseTable 3Noninterest ExpenseThree Months Ended June 30Six Months Ended June 30(Dollars in millions)2024202320242023Compensation and benefits$9,826$9,401$20,021$19,319 Occupancy and equipment1,818 1,776 3,629 3,575 Information processing and communications1,763 1,644 3,563 3,341 Product delivery and transaction related891 956 1,742 1,846 Marketing487 513 942 971 Professional fees654 527 1,202 1,064 Other general operating870 1,221 2,447 2,160 Total noninterest expense$16,309$16,038$33,546$32,276 Noninterest expense increased$271 million to$16.3 billion and$1.3 billion to$33.5billion for the three and six months ended June 30,2024 compared to the sameperiods in 2023.The increases in both periods were primarily driven by higherinvestments in people and revenue-related compensation,partially offset by lower litigation expense.The increase in the six-month period alsoincluded the additional accrual of$700 million for the Federal Deposit InsuranceCorporation(FDIC)special assessment recorded in the first quarter of 2024,as wellas higher investments in technology.5 Bank of AmericaIncome Tax ExpenseTable 4Income Tax ExpenseThree Months Ended June 30Six Months Ended June 30(Dollars in millions)2024202320242023Income before income taxes$7,560$8,034$14,822$17,123 Income tax expense663 626 1,251 1,554 Effective tax rate8.8%7.8%8.4%9.1%The effective tax rates for the three and six months ended June 30,2024 and 2023were primarily driven by our recurring tax preference benefits that mainly consist of taxcredits from investments in affordable housing and renewable energy.Also included inthe effective tax rate for the six months ended June 30,2024 was the discrete benefitfrom the$700 million charge recorded in the first quarter for the FDIC specialassessment.Absent the tax credits and discrete tax benefits,the effective tax rateswould have been approximately 25 percent and 26 percent for the three monthsended June 30,2024 and 2023 and 26 percent for both the six months ended June30,2024 and 2023.Supplemental Financial DataNon-GAAP Financial MeasuresIn this Quarterly Report on Form 10-Q,we present certain non-GAAP financialmeasures.Non-GAAP financial measures exclude certain items or otherwise includecomponents that differ from the most directly comparable measures calculated inaccordance with GAAP.Non-GAAP financial measures are provided as additionaluseful information to assess our financial condition,results of operations(includingperiod-to-period operating performance)or compliance with prospective regulatoryrequirements.These non-GAAP financial measures are not intended as a substitutefor GAAP financial measures and may not be defined or calculated the same way asnon-GAAP financial measures used by other companies.When presented on a consolidated basis,we view net interest income on an FTEbasis as a non-GAAP financial measure.To derive the FTE basis,net interest incomeis adjusted to reflect tax-exempt income on an equivalent before-tax basis with acorresponding increase in income tax expense.For purposes of this calculation,weuse the federal statutory tax rate of 21 percent and a representative state tax rate.Netinterest yield,which measures the basis points we earn over the cost of funds,utilizesnet interest income on an FTE basis.We believe that presentation of these items onan FTE basis allows for comparison of amounts from both taxable and tax-exemptsources and is consistent with industry practices.We may present certain key performance indicators and ratios excluding certainitems(e.g.,debit valuation adjustment(DVA)gains(losses),which result in non-GAAP financial measures.We believe that the presentation of measures that excludethese items is useful because such measures provide additional information to assessthe underlying operational performance and trends of our businesses and to allowbetter comparison of period-to-period operating performance.We also evaluate our business based on certain ratios that utilize tangible equity,anon-GAAP financial measure.Tangible equity represents shareholders equity orcommonshareholders equity reduced by goodwill and intangible assets(excluding mortgageservicing rights(MSRs),net of related deferred tax liabilities(“adjusted”shareholdersequity or common shareholders equity).These measures are used to evaluate ouruse of equity.In addition,profitability,relationship and investment models use bothreturn on average tangible common shareholders equity and return on averagetangible shareholders equity as key measures to support our overall growthobjectives.These ratios are:Return on average tangible common shareholders equity measures our netincome applicable to common shareholders as a percentage of adjusted averagecommon shareholders equity.The tangible common equity ratio representsadjusted ending common shareholders equity divided by total tangible assets.Return on average tangible shareholders equity measures our net income as apercentage of adjusted average total shareholders equity.The tangible equity ratiorepresents adjusted ending shareholders equity divided by total tangible assets.Tangible book value per common share represents adjusted ending commonshareholders equity divided by ending common shares outstanding.We believe ratios utilizing tangible equity provide additional useful informationbecause they present measures of those assets that can generate income.Tangiblebook value per common share provides additional useful information about the level oftangible assets in relation to outstanding shares of common stock.The aforementioned supplemental data and performance measures are presentedin Table 5 on page 7.For more information on the reconciliation of these non-GAAP financial measuresto the corresponding GAAP financial measures,see Non-GAAP Reconciliations onpage 48.Key Performance IndicatorsWe present certain key financial and nonfinancial performance indicators(keyperformance indicators)that management uses when assessing our consolidatedand/or segment results.We believe they are useful to investors because they provideadditional information about our underlying operational performance and trends.These key performance indicators(KPIs)may not be defined or calculated in thesame way as similar KPIs used by other companies.For information on how thesemetrics are defined,see Key Metrics on page 103.Our consolidated key performance indicators,which include various equity andcredit metrics,are presented in Table 1 on page 4 and Table 5 on page 7.For information on key segment performance metrics,see Business SegmentOperations on page 10.Bank of America 6Table 5Selected Financial DataSix Months EndedJune 302024 Quarters2023 Quarters(In millions,except per share information)SecondFirstFourthThirdSecond20242023Income statement Net interest income$13,702$14,032$13,946$14,379$14,158$27,734$28,606 Noninterest income11,675 11,786 8,013 10,788 11,039 23,461 22,849 Total revenue,net of interest expense25,377 25,818 21,959 25,167 25,197 51,195 51,455 Provision for credit losses1,508 1,319 1,104 1,234 1,125 2,827 2,056 Noninterest expense16,309 17,237 17,731 15,838 16,038 33,546 32,276 Income before income taxes7,560 7,262 3,124 8,095 8,034 14,822 17,123 Income tax expense663 588(20)293 626 1,251 1,554 Net income6,897 6,674 3,144 7,802 7,408 13,571 15,569 Net income applicable to common shareholders6,582 6,142 2,838 7,270 7,102 12,724 14,758 Average common shares issued and outstanding7,897.9 7,968.2 7,990.9 8,017.1 8,040.9 7,933.3 8,053.5 Average diluted common shares issued and outstanding7,960.9 8,031.4 8,062.5 8,075.9 8,080.7 7,996.2 8,162.6 Performance ratios Return on average assets 0.85%0.83%0.39%0.99%0.94%0.84%1.00%Four-quarter trailing return on average assets0.76 0.78 0.84 0.98 0.96 n/an/aReturn on average common shareholders equity 9.98 9.35 4.33 11.24 11.21 9.67 11.84 Return on average tangible common shareholders equity13.57 12.73 5.92 15.47 15.49 13.15 16.42 Return on average shareholders equity 9.45 9.18 4.32 10.86 10.52 9.32 11.22 Return on average tangible shareholders equity12.42 12.07 5.71 14.41 14.00 12.25 14.97 Total ending equity to total ending assets9.02 8.97 9.17 9.10 9.07 9.02 9.07 Common equity ratio 8.21 8.10 8.28 8.20 8.16 8.21 8.16 Total average equity to total average assets8.96 9.01 8.98 9.11 8.89 8.98 8.92 Dividend payout 28.66 31.11 67.42 26.39 24.88 29.84 23.99 Per common share data Earnings$0.83$0.77$0.36$0.91$0.88$1.60$1.83 Diluted earnings0.83 0.76 0.35 0.90 0.88 1.59 1.82 Dividends paid0.24 0.24 0.24 0.24 0.22 0.48 0.44 Book value 34.39 33.71 33.34 32.65 32.05 34.39 32.05 Tangible book value 25.37 24.79 24.46 23.79 23.23 25.37 23.23 Market capitalization$309,202$298,312$265,840$216,942$228,188$309,202$228,188 Average balance sheet Total loans and leases$1,051,472$1,047,890$1,050,705$1,046,254$1,046,608 Total assets3,274,988 3,247,159 3,213,159 3,128,466 3,175,358 Total deposits1,909,925 1,907,462 1,905,011 1,876,153 1,875,353 Long-term debt243,689 254,782 256,262 245,819 248,480 Common shareholders equity265,290 264,114 260,221 256,578 254,028 Total shareholders equity293,403 292,511 288,618 284,975 282,425 Asset quality Allowance for credit losses$14,342$14,371$14,551$14,640$14,338 Nonperforming loans,leases and foreclosed properties 5,691 6,034 5,630 4,993 4,274 Allowance for loan and lease losses as a percentage of total loans and leases outstanding 1.26%1.26%1.27%1.27%1.24%Allowance for loan and lease losses as a percentage of total nonperforming loans and leases 242 225 243 275 314 Net charge-offs$1,533$1,498$1,192$931$869 Annualized net charge-offs as a percentage of average loans and leases outstanding 0.59%0.58%0.45%0.35%0.33pital ratios at period end Common equity tier 1 capital11.9.9.8.9.6%Tier 1 capital13.5 13.6 13.5 13.6 13.3 Total capital15.1 15.2 15.2 15.4 15.1 Tier 1 leverage7.0 7.1 7.1 7.3 7.1 Supplementary leverage ratio6.0 6.0 6.1 6.2 6.0 Tangible equity7.0 7.0 7.1 7.0 7.0 Tangible common equity 6.2 6.1 6.2 6.1 6.1 Total loss-absorbing capacity and long-term debt metricsTotal loss-absorbing capacity to risk-weighted assets28.2(.7).0).3(.8%Total loss-absorbing capacity to supplementary leverage exposure12.5 12.8 13.0 13.3 13.0 Eligible long-term debt to risk-weighted assets13.7 14.2 14.5 14.8 14.6 Eligible long-term debt to supplementary leverage exposure6.0 6.3 6.5 6.7 6.6 For definitions,see Key Metrics on page 103.Calculated as total net income for four consecutive quarters divided by annualized average assets for four consecutive quarters.Tangible equity ratios and tangible book value per share of common stock are non-GAAP financial measures.For more information on these ratios and corresponding reconciliations to GAAP financial measures,see Supplemental Financial Data on page 6 andNon-GAAP Reconciliations on page 48.Includes the allowance for loan and lease losses and the reserve for unfunded lending commitments.Balances and ratios do not include loans accounted for under the fair value option.For additional exclusions from nonperforming loans,leases and foreclosed properties,see Consumer Portfolio Credit Risk Management Nonperforming Consumer Loans,Leasesand Foreclosed Properties Activity on page 33 and corresponding Table 25 and Commercial Portfolio Credit Risk Management Nonperforming Commercial Loans,Leases and Foreclosed Properties Activity on page 37 and corresponding Table 31.For more information,including which approach is used to assess capital adequacy,see Capital Management on page 21.n/a=not applicable(1)(2)(1)(3)(1)(3)(1)(1)(1)(3)(4)(5)(5)(5)(5)(6)(3)(3)(1)(2)(3)(4)(5)(6)7 Bank of AmericaTable 6Quarterly Average Balances and Interest Rates-FTE BasisAverageBalanceInterestIncome/Expense Yield/RateAverageBalanceInterestIncome/Expense Yield/Rate(Dollars in millions)Second Quarter 2024Second Quarter 2023Earning assets Interest-bearing deposits with the Federal Reserve,non-U.S.central banks and other banks$345,423$4,498 5.24%$359,042$4,303 4.81%Time deposits placed and other short-term investments10,845 123 4.55 11,271 129 4.56 Federal funds sold and securities borrowed or purchased under agreements to resell318,380 5,159 6.52 294,535 4,955 6.75 Trading account assets202,295 2,542 5.05 187,420 2,091 4.47 Debt securities852,427 6,352 2.98 771,355 4,717 2.44 Loans and leases Residential mortgage227,567 1,824 3.21 228,758 1,704 2.98 Home equity25,529 405 6.38 25,957 353 5.45 Credit card98,983 2,825 11.48 94,431 2,505 10.64 Direct/Indirect and other consumer103,689 1,428 5.54 104,915 1,274 4.87 Total consumer455,768 6,482 5.71 454,061 5,836 5.15 U.S.commercial386,232 5,267 5.49 379,027 4,786 5.06 Non-U.S.commercial123,094 2,170 7.09 125,827 1,949 6.21 Commercial real estate 71,345 1,285 7.24 74,065 1,303 7.06 Commercial lease financing15,033 196 5.22 13,628 149 4.38 Total commercial595,704 8,918 6.02 592,547 8,187 5.54 Total loans and leases1,051,472 15,400 5.89 1,046,608 14,023 5.37 Other earning assets107,093 2,940 11.04 102,712 2,271 8.88 Total earning assets2,887,935 37,014 5.15 2,772,943 32,489 4.70 Cash and due from banks24,208 26,098 Other assets,less allowance for loan and lease losses362,845 376,317 Total assets$3,274,988$3,175,358 Interest-bearing liabilities U.S.interest-bearing deposits Demand and money market deposits$941,109$5,234 2.24%$951,403$3,565 1.50%Time and savings deposits348,689 3,331 3.84 230,008 1,452 2.53 Total U.S.interest-bearing deposits1,289,798 8,565 2.67 1,181,411 5,017 1.70 Non-U.S.interest-bearing deposits106,496 1,090 4.12 96,802 768 3.18 Total interest-bearing deposits1,396,294 9,655 2.78 1,278,213 5,785 1.82 Federal funds purchased and securities loaned or sold under agreements to repurchase371,372 6,171 6.68 322,728 5,807 7.22 Short-term borrowings and other interest-bearing liabilities152,742 2,899 7.64 163,739 2,548 6.24 Trading account liabilities53,895 540 4.03 44,944 472 4.22 Long-term debt243,689 3,887 6.40 248,480 3,584 5.78 Total interest-bearing liabilities2,217,992 23,152 4.20 2,058,104 18,196 3.55 Noninterest-bearing sourcesNoninterest-bearing deposits513,631 597,140 Other liabilities 249,962 237,689 Shareholders equity293,403 282,425 Total liabilities and shareholders equity$3,274,988$3,175,358 Net interest spread0.95%1.15%Impact of noninterest-bearing sources0.98 0.91 Net interest income/yield on earning assets$13,862 1.93%$14,293 2.06%Includes the impact of interest rate risk management contracts.For more information,see Interest Rate Risk Management for the Banking Book on page 44.Nonperforming loans are included in the respective average loan balances.Income on these nonperforming loans is generally recognized on a cost recovery basis.Includes U.S.commercial real estate loans of$65.3 billion and$68.0 billion,and non-U.S.commercial real estate loans of$6.0 billion for both the second quarter of 2024 and 2023.Includes$46.6 billion and$39.9 billion of structured notes and liabilities for the second quarter of 2024 and 2023.Net interest income includes FTE adjustments of$160 million and$135 million for the second quarter of 2024 and 2023.(1)(1)(2)(3)(4)(5)(1)(2)(3)(4)(5)Bank of America 8Table 7Year-to-Date Average Balances and Interest Rates-FTE BasisAverageBalanceInterestIncome/Expense Yield/RateAverageBalanceInterestIncome/Expense Yield/RateSix Months Ended June 30(Dollars in millions)20242023Earning assets Interest-bearing deposits with the Federal Reserve,non-U.S.central banks and other banks$345,943$9,029 5.25%$281,303$6,302 4.52%Time deposits placed and other short-term investments10,286 239 4.67 10,928 237 4.37 Federal funds sold and securities borrowed or purchased under agreements to resell311,600 10,334 6.67 291,053 8,667 6.01 Trading account assets202,377 5,024 4.99 185,549 4,131 4.49 Debt securities847,455 12,514 2.95 811,046 10,202 2.51 Loans and leases Residential mortgage227,658 3,627 3.19 229,015 3,388 2.96 Home equity25,526 795 6.26 26,234 670 5.15 Credit card99,399 5,611 11.35 93,110 4,931 10.68 Direct/Indirect and other consumer 103,529 2,827 5.49 105,284 2,460 4.71 Total consumer456,112 12,860 5.66 453,643 11,449 5.08 U.S.commercial382,898 10,503 5.52 377,945 9,257 4.94 Non-U.S.commercial124,059 4,340 7.03 126,412 3,727 5.95 Commercial real estate 71,666 2,596 7.28 72,337 2,447 6.82 Commercial lease financing14,946 396 5.31 13,657 296 4.35 Total commercial593,569 17,835 6.04 590,351 15,727 5.37 Total loans and leases1,049,681 30,695 5.88 1,043,994 27,176 5.24 Other earning assets106,915 5,622 10.57 98,592 4,563 9.33 Total earning assets2,874,257 73,457 5.14 2,722,465 61,278 4.53 Cash and due from banks24,197 26,936 Other assets,less allowance for loan and lease losses362,617 386,478 Total assets$3,261,071$3,135,879 Interest-bearing liabilities U.S.interest-bearing deposits Demand and money market deposits948,912 10,246 2.173,178 6,355 1.33%Time and savings deposits337,228 6,390 3.81 213,587 2,371 2.24 Total U.S.interest-bearing deposits1,286,140 16,636 2.60 1,176,765 8,726 1.50 Non-U.S.interest-bearing deposits105,434 2,157 4.11 94,218 1,373 2.94 Total interest-bearing deposits1,391,574 18,793 2.72 1,270,983 10,099 1.60 Federal funds purchased,securities loaned or sold under agreements to repurchase360,939 12,197 6.80 289,556 9,358 6.52 Short-term borrowings and other interest-bearing liabilities146,917 5,408 7.40 160,331 5,177 6.51 Trading account liabilities52,826 1,086 4.14 44,451 976 4.43 Long-term debt249,234 7,921 6.37 246,630 6,793 5.53 Total interest-bearing liabilities2,201,490 45,405 4.15 2,011,951 32,403 3.24 Noninterest-bearing sources Noninterest-bearing deposits517,119 613,468 Other liabilities 249,505 230,607 Shareholders equity292,957 279,853 Total liabilities and shareholders equity$3,261,071$3,135,879 Net interest spread 0.99%1.29%Impact of noninterest-bearing sources 0.97 0.84 Net interest income/yield on earning assets$28,052 1.96%$28,875 2.13%Includes the impact of interest rate risk management contracts.For more information,see Interest Rate Risk Management for the Banking Book on page 44.Nonperforming loans are included in the respective average loan balances.Income on these nonperforming loans is generally recognized on a cost recovery basis.Includes U.S.commercial real estate loans of$65.8 billion and$66.8 billion,and non-U.S.commercial real estate loans of$5.9 billion and$5.5 billion for the six months ended June 30,2024 and 2023.Includes$45.3 billion and$38.6 billion of structured notes and liabilities for the six months ended June 30,2024 and 2023.Net interest income includes FTE adjustments of$318 million and$269 million for the six months ended June 30,2024 and 2023.(1)(1)(2)(3)(4)(5)(1)(2)(3)(4)(5)9 Bank of AmericaBusiness Segment OperationsSegment Description and Basis of PresentationWe report our results of operations through four business segments:ConsumerBanking,GWIM,Global Banking and Global Markets,with the remaining operationsrecorded in All Other.We manage our segments and report their results on an FTEbasis.For more information,see Business Segment Operations in the MD&A of theCorporations 2023 Annual Report on Form 10-K.We periodically review capital allocated to our businesses and allocate capitalannually during the strategic and capital planning processes.We utilize amethodology that considers the effect of regulatory capital requirements in addition tointernal risk-based capital models.The capital allocated to the business segments isreferred to as allocated capital.Allocated equity in the reporting units is comprised ofallocated capital plus capitalfor the portion of goodwill and intangibles specifically assigned to the reporting unit.For more information,including the definition of a reporting unit,see Note 7 Goodwilland Intangible Assets to the Consolidated Financial Statements.For more information on our presentation of financial information on an FTE basis,see Supplemental Financial Data on page 6,and for reconciliations to consolidatedtotal revenue,net income and period-end total assets,see Note 17 BusinessSegment Information to the Consolidated Financial Statements.Key Performance IndicatorsWe present certain key financial and nonfinancial performance indicators thatmanagement uses when evaluating segment results.We believe they are useful toinvestors because they provide additional information about our segments operationalperformance,client trends and business growth.Consumer BankingDepositsConsumer LendingTotal Consumer BankingThree Months Ended June 30(Dollars in millions)202420232024202320242023%ChangeNet interest income$5,220$5,733$2,898$2,704$8,118$8,437(4)%Noninterest income:Card income(10)(10)1,371 1,351 1,361 1,341 1 Service charges614 524 1 614 525 17 All other income95 177 18 44 113 221(49)Total noninterest income699 691 1,389 1,396 2,088 2,087 Total revenue,net of interest expense5,919 6,424 4,287 4,100 10,206 10,524(3)Provision for credit losses74 103 1,207 1,164 1,281 1,267 1 Noninterest expense3,385 3,428 2,079 2,025 5,464 5,453 Income before income taxes2,460 2,893 1,001 911 3,461 3,804(9)Income tax expense616 723 250 228 866 951(9)Net income$1,844$2,170$751$683$2,595$2,853(9)Effective tax rate 25.0%.0%Net interest yield2.22%2.29%3.78%3.58%3.29%3.24%Return on average allocated capital54 64 10 10 24 27 Efficiency ratio57.20 53.33 48.49 49.43 53.54 51.81 Balance SheetThree Months Ended June 30Average202420232024202320242023%ChangeTotal loans and leases$4,299$4,078$307,955$302,584$312,254$306,662 2%Total earning assets946,784 1,002,528 308,116 302,944 992,304 1,045,743(5)Total assets 979,302 1,035,969 313,070 309,228 1,029,777 1,085,469(5)Total deposits944,363 1,001,307 4,817 5,030 949,180 1,006,337(6)Allocated capital13,700 13,700 29,550 28,300 43,250 42,000 3 Estimated at the segment level only.In segments and businesses where the total of liabilities and equity exceeds assets,we allocate assets from All Other to match the segments and businesses liabilities and allocated shareholders equity.As a result,total earning assets and total assets of thebusinesses may not equal total Consumer Banking.(1)(2)(2)(1)(2)Bank of America 10DepositsConsumer LendingTotal Consumer BankingSix Months Ended June 30(Dollars in millions)202420232024202320242023%ChangeNet interest income$10,489$11,549$5,826$5,481$16,315$17,030(4)%Noninterest income:Card income(20)(20)2,653 2,635 2,633 2,615 1 Service charges1,191 1,122 1 2 1,192 1,124 6 All other income197 374 35 87 232 461(50)Total noninterest income1,368 1,476 2,689 2,724 4,057 4,200(3)Total revenue,net of interest expense11,857 13,025 8,515 8,205 20,372 21,230(4)Provision for credit losses150 286 2,281 2,070 2,431 2,356 3 Noninterest expense6,764 6,843 4,175 4,083 10,939 10,926 Income before income taxes4,943 5,896 2,059 2,052 7,002 7,948(12)Income tax expense1,236 1,474 515 513 1,751 1,987(12)Net income$3,707$4,422$1,544$1,539$5,251$5,961(12)Effective tax rate 25.0%.0%Net interest yield2.22%2.30%3.80%3.67%3.30%3.25%Return on average allocated capital54 65 11 11 24 29 Efficiency ratio57.04 52.53 49.04 49.77 53.70 51.46 Balance SheetSix Months Ended June 30Average202420232024202320242023%ChangeTotal loans and leases$4,270$4,099$308,376$301,126$312,646$305,225 2%Total earning assets948,489 1,012,432 308,515 301,378 993,931 1,055,419(6)Total assets 981,080 1,045,933 313,433 307,760 1,031,439 1,095,302(6)Total deposits946,103 1,011,285 4,720 4,949 950,823 1,016,234(6)Allocated capital13,700 13,700 29,550 28,300 43,250 42,000 3 Period endJune 302024December 312023June 302024December 312023June 302024December 312023%ChangeTotal loans and leases$4,357$4,218$308,444$310,901$312,801$315,119(1)%Total earning assets 948,823 965,088 308,592 311,008 995,348 1,009,360(1)Total assets981,546 999,372 314,481 317,194 1,033,960 1,049,830(2)Total deposits946,420 964,136 6,053 5,436 952,473 969,572(2)See page 10 for footnotes.Consumer Banking,comprised of Deposits and Consumer Lending,offers adiversified range of credit,banking and investment products and services toconsumers and small businesses.For more information about Consumer Banking,see Business Segment Operations in the MD&A of the Corporations 2023 AnnualReport on Form 10-K.Consumer Banking ResultsThree-Month ComparisonNet income for Consumer Banking decreased$258 million to$2.6 billion primarily dueto lower revenue.Net interest income decreased$319 million to$8.1 billion primarilydriven by lower deposit balances,partially offset by higher loan balances.Noninterestincome was$2.1 billion,largely unchanged from the same period a year ago.The provision for credit losses was$1.3 billion,relatively unchanged from thesame period a year ago.Noninterest expense was$5.5 billion,relatively unchangedfrom the same period a year ago.The return on average allocated capital was 24 percent,down from 27 percent,due to an increase in allocated capital and lower net income.For information oncapital allocated to the business segments,see Business Segment Operations onpage 10.Six-Month ComparisonNet income for Consumer Banking decreased$710 million to$5.3 billion primarily dueto lower revenue.Net interest income decreased$715 million to$16.3 billion primarilydue to the same factors as described in the three-month discussion.Noninterestincome decreased$143 million to$4.1 billion,primarily due to lower other incomedriven by the allocation of asset and liability management(ALM)results.The provision for credit losses increased$75 million to$2.4 billion primarily drivenby credit card loans.Noninterest expense was$10.9 billion,relatively unchanged fromthe same period a year ago.The return on average allocated capital was 24 percent,down from 29 percent,primarily due to an increase in allocated capital and lower net income.(1)(2)(2)(2)(2)11 Bank of AmericaDepositsThree-Month ComparisonNet income for Deposits decreased$326 million to$1.8 billion primarily due to lowerrevenue.Net interest income decreased$513 million to$5.2 billion primarily driven bylower deposit balances.Noninterest income was$699 million,relatively unchangedfrom the same period a year ago.Noninterest expense was$3.4 billion,relatively unchanged from the same period ayear ago.Average deposits decreased$56.9 billion to$944.4 billion primarily due to netoutflows of$60.9 billion in money market savings and$26.1 billion in checking,partially offset by growth in time deposits of$40.1 billion.Six-Month ComparisonNet income for Deposits decreased$715 million to$3.7 billion primarily due to lowerrevenue.Net interest income decreased$1.1 billion to$10.5 billion primarily due tothe same factor as described in the three-month discussion.Noninterest incomedecreased$108 million to$1.4 billion primarily driven by the allocation of ALM results.Average deposits decreased$65.2 billion to$946.1 billion primarily due to netoutflows of$67.2 billion in money market savings and$29.1 billion in checking,partially offset by growth in time deposits of$41.8 billion.The table below provides key performance indicators for Deposits.Managementuses these metrics,and we believe they are useful to investors because they provideadditional information to evaluate our deposit profitability and digital/mobile trends.Key Statistics DepositsThree Months Ended June 30Six Months Ended June 302024202320242023Total deposit spreads(excludes noninterest costs)2.77%2.67%2.73%2.60%Period endConsumer investment assets(in millions)$476,116$386,761Active digital banking users(in thousands)47,30445,713Active mobile banking users(in thousands)38,98837,329Financial centers3,7863,887ATMs14,97215,335Includes deposits held in Consumer Lending.Includes client brokerage assets,deposit sweep balances,Bank of America,N.A.brokered CDs and AUM in Consumer Banking.Represents mobile and/or online active users over the past 90 days.Represents mobile active users over the past 90 days.Consumer investment assets increased$89.4 billion from June 30,2023 to$476.1billion at June 30,2024 driven by market performance and positive net client flows.Active mobile banking users increased approximately two million,reflecting continuingchanges in our clients banking preferences.Since June 30,2023,we have had a netdecrease of 101 financial centers and 363 ATMs as we continue to optimize ourconsumer banking network.Consumer LendingThree-Month ComparisonNet income for Consumer Lending increased$68 million to$751 million primarily dueto higher revenue.Net interest income increased$194 million to$2.9 billion primarilydue to higher loan balances.Noninterest income was$1.4 billion,relativelyunchanged from the same period a year ago.The provision for credit losses was$1.2 billion,relatively unchanged from thesame period a year ago.Noninterest expense increased$54 million to$2.1 billion,relatively unchanged from the same period a year ago.Average loans increased$5.4 billion to$308.0 billion primarily driven by anincrease in credit card loans.Six-Month ComparisonNet income for Consumer Lending was$1.5 billion,relatively unchanged from thesame period a year ago.Net interest income increased$345 million to$5.8 billionprimarily due to the same factor as described in the three-month discussion.Noninterest income was$2.7 billion,relatively unchanged from the same period ayear ago.The provision for credit losses increased$211 million to$2.3 billion primarily drivenby credit card loans.Noninterest expense increased$92 million to$4.2 billion,relatively unchanged from the same period a year ago.Average loans increased$7.3 billion to$308.4 billion primarily driven by the samefactor as described in the three-month discussion.The following table provides key performance indicators for Consumer Lending.Management uses these metrics,and we believe they are useful to investors becausethey provide additional information about loan growth and profitability.(1)(2)(3)(4)(1)(2)(3)(4)Bank of America 12Key Statistics Consumer LendingThree Months Ended June 30Six Months Ended June 30(Dollars in millions)2024202320242023Total credit card Gross interest yield 12.32.66.28.75%Risk-adjusted margin 6.75 7.83 6.78 8.25 New accounts(in thousands)951 1,137 1,949 2,324 Purchase volumes$93,296$93,103$180,307$178,647 Debit card purchase volumes$140,346$132,962$272,753$257,338 Includes GWIMs credit card portfolio.Calculated as the effective annual percentage rate divided by average loans.Calculated as the difference between total revenue,net of interest expense,and net credit losses divided by average loans.During the three and six months ended June 30,2024,the total risk-adjustedmargin decreased 108 bps and 147 bps primarily driven by higher net credit lossesand lower net fee income,partially offset by higher interest margin.During thethree and six months ended June 30,2024,total credit card purchase volumesincreased$193 million and$1.7 billion,and debit card purchase volumes increased$7.4 billion and$15.4 billion,reflecting higher levels of consumer spending.Key Statistics Loan Production Three Months Ended June 30Six Months Ended June 30(Dollars in millions)2024202320242023Consumer Banking:First mortgage$2,696$2,889$4,384$4,845 Home equity2,027 2,171 3,627 4,354 Total:First mortgage$5,728$5,940$9,171$9,877 Home equity2,393 2,542 4,284 5,138 The loan production amounts represent the unpaid principal balance of loans and,in the case of home equity,the principal amount of the total line of credit.In addition to loan production in Consumer Banking,there is also first mortgage and home equity loan production in GWIM.First mortgage loan originations for Consumer Banking and the total Corporationdecreased$193 million and$212 million during the three months ended June 30,2024 primarily driven by lower demand.During the six months ended June 30,2024,first mortgage loan originations for Consumer Banking and the total Corporationdecreased$461 million and$706 million primarily driven by lower demand.Home equity production in Consumer Banking and the total Corporation decreased$144 million and$149 million during the three months ended June 30,2024 primarilydriven by lower demand.During the six months ended June 30,2024,home equityproduction in Consumer Banking and the total Corporation decreased$727 millionand$854 million primarily driven by lower demand.(1)(2)(3)(1)(2)(3)(1)(2)(1)(2)13 Bank of AmericaGlobal Wealth&Investment ManagementThree Months Ended June 30Six Months Ended June 30(Dollars in millions)20242023%Change20242023%ChangeNet interest income$1,693$1,805(6)%$3,507$3,681(5)%Noninterest income:Investment and brokerage services3,707 3,251 14 7,307 6,489 13 All other income174 186(6)351 387(9)Total noninterest income3,881 3,437 13 7,658 6,876 11 Total revenue,net of interest expense5,574 5,242 6 11,165 10,557 6 Provision for credit losses7 13(46)(6)38(116)Noninterest expense4,199 3,925 7 8,463 7,992 6 Income before income taxes1,368 1,304 5 2,708 2,527 7 Income tax expense342 326 5 677 632 7 Net income$1,026$978 5$2,031$1,895 7 Effective tax rate25.0%.0%.0%.0%Net interest yield2.15 2.21 2.19 2.20 Return on average allocated capital22 21 22 21 Efficiency ratio75.34 74.86 75.80 75.70 Balance SheetThree Months Ended June 30Six Months Ended June 30Average20242023%Change20242023%ChangeTotal loans and leases$222,776$218,604 2%$220,696$220,018%Total earning assets317,250 327,066(3)322,471 336,671(4)Total assets330,958 340,105(3)336,039 349,582(4)Total deposits287,678 295,380(3)292,525 304,648(4)Allocated capital18,500 18,500 18,500 18,500 Period endJune 302024December 312023%ChangeTotal loans and leases$224,837$219,657 2%Total earning assets310,055 330,653(6)Total assets324,476 344,626(6)Total deposits281,283 299,657(6)GWIM consists of two primary businesses:Merrill Wealth Management and Bank ofAmerica Private Bank.For additional information on GWIM,see Business SegmentOperations in the MD&A of the Corporations 2023 Annual Report on Form 10-K.Three-Month ComparisonNet income for GWIM increased$48 million to$1.0 billion primarily due to higherrevenue,largely offset by higher noninterest expense.The operating margin was 25percent,unchanged from the same period a year ago.Net interest income decreased$112 million to$1.7 billion primarily driven by anincrease in the deposit rate paid and lower average deposit balances.Noninterest income,which primarily includes investment and brokerage servicesincome,increased$444 million to$3.9 billion.The increase was primarily driven byhigher asset management fees due to higher average equity market valuations andpositive AUM flows,partially offset by the impact of lower AUM pricing.Noninterest expense increased$274 million to$4.2 billion primarily due to higherrevenue-related incentives.The return on average allocated capital was 22 percent,up from 21 percent,due tohigher net income.For information on capital allocated to the business segments,seeBusiness Segment Operations on page 10.Average loans increased$4.2 billion to$222.8 billion primarily driven by customlending and residential mortgage,partially offset by securities-based lending.Averagedeposits decreased$7.7 billion to$287.7 billion primarily driven by a higher level ofclient tax payments as well as clients moving deposits to higher yielding investmentcash alternatives,including offerings on our investment and brokerage platforms.Merrill Wealth Management revenue of$4.6 billion increased seven percentprimarily driven by higher asset management fees due to the impact of higher averageequity market valuations and positive AUM flows,partially offset by the impact of lowerAUM pricing and lower net interest income.Bank of America Private Bank revenue of$951 million increased five percentprimarily driven by higher asset management fees due to the impact of higher averageequity market valuations and the impact of positive AUM flows.Bank of America 14Six-Month ComparisonNet income for GWIM increased$136 million to$2.0 billion primarily due to the samefactors as described in the three-month discussion.The operating margin was 24percent,unchanged from the same period a year ago.Net interest income decreased$174 million to$3.5 billion primarily due to thesame factors as described in the three-month discussion.Noninterest income,which primarily includes investment and brokerage servicesincome,increased$782 million to$7.7 billion due to the same factors as described inthe three-month discussion.Noninterest expense increased$471 million to$8.5 billion due to the same factoras described in the three-month discussion.The return on average allocated capital was 22 percent,up from 21 percent,due tothe same factor as described in the three-month discussion.Average loans increased$678 million to$220.7 billion primarily due to the samefactors as described in the three-month discussion.Average deposits decreased$12.1 billion to$292.5 billion due to the same factors as described in the three-monthdiscussion.Merrill Wealth Management revenue of$9.3 billion increased six percent primarilydriven by the same factors as described in the three-month discussion.Bank of America Private Bank revenue of$1.9 billion increased four percentprimarily driven by the same factors as described in the three-month discussion.Key Indicators and MetricsThree Months Ended June 30Six Months Ended June 30(Dollars in millions)2024202320242023Revenue by BusinessMerrill Wealth Management$4,623$4,340$9,270$8,737 Bank of America Private Bank951 902 1,895 1,820 Total revenue,net of interest expense$5,574$5,242$11,165$10,557 Client Balances by Business,at period endMerrill Wealth Management$3,371,418$3,057,680 Bank of America Private Bank640,467 577,514 Total client balances$4,011,885$3,635,194 Client Balances by Type,at period endAssets under management$1,758,875$1,531,042 Brokerage and other assets1,779,881 1,628,294 Deposits281,283 292,526 Loans and leases 227,657 222,280 Less:Managed deposits in assets under management(35,811)(38,948)Total client balances$4,011,885$3,635,194 Assets Under Management RollforwardAssets under management,beginning of period$1,730,005$1,467,242$1,617,740$1,401,474 Net client flows10,790 14,296 35,445 29,558 Market valuation/other18,080 49,504 105,690 100,010 Total assets under management,end of period$1,758,875$1,531,042$1,758,875$1,531,042 Includes margin receivables,which are classified in customer and other receivables on the Consolidated Balance Sheet.Client BalancesClient balances increased$376.7 billion,or 10 percent,to$4.0 trillion at June 30,2024 compared to June 30,2023.The increase in client balances was primarily due to theimpact of higher end-of-period market valuations and positive net client flows.(1)(1)15 Bank of AmericaGlobal BankingThree Months Ended June 30Six Months Ended June 30(Dollars in millions)20242023%Change20242023%ChangeNet interest income$3,275$3,690(11)%$6,735$7,597(11)%Noninterest income:Service charges775 735 5 1,525 1,449 5 Investment banking fees835 718 16 1,685 1,386 22 All other income1,168 1,319(11)2,088 2,233(6)Total noninterest income2,778 2,772 5,298 5,068 5 Total revenue,net of interest expense6,053 6,462(6)12,033 12,665(5)Provision for credit losses235 9 n/m464(228)n/mNoninterest expense2,899 2,819 3 5,911 5,759 3 Income before income taxes2,919 3,634(20)5,658 7,134(21)Income tax expense803 981(18)1,556 1,926(19)Net income$2,116$2,653(20)$4,102$5,208(21)Effective tax rate27.5.0.5.0%Net interest yield2.37 2.80 2.44 2.92 Return on average allocated capital17 22 17 21 Efficiency ratio47.88 43.59 49.12 45.46 Balance SheetThree Months Ended June 30Six Months Ended June 30Average20242023%Change20242023%ChangeTotal loans and leases$372,738$383,058(3)%$373,173$382,039(2)%Total earning assets555,834 527,959 5 555,895 525,181 6 Total assets624,189 595,585 5 623,631 592,254 5 Total deposits525,357 497,533 6 525,528 495,069 6 Allocated capital49,250 49,250 49,250 49,250 Period endJune 302024December 31 2023%ChangeTotal loans and leases$372,421$373,891%Total earning assets550,525 552,453 Total assets620,217 621,751 Total deposits522,525 527,060(1)n/m=not meaningfulGlobal Banking,which includes Global Corporate Banking,Global CommercialBanking,Business Banking and Global Investment Banking,provides a wide range oflending-related products and services,integrated working capital management andtreasury solutions,and underwriting and advisory services through our network ofglobal offices and client relationship teams.For more information about GlobalBanking,see Business Segment Operations in the MD&A of the Corporations 2023Annual Report on Form 10-K.Three-Month ComparisonNet income for Global Banking decreased$537 million to$2.1 billion primarily drivenby lower revenue and higher provision for credit losses.Net interest income decreased$415 million to$3.3 billion primarily due to theimpact of interest rates,partially offset by the benefit of higher average depositbalances.Noninterest income was$2.8 billion,relatively unchanged from the same period ayear ago.The provision for credit losses increased$226 million to$235 million primarilydriven by the commercial real estate office portfolio.Noninterest expense increased$80 million to$2.9 billion due to higher regulatorycosts and continued investments in the business,including technology.The return on average allocated capital was 17 percent,down from 22 percent,due to lower net income.For information on capital allocated to the businesssegments,see Business Segment Operations on page 10.Six-Month ComparisonNet income for Global Banking decreased$1.1 billion to$4.1 billion driven by higherprovision for credit losses,lower revenue and higher noninterest expense.Net interest income decreased$862 million to$6.7 billion primarily due to thesame factors as described in the three-month discussion.Noninterest income increased$230 million to$5.3 billion due to higher investmentbanking fees and treasury service charges,partially offset by lower leasing-relatedrevenue.The provision for credit losses increased$692 million to$464 million primarilydriven by the commercial real estate office portfolio compared to a benefit in the prioryear due to certain improved macroeconomic conditions.Noninterest expense increased$152 million to$5.9 billion primarily due to thesame factors as described in the three-month discussion.The return on average allocated capital was 17 percent,down from 21 percent,due to lower net income.Bank of America 16Global Corporate,Global Commercial and Business BankingThe following table and discussion present a summary of the results,which exclude certain investment banking and other activities in Global Banking.Global Corporate,Global Commercial and Business Banking Global Corporate BankingGlobal Commercial BankingBusiness BankingTotalThree Months Ended June 30(Dollars in millions)20242023202420232024202320242023RevenueBusiness Lending$1,260$1,359$1,247$1,270$58$63$2,565$2,692 Global Transaction Services1,261 1,483 938 1,045 362 395 2,561 2,923 Total revenue,net of interest expense$2,521$2,842$2,185$2,315$420$458$5,126$5,615 Balance SheetAverageTotal loans and leases$162,283$174,280$197,906$196,069$12,439$12,508$372,628$382,857 Total deposits287,350 267,949 186,975 177,901 51,032 51,682 525,357 497,532 Global Corporate BankingGlobal Commercial BankingBusiness BankingTotalSix Months Ended June 30(Dollars in millions)20242023202420232024202320242023RevenueBusiness Lending$2,325$2,393$2,527$2,503$117$130$4,969$5,026 Global Transaction Services2,596 3,032 1,908 2,174 723 782 5,227 5,988 Total revenue,net of interest expense$4,921$5,425$4,435$4,677$840$912$10,196$11,014 Balance SheetAverageTotal loans and leases$163,662$174,783$197,091$194,442$12,285$12,563$373,038$381,788 Total deposits288,871 263,587 186,351 180,245 50,305 51,241 525,527 495,073 Period endTotal loans and leases$162,276$173,248$197,546$195,899$12,467$12,324$372,289$381,471 Total deposits283,248 265,104 187,766 177,235 51,509 50,391 522,523 492,730 Business Lending revenue decreased$127 million for the three months endedJune 30,2024 compared to the same period a year ago primarily driven by lowerleasing-related revenue and the impact of lower average loan balances.Businesslending revenue decreased$57 million for the six months ended June 30,2024compared to the same period a year ago primarily driven by the same factors asdescribed in the three-month discussion.Global Transaction Services revenue decreased$362 million for the three monthsended June 30,2024 primarily driven by the impact of interest rates,partially offset bythe benefit of higher average deposit balances and treasury service charges.GlobalTransaction Services revenue decreased$761 million for the six months ended June30,2024 primarily driven by the same factors as described in the three-monthdiscussion.Average loans and leases of$372.6 billion decreased three percent for the threemonths ended June 30,2024,and average loans and leases of$373.0 billiondecreased two percent for the six months ended June 30,2024 due to lower clientdemand.Average deposits of$525.4 billion and$522.5 billion for the three and six monthsended June 30,2024 increased six percent for both periods.The increases were dueto growth in both domestic and international balances.Global Investment BankingClient teams and product specialists underwrite and distribute debt,equity and loanproducts,and provide advisory services and tailored risk management solutions.Theeconomics of certain investment banking and underwriting activities are sharedprimarily between Global Banking and Global Markets under an internal revenue-sharing arrangement.Global Banking originates certain deal-related transactions withour corporate and commercial clients that are executed and distributed by GlobalMarkets.To provide a complete discussion of our consolidated investment bankingfees,the table below presents total Corporation investment banking fees and theportion attributable to Global Banking.17 Bank of AmericaInvestment Banking FeesGlobal BankingTotal CorporationGlobal BankingTotal CorporationThree Months Ended June 30Six Months Ended June 30(Dollars in millions)20242023202420232024202320242023ProductsAdvisory$322$333$374$375$639$646$747$738 Debt issuance363 263 880 600 746 553 1,765 1,244 Equity issuance150 122 357 287 300 187 720 455 Gross investment banking fees835 718 1,611 1,262 1,685 1,386 3,232 2,437 Self-led deals(5)(16)(50)(50)(18)(20)(103)(62)Total investment banking fees$830$702$1,561$1,212$1,667$1,366$3,129$2,375 Total Corporation investment banking fees,which exclude self-led deals and are primarily included within Global Banking and Global Markets,were$1.6 billion and$3.1 billionfor the three and six months ended June 30,2024.The three-month period increased 29 percent compared to the same period in 2023,and the six-month period increased 32percent compared to the same period in 2023.The increases in both periods were primarily due to higher debt and equity issuance fees.Global MarketsThree Months Ended June 30Six Months Ended June 30(Dollars in millions)20242023%Change20242023%ChangeNet interest income$770$297 n/m$1,451$406 n/mNoninterest income:Investment and brokerage services516 499 3%1,011 1,032(2)%Investment banking fees719 503 43 1,427 972 47 Market making and similar activities3,218 3,409(6)7,048 7,807(10)All other income236 163 45 405 280 45 Total noninterest income4,689 4,574 3 9,891 10,091(2)Total revenue,net of interest expense5,459 4,871 12 11,342 10,497 8 Provision for credit losses(13)(4)n/m(49)(57)n/mNoninterest expense3,486 3,349 4 6,978 6,700 4 Income before income taxes1,986 1,526 30 4,413 3,854 15 Income tax expense576 420 37 1,280 1,060 21 Net income$1,410$1,106 27$3,133$2,794 12 Effective tax rate29.0.5).0.5%Return on average allocated capital13 10 14 12 Efficiency ratio63.83 68.74 61.52 63.82 Balance SheetThree Months Ended June 30Six Months Ended June 30Average20242023%Change20242023%ChangeTrading-related assets:Trading account securities$321,204$317,928 1%$322,207$328,529(2)%Reverse repurchases139,901 139,480 136,991 133,155 3 Securities borrowed139,705 120,481 16 137,278 118,392 16 Derivative assets38,953 43,236(10)38,318 43,490(12)Total trading-related assets639,763 621,125 3 634,794 623,566 2 Total loans and leases135,106 128,539 5 134,431 126,802 6 Total earning assets706,383 657,947 7 699,615 643,024 9 Total assets908,525 877,471 4 901,952 873,727 3 Total deposits31,944 33,222(4)32,265 34,658(7)Allocated capital45,500 45,500 45,500 45,500 Period endJune 302024December 312023%ChangeTotal trading-related assets$619,122$542,544 14%Total loans and leases138,441 136,223 2 Total earning assets701,978 637,955 10 Total assets887,162 817,588 9 Total deposits33,151 34,833(5)n/m=not meaningfulGlobal Markets offers sales and trading services and research services to institutionalclients across fixed-income,credit,currency,commodity and equity businesses.Global Marketsproduct coverage includes securities and derivative products in both the primary andsecondary markets.For more information about Global Markets,see BusinessSegmentBank of America 18Operations in the MD&A of the Corporations 2023 Annual Report on Form 10-K.The following explanations for period-over-period changes in results for GlobalMarkets,including those disclosed under Sales and Trading Revenue,are the samefor amounts including and excluding net DVA.Amounts excluding net DVA are a non-GAAP financial measure.For more information on net DVA,see SupplementalFinancial Data on page 6.Three-Month ComparisonNet income for Global Markets increased$304 million to$1.4 billion for the threemonths ended June 30,2024 compared to the same period in 2023.Net DVA lossestotaled$1 million compared to$102 million in 2023.Excluding net DVA,net incomeincreased$227 million to$1.4 billion.These increases were primarily driven by higherrevenue,partially offset by higher noninterest expense.Revenue increased$588 million to$5.5 billion primarily due to higher sales andtrading revenue and investment banking fees.Sales and trading revenue increased$394 million,and excluding net DVA,increased$293 million.These increases wereprimarily driven by higher revenue in Equities.Noninterest expense increased$137 million to$3.5 billion,primarily driven byrevenue-related expenses and continued investments in the business,includingtechnology.Average total assets increased$31.1 billion to$908.5 billion for the three monthsended June 30,2024 compared to the same period in 2023 driven by increasedsecurities financing activity,higher levels of inventory and loan growth in FICC.The return on average allocated capital was 13 percent,up from 10 percent in thesame period a year ago,reflecting higher net income.For information on capitalallocated to the business segments,see Business Segment Operations on page 10.Six-Month ComparisonNet income for Global Markets increased$339 million to$3.1 billion for the six monthsended June 30,2024 compared to the same period in 2023.Net DVA losses were$86million compared to$88 million in 2023.Excluding net DVA,net income increased$337 million to$3.2 billion.These increases were primarily driven by higher revenue,partially offset by higher noninterest expense.Revenue increased$845 million to$11.3 billion primarily due to the same factorsas described in the three-month discussion.Sales and trading revenue increased$419 million,and excluding net DVA,sales and trading revenue increased$417million.These increases were driven by higher revenue in Equities,partially offset bylower revenue in FICC.Noninterest expense increased$278 million to$7.0 billion,driven by the samefactors as described in the three-month discussion.Average total assets increased$28.2 billion to$902.0 billion,and period-end totalassets increased$69.6 billion from December 31,2023 to$887.2 billion.Theincreases were driven by higher securities financing activity and higher levels ofinventory in FICC.The return on average allocated capital was 14 percent,up from 12 percent in thesame period a year ago,reflecting higher net income.Sales and Trading RevenueFor a description of sales and trading revenue,see Business Segment Operations inthe MD&A of the Corporations 2023 Annual Report on Form 10-K.The following tableand related discussion present sales and trading revenue,substantially all of which isin Global Markets,with the remainder in Global Banking.In addition,the followingtable and related discussion also present sales and trading revenue,excluding netDVA,which is a non-GAAP financial measure.For more information on net DVA,seeSupplemental Financial Data on page 6.Sales and Trading Revenue Three Months Ended June 30Six Months Ended June 30(Dollars in millions)2024202320242023Sales and trading revenue Fixed-income,currencies and commodities$2,742$2,667$5,973$6,107 Equities1,937 1,618 3,798 3,245 Total sales and trading revenue$4,679$4,285$9,771$9,352 Sales and trading revenue,excluding net DVA Fixed-income,currencies and commodities$2,737$2,764$6,044$6,193 Equities1,943 1,623 3,813 3,247 Total sales and trading revenue,excluding net DVA$4,680$4,387$9,857$9,440 For more information on sales and trading revenue,see Note 3 Derivatives to the Consolidated Financial Statements.Includes FTE adjustments of$142 million and$291 million for the three and six months ended June 30,2024 compared to$85 million and$175 million for the same periods in 2023.Includes Global Banking sales and trading revenue of$186 million and$330 million for the three and six months ended June 30,2024 compared to$154 million and$331 million for the same periods in 2023.FICC and Equities sales and trading revenue,excluding net DVA,is a non-GAAP financial measure.FICC net DVA gains(losses)were$5 million and$(71)million for the three and six months ended June 30,2024 compared to$(97)million and$(86)million forthe same periods in 2023.Equities net DVA gains(losses)were$(6)million and$(15)million for the three and six months ended June 30,2024 compared to$(5)million and$(2)million for the same periods in 2023.Three-Month ComparisonIncluding net DVA,FICC revenue increased$75 million for the three months endedJune 30,2024 compared to the same period in 2023.Excluding net DVA,FICCrevenue decreased$27 million.FICC revenue,including and excluding net DVA,wasdriven by a weaker trading environment for foreign exchange and rates products,largely offset by improved client activity in mortgages,credit and commodities.Including and excluding net DVA,Equities revenue increased$319 million and$320million driven by a strong trading performance in cash and derivatives.Six-Month ComparisonIncluding and excluding net DVA,FICC revenue decreased$134 million and$149million for the six months ended June 30,2024 compared to the same period in 2023driven by a weaker trading environment for macro products,partially offset byimproved trading in mortgages.Including and excluding net DVA,Equities revenueincreased$553 million and$566 million driven by the same factors as described in thethree-month discussion.(1,2,3)(2)(4)(1)(2)(3)(4)19 Bank of AmericaAll OtherThree Months Ended June 30Six Months Ended June 30(Dollars in millions)20242023%Change20242023%ChangeNet interest income$6$64(91)%$44$161(73)%Noninterest income(loss)(1,761)(1,831)(4)(3,443)(3,386)2 Total revenue,net of interest expense(1,755)(1,767)(1)(3,399)(3,225)5 Provision for credit losses(2)(160)(99)(13)(53)(75)Noninterest expense261 492(47)1,255 899 40 Loss before income taxes(2,014)(2,099)(4)(4,641)(4,071)14 Income tax benefit(1,764)(1,917)(8)(3,695)(3,782)(2)Net loss$(250)$(182)37$(946)$(289)n/mBalance SheetThree Months Ended June 30Six Months Ended June 30Average20242023%Change20242023%ChangeTotal loans and leases$8,598$9,745(12)%$8,735$9,910(12)%Total assets 381,539 276,728 38 368,010 225,014 64 Total deposits115,766 42,881 n/m107,552 33,842 n/mPeriod endJune 302024December 312023%ChangeTotal loans and leases$8,285$8,842(6)%Total assets 392,181 346,356 13 Total deposits121,059 92,705 31 In segments where the total of liabilities and equity exceeds assets,which are generally deposit-taking segments,we allocate assets from All Other to those segments to match liabilities(i.e.,deposits)and allocated shareholders equity.Average allocated assetswere$941.7 billion and$949.8 billion for the three and six months ended June 30,2024 compared to$977.8 billion and$995.1 billion for the same periods in 2023,and period-end allocated assets were$931.1 billion and$972.9 billion at June 30,2024 andDecember 31,2023.n/m=not meaningfulAll Other primarily consists of ALM activities,liquidating businesses and certainexpenses not otherwise allocated to a business segment.ALM activities encompassinterest rate and foreign currency risk management activities for which substantially allof the results are allocated to our business segments.For more information on ourALM activities,see Note 17 Business Segment Information to the ConsolidatedFinancial Statements.Three-Month ComparisonThe net loss in All Other increased$68 million to$250 million primarily due to a lowerincome tax benefit,partially offset by lower noninterest expense.Noninterest expense decreased$231 million to$261 million primarily due to lowerexpenses related to a liquidating business activity.The income tax benefit decreased$153 million to$1.8 billion due to lower taxpreference benefits primarily related totax credit investment activity.Both periods included income tax benefit adjustments toeliminate the FTE treatment of certain tax credits recorded in Global Banking andGlobal Markets.Six-Month ComparisonThe net loss in All Other increased$657 million to$946 million primarily due to highernoninterest expense.Noninterest expense increased$356 million to$1.3 billion primarily due to a$700million accrual for the increase in the Corporations estimated share of the FDICspecial assessment,partially offset by lower expenses related to a liquidatingbusiness activity.The income tax benefit was$3.7 billion,relatively unchanged from the same perioda year ago.Both periods included income tax benefit adjustments to eliminate the FTEtreatment of certain tax credits recorded in Global Banking and Global Markets.(1)(1)(1)Bank of America 20Managing RiskRisk is inherent in all our business activities.The seven key types of risk faced by theCorporation are strategic,credit,market,liquidity,compliance,operational andreputational.Sound risk management enables us to serve our customers and deliverfor our shareholders.If not managed well,risk can result in financial loss,regulatorysanctions and penalties,and damage to our reputation,each of which may adverselyimpact our ability to execute our business strategies.We take a comprehensiveapproach to risk management with a defined Risk Framework and an articulated RiskAppetite Statement,which are approved annually by the Enterprise Risk Committeeand the Board.Our Risk Framework serves as the foundation for the consistent and effectivemanagement of risks facing the Corporation.The Risk Framework sets forth roles andresponsibilities for the management of risk and provides a blueprint for how the Board,through delegation of authority to committees and executive officers,establishes riskappetite and associated limits for our activities.Our risk appetite provides a common framework that includes a set of measures toassist senior management and the Board in assessing the Corporations risk profileacross all risk types against our risk appetite and risk capacity.Our risk appetite isformally articulated in the Risk Appetite Statement,which includes both qualitativestatements and quantitative limits.For more information on the Corporations risks,see Item 1A.Risk Factors of theCorporations 2023 Annual Report on Form 10-K.These risks are being managedwithin our Risk Framework and supporting risk management programs.For moreinformation on our Risk Framework,risk management activities and the key types ofrisk faced by the Corporation,see the Managing Risk section in the MD&A of theCorporations 2023 Annual Report on Form 10-K.Capital ManagementThe Corporation manages its capital position so that its capital is more than adequateto support its business activities and aligns with risk,risk appetite and strategicplanning.For more information,see Capital Management in the MD&A of theCorporations 2023 Annual Report on Form 10-K.CCAR and Capital PlanningThe Federal Reserve requires BHCs to submit a capital plan and planned capitalactions on an annual basis,consistent with the rules governing the CCAR capital plan,which includes supervisory stress testing by the Federal Reserve.We submitted our2024 CCAR capital plan and related supervisory stress tests in April 2024 andreceived our results on June 26,2024.Based on the results,our SCB is expected tobe 3.2 percent,and the CET1 minimum requirement will be 10.7 percent whenfinalized.The new SCB will be effective from October 1,2024 through September 30,2025.The Board has authorized the repurchase of up to$25 billion of common stockover time,which includes common stock repurchases to offset shares awarded underthe Corporations equity-based compensation plans.Pursuant to Board authorization,during the three months ended June 30,2024,we repurchased$3.5 billion of commonstock.For moreinformation,see Part II,Item 2.Unregistered Sales of Equity Securities and Use ofProceeds on page 105 and Capital Management CCAR and Capital Planning in theMD&A of the Corporations 2023 Annual Report on Form 10-K.On July 24,2024,the Corporations Board authorized a$25 billion common stockrepurchase program,effective August 1,2024,to replace the Corporations existingprogram adopted by the Board in October 2021 and subsequently modified inSeptember 2023.The existing repurchase program will expire on August 1,2024.The timing and amount of common stock repurchases are subject to variousfactors,including the Corporations capital position,liquidity,financial performance andalternative uses of capital,stock trading price,regulatory requirements and generalmarket conditions,and may be suspended at any time.Such repurchases may beeffected through open market purchases or privately negotiated transactions,including repurchase plans that satisfy the conditions of Rule 10b5-1 of the SecuritiesExchange Act of 1934,as amended(Exchange Act).Regulatory CapitalAs a BHC,we are subject to regulatory capital rules,including Basel 3,issued by U.S.banking regulators.The Corporations depository institution subsidiaries are alsosubject to the Prompt Corrective Action(PCA)framework.The Corporation and itsprimary affiliated banking entity,BANA,are Advanced approaches institutions underBasel 3 and are required to report regulatory risk-based capital ratios and risk-weighted assets(RWA)under both the Standardized and Advanced approaches.Thelower of the capital ratios under Standardized or Advanced approaches compared totheir respective regulatory capital ratio requirements is used to assess capitaladequacy,including under the PCA framework.As of June 30,2024,the CET1 capital,Tier 1 capital and Total capital ratios under the Standardized approach were thebinding ratios.Minimum Capital RequirementsIn order to avoid restrictions on capital distributions and discretionary bonus paymentsto executive officers,the Corporation must meet risk-based capital ratio requirementsthat include a capital conservation buffer of 2.5 percent(under the Advancedapproaches only),an SCB(under the Standardized approach only),plus anyapplicable countercyclical capital buffer and a global systemically important bank(G-SIB)surcharge.The buffers and surcharge must be comprised solely of CET1 capital.For the period from January 1,2024 through September 30,2024,the Corporationsminimum CET1 capital ratio requirements are 10.0 percent under both theStandardized approach and the Advanced approaches.The Corporation is required to calculate its G-SIB surcharge on an annual basisunder two methods and is subject to the higher of the resulting two surcharges.Method 1 is consistent with the approach prescribed by the Basel Committeesassessment methodology and is calculated using specified indicators of systemicimportance.Method 2 modifies the Method 1 approach by,among other factors,including a measure of the Corporations reliance on short-term wholesale funding.Effective January 1,2024,the Corporations G-SIB surcharge,which is higher underMethod 2,increased 50 bps,resulting in an increase in our minimum CET1 capitalratio21 Bank of Americarequirement under the Standardized approach to 10.0 percent from 9.5 percent.AtJune 30,2024,the Corporations CET1 capital ratio of 11.9 percent under theStandardized approach exceeded its CET1 capital ratio requirement.The Corporation is also required to maintain a minimum supplementary leverageratio(SLR)of 3.0 percent plus a leverage buffer of 2.0 percent in order to avoidcertain restrictions on capital distributions and discretionary bonus payments toexecutive officers.At June 30,2024,our insured depository institution subsidiariesexceeded their requirement tomaintain a minimum 6.0 percent SLR to be considered well capitalized under the PCAframework.Capital Composition and RatiosTable 8 presents Bank of America Corporations capital ratios and related informationin accordance with Basel 3 Standardized and Advanced approaches as measured atJune 30,2024 and December 31,2023.For the periods presented herein,theCorporation met the definition of well capitalized under current regulatoryrequirements.Table 8Bank of America Corporation Regulatory Capital under Basel 3StandardizedApproach AdvancedApproaches RegulatoryMinimum(Dollars in millions,except as noted)June 30,2024Risk-based capital metrics:Common equity tier 1 capital$198,119$198,119 Tier 1 capital224,641 224,641 Total capital 251,434 241,423 Risk-weighted assets(in billions)1,661 1,469 Common equity tier 1 capital ratio11.9.5.0%Tier 1 capital ratio13.5 15.3 11.5 Total capital ratio15.1 16.4 13.5 Leverage-based metrics:Adjusted quarterly average assets(in billions)$3,196$3,196 Tier 1 leverage ratio7.0%7.0%4.0 Supplementary leverage exposure(in billions)$3,757 Supplementary leverage ratio6.0%5.0 December 31,2023Risk-based capital metrics:Common equity tier 1 capital$194,928$194,928 Tier 1 capital223,323 223,323 Total capital 251,399 241,449 Risk-weighted assets(in billions)1,651 1,459 Common equity tier 1 capital ratio11.8.4%9.5%Tier 1 capital ratio13.5 15.3 11.0 Total capital ratio15.2 16.6 13.0 Leverage-based metrics:Adjusted quarterly average assets(in billions)$3,135$3,135 Tier 1 leverage ratio7.1%7.1%4.0 Supplementary leverage exposure(in billions)$3,676 Supplementary leverage ratio6.1%5.0 Capital ratios as of June 30,2024 and December 31,2023 are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of the current expected credit losses(CECL)accounting standard on January 1,2020.The CET1 capital regulatory minimum is the sum of the CET1 capital ratio minimum of 4.5 percent,our G-SIB surcharge of 3.0 percent at June 30,2024 and 2.5 percent at December 31,2023,and our capital conservation buffer(under the Advanced approaches)or SCB(under the Standardized approach)of 2.5 percent,as applicable.The countercyclical capital buffer was zero for both periods.The SLR regulatory minimum includes a leverage buffer of 2.0 percent.Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.Reflects total average assets adjusted for certain Tier 1 capital deductions.At June 30,2024,CET1 capital was$198.1 billion,an increase of$3.2 billion fromDecember 31,2023,primarily due to earnings,partially offset by capital distributions.Tier 1 capital increased$1.3 billion primarily driven by the same factors as CET1capital,partially offset by preferred stock redemptions.Total capital under theStandardized approach increased$35 million primarily due to the same factors drivingthe increase in Tier 1 capital and an increase in the adjusted allowance forcredit losses included in Tier 2 capital,largely offset by a decrease in subordinateddebt.RWA under the Standardized approach,which yielded the lower CET1 capitalratio at June 30,2024,increased$10.2 billion during 2024 to$1,661 billion primarilydriven by client activity in Global Markets and lending activity in GWIM.Supplementary leverage exposure at June 30,2024 increased$80.2 billion primarilydriven by increased activity in Global Markets and ALM activities in All Other.(1)(1)(2)(3)(4)(3)(4)(1)(2)(3)(4)Bank of America 22Table 9 shows the capital composition at June 30,2024 and December 31,2023.Table 9Capital Composition under Basel 3(Dollars in millions)June 302024December 312023Total common shareholders equity$267,344$263,249 CECL transitional amount 627 1,254 Goodwill,net of related deferred tax liabilities(68,648)(68,648)Deferred tax assets arising from net operating loss and tax credit carryforwards(8,074)(7,912)Intangibles,other than mortgage servicing rights,net of related deferred tax liabilities(1,467)(1,496)Defined benefit pension plan net assets(787)(764)Cumulative unrealized net(gain)loss related to changes in fair value of financial liabilities attributable to own creditworthiness,net-of-tax1,511 1,342 Accumulated net(gain)loss on certain cash flow hedges 7,762 8,025 Other(149)(122)Common equity tier 1 capital198,119 194,928 Qualifying preferred stock,net of issuance cost26,547 28,396 Other(25)(1)Tier 1 capital224,641 223,323 Tier 2 capital instruments13,583 15,340 Qualifying allowance for credit losses 13,564 12,920 Other(354)(184)Total capital under the Standardized approach251,434 251,399 Adjustment in qualifying allowance for credit losses under the Advanced approaches(10,011)(9,950)Total capital under the Advanced approaches$241,423$241,449 June 30,2024 and December 31,2023 include 25 percent and 50 percent of the CECL transition provisions impact as of December 31,2021.Includes amounts in accumulated other comprehensive income(OCI)related to the hedging of items that are not recognized at fair value on the Consolidated Balance Sheet.Includes the impact of transition provisions related to the CECL accounting standard.Table 10 shows the components of RWA as measured under Basel 3 at June 30,2024 and December 31,2023.Table 10Risk-weighted Assets under Basel 3StandardizedApproachAdvancedApproachesStandardizedApproachAdvancedApproaches(Dollars in billions)June 30,2024December 31,2023Credit risk$1,588$991$1,580$983 Market risk73 73 71 71 Operational riskn/a359 n/a361 Risks related to credit valuation adjustmentsn/a46 n/a44 Total risk-weighted assets$1,661$1,469$1,651$1,459 n/a=not applicable(1)(2)(3)(3)(1)(2)(3)23 Bank of AmericaBank of America,N.A.Regulatory CapitalTable 11 presents regulatory capital information for BANA in accordance with Basel 3 Standardized and Advanced approaches as measured at June 30,2024 and December 31,2023.BANA met the definition of well capitalized under the PCA framework for both periods.Table 11Bank of America,N.A.Regulatory Capital under Basel 3StandardizedApproach AdvancedApproaches RegulatoryMinimum(Dollars in millions,except as noted)June 30,2024Risk-based capital metrics:Common equity tier 1 capital$190,106$190,106 Tier 1 capital190,106 190,106 Total capital 205,041 195,264 Risk-weighted assets(in billions)1,406 1,124 Common equity tier 1 capital ratio13.5.9%7.0%Tier 1 capital ratio13.5 16.9 8.5 Total capital ratio14.6 17.4 10.5 Leverage-based metrics:Adjusted quarterly average assets(in billions)$2,492$2,492 Tier 1 leverage ratio7.6%7.6%5.0 Supplementary leverage exposure(in billions)$2,944 Supplementary leverage ratio6.5%6.0 December 31,2023Risk-based capital metrics:Common equity tier 1 capital$187,621$187,621 Tier 1 capital187,621 187,621 Total capital 201,932 192,175 Risk-weighted assets(in billions)1,395 1,114 Common equity tier 1 capital ratio13.5.8%7.0%Tier 1 capital ratio13.5 16.8 8.5 Total capital ratio14.5 17.2 10.5 Leverage-based metrics:Adjusted quarterly average assets(in billions)$2,471$2,471 Tier 1 leverage ratio7.6%7.6%5.0 Supplementary leverage exposure(in billions)$2,910 Supplementary leverage ratio6.4%6.0 Capital ratios as of June 30,2024 and December 31,2023 are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of the CECL accounting standard on January 1,2020.Risk-based capital regulatory minimums at both June 30,2024 and December 31,2023 are the minimum ratios under Basel 3 including a capital conservation buffer of 2.5 percent.The regulatory minimums for the leverage ratios as of both period ends are thepercent required to be considered well capitalized under the PCA framework.Total capital under the Advanced approaches differs from the Standardized approach due to differences in the amount permitted in Tier 2 capital related to the qualifying allowance for credit losses.Reflects total average assets adjusted for certain Tier 1 capital deductions.Total Loss-Absorbing Capacity RequirementsTotal loss-absorbing capacity(TLAC)consists of the Corporations Tier 1 capital andeligible long-term debt issued directly by the Corporation.Eligible long-term debt forTLAC ratios is comprised of unsecured debt that has a remaining maturity of at leastone year and satisfies additional requirements as prescribed in the TLAC final rule.Aswith therisk-based capital ratios and SLR,the Corporation is required to maintain TLAC ratiosin excess of minimum requirements plus applicable buffers to avoid restrictions oncapital distributions and discretionary bonus payments to executive officers.Table 12presents the Corporations TLAC and long-term debt ratios and related information asof June 30,2024 and December 31,2023.(1)(1)(2)(3)(4)(3)(4)(1)(2)(3)(4)Bank of America 24Table 12Bank of America Corporation Total Loss-Absorbing Capacity and Long-Term DebtTLAC Regulatory MinimumLong-termDebtRegulatory Minimum(Dollars in millions)June 30,2024Total eligible balance$467,863$226,808 Percentage of risk-weighted assets 28.2.0.7%9.0%Percentage of supplementary leverage exposure12.5 9.5 6.0 4.5 December 31,2023Total eligible balance$479,156$239,892 Percentage of risk-weighted assets 29.0.0.5%8.5%Percentage of supplementary leverage exposure13.0 9.5 6.5 4.5 As of June 30,2024 and December 31,2023,TLAC ratios are calculated using the regulatory capital rule that allows a five-year transition period related to the adoption of the CECL accounting standard on January 1,2020.The TLAC RWA regulatory minimum consists of 18.0 percent plus a TLAC RWA buffer comprised of 2.5 percent plus the Method 1 G-SIB surcharge of 1.5 percent.The countercyclical buffer is zero for both periods.The TLAC supplementary leverage exposureregulatory minimum consists of 7.5 percent plus a 2.0 percent TLAC leverage buffer.The TLAC RWA and leverage buffers must be comprised solely of CET1 capital and Tier 1 capital,respectively.The long-term debt RWA regulatory minimum is comprised of 6.0 percent plus the Corporat
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As of June 30,2024 Table of ContentsCondensed Consolidated Statements of Income 3 Condensed Consolidated Balance Sheets 4 Consolidated-Selected Financial and Operating Statistics 5 Condensed Consolidated Statements of Cash Flows 6 Consumer Selected Financial Results 7 Consumer Selected Operating Statistics 8 Business Selected Financial Results 9 Business Selected Operating Statistics 10 Supplemental Information 11 Non-GAAP Reconciliations and Notes 12 Verizon Communications Inc.Condensed Consolidated Statements of Income (dollars in millions,except per share amounts)202220232024UnauditedFull Year1Q2Q3Q4QFull Year1Q2QYear to dateOperating RevenuesService revenues and other$109,625$27,152$27,319$27,523$27,658$109,652$27,620$27,798$55,418 Wireless equipment revenues 27,210 5,760 5,277 5,813 7,472 24,322 5,361 4,998 10,359 Total Operating Revenues 136,835 32,912 32,596 33,336 35,130 133,974 32,981 32,796 65,777 Operating ExpensesCost of services 28,637 7,078 6,986 7,084 6,952 28,100 6,967 6,904 13,871 Cost of wireless equipment 30,496 6,426 5,778 6,353 8,230 26,787 5,905 5,567 11,472 Selling,general and administrative expense 30,136 7,506 8,253 7,995 8,991 32,745 8,143 8,024 16,167 Depreciation and amortization expense 17,099 4,318 4,359 4,431 4,516 17,624 4,445 4,483 8,928 Verizon Business Group goodwill impairment 5,841 5,841 Total Operating Expenses 106,368 25,328 25,376 25,863 34,530 111,097 25,460 24,978 50,438 Operating Income 30,467 7,584 7,220 7,473 600 22,877 7,521 7,818 15,339 Equity in earnings(losses)of unconsolidated businesses 44 9 (33)(18)(11)(53)(9)(14)(23)Other income(expense),net 1,373 114 210 170 (807)(313)198 (72)126 Interest expense(3,613)(1,207)(1,285)(1,433)(1,599)(5,524)(1,635)(1,698)(3,333)Income(Loss)Before Provision For Income Taxes 28,271 6,500 6,112 6,192 (1,817)16,987 6,075 6,034 12,109 Provision for income taxes(6,523)(1,482)(1,346)(1,308)(756)(4,892)(1,353)(1,332)(2,685)Net Income(Loss)$21,748$5,018$4,766$4,884$(2,573)$12,095$4,722$4,702$9,424 Net income attributable to noncontrolling interests$492$109$118$122$132$481$120$109$229 Net income(loss)attributable to Verizon 21,256 4,909 4,648 4,762 (2,705)11,614 4,602 4,593 9,195 Net Income(Loss)$21,748$5,018$4,766$4,884$(2,573)$12,095$4,722$4,702$9,424 Basic Earnings Per Common ShareNet income(loss)attributable to Verizon$5.06$1.17$1.10$1.13$(0.64)$2.76$1.09$1.09$2.18 Weighted-average shares outstanding(in millions)4,202 4,207 4,208 4,213 4,214 4,211 4,215 4,215 4,215 Diluted Earnings Per Common Share(1)Net income(loss)attributable to Verizon$5.06$1.17$1.10$1.13$(0.64)$2.75$1.09$1.09$2.18 Weighted-average shares outstanding(in millions)4,204 4,211 4,213 4,216 4,214 4,215 4,219 4,221 4,220 Footnotes:(1)Where applicable,Diluted Earnings per Common Share includes the dilutive effect of shares issuable under our stock-based compensation plans,which represents the only potential dilution.EPS may not add due to rounding.Verizon Communications Inc.3Condensed Consolidated Balance Sheets (dollars in millions)Unaudited12/31/223/31/236/30/239/30/2312/31/233/31/246/30/24AssetsCurrent assetsCash and cash equivalents$2,605$2,234$4,803$4,210$2,065$2,365$2,432 Accounts receivable 25,332 23,748 24,108 24,559 26,102 26,380 26,702 Less Allowance for credit losses 826 892 922 957 1,017 1,061 1,095 Accounts receivable,net 24,506 22,856 23,186 23,602 25,085 25,319 25,607 Inventories 2,388 2,381 1,896 2,240 2,057 2,076 1,841 Prepaid expenses and other 8,358 8,251 7,503 8,067 7,607 8,197 8,176 Total current assets 37,857 35,722 37,388 38,119 36,814 37,957 38,056 Property,plant and equipment 307,689 310,519 313,424 316,767 320,108 322,266 324,978 Less Accumulated depreciation 200,255 203,532 206,154 209,277 211,798 214,403 217,088 Property,plant and equipment,net 107,434 106,987 107,270 107,490 108,310 107,863 107,890 Investments in unconsolidated businesses 1,071 1,052 1,015 929 953 941 908 Wireless licenses 149,796 150,485 151,337 155,465 155,667 156,111 156,291 Goodwill 28,671 28,674 28,647 28,642 22,843 22,842 22,842 Other intangible assets,net 11,461 11,246 11,097 10,952 11,057 10,835 10,680 Operating lease right-of-use assets 26,130 25,947 25,345 25,086 24,726 24,351 24,064 Other assets 17,260 17,603 17,856 18,147 19,885 19,258 18,415 Total assets$379,680$377,716$379,955$384,830$380,255$380,158$379,146 Liabilities and EquityCurrent liabilitiesDebt maturing within one year$9,963$12,081$14,827$12,950$12,973$15,594$23,255 Accounts payable and accrued liabilities 23,977 19,273 20,067 26,140 23,453 20,139 19,727 Current operating lease liabilities 4,134 4,177 4,211 3,906 4,266 4,282 4,247 Other current liabilities 12,097 12,237 12,299 12,681 12,531 13,616 13,577 Total current liabilities 50,171 47,768 51,404 55,677 53,223 53,631 60,806 Long-term debt 140,676 140,772 137,871 134,441 137,701 136,104 126,022 Employee benefit obligations 12,974 12,750 12,357 12,226 13,189 12,805 12,812 Deferred income taxes 43,441 43,667 44,055 44,434 45,781 45,980 46,082 Non-current operating lease liabilities 21,558 21,303 20,745 20,773 20,002 19,654 19,456 Other liabilities 18,397 17,237 17,021 18,191 16,560 16,258 16,429 Total long-term liabilities 237,046 235,729 232,049 230,065 233,233 230,801 220,801 EquityCommon stock 429 429 429 429 429 429 429 Additional paid in capital 13,420 13,523 13,523 13,524 13,631 13,571 13,539 Retained earnings 82,380 84,543 86,448 88,416 82,915 84,714 86,504 Accumulated other comprehensive loss(1,865)(2,177)(1,921)(1,428)(1,380)(1,199)(1,287)Common stock in treasury,at cost(4,013)(3,832)(3,830)(3,828)(3,821)(3,602)(3,590)Deferred compensation employee stock ownership plans and other 793 397 544 628 656 421 577 Noncontrolling interests 1,319 1,336 1,309 1,347 1,369 1,392 1,367 Total equity 92,463 94,219 96,502 99,088 93,799 95,726 97,539 Total liabilities and equity$379,680$377,716$379,955$384,830$380,255$380,158$379,146 Verizon Communications Inc.4Consolidated-Selected Financial and Operating Statistics (dollars in millions)Unaudited12/31/223/31/236/30/239/30/2312/31/233/31/246/30/24Total debt$150,639$152,853$152,698$147,391$150,674$151,698$149,277 Unsecured debt$130,631$132,018$131,356$126,440$128,491$128,408$125,262 Net unsecured debt(1)$128,026$129,784$126,553$122,230$126,426$126,043$122,830 Unsecured debt/Consolidated Net Income(LTM)6.1x 5.9x 10.6x 10.9x 10.7x Net unsecured debt/Consolidated Adjusted EBITDA(1)(2)2.6x 2.6x 2.6x 2.6x 2.5x Common shares outstanding end of period(in millions)4,200 4,204 4,204 4,204 4,204 4,209 4,210 Total employees(000)(3)117.1 115.5 114.2 110.5 105.4 104.4 103.9 Quarterly cash dividends declared per common share$0.6525$0.6525$0.6525$0.6650$0.6650$0.6650$0.6650 Footnotes:(1)Non-GAAP financial measure.(2)Consolidated Adjusted EBITDA excludes the effects of non-operational items and special items.(3)Number of employees on a full-time equivalent basis.Verizon Communications Inc.5Condensed Consolidated Statements of Cash Flows (dollars in millions)12 Mos.Ended3 Mos.Ended6 Mos.Ended9 Mos.Ended12 Mos.Ended3 Mos.Ended6 Mos.EndedUnaudited12/31/223/31/236/30/239/30/2312/31/233/31/246/30/24Cash Flows from Operating ActivitiesNet Income$21,748$5,018$9,784$14,668$12,095$4,722$9,424 Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization expense 17,099 4,318 8,677 13,108 17,624 4,445 8,928 Employee retirement benefits(2,046)54 108 161 1,206 62 354 Deferred income taxes 2,973 331 633 822 2,388 141 282 Provision for expected credit losses 1,611 530 1,061 1,596 2,214 567 1,119 Equity in(earnings)losses of unconsolidated businesses,net of dividends received(10)10 49 69 84 14 33 Verizon Business Group goodwill impairment 5,841 Changes in current assets and liabilities,net of effects from acquisition/disposition of businesses(456)(774)(620)972 (267)(2,531)(3,572)Other,net(3,778)(1,198)(1,672)(2,598)(3,710)(336)1 Net cash provided by operating activities 37,141 8,289 18,020 28,798 37,475 7,084 16,569 Cash Flows from Investing ActivitiesCapital expenditures(including capitalized software)(23,087)(5,958)(10,070)(14,164)(18,767)(4,376)(8,071)Cash received(paid)related to acquisitions of businesses,net of cash acquired 248 (30)Acquisitions of wireless licenses(3,653)(598)(1,085)(1,859)(5,796)(449)(613)Collateral receipts(payments)related to derivative contracts,net(2,265)367 824 162 880 (432)(424)Proceeds from disposition of business 33 Other,net 62 79 131 253 281 12 (2)Net cash used in investing activities(28,662)(6,110)(10,200)(15,608)(23,432)(5,245)(9,110)Cash Flows from Financing ActivitiesProceeds from long-term borrowings 7,074 504 1,503 1,999 2,018 3,110 3,122 Proceeds from asset-backed long-term borrowings 10,732 1,754 3,705 4,656 6,594 2,510 5,828 Net proceeds from(repayments of)short-term commercial paper 106 342 (167)333 (150)2,347 603 Repayments of long-term borrowings and finance lease obligations(8,616)(1,325)(2,600)(5,568)(6,181)(4,508)(5,719)Repayments of asset-backed long-term borrowings(4,948)(931)(2,383)(3,729)(4,443)(1,408)(4,008)Dividends paid(10,805)(2,744)(5,487)(8,231)(11,025)(2,796)(5,598)Other,net(2,072)17 (157)(1,101)(1,470)(683)(1,290)Net cash used in financing activities(8,529)(2,383)(5,586)(11,641)(14,657)(1,428)(7,062)Increase(decrease)in cash,cash equivalents and restricted cash(50)(204)2,234 1,549 (614)411 397 Cash,cash equivalents and restricted cash,beginning of period 4,161 4,111 4,111 4,111 4,111 3,497 3,497 Cash,cash equivalents and restricted cash,end of period$4,111$3,907$6,345$5,660$3,497$3,908$3,894 Verizon Communications Inc.6Consumer-Selected Financial Results (dollars in millions)20232024Unaudited1Q2Q3Q4Q1Q2QOperating RevenuesService$18,456$18,641$18,850$18,927$18,998$19,208 Wireless equipment 4,878 4,430 4,902 6,435 4,490 4,143 Other 1,523 1,487 1,505 1,592 1,569 1,576 Total Operating Revenues 24,857 24,558 25,257 26,954 25,057 24,927 Operating ExpensesCost of services 4,432 4,367 4,419 4,362 4,537 4,450 Cost of wireless equipment 5,191 4,626 5,133 6,877 4,750 4,432 Selling,general and administrative expense 4,921 4,988 4,886 5,336 5,089 5,047 Depreciation and amortization expense 3,214 3,247 3,272 3,344 3,309 3,394 Total Operating Expenses 17,758 17,228 17,710 19,919 17,685 17,323 Operating Income$7,099$7,330$7,547$7,035$7,372$7,604 Operating Income Margin 28.6).8).9&.1).40.5%Segment EBITDA(1)$10,313$10,577$10,819$10,379$10,681$10,998 Segment EBITDA Margin(1)41.5C.1B.88.5B.6D.1%Footnotes:(1)Non-GAAP financial measure.The segment financial results and metrics above exclude the effects of special items(other than the effects of acquisition-related intangible asset amortization),which the Companys chief operating decision maker does not consider in assessing segment performance.Certain intersegment transactions with corporate entities have not been eliminated.Verizon Communications Inc.7Consumer-Selected Operating Statistics 20232024Unaudited1Q2Q3Q4Q1Q2QConnections(000):Wireless retail postpaid 92,192 92,474 92,704 93,850 93,905 93,960 Wireless retail prepaid 22,331 21,646 21,420 21,122 20,904 20,276 Total wireless retail 114,523 114,120 114,124 114,972 114,809 114,236 Wireless retail prepaid excl.SafeLink 19,758 19,362 19,123 18,851 18,717 18,702 Wireless retail postpaid phone 74,611 74,465 74,407 74,720 74,561 74,551 Fios video 3,160 3,091 3,013 2,951 2,883 2,818 Fios internet 6,803 6,854 6,923 6,976 7,025 7,049 Fixed wireless access(FWA)broadband 1,140 1,390 1,641 1,866 2,070 2,292 Wireline broadband 7,062 7,098 7,151 7,190 7,227 7,238 Total broadband 8,202 8,488 8,792 9,056 9,297 9,530 Gross Additions(000):Wireless retail postpaid 3,210 2,928 3,152 4,185 2,983 2,901 Wireless retail postpaid phone 1,624 1,570 1,843 2,293 1,710 1,758 Net Additions Detail(000):Wireless retail postpaid 321 304 251 1,168 75 72 Wireless retail prepaid(351)(304)(207)(289)(216)(624)Total wireless retail(30)44 879 (141)(552)Wireless retail prepaid excl.SafeLink(277)(317)(221)(263)(131)(12)Wireless retail postpaid phone(263)(136)(51)318 (158)(8)Fios video (74)(69)(78)(62)(68)(65)Fios internet 63 51 69 53 49 24 FWA broadband 256 251 251 231 203 218 Wireline broadband 46 36 53 39 36 13 Total broadband 302 287 304 270 239 231 Churn Rate:Wireless retail postpaid 1.05%0.95%1.04%1.08%1.03%1.00%Wireless retail postpaid phone 0.84%0.76%0.85%0.88%0.83%0.79%Wireless retail prepaid 4.31%4.24%4.39%4.55%4.26%4.49%Wireless retail prepaid excl.SafeLink 3.72%3.71%3.85%3.94%3.61%3.59%Wireless retail 1.69%1.58%1.68%1.73%1.62%1.63%Revenue Statistics(in millions):Wireless service revenue$15,599$15,762$15,963$16,034$16,134$16,342 Fios revenue$2,889$2,886$2,897$2,942$2,896$2,896 Other Wireless Statistics:Wireless retail postpaid ARPA(1)$130.06$131.83$133.47$134.10$135.75$138.44 Wireless retail postpaid upgrade rate 4.0%3.5%3.6%4.4%3.1%2.9%Wireless retail postpaid accounts(000)(2)33,034 32,976 32,938 32,990 32,876 32,769 Wireless retail postpaid connections per account(2)2.79 2.80 2.81 2.84 2.86 2.87 Wireless retail prepaid ARPU(3)$30.71$31.42$31.87$31.87$31.17$30.90 Wireless retail prepaid ARPU(3)excl.SafeLink$32.15$32.90$33.13$33.11$32.26$32.48 Footnotes:(1)Wireless retail postpaid ARPA-average service revenue per account from retail postpaid accounts.(2)Statistics presented as of end of period.(3)Wireless retail prepaid ARPU-average service revenue per unit from retail prepaid connections.Where applicable,the operating results reflect certain adjustments,including those related to the 3G network shutdowns,migration activity among different types of devices and plans,customer profile changes,and adjustments in connection with mergers,acquisitions and divestitures.Certain intersegment transactions with corporate entities have not been eliminated.Verizon Communications Inc.8Business-Selected Financial Results (dollars in millions)20232024Unaudited1Q2Q3Q4Q1Q2QOperating RevenuesEnterprise and Public Sector$3,787$3,784$3,787$3,718$3,587$3,545 Business Markets and Other 3,104 3,109 3,184 3,318 3,195 3,203 Wholesale 603 590 556 582 594 552 Total Operating Revenues 7,494 7,483 7,527 7,618 7,376 7,300 Operating ExpensesCost of services 2,582 2,543 2,536 2,519 2,432 2,455 Cost of wireless equipment 1,234 1,152 1,220 1,353 1,155 1,135 Selling,general and administrative expense 2,033 2,152 2,105 2,139 2,262 2,132 Depreciation and amortization expense 1,094 1,103 1,127 1,164 1,128 1,078 Total Operating Expenses 6,943 6,950 6,988 7,175 6,977 6,800 Operating Income$551$533$539$443$399$500 Operating Income Margin 7.4%7.1%7.2%5.8%5.4%6.8%Segment EBITDA(1)$1,645$1,636$1,666$1,607$1,527$1,578 Segment EBITDA Margin(1)22.0!.9.1!.1 .7!.6%Footnotes:(1)Non-GAAP financial measure.The segment financial results and metrics above exclude the effects of special items(other than the effects of acquisition-related intangible asset amortization),which the Companys chief operating decision maker does not consider in assessing segment performance.Certain intersegment transactions with corporate entities have not been eliminated.Verizon Communications Inc.9Business-Selected Operating Statistics 20232024Unaudited1Q2Q3Q4Q1Q2QConnections(000):Wireless retail postpaid 28,820 29,105 29,455 29,779 29,947 30,230 Wireless retail postpaid phone 17,703 17,856 18,019 18,170 18,306 18,480 Fios video 65 64 63 61 59 58 Fios internet 377 380 383 385 389 393 FWA broadband 726 870 1,038 1,201 1,358 1,523 Wireline broadband 466 464 461 460 458 458 Total broadband 1,192 1,334 1,499 1,661 1,816 1,981 Gross Additions(000):Wireless retail postpaid 1,607 1,590 1,618 1,605 1,531 1,579 Wireless retail postpaid phone 757 733 761 738 705 760 Net Additions Detail(000):Wireless retail postpaid 312 308 330 292 178 268 Wireless retail postpaid phone 136 144 151 131 90 156 Fios video(2)(1)(1)(2)(2)(1)Fios internet 4 3 3 2 4 4 FWA broadband 137 133 133 144 151 160 Wireline broadband(2)(2)(3)(1)(1)Total broadband 135 131 130 143 150 160 Churn Rate:Wireless retail postpaid 1.50%1.48%1.47%1.48%1.51%1.45%Wireless retail postpaid phone 1.16%1.10%1.14%1.12%1.13%1.10%Revenue Statistics(in millions):Wireless service revenue$3,290$3,351$3,367$3,364$3,379$3,431 Fios revenue$307$308$308$312$311$313 Other Operating Statistics:Wireless retail postpaid upgrade rate 2.8%2.7%2.9%3.1%2.5%2.4%Footnotes:Where applicable,the operating results reflect certain adjustments,including those related to the 3G network shutdowns,migration activity among different types of devices and plans,customer profile changes,and adjustments in connection with mergers,acquisitions and divestitures.Certain intersegment transactions with corporate entities have not been eliminated.Verizon Communications Inc.10Supplemental Information-Total Wireless Operating and Financial Statistics The following supplemental schedule contains certain financial and operating metrics which reflect an aggregation of our Consumer and Business segments wireless results.20232024Unaudited1Q2Q3Q4Q1Q2QConnections(000)Retail postpaid 121,012 121,579 122,159 123,629 123,852 124,190 Retail prepaid 22,331 21,646 21,420 21,122 20,904 20,276 Total retail 143,343 143,225 143,579 144,751 144,756 144,466 Retail prepaid excl.SafeLink 19,758 19,362 19,123 18,851 18,717 18,702 Retail postpaid phone 92,314 92,321 92,426 92,890 92,867 93,031 Net Additions Detail(000)Retail postpaid phone(127)8 100 449 (68)148 Retail postpaid 633 612 581 1,460 253 340 Retail prepaid(351)(304)(207)(289)(216)(624)Total retail 282 308 374 1,171 37 (284)Retail prepaid excl.SafeLink(277)(317)(221)(263)(131)(12)Account StatisticsRetail postpaid accounts(000)(1)34,877 34,855 34,855 34,958 34,839 34,766 Retail postpaid connections per account(1)3.47 3.49 3.50 3.54 3.55 3.57 Retail postpaid ARPA(2)$152.27$154.51$156.13$156.48$158.25$161.20 Retail prepaid ARPU(3)$30.71$31.42$31.87$31.87$31.17$30.90 Retail prepaid ARPU(3)excl.SafeLink$32.15$32.90$33.13$33.11$32.26$32.48 Churn DetailRetail postpaid phone 0.90%0.83%0.90%0.93%0.89%0.85%Retail postpaid 1.15%1.07%1.15%1.18%1.15%1.11%Retail prepaid 4.31%4.24%4.39%4.55%4.26%4.49%Retail prepaid excl.SafeLink 3.72%3.71%3.85%3.94%3.61%3.59%Retail 1.65%1.56%1.63%1.67%1.60%1.59%Retail Postpaid Connection Statistics Upgrade rate 3.7%3.3%3.4%4.1%3.0%2.8%Revenue Statistics(in millions)(4)FWA revenue$255$297$347$403$452$514 Wireless service$18,889$19,113$19,330$19,398$19,513$19,773 Wireless equipment 5,760 5,277 5,813 7,472 5,361 4,998 Wireless other 1,515 1,486 1,507 1,575 1,585 1,600 Total Wireless$26,164$25,876$26,650$28,445$26,459$26,371 Footnotes:(1)Statistics presented as of end of period.(2)Wireless retail postpaid ARPA-average service revenue per account from retail postpaid accounts.(3)Wireless retail prepaid ARPU-average service revenue per unit from retail prepaid connections.(4)Intersegment transactions between Consumer or Business segment with corporate entities have not been eliminated.Where applicable,the operating results reflect certain adjustments,including those related to the 3G network shutdowns,migration activity among different types of devices and plans,customer profile changes,and adjustments in connection with mergers,acquisitions and divestitures.Verizon Communications Inc.11Non-GAAP MeasuresVerizons Financial and Operating Information includes financial information prepared in conformity with generally accepted accounting principles in the United States(GAAP)as well as non-GAAP financial information.It is managements intent to provide non-GAAP financial information to enhance the understanding of Verizons GAAP financial information and it should be considered by the reader in addition to,but not instead of,the financial statements prepared in accordance with GAAP.Each non-GAAP financial measure is presented along with the corresponding GAAP measure so as not to imply that more emphasis should be placed on the non-GAAP measure.We believe that providing these non-GAAP measures in addition to the GAAP measures allows management,investors and other users of our financial information to more fully and accurately assess both consolidated and segment performance.The non-GAAP financial information presented may be determined or calculated differently by other companies and may not be directly comparable to that of other companies.EBITDA and EBITDA Margin Related Non-GAAP Measures Consolidated earnings before interest,taxes,depreciation and amortization(EBITDA),Segment EBITDA and Segment EBITDA Margin are non-GAAP financial measures that we believe are useful to management,investors and other users of our financial information as they are widely accepted financial measures used in evaluating the profitability of a company and its operating performance in relation to its competitors.Consolidated EBITDA is calculated by adding back interest,taxes and depreciation and amortization expense to net income.Segment EBITDA is calculated by adding back segment depreciation and amortization expense to segment operating income.Segment EBITDA Margin is calculated by dividing Segment EBITDA by total segment operating revenues.Consolidated Adjusted EBITDA,Consolidated Adjusted EBITDA Margin and Consolidated Adjusted EBITDA Growth ForecastConsolidated Adjusted EBITDA,Consolidated Adjusted EBITDA Margin and Consolidated Adjusted EBITDA Growth Forecast are non-GAAP financial measures that we believe provide relevant and useful information to management,investors and other users of our financial information in evaluating the effectiveness of our operations and underlying business trends.We believe that Consolidated Adjusted EBITDA,Consolidated Adjusted EBITDA Margin and Consolidated Adjusted EBITDA Growth Forecast are used by investors to compare a companys operating performance to its competitors by minimizing impacts caused by differences in capital structure,taxes and depreciation and amortization policies.Further,the exclusion of non-operational items and special items enables comparability to prior period performance and trend analysis.Consolidated Adjusted EBITDA is calculated by excluding from Consolidated EBITDA the effect of the following non-operational items:equity in earnings and losses of unconsolidated businesses and other income and expense,net,and the following special items:legacy legal matter,severance charges,Verizon Business Group(Verizon Business)goodwill impairment,asset rationalization,legal settlement,business transformation costs and non-strategic business shutdown.Legacy legal matter recorded during 2024 relates to a litigation matter associated with a legacy contract for the production of telephone directories in Costa Rica by a subsidiary of Verizon.Severance charges recorded during 2023 and 2022 primarily relate to involuntary separations under our existing plans.Verizon Business goodwill impairment relates to an impairment charge recognized in the fourth quarter of 2023 as a result of Verizons annual goodwill impairment test.Asset rationalization recorded during the second quarter of 2023 relates to certain real estate and non-strategic assets that we made a decision to cease use of as part of our transformation initiatives.Asset rationalization recorded during the fourth quarter of 2023 primarily relates to Verizon Business network assets that we made a decision to cease use of as part of our continued transformation initiatives.Legal settlement recorded during 2023 relates to the settlement of a litigation matter regarding certain administrative fees.Business transformation costs recorded during 2023 primarily relate to costs incurred in connection with strategic partnership initiatives in our managed network support services for certain Verizon Business customers.Non-strategic business shutdown relates to the shutdown of our BlueJeans business offering in 2023.Consolidated Adjusted EBITDA Margin is calculated by dividing Consolidated Adjusted EBITDA by consolidated operating revenues.We have not provided a reconciliation for our Consolidated Adjusted EBITDA Growth Forecast because we cannot,without unreasonable effort,predict the special items that could arise during 2024.Net Unsecured Debt and Net Unsecured Debt to Consolidated Adjusted EBITDA RatioNet Unsecured Debt and Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio are non-GAAP financial measures that we believe are useful to management,investors and other users of our financial information in evaluating Verizons ability to service its unsecured debt from continuing operations.Net Unsecured Debt is calculated by subtracting secured debt and cash and cash equivalents,from the sum of debt maturing within one year and long-term debt.Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio is calculated by dividing Net Unsecured Debt by Consolidated Adjusted EBITDA.For purposes of Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio,Consolidated Adjusted EBITDA is calculated for the last twelve months.Adjusted Earnings per Common Share(Adjusted EPS)and Adjusted EPS ForecastAdjusted EPS and Adjusted EPS Forecast are non-GAAP financial measures that we believe are useful to management,investors and other users of our financial information in evaluating our operating results and understanding our operating trends without the effect of special items which could vary from period to period.We believe excluding special items provides more comparable assessment of our financial results from period to period.Adjusted EPS is calculated by excluding from the calculation of reported EPS the effect of the following special items:amortization of acquisition-related intangible assets,severance,pension and benefits charges and asset rationalization.We exclude the amortization of acquisition-related intangible assets because the amount and timing of such charges are significantly impacted by the timing,size,number and nature of the acquisitions we consummate.While we have a history of significant acquisition activity,we do not acquire businesses on a predictable cycle,and the amount of an acquisitions purchase price allocated to intangible assets and related amortization term are unique to each acquisition and can vary significantly from acquisition to acquisition.Exclusion of this amortization expense facilitates more consistent comparisons of operating results over time between our newly acquired and long-held businesses,and with both acquisitive and non-acquisitive peer companies.We believe that it is important for investors to Verizon Communications Inc.Definitions-Non-GAAP Measures 12understand that our non-GAAP financial measure adjusts for the intangible asset amortization but does not adjust the revenue that is generated in part from the use of such intangible assets.We have not provided a reconciliation for our Adjusted EPS Forecast because we cannot,without unreasonable effort,predict the special items that could arise during 2024.Adjusted Effective Income Tax Rate Attributable to Verizon Forecast(Adjusted ETR Forecast)Adjusted ETR Forecast is a non-GAAP financial measure that we believe is useful to management,investors and other users of our financial information in assessing our effective income tax rate without the effect of special items which could vary from period to period.Adjusted ETR Forecast is calculated by dividing the provision for income taxes by net income attributable to Verizon before tax after adjusting for the effect of special items.We have not provided a reconciliation for our Adjusted ETR Forecast because we cannot,without unreasonable effort,predict the special items that could arise during 2024.Free Cash FlowFree cash flow is a non-GAAP financial measure that reflects an additional way of viewing our liquidity that,when viewed with our GAAP results,provides a more complete understanding of factors and trends affecting our cash flows.We believe it is a more conservative measure of cash flow since capital expenditures are necessary for ongoing operations.Free cash flow has limitations due to the fact that it does not represent the residual cash flow available for discretionary expenditures.For example,free cash flow does not incorporate payments made or expected to be made on finance lease obligations or cash payments for acquisitions of businesses or wireless licenses.Therefore,we believe it is important to view free cash flow as a complement to our entire consolidated statements of cash flows.Free cash flow is calculated by subtracting capital expenditures(including capitalized software)from net cash provided by operating activities.Consolidated Operating Expenses Excluding Depreciation and Amortization and Special ItemsConsolidated operating expenses excluding depreciation and amortization and special items is a non-GAAP financial measure that we believe is useful to management,investors and other users of our financial information in evaluating our operating expenses and underlying operating trends.We believe that consolidated operating expenses excluding depreciation and amortization and special items is used by investors to more accurately compare a companys operating expenses to those of its competitors by eliminating impacts caused by differences in depreciation and amortization policies.In addition,the exclusion of the effects of special items allows for better comparability of our financial results from period to period.Consolidated operating expenses excluding depreciation and amortization and special items is calculated by excluding from consolidated operating expenses the effects of depreciation and amortization expense and the following special items:severance charges and asset rationalization.Verizon Communications Inc.Definitions-Non-GAAP Measures 13Consolidated EBITDA,Consolidated Adjusted EBITDA and Consolidated Adjusted EBITDA Margin(dollars in millions)202220232024Unaudited3Q4Q1Q2Q3Q4Q1Q2QConsolidated Net Income(Loss)$5,024$6,698$5,018$4,766$4,884$(2,573)$4,722$4,702 Add:Provision for income taxes 1,496 2,113 1,482 1,346 1,308 756 1,353 1,332 Interest expense 937 1,105 1,207 1,285 1,433 1,599 1,635 1,698 Depreciation and amortization expense(1)4,324 4,218 4,318 4,359 4,431 4,516 4,445 4,483 Consolidated EBITDA$11,781$14,134$12,025$11,756$12,056$4,298$12,155$12,215 Add/(subtract):Other(income)expense,net(2)$439$(2,687)$(114)$(210)$(170)$807$(198)$72 Equity in(earnings)losses of unconsolidated businesses (2)(4)(9)33 18 11 9 14 Severance charges 304 237 296 Legacy legal matter 106 Verizon Business Group goodwill impairment 5,841 Asset rationalization 155 325 Legal settlement 100 Business transformation costs 176 Non-strategic business shutdown 158 Consolidated Adjusted EBITDA$12,218$11,747$11,902$11,971$12,238$11,678$12,072$12,301 Consolidated Operating Revenues$32,596$33,336$35,130$32,981$32,796 Consolidated Net Income(Loss)Margin 14.6.7%(7.3).3.3%Consolidated Adjusted EBITDA Margin 36.76.73.26.67.5%Consolidated Adjusted EBITDA-Year over year change%2.8%Footnotes:(1)Includes Amortization of acquisition-related intangible assets and a portion of the Non-strategic business shutdown,where applicable.(2)Includes Pension and benefits remeasurement adjustments,where applicable.Verizon Communications Inc.Non-GAAP Reconciliations-Consolidated14 Consolidated EBITDA and Consolidated Adjusted EBITDA(LTM)(dollars in millions)12 Mos.Ended12 Mos.Ended12 Mos.Ended12 Mos.Ended12 Mos.EndedUnaudited6/30/239/30/2312/31/233/31/246/30/24Consolidated Net Income$21,506$21,366$12,095$11,799$11,735 Add:Provision for income taxes 6,437 6,249 4,892 4,763 4,749 Interest expense 4,534 5,030 5,524 5,952 6,365 Depreciation and amortization expense(1)17,219 17,326 17,624 17,751 17,875 Consolidated EBITDA$49,696$49,971$40,135$40,265$40,724 Add/(subtract):Other(income)expense,net(2)$(2,572)$(3,181)$313$229$511 Equity in losses of unconsolidated businesses 18 38 53 71 52 Severance charges 541 541 533 533 296 Legacy legal matter 106 106 Verizon Business Group goodwill impairment 5,841 5,841 5,841 Asset rationalization 155 155 480 480 325 Legal settlement 100 100 100 Business transformation costs 176 176 176 176 Non-strategic business shutdown 158 158 158 158 Consolidated Adjusted EBITDA$47,838$47,858$47,789$47,959$48,289 Footnotes:(1)Includes Amortization of acquisition-related intangible assets and a portion of the Non-strategic business shutdown,where applicable.(2)Includes Pension and benefits remeasurement adjustments,where applicable.Net Unsecured Debt and Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio(dollars in millions)Unaudited12/31/223/31/236/30/239/30/2312/31/233/31/246/30/24Debt maturing within one year$9,963$12,081$14,827$12,950$12,973$15,594$23,255 Long-term debt 140,676 140,772 137,871 134,441 137,701 136,104 126,022 Total Debt 150,639 152,853 152,698 147,391 150,674 151,698 149,277 Less Secured debt 20,008 20,835 21,342 20,951 22,183 23,290 24,015 Unsecured Debt 130,631 132,018 131,356 126,440 128,491 128,408 125,262 Less Cash and cash equivalents 2,605 2,234 4,803 4,210 2,065 2,365 2,432 Net Unsecured Debt$128,026$129,784$126,553$122,230$126,426$126,043$122,830 Consolidated Net Income(LTM)$21,506$21,366$12,095$11,799$11,735 Unsecured Debt to Consolidated Net Income Ratio 6.1x 5.9x 10.6x 10.9x 10.7x Consolidated Adjusted EBITDA(LTM)$47,838$47,858$47,789$47,959$48,289 Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio 2.6x 2.6x 2.6x 2.6x 2.5x Net Unsecured Debt-Quarter over quarter change$(3,213)Net Unsecured Debt-Year over year change$(3,723)Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio-Quarter over quarter change(0.1x)Net Unsecured Debt to Consolidated Adjusted EBITDA Ratio-Year over year change(0.1x)Verizon Communications Inc.Non-GAAP Reconciliations-Consolidated15Adjusted Earnings per Common Share(Adjusted EPS)(dollars in millions except per share amounts)3 Mos.Ended3 Mos.EndedUnaudited6/30/236/30/24Pre-taxTaxAfter-TaxPre-taxTaxAfter-TaxEPS$1.10$1.09 Amortization of acquisition-related intangible assets$206$(53)$153 0.04$219$(55)$164 0.04 Severance,pension and benefits charges 237 (59)178 0.04 136 (34)102 0.02 Asset rationalization 155 (33)122 0.03$598$(145)$453$0.11$355$(89)$266$0.06 Adjusted EPS$1.21$1.15 Year over year change%(5.0)%Footnote:Adjusted EPS may not add due to rounding.Free Cash Flow(dollars in millions)3 Mos.Ended3 Mos.Ended6 Mos.Ended6 Mos.EndedUnaudited6/30/236/30/246/30/236/30/24Net Cash Provided by Operating Activities$9,731$9,485$18,020$16,569 Capital expenditures(including capitalized software)(4,112)(3,695)(10,070)(8,071)Free Cash Flow$5,619$5,790$7,950$8,498 Free Cash Flow for 3 Mos.Ended 6/30/24-Year over year change%3.0%Free Cash Flow for 6 Mos.Ended 6/30/24-Year over year change$548 Free Cash Flow for 6 Mos.Ended 6/30/24-Year over year change%6.9%Consolidated Operating Expenses Excluding Depreciation and Amortization and Special Items(dollars in millions)3 Mos.Ended3 Mos.EndedUnaudited6/30/236/30/24Consolidated Operating Expenses$25,376$24,978 Depreciation and amortization expense(1)4,359 4,483 Severance charges 237 Asset rationalization 155 Consolidated Operating Expenses Excluding Depreciation and Amortization and Special Items$20,625$20,495 Year over year change%(0.6)%Footnote:(1)Includes Amortization of acquisition-related intangible assets.Verizon Communications Inc.Non-GAAP Reconciliations-Consolidated16Non-GAAP Reconciliations-SegmentsSegment EBITDA and Segment EBITDA MarginConsumer(dollars in millions)3 Mos.3 Mos.3 Mos.3 Mos.3 Mos.3 Mos.EndedEndedEndedEndedEndedEndedUnaudited3/31/236/30/239/30/2312/31/233/31/246/30/24Operating Income$7,099$7,330$7,547$7,035$7,372$7,604 Add Depreciation and amortization expense 3,214 3,247 3,272 3,344 3,309 3,394 Segment EBITDA$10,313$10,577$10,819$10,379$10,681$10,998 Total operating revenues$24,857$24,558$25,257$26,954$25,057$24,927 Operating Income Margin 28.6).8).9&.1).40.5%Segment EBITDA Margin 41.5C.1B.88.5B.6D.1%Segment EBITDA-Year over year change%4.0%Business(dollars in millions)3 Mos.3 Mos.3 Mos.3 Mos.3 Mos.3 Mos.EndedEndedEndedEndedEndedEndedUnaudited3/31/236/30/239/30/2312/31/233/31/246/30/24Operating Income$551$533$539$443$399$500 Add Depreciation and amortization expense 1,094 1,103 1,127 1,164 1,128 1,078 Segment EBITDA$1,645$1,636$1,666$1,607$1,527$1,578 Total operating revenues$7,494$7,483$7,527$7,618$7,376$7,300 Operating Income Margin 7.4%7.1%7.2%5.8%5.4%6.8%Segment EBITDA Margin 22.0!.9.1!.1 .7!.6%Segment EBITDA-Year over year change%(3.5)%Verizon Communications Inc.17
2024-08-05
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Earnings Results PresentationFirst Quarter 2024April 12,2024Be the preeminent banking partner for institutions with cross-border needs,a global leader in wealth management and a valued personal bank in our home marketOur VisionDelivering on our Investor Day prioritiesBuild winning cultureInvest in talentDeliver One Citi Focus on five core interconnected businessesExit 14 international consumer markets Simplify the organization and management structure#1 priorityRelentless executionRegulatory remediationModernize infrastructure Data enhancementsTransformationSimplificationCulture and TalentMaximize unique global networkGrow Commercial Banking client sectorScale WealthTarget share gains in Banking,Markets and U.S.Personal BankingInvest for GrowthElements of our StrategyOur strategy and path forward remains unchanged2We now have a simpler structure aligned with five core businesses 32021-2023 Priorities Execute on TransformationImprove Business PerformancePriorities:2024 and BeyondBankingProgressed on the Divestitures Simplified Organizational Structure Established a Winning Culture Developed a Refreshed Strategy TransformationStrategic ExecutionOrganization,Culture,and TalentRetired 110 technology applications,continuing to simplify our infrastructure and focus on strategic platformsBuilt greater efficiency and scale in the risk management of our Global Spread Products business with 99%of risk computations now on cloud-based infrastructureImproved resiliency and reduced downtime by simplifying system restoration to a single click for 30%of our critical applications(1)Launched a robust position management tool to better track,manage and forecast for roles across Citi Intensifying our efforts in 2024 to accelerate progress automating our regulatory processes and in remediating our data,particularly related to regulatory reportingStrategy:Continued Services momentum driven by client activity,new wins and investments.Citi Token Services won the 2024 Celent Model Bank Award for Digital Asset Innovation(2)In Markets,unified Spread Products business,which now includes all of F&S,benefiting from strong activity in financing and intermediationInvestment Banking seeing share gains,benefiting from past investments and Industry alignment across Banking,enabling coordinated coverage and opportunity captureIn Wealth,double-digit non-interest revenue growth with continued focus on growing investment assets and scaling alternatives.Significant hires announced USPB revenue momentum driven by robust borrowing,product innovation(Citi Shop and Citi Travel)card partner deepening,and benefits from Simplified BankingProgress on divestitures:Banamex leadership team and new Chair announced and Mexico separation remains on track for 2H24 Wind-down ahead of plan in Korea,Russia and China China Consumer Wealth and Credit Card portfolio sales on track to be completed in 2024Completed the organizational changes to align our structure with our strategy and simplified business model.Key aspects include:Executed remaining phases in 1Q24,with a total headcount reduction of 7,000 from the broader restructuring,which is largely from the organizational simplification Over 98%of bank now operates under 8 layers(excluding CEO)Improved average span of control for managers by 2 Eliminated more than half of internal governance committees(200 )Announced Vis Raghavan as new Head of Banking and Andrei Magasiner as new TreasurerPromoted a diverse global managing director class with women comprising nearly 30%Drive Revenue GrowthDisciplined Expense Management Executing with Excellence Across All Priorities To Unlock the Value of CitiMaintain Robust Capital and LiquidityImprove Returns Over the Medium-Term4Progress against our priorities in first quarter 2024Note:All footnotes are presented starting on Slide 32.NIR up 11%YoY on market performance and investment asset focusEstimated Client investment assets(9)up 12%YoYClient balances(10)up 6%YoYRevenues1Q24$21.1 billion 1Q23(2)%Net Income1Q24$3.4 billion 1Q23(27)%EPS1Q24$1.58 1Q23(28)%RoTCE(1)1Q247.6%1Q2310.9T1 Capital Ratio(2)1Q2413.5%1Q2313.4%Tangible Book Value Per Share(3)1Q24$86.67 1Q233%Continued momentumTTS:Maintained marketshare of 10.0%(4)Cross border transaction value up 9%YoY(5)Securities Services:Gained 60bps of market share YoY in 2023(6)Continued double-digit revenue growth on flat expenses Interest-earning balances up 10%YoY in Branded Cards and up 9%YoY in Retail ServicesBranded Cards and Retail Services revenues up 7%YoY and 18%YoY,respectively5Strong performance in Spread Products Spread Products and Other Fixed Income up 26%Strength in Cash and Equity Derivatives Continued progress in Prime with balances(7)up over 10%YoYGained share of a recovering IB wallet(8)DCM Fees up 62%YoYECM Fees up 57%YoYSeeing good momentum in announced Technology and Healthcare M&AImproved Operating LeverageServicesMarketsBankingUSPBWealthReturned$1.5 billion in capital to common shareholders through dividends and share buybacksFirst Quarter Key HighlightsNote:All footnotes are presented starting on Slide 32.First quarter 2024 results snapshot($in MM,except EPS)1Q24%QoQ%YoYNet Interest Income13,507(2)%1%Non-Interest Revenue7,597NM(6)%Total Revenues21,10421%(2)%Expenses14,195(11)%7%NCLs2,30315wL Build and Other(1)62NMNMCredit Costs2,365(33) T 4,544NM(27)%Income Taxes1,136NM(26)%Net Income3,371NM(27)%Net Income to Common3,062NM(29)%Diluted EPS$1.58NM(28)ficiency Ratio(in bps)67%NM530 ROE6.6%RoTCE(2)7.6T1 Capital Ratio(3)13.5%Revenues Decreased(2)%YoY.Excluding divestiture-related impacts of$1 billion,primarily consisting of the gain from the sale of the India consumer business(4)in the prior-year quarter,revenues increased more than 3%,driven by growth across Banking,USPB and Services,partially offset by lower revenues in Markets and WealthExpenses Up 7%YoY,including$258 million of repositioning costs during the quarter,$251 million from the incremental FDIC special assessment and$225 million of restructuring charges(5).Excluding divestiture-related impacts and incremental FDIC special assessment(6),expenses were up 5%Credit Costs$2.4 billion,primarily driven by higher card NCLs At the end of the quarter,we had nearly$22 billion in total reserves with a reserve-to-funded loans ratio of approximately 2.8%Net Income-$3.4 billion as lower non-interest revenue,as well as higher expenses and cost of credit,more than offset higher net interest income Impact on 1Q24:Pretax($MM)EPSRoTCEIncremental FDIC special assessment related to regional bank failures from March 2023$(251)Restructuring charges related to organizational simplification(5)$(225)Notable items$(476)(7)$(0.18)(88)BpsFinancial Results1Q24 Financial Overview HighlightsNotable Items in the QuarterNote:Totals may not sum due to rounding.All footnotes are presented starting on Slide 32.6Financial results overviewExpense TrendNote:Totals may not sum due to rounding.All footnotes are presented starting on Slide 32.7$13.2B$13.5B$13.4B$14.2B$13.8B1Q232Q233Q234Q231Q24Quarterly expense trend and 2024 outlookRestructuring-$0.8B$0.2BRepositioning$0.2B$0.2B$0.2B$0.1B$0.3B($in B)FY24 Expense Guidance$53.5B-53.8B ex-FDIC special assessment(3)Expenses ex-Divestitures&FDIC special assessment(1,2)Reported Expenses$13.3B$16.0B$14.2B$13.6B$13.5B In 1Q24,we took an additional$225 million of restructuring charges,largely related to the organizational simplification,totaling approximately$1 billion across the last two quarters These actions are driving a headcount reduction of 7,000 and$1.5 billion of annualized run rate saves over the medium-term(4)In addition to the restructuring,we incurred$258 million of repositioning costs largely related to our efficiency efforts across the firm,including the reduction of stranded costs associated with the consumer divestituresThe expected savings from these actions will allow us to continue to fund additional investments in the transformation this year As a reminder,the benefits from the restructuring and reduction of stranded costs are expected to result in$2-2.5 billion of annualized run rate saves over the medium-term(4)Restructuring and Repositioning Summary11.7911.8912.1311.8311.801.562.011.701.991.71$13.35$13.90$13.83$13.82$13.512.41%2.48%2.49%2.46%2.42%1Q232Q233Q234Q231Q2475 69 73 76 74 854 838 821 827 833 434 431 421 417 419$1,363$1,338$1,315$1,320$1,3261Q232Q233Q234Q231Q24290 286 287 294 297 364 368 376 380 382$654$654$662$675$679 1Q232Q233Q234Q231Q24Ex-MarketsNet Interest IncomeCitigroup NIMMarkets(1)8Average LoansAverage DepositsCorporateConsumerCorporateConsumerAll OtherGross Loan Yield(2)Cost of Interest-Bearing Deposits(3)8.26%8.63%9.02%9.12%9.22%2.72%3.09%3.41%3.61%3.70%YoYQoQNote:uivalent adjustment(based on the U.S.federal statutory tax rate of 21%in all periods).Consumer loans includes USPB,Wealth and Legacy excluding Mexico SBMM.Consumer deposits includes USPB and Wealth.Corporate loans includes Services,Markets,Banking and Mexico SBMM.All footnotes are presented starting on Slide 32.($in B)5%1%2%1%4%1%YoYQoQ(3)%0%(2)%1%(3)%1%(1)%(3)%Net interest income,average loans and depositsQoQYoY$(0.31)$0.16$(0.28)$0.15$(0.03)$0.0114%1Q234Q231Q241Q234Q231Q24EOP Corporate Loans$288$300$293NCLs$0.1$0.2$0.2%of Avg Loans0.0%0.1%0.1%NALs$1.2$1.9$1.5%of Loans0.4%0.6%0.5LL/EOP Loans1.0%0.9%1.0%U.S.Cards LoansCorporate Lending Exposure($in B)By RegionBy Grade RatingEOP Loans by SegmentEOP Loans by FICO Score(1)9International ExposureKey Corporate Lending Exposure MetricsKey U.S.Cards Loan MetricsTotal EOP Consumer Loans:$382Total Exposure:$706 IGNon-IG3332ggh%1Q234Q231Q24Branded CardsRetail Services 660660Note:Totals may not sum due to rounding.All information for 1Q24 is preliminary.All footnotes are presented starting on Slide 32.U.S.cards and corporate credit overviewIG/MNCs or subsidiaries,90%Other,10%1Q234Q231Q24International44%U.S.56%1Q234Q231Q24EOP Card Loans$146$165$159NCLs$1.0$1.5$1.8%of Avg Loans2.8%3.8%4.5 DPD1.1%1.5%1.6LL/EOP Loans8.1%7.7%8.2%1Q234Q231Q24AFS Securities(Duration:2 Years)$240$257$255 HTM Securities(Duration:3 Years)264 254 252 Tangible Book Value Per Share(4)84.21 86.19 86.67 Corporate Deposits(EOP)821 803 812 Consumer Deposits(EOP)437 426 423 All Other Deposits(EOP)73 80 73 154 150 152 635 671 656 824 811 837 513 519 515 329 261 273$2,455$2,412$2,433 1Q234Q231Q241Q234Q231Q24Liquidity Coverage Ratio12067%Average HQLA584561552Total Available Liquidity Resources(3)1,033965965Balance Sheet2092062072802872851171131051,3301,3091,307519497529$2,455$2,412$2,433 1Q234Q231Q241Q234Q231Q24CET1 Capital154 154 153 Standardized RWA1,1441,1491,137CET1 Capital Ratio-Standardized13.4.4.5vanced RWA1,2661,2691,278CET1 Capital Ratio-Advanced12.1.1.0%1Q234Q231Q24Supplementary Leverage Ratio(2)6.0%5.8%5.8%Liquidity MetricsLeverage-based Capital MetricsNote:Totals may not sum due to rounding.All information for 1Q24 is preliminary.Consumer deposits includes USPB and Wealth.Corporate deposits includes Services,Markets,are included in All Other which comprises of Corporate/Other and Legacy Franchises.All footnotes are presented starting on Slide 32.End of Period AssetsEnd of Period Liabilities and EquityCashInvestments,netTrading-Related Assets(5)Loans,net(6)Other Assets(5)Trading-Related Liabilities(6)Other Liabilities(7)LTDEquityRisk-based Capital Metrics(1)($in B,except per share data)YoY(1)%(17)%-2%3%(1)%(1)%2%(10)%2%(1)%YoY(2)positsCapital and Balance Sheet Overview10QoQ1%5%(1)%3%(2)%1%1%6%(7)%(1)%-QoQ(0).4.5 bps(13)bps(10)bps6 bps4Q23 Net Income toCommon CapitalDistributions DTA RWA&Other 1Q244.5%4.5%4.5%4.5%3.0%3.5%3.5%3.5%3.0%4.0%4.3%4.3%1.2.5.0.3.5%1Q221Q23CurrentRequirement1Q24Note:Totals may not sum due to rounding.All information for 1Q24 is preliminary.All footnotes are presented starting on Slide 32.Key drivers resulting in CET1 Capital ratio of 13.5%(1)Strength in earnings Reduction in RWA Largely offset by:Capital distribution in the form of common dividends and share repurchases Seasonal increase in disallowed DTAWell capitalized today with a CET1 Capital ratio of 13.5%which is 120bps above our current 12.3%regulatory capital requirementIncluded in our current CET1 Capital ratio of 13.5%is a 100bps management bufferEffective Regulatory Requirement11Standardized CET1 Ratio Overview(1)(3)Regulatory MinimumStress Capital BufferG-SIB SurchargeManagement Buffer and ExcessActual1Q24 QoQ Standardized CET1 Ratio WalkCET1 Standardized Regulatory Requirement and Target(1)(2)($in B,unless otherwise noted)1Q24%QoQ%YoYTreasury and Trade SolutionsAverage Loans81(1)%4%Average Deposits684-(3)%Cross Border Transaction Value(4)91(9)%9%US Dollar Clearing Volume(#MM)(5)40(1)%3%Commercial Card Spend Volume(6)171%5%Securities ServicesAverage Deposits1242%(1)%Preliminary AUC/AUA($T)(7)242%($in B,unless otherwise noted)1Q24%QoQ%YoYAllocated Average TCE(2)258%8%RoTCE(3)24.1ficiency Ratio(in bps)56%(100)100 Average Loans82(1)%4%EOP Loans81(5)%-Average Deposits8081%(3)%EOP Deposits7871%(1)%Memo:($in MM)Net Interest Income3,317(4)%6%Non-Interest Revenue1,44935%($in MM)1Q24%QoQ%YoYNet Interest Income2,723(6)%4%Non-Interest Revenue79342%9%Treasury and Trade Solutions3,5162%5%Net Interest Income5947%Non-Interest Revenue65627!%Securities Services1,25016%Total Revenues4,7666%8%Expenses2,6663%NCLs6NM-ACL Build(Release)and Other(1)58(91)%NMCredit Costs64(90)%NMEBT 2,03660%2%Net Income1,49490%HighlightsServices results,key metrics and statisticsRevenues Up 8%YoY,largely driven by continued momentum across both TTS and Securities Services NII increased 6%driven by higher deposit spreads and higher trade loan spreads NIR increased 14%,reflecting continued strength across underlying fee drivers Expenses Up 11%YoY,primarily driven by continued investments in technology and product innovation Credit Costs Cost of$64 million as net credit losses remain lowNet Income Approximately$1.5 billion,up 15%YoYRoTCE(4)of 24.1%Financial ResultsKey Metrics and StatisticsKey Metrics and Statistics Detail by BusinessNote:Services includes revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets,and Services products sold to clients.Totals may not sum due to rounding.Preliminary AUC/A reflects prior-period revisions for certain AUC North America accounts.All footnotes are presented starting on Slide 32.12($in MM)1Q221Q232Q23 3Q23 4Q231Q24%QoQ%YoYMarketsFixed Income Revenues4,586 4,6233,707 3,829 2,5694,15162%(10)%Equities Revenues1,5261,1671,1099428191,22750%5%Total Markets Revenues6,112 5,7904,8164,771 3,388 5,37859%(7)%($in B,unless otherwise noted)1Q24%QoQ%YoYAllocated Average TCE(2)542%2%RoTCE(3)10.4ficiency Ratio(in bps)63%NM800 Average Trading Account Assets4084%Average Total Assets1,0482%4%Average Loans1204%8%Average VaR(4)($in MM)(99%confidence level)15411Markets results,key metrics and statisticsRevenues Down(7)%YoY,driven by Fixed Income(down(10)%),partially offset by Equities(up 5%)Fixed Income decline was driven by Rates and Currencies,reflecting lower volatility against a strong quarter in the prior year,partially offset by strength in Spread Products Equities benefited from growth across cash trading and equity derivatives Expenses up 7%YoY largely driven by the absence of a legal reserve release in the prior yearCredit Costs Cost of$200 million,primarily driven by changes in macroeconomic assumptions related to loans in Spread ProductsNet Income Approximately$1.4 billion,down(25)%YoYRoTCE(3)of 10.4%HighlightsFinancial ResultsKey Metrics and StatisticsNote:Markets includes revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets,and Services products sold to clients.Totals may not sum due to rounding.All footnotes are presented starting on Slide 32.Revenue Detail by Business($in MM)1Q24%QoQ%YoYRates and currencies2,79961%(21)%Spread products/other fixed income1,35262&%Fixed Income Markets4,15162%(10)%Equity Markets1,22750%5%Total Revenues5,37859%(7)%Expenses3,380(2)%7%NCLs78NMNMACL Build(Release)and Other(1)122(32)T%Credit Costs200(4)%NMEBT 1,798NM(29)%Net Income1,395NM(25)%($in MM)1Q22 1Q23 2Q23 3Q23 4Q23 1Q24%QoQ%YoYInvestment BankingAdvisory347276156299286230(20)%(17)%Equity Underwriting18310915812311017155Wbt Underwriting38735525927231057686b%Investment Banking fees917740573694706977382%($in B,unless otherwise noted)1Q24%QoQ%YoYAllocated Average TCE(3)222%2%RoTCE(4)9.9ficiency Ratio(in bps)69%NMNMAverage Loans89-(6)%EOP Loans871%(4)%NCL Rate(in bps)0.30%(2)25 Memo:($in MM)Net Interest Income5746%Non-Interest Revenue1,140NM75%($in MM)1Q24%QoQ%YoYInvestment Banking903365%Corporate Lending(ex-gain/(loss)(1)915NM34%Gain/(loss)on loan hedges(104)21H%Corporate Lending incl.gain/(loss)(1)811180h%Total Revenues1,71480I%Expenses1,1842%(4)%NCLs66(7)%NMACL Build(Release)and Other(2)(195)NM(44)%Credit Costs(129)NM(5)T 659NMNMNet Income536NMNMHighlights14Banking results,key metrics and statisticsFinancial ResultsRevenues Up 49%YoY driven by Investment Banking revenues up 35%,driven by DCM and ECM as improved market sentiment led to growth in issuance activity Corporate lending(ex-gain/loss on loan hedges(1)up 34%,largely driven by the higher revenue shareExpenses Down(4)%YoY,primarily driven by actions to right size the expense baseCredit Costs Benefit of$(129)million,primarily driven by changes in portfolio compositionNet Income$536 million RoTCE(4)of 9.9%Key Metrics and StatisticsInvestment Banking Fees Detail by BusinessNote:Banking includes revenues earned by Citi that are subject to a revenue sharing arrangement with BankingCorporate Lending for Investment Banking,Markets,and Services products sold to clients.Totals may not sum due to rounding.All footnotes are presented starting on Slide 32.($in MM)1Q221Q232Q23 3Q23 4Q231Q24%QoQ%YoYWealthPrivate Bank7945686056175425715%1%Wealth at Work183193224234211181(14)%(6)%Citigold9551,0059701,0049189433%(6)%Total Wealth Revenues1,932 1,7661,799 1,8551,6711,6951%(4)%($in B,unless otherwise noted)1Q24%QoQ%YoYAllocated Average TCE(2)13(1)%(1)%RoTCE(3)4.6ficiency Ratio(in bps)98%(100)600 Average Loans1500%0%EOP Loans149(2)%(1)%Average Deposits(4)3192%(1)%EOP Deposits(4)3230%0%Estimated Client Investment Assets(5)5153%Client Balances(6)9871%6%Estimated Net New Assets(7)(0)NMNMMemo:($in MM)Net Interest Income979(6)%(13)%Non-Interest Revenue71614%($in MM)1Q24%QoQ%YoYPrivate Bank5715%1%Wealth at Work181(14)%(6)%Citigold9433%(6)%Total Revenues1,6951%(4)%Expenses1,6681%3%NCLs29(6)EL Build(Release)and Other(1)(199)NMNMCredit Costs(170)NMNMEBT 197NM(1)%Net Income150NM(6)%Highlights15Wealth results,key metrics and statisticsRevenues Down(4)%YoY,driven by lower NII(down(13)%)due to lower deposit spreads and higher mortgage funding costs,partially offset by higher NIR,up 11%,driven by investment fee revenuesExpenses Up 3%YoY,driven by technology investments focused on risk and controls,as well as platform enhancements,partially offset by the initial benefits of actions to right size the expense baseCredit Costs Benefit of$(170)million,primarily related to a change in estimate as we enhanced our data related to margin lending collateralNet Income$150 millionRoTCE(3)of 4.6%Financial ResultsKey Metrics and StatisticsNote:Totals may not sum due to rounding.Client Investment Assets and Net new assets are estimated as of 1Q24.All footnotes are presented starting on Slide 32.Revenue Detail by Business($in B,unless otherwise noted)1Q24%QoQ%YoYBranded CardsCredit Card Spend Volume121(7)%4%Average Loans1081%NCL Rate (in bps)3.65Y 147 90 day Delinquency Rate (in bps)1.19 41 Retail ServicesCredit Card Spend Volume20(23)%(4)%Average Loans52-6%NCL Rate (in bps)6.32 224 90 day Delinquency Rate (in bps)2.53 77 Retail BankingEOP Digital Deposits(8)281%(1)%USPB Branches645-(1)%Mortgage Originations311%(6)%Average Mortgage Loans403%($in B,unless otherwise noted)1Q24%QoQ%YoYAllocated Average TCE(2)2515%RoTCE(3)5.5ficiency Ratio(in bps)49%(400)(500)Average Loans2041%EOP Loans204(2)%Average Deposits(4)100(5)%(10)%EOP Deposits(4)100(3)%(13)tive Mobile Users(MM)(5)192tive Digital Users(MM)(6)252%6%NCL Rate (in bps)3.67S 130 Average Installment Loans(7)64%Memo:($in MM)Net Interest Income5,226-8%Non-Interest Revenue(48)84f%($in MM)1Q24%QoQ%YoYBranded Cards2,6401%7%Retail Services1,90016%Retail Banking638(7)%1%Total Revenues5,1785%Expenses2,519(3)%-NCLs1,86417tL Build(Release)and Other(1)340(28)%(41)%Credit Costs2,20464T 45567%(15)%Net Income34773%(14)%U.S.Personal Banking results,key metrics and statisticsRevenues Up 10%YoY,driven by NII growth of 8%and lower partner payments Expenses Roughly flat,reflecting lower compensation costs,offset by higher repositioning costs and volume-related expenses Credit Costs Cost of$2.2 billion,driven by higher NCLs of$1.9 billion as card loan vintages that were originated over the last few years were delayed in their maturation due to the unprecedented levels of government stimulus during the pandemic and are now maturingNet Income$347 millionRoTCE(3)of 5.5%Financial ResultsKey Metrics and Statistics Detail by BusinessKey Metrics and StatisticsHighlightsNote:Totals may not sum due to rounding.All footnotes are presented starting on Slide 32.162022(4)2023(4)1Q24(4)StatusRevenue ExpensesRevenue ExpensesRevenue ExpensesClosed Exit Markets$2.9$2.1$2.3$1.5$0.1$0.2Mexico Consumer/SBMM4.73.45.74.21.61.2Wind-Downs/Sale/Other0.82.10.61.20.10.3Legacy Franchises8.37.78.67.01.81.7Divestiture-related Impacts0.90.71.30.4(0.0)0.1Legacy Franchises ex-divestitures(4)7.57.07.26.61.81.6($in B,unless otherwise noted)1Q24%QoQ%YoYLegacy Franchises Average Allocated TCE(3)6(38)%(38)%Corporate/Other Average Allocated TCE(3)19-6%Allocated Average TCE(3)26Efficiency Ratio(in bps)112%NMNMLegacy Franchises Revenues(in$MM)1,8146%-Legacy Franchises Expenses(in$MM)1,588(2)%(4)%Corporate/Other Revenues(in$MM)57176%(30)%Corporate/Other Expenses(in$MM)1,080(62)%NMMemo:($in MM)Net Interest Income1,6989%(22)%Non-Interest Revenue68747Y%($in MM)1Q24%QoQ%YoYLegacy Franchises1,8146%-Corporate/Other57176%(30)%Total Revenues2,38517%(9)%Expenses2,668(40)%NCLs2496&L Build(Release)and Other(2)(64)(129)%(126)%Credit Costs185(60)%(59)T(468)84%NMNet Income(457)80%NMAll Other(Managed Basis(1)results,key metrics and statistics Revenues Down(9)%YoY,primarily driven by closed exits and wind-downs,as well as higher funding costs,partially offset by higher revenues in Mexico Expenses Up 18%YoY,primarily driven by the incremental FDIC special assessment and restructuring charges,partially offset by lower expenses from both wind-down and exit markets Credit Costs Costs of$185 million decreased 59%YoY,largely driven by the absence of a reserve build in the prior year period,partially offset by higher net credit losses in Mexico Consumer17Financial ResultsKey Metrics and StatisticsHighlightsNote:Wind-down /Sale/Other includes consumer businesses in Poland,China and Korea,as well as Russia and Legacy Assets.Totals may not sum due to rounding.All footnotes are presented starting on Slide 32.Legacy Franchise Exits Contribution($in B)18Full year revenues:$80-81 billionNIR driven by Fee growth in Services,driven by client wins and deepening of existing relationships Rebound in Investment Banking and Improvement in Wealth Lower partner payments in Retail ServicesNII ex-Markets down modestly YoY(2)Full year expenses:$53.5-53.8 billion ex.FDIC special assessment(3)Full year guidance includes-$700 million to$1 billion of repositioning costs and restructuring charges,of which a total of$483 million was recorded in 1Q24Cost of CreditFull year Branded Cards average NCL rate:3.50-4.00%Full year Retail Services average NCL rate:5.75-6.25%Expect seasonality to create some variability in the quarterly NCL rateCapitalExpensesRevenueFull Year 2024 Guidance 4-5%revenue CAGR as we continue to execute in Services,Markets and USPB Capitalize on expected rebound in Banking wallet Refocus our strategy in Wealth to drive growth in investment revenueUnderlying Drivers of Medium-Term(1)Targets$1.5B and all Financial Institutions.5)Worldlink and Cross Border Funds Transfer platforms,including payments from Consumer,Corporate,Financial Institution and Public Sector clients.6)Coalition Greenwich Global FY23 Preliminary Competitor Benchmarking Analytics,including Argentina impact.Results are based upoMarket Share based on Industry Revenue Pools.7)8)Wallet share based on Dealogic data as of March 31,2024;wallet share for Debt Capital Markets includes Leverage Finance and Securitization.9)Estimated Client Investment Assets includes Assets Under Management,trust and custody assets.10)Client Balances includes EOP Deposits,Loans,and Estimated Client Investment Assets.32Slide 41)Critical applications are those supporting critical business services,the disruption of which could result in imminent intolerable harm to clients,financial markets or Citi.2)inainitiatives.In order to win,the initiatives must demonstrate clear business benefits,innovation,and technology or implementation Excellence.Footnotes(cont.)33Slide 7 1)1Q24 includes approximately$110 million in divestiture-related expenses primarily related to separation costs in Mexico and severance costs in Asia exit markets.Citi also recorded divestiture-related expenses of$106 million,$114 million,$79 million,and$73 million for 4Q23,3Q23,2Q23 and 1Q23,respectively.Results excluding divestiture-related items are non-GAAP financial measures.For a reconciliation of these results,please refer to Slide 28.2)1Q24 includes an incremental$251 million pre-the FDIC had increased its estimated loss attributable to the protection of uninsured depositors at Silicon Valley Bank and Signature Bank.This is in addition to the$1,706 million pre-tax charge to operating expenses for the FDIC special assessment in the fourth quarter of 2023.Results excluding FDIC special assessment-related items are non-GAAP financial measures.For reconciliation of these results,please refer Slide 28.3)Full year 2024 expense estimates excluding FDIC special assessment related impacts are a forward-looking non-GAAP financial measure.From time-to-time,management may discuss forward-looking non-GAAP financial measures,such as forward-looking estimates or targets for revenue,expenses,and RoTCE.We are unable to provide a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because we are unable to provide,without unreasonable effort,a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur.Such unavailable information could be significant to future results.4)Defined as 2025-2026.Slide 61)Allowance for Credit Losses(ACL)Build/(Release)and Other provisions includes a net ACL build of approximately$21 million related to loans and unfunded lending commitments as well as other provisions of approximately$41 million relating to held-to-maturity(HTM)debt securities and other assets and policyholder benefits and claims.2)Return on Tangible Common Equity(RoTCE)is a non-GAAP financial measure.RoTCE represents annualized net income available to common shareholders as a percentage of average TCE.For a reconciliation to reported results,please refer to Slide 26.3)thD of the-K filed with the SEC on April 12,2024.4)1Q24 includes divestiture-related revenue impacts of approximately$(12)million primarily due to held-for-sale accounting related to consumer loan sales.1Q23 includes an approximate$1,059 estiture-related items are non-GAAP financial measures.See Slide 28 for a reconciliation to reported results.5)Citi recorded approximately$225 million in restructuring charges in the first quarter of 2024,largely driven by severance and other related charges,related tsimplification initiatives.6)1Q24 includes approximately$110 million in divestiture-related expenses primarily related to separation costs in Mexico and severance costs in Asia exit markets and an incremental$251 million pre-ttributable to the protection of uninsured depositors at Silicon Valley Bank and Signature Bank.1Q23 divestiture-related expenses of$73 million were also primarily driven by separation costs in Mexico and repositioning costs in Asia exit markets.Results excluding divestiture-related items and the FDIC special assessment are non-GAAP measures.See Slide 28 for a reconciliation to reported results.7)In total,on an after-tax basis the notable items are$(0.4)billion.Footnotes(cont.)34Slide 111)com-K filed with the SEC on April 12,2024.2)Represents deferred tax excludable from Basel III CET1 Capital,which includes net DTAs arising from net operating loss,foreign tax credit and general business credit tax carry-forwards and DTA arising from timing difference(future deductions)that are deducted from CET1 capital exceeding the 10%limitation.3)Includes changes in goodwill and intangible assets,changes in Other Comprehensive Income and changes to certain deferrals based on the modified regulatory capital transition provision related to Regulatory Capital Treatment-Modified Transition of the Current Expected Credit Losses-K.Slide 101)th-K filed with the SEC on April 12,2024.Certain prior period amounts and ratios have been revised to conform with enhancements made in the current period.2)1Q24 is preliminary.For the composition of Citigroups Supplementary Leverage ratio,please see Appendix E of the 1Q24 earnings press release included as Exhibit 99.1 to Citigroups Current Report on Form 8-K filed with the SEC on April,12 2024.3)Available Liquidity Resources is defined as end-of-period HQLA;additional unencumbered securities,including excess liquidity held at bank entities that is non-transferable to other entities within serve Bank discount window.4)-GAAP financial measure.For a reconciliation of this measure to reported results,please refer to Slide 26.5)Trading-related assets include securities borrowed or purchased under agreements to resell net of allowance and trading account assets and brokerage receivables net of allowance.All other assets include,goodwill,intangible assets,deferred tax assets,allowance for credit losses on loans and all other assets net of allowance.6)Net loans includes ACLL.EOP gross loans,which does not include ACLL,for 1Q24,4Q23,and 1Q23 are$675 billion,$689 billion,and$652 billion,respectively.7)Trading-related liabilities include securities loaned or sold under agreements to repurchase and trading account liabilities and brokerage payables.All other liabilities include short-term borrowings and other liabilities.Slide 91)FICO scores are updated as they become available.Citi adjusted its disclosures for Credit Card FICO score distribution in 1Q24 to align with industry reporting practices using a threshold of 660 vs.680 previously.Slide 8 1)Markets is defined as Fixed Income Markets and Equity Markets.2)Gross Loan Yield is defined as gross interest revenue earned on loans divided by average loans.3)Cost of Interest-bearing deposits.Footnotes(cont.)35Slide 13 1)Allowance for Credit Losses(ACL)Build/(Release)and Other provisions includes a net ACL build of approximately$119 million related to loans and unfunded lending commitments as well as other provisions of approximately$3 million relating to held-to-maturity(HTM)debt securities and other assets.2)ardized risk-weighted assets,the global systemically important banks(GSIB)surcharge,a simulation of TCE in severe stress environments,as well as a leverage component.The allocation methodology,including underlying assumptions and judgments used to allocate TCE,are periodically reassessed and as a result the TCE allocated to the segments may change.TCE is a non-GAAP financial measure.For additional information on this measure and a reconciliation stockholders equity,please refer to Slide 26.3)Return on Tangible Common Equity(RoTCE)is a non-GAAP financial measure.RoTCE represents annualized net income available to common shareholders as a percentage of average TCE.For the components of the calculation,please refer to Slide 26.4)VaR estimates,at a 99%confidence level,the potential decline in the value of a position or a portfolio under normal market conditions assuming a one-day holding period.VAR statistics,which are based on historical data,can be materially different across firms due to differences in portfolio composition,VAR methodologies and model parameters.Slide 12 1)Allowance for Credit Losses(ACL)Build/(Release)and Other provisions includes a net ACL build of approximately$46 million related to loans and unfunded lending commitments as well as other provisions of approximately$12 million relating to held-to-maturity(HTM)debt securities and other assets.2)ardized risk-weighted assets,the global systemically important banks(GSIB)surcharge,a simulation of TCE in severe stress environments,as well as a leverage component.The allocation methodology,including underlying assumptions and judgments used to allocate TCE,are periodically reassessed and as a result the TCE allocated to the segments may change.TCE is a non-GAAP financial measure.For additional information on this measure and a reconciliation stockholders equity,please refer to Slide 26.3)Return on Tangible Common Equity(RoTCE)is a non-GAAP financial measure.RoTCE represents annualized net income available to common shareholders as a percentage of average TCE.For the components of the calculation,please refer to Slide 26.4)Worldlink and Cross Border Funds Transfer platforms,including payments from Consumer,Corporate,Financial Institution and Public Sector clients.5)U.S.Dollar Clearing Volume is defined as the number of USD Clearing Payment instructions processed by Citi on behalf of U.S.and foreign-domiciled entities(primarily Financial Institutions).Amounts in the table are stated in millions of payment instructions processed.6)Commercial Card Spend Volume is defined as total global spend volumes using Citi issued commercial cards net of refunds and returns.7)Reflects prior-period revisions for certain AUC North America accounts.Footnotes(cont.)36Slide 15 1)Allowance for Credit Losses(ACL)Build/(Release)and Other provisions includes a net ACL release of approximately$(198)million related to loans and unfunded lending commitments as well as other provisions of approximately$(1)million relating to benefits and claims,and other assets.2)ardized risk-weighted assets,the global systemically important banks(GSIB)surcharge,a simulation of TCE in severe stress environments,as well as a leverage component.The allocation methodology,including underlying assumptions and judgments used to allocate TCE,are periodically reassessed and as a result the TCE allocated to the segments may change.TCE is a non-GAAP financial measure.For additional information on this measure and a reconciliation stockholders equity,please refer to Slide 26.3)Return on Tangible Common Equity(RoTCE)is a non-GAAP financial measure.RoTCE represents annualized net income available to common shareholders as a percentage of average TCE.For the components of the calculation,please refer to Slide 26.4)The period over period variances reflect the impact of the net deposit balance transfers from USPB to Wealth of$5.9 billion over the quarter,and$15.6 billion over the last 12 months.These amounts represent the balances at the time relationships are transferred and include estimated amounts for the net transfers in March 2024.5)Estimated Client Investment Assets includes Assets Under Management,trust and custody assets.6)Client Balances includes EOP Deposits,Loans,and Estimated Client Investment Assets.7)Estimated Net New Assets represent estimated asset inflows,including dividends,interest and distributions,less asset outflows.Excluded from the calculation are the impact of fees and commissions,market movement,internal transfers within Citi specific to systematic upgrades/downgrades with US Personal Banking,and any impact from strategic decisions by Citi to exit certain markets or services.Also excluded from the calculation are potential Net New Asset amounts,expected to be immaterial,associated with markets in which the data was not available for current period reporting.Slide 14 1)Corporate Lending revenues exclude the impact of gains/(losses)on loan hedges and are non-GAAP financial measures.Gains/(losses)on loan hedges include the mark-to-market on credit derivatives and the mark-to-market on loans in the portfolio that are at fair value.Corporate Lending excludes the impact of gains/(losses)on loan hedges of approximately$(104)million in 1Q24,approximately$(131)million in 4Q23 and approximately$(199)million in 1Q23.The fixed premium costs of these hedges are netted against product revenues to reflect the cost of credit protection.-GAAP financial measures.For additional information on this measure,please refer to Slide 28.2)Allowance for Credit Losses(ACL)Build/(Release)and Other provisions includes a net ACL release of approximately$(185)million related to loans and unfunded lending commitments as well as other provisions of approximately$(10)million relating to other assets.3)ardized risk-weighted assets,the global systemically important banks(GSIB)surcharge,a simulation of TCE in severe stress environments,as well as a leverage component.The allocation methodology,including underlying assumptions and judgments used to allocate TCE,are periodically reassessed and as a result the TCE allocated to the segments may change.TCE is a non-GAAP financial measure.For additional information on this measure and a reconciliation stockholders equity,please refer to Slide 26.4)Return on Tangible Common Equity(RoTCE)is a non-GAAP financial measure.RoTCE represents annualized net income available to common shareholders as a percentage of average TCE.For the components of the calculation,please refer to Slide 26.Slide 17 1)All Other(Managed Basis)reflects results on a managed basis,which excludes divestiture-related impacts,for all periods,related to Citis divestitures of its Asia consumer banking businesses and the planned divestiture of Mexico consumer banking and small business and middle market banking within Legacy Franchises.For additional information and a reconciliation of All Other Legacy Franchises on a managed basis,please refer to Slides 29 and 30.2)Allowance for Credit Losses(ACL)Build/(Release)and Other provisions includes a net ACL release of approximately$(98)million related to loans and unfunded lending commitments as well as other provisions of approximately$34 million relating to held-to-maturity(HTM)debt securities and other assets.3)ardized risk-weighted assets,the global systemically important banks(GSIB)surcharge,a simulation of TCE in severe stress environments,as well as a leverage component.The allocation methodology,including underlying assumptions and judgments used to allocate TCE,are periodically reassessed and as a result the TCE allocated to the segments may change.TCE is a non-GAAP financial measure.For additional information on this measure and a reconciliation of the summation of the segment s and components average allocated TCE to Citis total average TCE and Citis total average stockholders equity,please refer to Slide 26.4)Legacy Franchises revenues and expenses ex-divestitures are non-GAAP measures.1Q24 includes approximately$110 million in operating expenses(approximately$77 million after-tax),primarily related to separation costs in Mexico and severance costs in the Asia exit markets.Divestiture-related impacts in 2023 includes:(i)an approximate$1.059 billion gain on sale recorded in revenue(approximately$727 million after-tax)related to the India consumer banking business sale;(ii)an approximate$403 million gain on sale recorded in revenue(approximately$284 million after-tax)related to the Taiwan consumer banking business sale;and(iii)approximately$372 million(approximately$263 million after-tax)in operating expenses primarily related to separation costs in Mexico and severance costs in the Asia exit markets.Divestiture-related impacts in 2022 includes:(i)an approximate$535 million(approximately$489 million after-tax)goodwill write-down due to resegmentation and the timing of Asia consumer banking business divestitures;(ii)an approximate$616 million gain on sale recorded in revenue(approximately$290 million after-tax)related to the Philippines consumer banking business sale;and(iii)an approximate$209 million gain on sale recorded in revenue(approximately$115 million after-tax)related to the Thailand consumer banking business sale.Footnotes(cont.)37Slide 16 1)Allowance for Credit Losses(ACL)Build/(Release)and Other provisions includes a net ACL build of approximately$337 million related to loans and unfunded lending commitments as well as other provisions of approximately$3 million relating to benefits and claims,and other assets.2)ardized risk-weighted assets,the global systemically important banks(GSIB)surcharge,a simulation of TCE in severe stress environments,as well as a leverage component.The allocation methodology,including underlying assumptions and judgments used to allocate TCE,are periodically reassessed and as a result the TCE allocated to the segments may change.TCE is a non-GAAP financial measure.For additional information on this measure and a reconciliation stockholders equity,please refer to Slide 26.3)Return on Tangible Common Equity(RoTCE)is a non-GAAP financial measure.RoTCE represents annualized net income available to common shareholders as a percentage of average TCE.For the components of the calculation,please refer to Slide 26.4)The period over period variances reflect the impact of the net deposit balance transfers from USPB to Wealth of$5.9 billion over the quarter,and$15.6 billion over the last 12 months.These amounts represent the balances at the time relationships are transferred and include estimated amounts for the net transfers in March 2024.5)Active Mobile Users represents customers of all mobile services(mobile apps or via mobile browser)within the last 90 days through February 2024.Excludes Citi mortgage and Retail Services reported in U.S.Personal Banking and includes U.S.Citigold reported in Wealth.6)Active Digital Users represents customers of all online and/or mobile services within the last 90 days through February 2024.Excludes Citi mortgage and Retail Services reported in U.S.Personal Banking and includes U.S.Citigold reported in Wealth.7)Average Installment Loans is the total of U.S.Personal Loans,Merchant Installment Lending,and Flex(Loan/Pay/Point-of-Sale)products.8)Digital Deposits includes U.S.Citigold deposits reported under Wealth.Footnotes(cont.)38Slide 231)The loss is already reflected in AOCI in Equity and therefore will not have an impact on capital.2)Other Net Income includes income from operations and tax effects.Slide 24 1)Available Liquidity Resources is defined as end-of-period HQLA;additional unencumbered securities,including excess liquidity held at bank entities that is non-transferable to other entities within serve Bank discount window.2)Calculated as Total Available Liquidity Resources of$965 billion minus$473 billion of Net Cash Outflow as March 31,2024.Slide 181)Defined as 2025-2026.2)Full year 2024 NII ex-Markets is a forward-looking non-GAAP financial measure.From time-to-time,management may discuss forward-looking non-GAAP financial measures,such as forward-looking estimates or targets for revenue,expenses,and RoTCE.We are unable to provide a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because we are unable to provide,without unreasonable effort,a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur.Such unavailable information could be significant to future results.3)Full year 2024 expense estimates excluding the incremental FDIC special assessment related impacts are forward-looking non-GAAP financial measures.1Q24 includes incremental$251 million pre-tection of uninsured depositors at Silicon Valley Bank and Signature Bank.From time-to-time,management may discuss forward-looking non-GAAP financial measures,such as forward-looking estimates or targets for revenue,expenses,and RoTCE.We are unable to provide a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because we are unable to provide,without unreasonable effort,a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur.Such unavailable information could be significant to future results.4)Subject to Citigroup Board of Directors approval.5)RoTCE over the medium-term is a forward-looking non-GAAP financial measure.From time-to-time,management may discuss forward-looking non-GAAP financial measures,such as forward-looking estimates or targets for revenue,expenses,and RoTCE.We are unable to provide a reconciliation of forward-looking non-GAAP financial measures to their most directly comparable GAAP financial measures because we are unable to provide,without unreasonable effort,a meaningful or accurate calculation or estimation of amounts that would be necessary for the reconciliation due to the complexity and inherent difficulty in forecasting and quantifying future amounts or when they may occur.Such unavailable information could be significant for future results.Slide 22 1)The loss is already reflected in AOCI in Equity and therefore will not have an impact on capital.2)Full year 2023 Other Net Income includes NII earnings on its investment,income from operations and tax effects.3)$537 million pre-tax onshore transfer risk reserve build during 2023 compares to a$58 million pre-tax onshore transfer risk reserve release during 1Q24.Footnotes(cont.)39Slide 271)Reflects the impact of foreign currency(FX)translation into U.S.dollars applying the first quarter 2024 average exchange rates for all periods presented,with the exception of EOP loans and deposits non-GAAP financial measures.Slide 28 1)Divestiture-related impacts in 2024:1Q24 includes approximately$110 million in operating expenses(approximately$77 million after-tax),primarily related to separation costs in Mexico and severance costs in the Asia exit markets.Divestiture-related impacts in 2023:1Q23 includes an approximate$1,059 million gain on sale recorded in revenue(approximately$727 million after various taxes)related to Citis sale of the India consumer banking business.For additional information,see Citis Quarterly Report on Form 10-Q for the quarterly period ended March 31,2023.2Q23 includes approximately$79 million in expenses(approximately$57 million after-tax),primarily related to separation costs in Mexico and severance costs in Asia exit markets.For additional information,see Citis Quarterly Report on Form 10-Q for the quarterly period ended June 30,2023.3Q23 includes an approximate$403 million gain on sale recorded in revenue(approximately$284 million after various taxes)related to Citis sale of the Taiwan consumer banking business.For additional information,see Citis Quarterly Report on Form 10-Q for the quarterly period ended September 30,2023.4Q23 includes approximately$106 million in expenses(approximately$75 million after-tax),primarily related to separation costs in Mexico and severance costs in Asia exit markets.For additional information,see Citis Annual Report on Form 10-K for the year ended December 31,2023.2)Results of operations for NII excluding Markets is a non-GAAP financial measure.3)Fourth Quarter 2023 expenses include FDIC special assessment of approximately$1,706 million.First quarter 2024 expenses include an incremental FDIC special assessment of$251 million.4)Corporate Lending revenues exclude the impact of gains/(losses)on loan hedges and are non-GAAP financial measures.Gains/(losses)on loan hedges include the mark-to-market on credit derivatives and the mark-to-market on loans in the portfolio that are at fair value.Corporate Lending excludes the impact of gains/(losses)on loan hedges of approximately$(104)million in 1Q24,approximately$(131)million in 4Q23 and approximately$(199)million in 1Q23.The fixed premium costs of these hedges are netted against product revenues to reflect the cost of credit protection.-GAAP financial measures.Slide 26 1)Net income to common for All Other(Managed Basis)is reduced by preferred dividends of approximately$279 million in 1Q24.2)ardized risk-weighted assets,the global systemically important banks(GSIB)surcharge,a simulation of TCE in severe stress environments,as well as a leverage component.The allocation methodology,including underlying assumptions and judgments used to allocate TCE,are periodically reassessed and as a result the TCE allocated to the segments may change.TCE is a non-GAAP financial measure.3)Return on Tangible Common Equity(RoTCE)is a non-GAAP financial measure.RoTCE represents annualized net income available to common shareholders as a percentage of average TCE.4)1Q24 reconciling items included divestiture-related impacts of approximately$(0.1)billion,primarily comprised of separation costs in Mexico and severance costs in Asia exit markets.Results excluding divestiture-related items are non-GAAP financial measures.For a reconciliation of these results,please refer to Slide 28.Footnotes(cont.)40Slide 301)Reconciling Items consist of the divestiture-related impacts excluded from the results of All Other,as well as All OtherLegacy Franchises on a managed basis.2)1Q23 includes an$1.059 billion gain on sale recorded in revenue($727 million after various taxes)related to Citis sale of the India consumer banking business.For additional information,see Citis Quarterly Report on Form 10-Q for the quarterly period ended March 31,2023.3)4Q23 includes$106 million in expenses($75 million after-tax),primarily related to separation costs in Mexico and severance costs in Asia exit markets.For additional information,see Citis Annual Report on Form 10-K for the year ended December 31,2023.4)1Q24 includes$110 million in operating expenses($77 million after-tax),primarily related to separation costs in Mexico and severance costs in Asia exit markets.5)Includes credit reserve build/(release)for loans and provision for credit losses on unfunded lending commitments.6)Includes provisions for policyholder benefits and claims and other assets.Slide 291)All Other(Managed Basis)reflects results on a managed basis,which excludes divestiture-related impacts,for all periods,related to Citis divestitures of its Asia consumer banking businesses and the planned divestiture of Mexico consumer banking and small business and middle market banking within Legacy Franchises.For additional information and a reconciliation of All Other Legacy Franchises on a managed basis,please refer to Slide 30.
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HALF-YEAR REPORT30 JUNE 20242 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information CONTENTS 3 BMW Group at a Glance 7 Interim Group Management Report 25 Interim Group Financial Statements 66 Other Information 3 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information BMW GROUP AT A GLANCE 4 BMW Group in Figures 4 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information BMW Group in Figures KEY PERFORMANCE INDICATORS 2nd quarter 2024 2nd quarter 2023 Change in%1 January to 30 June 2024 1 January to 30 June 2023 Change in%GROUP Profit before tax million 3,861 4,222 8.6 8,023 9,351 14.2 AUTOMOTIVE SEGMENT Deliveries units 618,743 626,726 1.3 1,213,276 1,214,864 0.1 Share of all-electric cars in deliveries.4 14.1 23.4 15.7 12.6 24.6 EBIT margin1%8.4 9.2 8.7 8.6 10.6 18.9 MOTORCYCLES SEGMENT Deliveries units 66,638 64,936 2.6 113,072 112,871 0.2 EBIT margin1.1 16.0 30.6 11.6 16.2 28.4 FURTHER PERFORMANCE FIGURES 2nd quarter 2024 2nd quarter 2023 Change in%1 January to 30 June 2024 1 January to 30 June 2023 Change in%GROUP EBT Margin2.5 11.3 7.1 10.9 12.6 13.5 Earnings per share of common stock3 4.15 4.39 5.5 8.57 9.70 11.6 Earnings per share of preferred stock3 4.16 4.40 5.5 8.58 9.71 11.6 AUTOMOTIVE SEGMENT Free cash flow million 1,006 1,160 13.3 2,289 3,141 27.1 BMW GROUP IN FIGURES 1 Profit before financial result as percentage of segment revenues.2 Group profit before tax as a percentage of Group reve-nues.3 Shares of common/preferred stock.In computing earnings per share of preferred stock,earnings to cover the additional dividend of 0.02 per share of preferred stock are spread over the four quarters of the corre-sponding financial year.5 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information BMW Group in Figures FURTHER PERFORMANCE FIGURES 2nd quarter 2024 2nd quarter 2023 Change in%1 January to 30 June 2024 1 January to 30 June 2023 Change in%GROUP Group revenues million 36,944 37,219 0.7 73,558 74,072 0.7 Automotive million 32,070 31,630 1.4 63,009 62,898 0.2 Motorcycles million 989 988 0.1 1,861 1,921 3.1 Financial Services million 9,742 8,795 10.8 19,267 17,621 9.3 Other Entities million 3 3 -7 6 16.7 Eliminations million 5,860 4,197 39.6 10,586 8,374 26.4 Group profit/loss before financial result(EBIT)million 3,877 4,343 10.7 7,931 9,718 18.4 Automotive million 2,684 2,898 7.4 5,394 6,675 19.2 Motorcycles million 110 158 30.4 216 312 30.8 Financial Services million 725 751 3.5 1,439 1,709 15.8 Other Entities million 8 1 -13 5 -Eliminations million 366 537 31.8 895 1,027 12.9 Group profit/loss before tax(EBT)million 3,861 4,222 8.6 8,023 9,351 14.2 Automotive million 2,627 2,740 4.1 5,330 6,568 18.8 Motorcycles million 110 159 30.8 216 313 31.0 Financial Services million 751 759 1.1 1,481 1,704 13.1 Other Entities million 295 245 20.4 696 117 -Eliminations million 78 319 75.5 300 649 53.8 Group income taxes million 1,156 1,264 8.5 2,367 2,731 13.3 Group net profit/loss million 2,705 2,958 8.6 5,656 6,620 14.6 6 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information BMW Group in Figures FURTHER PERFORMANCE FIGURES 2nd quarter 2024 2nd quarter 2023 Change in%1 January to 30 June 2024 1 January to 30 June 2023 Change in%AUTOMOTIVE SEGMENT Deliveries units 618,743 626,726 1.3 1,213,276 1,214,864 0.1 BMW units 565,490 553,369 2.2 1,096,423 1,071,326 2.3 MINI units 51,959 71,816 27.6 114,034 140,357 18.8 Rolls-Royce units 1,294 1,541 16.0 2,819 3,181 11.4 Production volume units 670,454 663,080 1.1 1,343,681 1,340,932 0.2 FINANCIAL SERVICES SEGMENT New contracts leasing/credit financing 427,852 382,010 12.0 849,908 729,308 16.5 sTT7 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information INTERIM GROUP MANAGEMENT REPORT 8 Financial Performance 8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook,Risk and Opportunity Management 21 Outlook 24 Risk and Opportunity Management 8 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance Despite a volatile market environment during the first half of the year,the BMW Group remains on course and confirms its full-year forecast for 2024.Thanks to its extensive range of innovative and attractive vehicle models,the BMW Group has once again achieved its targeted rates of return.Targeted investments are helping to drive forward innovation,thereby strengthening the BMW Groups future model portfolio.Growth was driven primarily by all-electric vehicles(BEVs)and models in higher price segments.BEVs in particular bucked the general trend during the six-month period,with deliveries up well into the double-digit range.The number of BMW brand BEVs delivered to customers during the first half of the year rose by more than a third( 34.1%).The brands total deliveries also went up( 2.3%).Between January and June 2024,a total of 1,213,276 BMW Group brand vehicles were delivered to customers (0.1%),on a par with the previous years high volumes.The EBT margin at Group level came in at 10.9%(10.5%in the second quarter),thereby exceeding the strategic target of 10%.The EBIT margin in the Automotive Segment for the first six months was 8.6%(8.4%in the second quarter),marking the tenth quarter in a row that the EBIT margin has been within the strategic target range of 8 to 10%.Intense competition and a prolonged downturn in consumer confidence particularly in the Chinese market affected the segments earnings performance,in addition to year-on-year rises in manufacturing costs,fixed costs and research and development expenses.The Financial Services segment recorded a significant increase in the num-ber of new credit financing and leasing contracts in the first six months of the year( 16.5%).In contrast,the ongoing normalisation of the pre-owned vehicle market had a dampening effect on the development of segment profit before tax(13.1%).GENERAL ECONOMIC ENVIRONMENT The global economy continued to grow at a slow rate over the first half of 2024.Inflation stabilised or continued to decline in the USA and Europe.However,geopolitical tensions and trade wars are having a sustained neg-ative impact on market sentiment in general,with a tighter interest rate en-vironment also having an impact.Higher savings ratios in China reflect a reluctance to spend on the part of consumers.FINANCIAL PERFORMANCE 8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 9 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance International automobile markets an overview The worlds largest automobile markets still performed well overall in the first half of 2024.However,the majority of markets saw a significant down-ward trend in the second quarter of the year,in particular in China and the USA.Vehicles priced at 40 thousand or less accounted for the majority of the growth in China.In the six-month period from January to June 2024,the worlds largest automobile markets developed as follows:Change compared to prior year in%EU 27 4 thereof Germany 5 thereof France 3 thereof Italy 5 thereof Spain 7 United Kingdom(UK) 6 USA 2 China 3 Japan 13 South Korea 9 Total 3 GROUP OVERVIEW Top spot in premium segment retained The BMW Group remained at the top of the global premium segment in the first half of 2024.The young,attractive and innovative products with differ-ent drive systems ensured robust delivery figures despite the volatile envi-ronment.Deliveries of BMW,MINI and Rolls-Royce brand vehicles totalled 1,213,276 units in the first six months of 2024,on a par with the previous year(2023:1,214,864 units;0.1%).A total of 618,743 units were deliv-ered between April and June(2023:626,726 units;1.3%).All-electric vehicles had a positive impact on sales growth in the first half of 2024,with deliveries continuing to rise significantly once again to 190,614 units(2023:152,936 units; 24.6%).All-electric vehicles accounted for 15.7%of all units delivered in the first six months of 2024(2023:12.6%).The BMW Group delivered a total of 269,057 electrified vehicles(BEV and PHEV)to customers in the first half of 2024(2023:245,468 units; 9.6%).In the Financial Services segment,the number of new credit financing and leasing contracts increased significantly in the first half of 2024 to 849,908(2023:729,308 contracts; 16.5%),with leasing and credit financing busi-ness up by 28.7%and 10.8%respectively.Second quarter Group EBT margin of 10.5%In the second quarter 2024,Group revenues amounted to 36,944 million on a par with the previous year(2023:37,219 million;0.7%).Adjusted for currency effects,Group revenues also remained largely unchanged(-0.1%).Favourable volume and product mix effects arising from deliveries to the dealership organisation led to an increase in revenues for the Auto-motive Segment.Pricing measures implemented in the previous year com-pensated for some of the increased level of competition,which was particu-larly strong in China.Sales went up slightly in the USA and remained in line with the previous year in Europe.In China,consumer confidence remains low despite the measures implemented by the central government,as a re-sult of which sales were held down to a level below expectations.The Fi-nancial Services segment posted increased revenues due to rising interest and leasing income.Increases in contract values and the financing of higher dealership inventory levels also had a positive impact on revenues.In con-trast,higher revenue eliminations due to the increase in new leasing busi-ness had a significant negative impact on reported Group revenues.Group cost of sales in the second quarter amounted to 30,285 million(2023:30,089 million; 0.7%),influenced by higher manufacturing costs in the Automotive Segment and an increase in research and development expenses.R&D expenditure relates in particular to cross-series digitalisation and electrification of the vehicle fleet,as well as the development of auto-mated driving functions.Additional R&D expenditure arose in connection with the development of new models,such as the new BMW X5 and other 8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 10 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance NEUE KLASSE models.In the Financial Services segment,a rise in interest rates increased the cost of sales.Selling and administrative expenses increased to 2,772 million in the re-porting period(2023:2,630 million; 5.4%),partly reflecting higher per-sonnel and IT costs.Group profit before financial result decreased by 10.7%in the second quar-ter due to the factors outlined above and amounted to 3,877 million(2023:4,343 million).In contrast,the financial result improved by 105 million compared to the previous year(2024:16 million;2023:121 million),driven by the im-proved result from equity-accounted investments.Second-quarter profit before tax was moderately down on the previous year at 3,861 million(2023:4,222 million;8.6%).The EBT margin for the three-month period came in at 10.5%(2023:11.3%;0.8 percentage points).Successful first half of the year for BMW Group At 73,558 million,Group revenues recorded between January and June 2024 were at a similar level to the previous year(2023:74,072 mil-lion;-0.7%, 0.7justed for currency effects).Increased sales to deal-erships and favourable product mix effects had a positive impact on reve-nues.Pricing measures implemented in the previous year compensated for some of the increased level of competition.The upturn in dealership and customer credit financing business was largely driven by increases in con-tract values and interest rates as well as higher dealership inventory levels.In contrast,higher revenue eliminations due to the increase in new leasing business had a significant negative impact on reported Group revenues in the first half of 2024.Group cost of sales amounted to 60,335 million(2023:59,170 million; 2.0%).The slight increase is due to a rise in sales to the dealership organisation and higher manufacturing and R&D expenses.Cost of sales in the Financial Services segment went up as a result of a rise in refinancing costs.R&D expenditure amounted to 4,169 million in the first six months of the year and was therefore significantly higher than in the previous year(2023:3,396 million).The R&D expenditure ratio increased to 5.7%(2023:4.6%).R&D expenditure relates in particular to cross-series digitalisation and elec-trification of the vehicle fleet,as well as the development of automated driv-ing functions.Additional R&D expenditure arose in connection with the de-velopment of new models,such as the new BMW X5 and other NEUE KLASSE models.The capitalisation rate as at 30 June 2024 was 30.8%(2023:28.9%).Selling and administrative expenses went up by 6.0%to 5,287 million(2023:4,989 million),primarily due to higher personnel and IT costs.Profit before financial result in the period between January and June 2024 fell significantly to 7,931 million(2023:9,718 million;18.4%)in par-ticular due to rises in manufacturing costs,research and development ex-penses,and sales and administrative expenses.The financial result in the reporting period was 92 million,a significant im-provement compared to the previous year(2023:367 million).This turnaround was driven by developments on interest rate and foreign ex-change hedge markets,in addition to the improved result from equity-ac-counted investments.Group profit before tax for the six-month period amounted to 8,023 mil-lion(2023:9,351 million;14.2%).The EBT margin was 10.9%at a Group level(2023:12.6%).8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 11 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance BMW Group research and development expenses in million 2nd quarter 2024 2nd quarter 2023 Change in%1 January to 30 June 2024 1 January to 30 June 2023 Change in%Research and development expenditure1 2,195 1,842 19.2 4,169 3,396 22.8 Amortisation of development costs 540 606 10.9 1,094 1,236 11.5 Capitalised development costs 746 602 23.9 1,282 981 30.7 Research and development expenses 1,989 1,846 7.7 3,981 3,651 9.0 in%2nd quarter 2024 2nd quarter 2023 Change in%-pts.1 January to 30 June 2024 1 January to 30 June 2023 Change in%-pts.Research and development expenditure ratio2 5.9 4.9 1.0 5.7 4.6 1.1 Capitalisation rate3 34.0 32.7 1.3 30.8 28.9 1.9 Share buyback programme At the Annual General Meeting of BMW AG held on 11 May 2022,the shareholders authorised the Board of Management to acquire treasury shares via the stock exchange,up to a maximum of 10%of the share capital in place at the date of the resolution or if this value is lower of the share capital in place at the time the authorisation is exercised,and to redeem those shares without any further action required by the Annual General Meeting.The buyback authorisation remains valid until 10 May 2027.As at 30 June 2024,BMW AG held a total of 11,056,731 treasury shares,corresponding to a nominal amount of 11,056,731.BMW AG has ac-quired shares equivalent to 5.51%of the share capital in place as at 30 June 2024 on the basis of the authorisation granted by the Annual Gen-eral Meeting on 11 May 2022.Financing activities During the six-month period ended 30 June 2024,the BMW Group issued bonds totalling approximately 8.5 billion,refinancing itself via a variety of instruments,including two euro benchmark bonds,a 144A bond denomi-nated in US dollars,a bond denominated in Canadian dollars and a Panda bond in China.In addition,ABS transactions with a total volume of approxi-mately 6.8 billion were either concluded or prolonged in the USA,Ger-many,the UK,Canada,Japan and Korea.As at 30 June 2024,Group liquidity stood at around 19.5 billion,un-changed from the end of the previous financial year(31 December 2023:19.5 billion).8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 1 Research and development expenditure is the sum of research and non-capitalised development costs and investments in capitalised development costs,adjusted for the associated scheduled amortisation.2 Research and development expenditure as a percent-age of Group revenues.3 Capitalised development costs as a percentage of re-search and development expenditure.12 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance AUTOMOTIVE SEGMENT 2nd quarter 2024 2nd quarter 2023 Change in%1 January to 30 June 2024 1 January to 30 June 2023 Change inliveries*units 618,743 626,726 1.3 1,213,276 1,214,864 0.1 Production volume units 670,454 663,080 1.1 1,343,681 1,340,932 0.2 Revenues million 32,070 31,630 1.4 63,009 62,898 0.2 Profit before financial result(EBIT)million 2,684 2,898 7.4 5,394 6,675 19.2 Profit before tax million 2,627 2,740 4.1 5,330 6,568 18.8 EBIT margin*%8.4 9.2 8.7 8.6 10.6 18.9 BMW Group deliveries in line with previous years level in first half of year The BMW Group delivered a total of 1,213,276 BMW,MINI and Rolls-Royce brand vehicles worldwide in the first six months of 2024,matching the pre-vious years level(2023:1,214,864 units;0.1%).A total of 618,743 units were delivered between April and June(2023:626,726 units;1.3%).Deliveries of BMW brand vehicles increased by 2.3%to 1,096,423 units in the first half of 2024(2023:1,071,326 units)and by 2.2%to 565,490 units between April and June(2023:553,369 units).Deliveries of MINI brand vehicles went down due to the planned model changeover throughout the product portfolio.Deliveries of MINI brand vehicles fell to 114,034 units(2023:140,357 units;18.8%)in the six-month period,including 51,959 units delivered in the second quarter of 2024(2023:71,816 units;27.6%).Deliveries of the ultra-luxury Rolls-Royce brand totalled 2,819 units in the first half of the year(2023:3,181 units;11.4%),including 1,294 units delivered in the second quarter(2023:1,541 units;16.0%).Electromobility driving growth Once again,the ongoing electrification of the model range was the biggest driver of sales growth in the first half of 2024.The all-electric automobiles of the BMW,MINI,and Rolls-Royce brands saw another significant increase,with a total of 190,614 BEVs delivered during the six-month period(2023:152,936 units; 24.6%).In the second quarter 2024,107,925 BEVs were delivered to customers(2023:88,289 units; 22.2%).The ratio of all-elec-tric vehicles to total deliveries climbed to 15.7%(2023:12.6%)in the first six months of 2024,and to 17.4%during the period from April to June(2023:14.1%).A total of 269,057 electrified vehicles(BEV and PHEV)were delivered to customers in the first half of the year(2023:245,468 units; 9.6%).In the second quarter,the number rose by 8.5%,reaching 146,475 units com-pared to 134,982 units in 2023.The share of total deliveries accounted for by electrified vehicles went up to 22.2%in the first half of the year(2023:20.2%)and 23.7%in the second quarter(2023:21.5%).8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management *Key performance indicator.13 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance BMW Group deliveries of electrified models in units 1 January to 30 June 2024 1 January to 30 June 2023 Change inV 190,614 152,936 24.6 BMW 179,554 133,927 34.1 MINI 9,950 19,009 47.7 Rolls-Royce 1,110 PHEV 78,443 92,532 15.2 BMW 76,265 83,427 8.6 MINI 2,178 9,105 76.1 Total 269,057 245,468 9.6 Sales growth for BMW brand The BMW brand maintained its leading position in the global premium seg-ment during the reporting period.The core brand achieved a slight increase in sales in both the second quarter(2024:565,490 units;2023:553,369 units; 2.2%)and in the first half of the year(2024:1,096,423 units;2023:1,071,326 units; 2.3%).The brands all-electric models were the main growth driver.The number of BMW brand BEVs delivered in the first half of the year increased sharply to 179,554 units(2023:133,927 units; 34.1%).Models from the X family and top-range classes also recorded significant growth.Notably,one in every five deliveries of the successful BMW X1 and the luxury BMW 7 Series Sedan was an all-electric variant,specifically the BMW iX1*and BMW i7*.Once again,the most successful all-electric model was the BMW i4*Sports Coup,which continued to record double-digit growth rates.The X models,including the BMW iX3*,BMW iX*,and the newly introduced BMW iX2*,also enjoyed widespread popularity globally.The launch of the new BMW 5 Series demonstrates the technologically flexible approach of the BMW Groups model offerings.The BMW 5 Series Business Sedan is available in all drivetrain variants.The new BMW M5*has received particu-larly positive feedback from the international trade press in the run-up to its launch at the end of 2024.The high-performance sedan will be available as a PHEV with an electrified drivetrain for the first time.Deliveries of BMW automobiles by model series in units 1 January to 30 June 2024 1 January to 30 June 2023 Change in%BMW 1 Series/2 Series 105,574 112,123 5.8 BMW 3 Series/4 Series 272,218 262,343 3.8 BMW 5 Series/6 Series 114,165 140,989 19.0 BMW 7 Series/8 Series 30,249 27,155 11.4 BMW Z4 5,489 6,446 14.8 BMW X1/X2 185,243 138,100 34.1 BMW X3/X4 193,162 195,664 1.3 BMW X5/X6 136,842 136,201 0.5 BMW X7 31,068 28,074 10.7 BMW iX 18,582 21,172 12.2 BMW XM 3,807 2,484 53.3 BMW i3/i8 24 575 95.8 BMW total 1,096,423 1,071,326 2.3 thereof BEV 179,554 133,927 34.1 thereof PHEV 76,265 83,427 8.6 xx General Economic Environment xx Group Overview xx Automotive Segment xx Financial Services Segment xx Other Entities Segment and Eliminations xx Outlook xx Risk and Opportunity Management 8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management *Consumption and Carbon Disclosures.14 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance Ready for the New MINI Family As expected,the MINI brand recorded lower deliveries during the reporting period due to the entire product portfolio transitioning to the New MINI Family.In the first half of 2024,a total of 114,034 MINI brand vehicles were delivered to customers(2023:140,357 units;18.8%),thereof 51,959 vehicles in the second quarter(2023:71,816 units;27.6%).Between April and June,the first customers were able to take delivery of a MINI Cooper*from the New MINI Family,powered by either a combustion engine or an all-electric drivetrain.In the second half of the year,the MINI brand will welcome a new family member:the all-electric crossover Aceman*.Rolls-Royce:Spectre exceeds one thousand deliveries In the first half of 2024,Rolls-Royce delivered a total of 2,819 units to customers(2023:3,181 units;11.4%).The ultra-luxury brand delivered a total of 1,294 units to customers in the second quarter(2023:1,541 units;16.0%).A notable milestone was achieved by the Rolls-Royce Spectre*:The first all-electric Supercoup surpassed the thousand unit mark just six months after coming onto the market and accounted for 40%of all deliveries made by the brand.The launch of the new Rolls-Royce Cullinan Series II*also proved successful.The luxury off-roader Rolls-Royce Cullinan*remains one of the most popular Rolls-Royce models.BMW Group deliveries of vehicles by region and market in units 2nd quarter 2024 2nd quarter 2023 Change in%1 January to 30 June 2024 1 January to 30 June 2023 Change in%Europe 232,790 232,994 0.1 460,793 449,264 2.6 thereof Germany 64,990 67,623 3.9 122,656 124,080 1.1 thereof UK 40,445 36,527 10.7 87,340 75,040 16.4 Americas 121,182 117,790 2.9 230,141 225,645 2.0 thereof USA 97,491 95,948 1.6 188,783 186,122 1.4 Asia 249,870 261,242 4.4 494,567 513,169 3.6 thereof China 188,661 198,161 4.8 376,353 393,261 4.3 Other markets 14,901 14,700 1.4 27,775 26,786 3.7 Total 618,743 626,726 1.3 1,213,276 1,214,864 0.1 8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management *Consumption and Carbon Disclosures.15 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance Second quarter EBIT margin of 8.4%in Automotive segment Segment revenues totalled 32,070 million in the second quarter 2024,up slightly on the previous year(2023:31,630 million; 1.4%, 2.1justed for currency effects).The increase was mainly driven by higher vehicle sales to supply the dealership organisation and fa-vourable product mix effects.Pricing measures implemented in the previous year compensated for some of the increased level of competition,which was particularly strong in China.Sales went up slightly in the USA and remained in line with the previous year in Europe.In China,consumer confidence re-mains low,holding down sales to a lower-than-expected level.Second-quarter segment cost of sales went up slightly year on year to 27,039 million(2023:26,400 million; 2.4%).This rise was driven by higher manufacturing costs and an increase in research and development expenses.Moreover,depreciation and amortisation amounting to approxi-mately 0.3 billion(2023:0.3 billion)arising on the purchase price allo-cation was included in cost of sales in the second quarter.The increase in R&D expenditure is related to the cross-series digitalisation and electrification of the vehicle fleet,as well as the development of auto-mated driving functions.The expenditure also related to the development of new models,such as the BMW X5 and other NEUE KLASSE models.Selling and administrative expenses went up by 116 million compared to the prior years second quarter(2024:2,307 million;2023:2,191 mil-lion; 5.3%).This was primarily driven by higher personnel costs and IT costs.Profit before financial result in the second quarter amounted to 2,684 mil-lion(2023:2,898 million;7.4%),resulting in an EBIT margin of 8.4%(2023:9.2%).The financial result of the segment was a net negative amount of 57 mil-lion(2023:158 million),whereby the change in the second quarter was attributable to the improved result from equity-accounted investments.Segment profit before tax fell slightly in the second quarter to 2,627 million(2023:2,740 million;4.1%).Solid six-month period for Automotive segment Segment revenues for the six-month period were in line with the previous year at 63,009 million(2023:62,898 million; 0.2%, 1.8justed for currency effects).Segment revenues were primarily affected by an in-crease in sales to dealerships and favourable product mix effects.Segment cost of sales went up slightly year on year to 53,166 million(2023:51,890 million; 2.5%).The rise was largely driven by higher ma-terial costs and an increase in research and development expenses.The purchase price allocation resulted in depreciation and amortisation costs amounting to approximately 0.7 billion(2023:0.7 billion).The increase in R&D expenditure is related to the cross-series digitalisation and electrification of the vehicle fleet,as well as the development of auto-mated driving functions.Additional expenditure was related to the develop-ment of new models,such as the BMW X5 and other NEUE KLASSE mod-els.Selling and administrative expenses went up by 249 million year on year(2024:4,399 million;2023:4,150 million; 6.0%).The increase was driven by higher personnel costs and IT costs,mainly for projects and soft-ware licenses.Profit before financial result for the six-month period amounted to 5,394 million(2023:6,675 million;19.2%),while the EBIT margin fell by 2.0 percentage points to 8.6%(2023:10.6%).The financial result of the Automotive segment was a net negative amount of 64 million(2023:107 million),whereby the change for the six-month period was attributable mainly to the improved result from equity-accounted investments.Segment profit before tax amounted to 5,330 million(2023:6,568 mil-lion;18.8%).8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 16 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance Automotive segment free cash flow of 2.3 billion generated for period January to June 2024 Net cash inflow from operating activities amounted to 7,355 million in the first six months,comprising primarily profit before tax plus depreciation and amortisation of tangible,intangible and investment assets.The change in working capital reduced the net cash inflow from operating activities,as did income tax payments.The increase in inventories,partly in connection with the renewal of the MINI product family,had a negative impact on free cash flow,while the increase in trade payables and the decrease in trade receiv-ables had a partially offsetting effect.Net cash outflow from investing activities amounted to 4,474 million,a significant portion of which was related to investments in property,plant and equipment and intangible assets,particularly in connection with the Groups continued expansion of electromobility and new models.Free cash flow of the Automotive segment amounted to 2,289 million in the first six months(2023:3,141 million).The main reason for the year-on-year decline was the higher cash outflow from investing activities.This was partially offset by the higher cash inflow from operating activities.in million 2024 2023 Change Cash inflow( )/outflow()from operating activities 7,355 7,180 175 Cash inflow( )/outflow()from investing activities 4,474 4,031 443 Adjustment for net investment in marketable securities and investment funds 592 8 584 Free cash flow Automotive segment 2,289 3,141 852 Net financial assets Automotive1 In the 2024 Half-Year Report,the net financial assets of the Automotive segment are reported in an expanded scope.Automotive-related net finan-cial assets now comprise the net financial assets of the Automotive segment as well as those of the holding companies included in the Other Entities seg-ment.These holding companies receive distributions at least once a year from their subsidiaries that are included in other segments.By including the net financial assets of the holding companies,the relevant intragroup distri-butions continue to be reflected in net financial assets.Currently,these as-sets are primarily used alongside external financing to finance the oper-ations of the Financial Services segment.Automotive-related net financial assets comprise the following:in million 30.6.2024 31.3.2024 31.12.2023 Change to 31.12.2023 Cash and cash equivalents 14,132 12,517 13,682 450 Marketable securities and investment funds 1,215 1,628 1,782 567 Intragroup net financial assets 31,063 35,339 32,832 1,769 Financial assets 46,410 49,484 48,296 1,886 Less:external financial liabilities2 3,202 2,666 2,794 408 Net financial assets Automotive 43,208 46,818 45,502 2,294 8 General Economic Environment 9 Group Overview 11 Automotive Segment 15 Financial Services Segment 16 Other Entities Segment and Eliminations 17 Outlook 20 Risk and Opportunity Management xx General Economic Environment xx Group Overview xx Automotive Segment xx Financial Services Segment xx Other Entities Segment and Eliminations xx Outlook xx Risk and Opportunity Management *Consumption and Carbon Disclosures.8 General Economic Environment 9 Group Overview 11 Automotive Segment 15 Financial Services Segment 16 Other Entities Segment and Eliminations 17 Outlook 20 Risk and Opportunity Management *Consumption and Carbon Disclosures.8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 1 For comparison purposes,the figures as at 31 March 2024 and 31 December 2023 have been adjusted ac-cordingly.2 Excluding derivative financial instruments.17 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance Automotive segment net financial assets comprise the following:in million 30.6.2024 31.3.2024 31.12.2023 Change to 31.12.2023 Cash and cash equivalents 14,114 12,421 13,590 524 Marketable securities and investment funds 1,215 1,628 1,782 567 Intragroup net financial assets 3,087 6,638 4,406 7,493 Financial assets 12,242 20,687 19,778 7,536 Less:external financial liabilities*3,202 2,646 2,775 427 Net financial assets Segment Automotive 9,040 18,041 17,003 7,963 8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management *Excluding derivative financial instruments.18 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance FINANCIAL SERVICES SEGMENT Credit financing and leasing for private and commercial customers represent the largest business area for the Financial Services segment.Credit financ-ing for dealerships and the management of the Groups own fleet round out the segments portfolio of financing products.Significant increase in new business in second quarter In the second quarter of 2024,the Financial Services segment achieved a significant increase in the credit financing and leasing lines of business with 427,852 new contracts(2023:382,010 contracts; 12.0%).The growth was driven in part by a higher number of contracts for new vehicles.New contracts for pre-owned BMW Group vehicles were also up notably com-pared to the same quarter of the previous year(2024:89,726 contracts;2023:80,533 contracts; 11.4%).The volume of new leasing and credit financing business grew by 25.5%and 5.4%respectively.Overall,leasing accounted for 36.7%of all new business,and financing for 63.3%.The total new business volume of all financing and leasing contracts in-creased by 14.6%compared to the corresponding prior year quarter to 16,057 million(2023:14,009 million).The share of new BMW Group vehicles either leased or financed by the Financial Services segment stood at 40.6%2 in the second quarter(2023:38.5%; 2.1 percentage points).Second quarter profit before tax down slightly compared to previous year At 751 million,segment profit before tax in the second quarter 2024 was down slightly year on year(2023:759 million;1.1%)due to lower reve-nues from the remarketing of lease returns.This downturn was somewhat offset by a lower allocation to credit risk provisions,as the corresponding prior year quarter was impacted by an additional credit risk provision related to the war in Ukraine.2nd quarter 2024 2nd quarter 2023 Change in%1 January to 30 June 2024 1 January to 30 June 2023 Change in%New contracts leasing/credit financing 427,852 382,010 12.0 849,908 729,308 16.5 Revenues million 9,742 8,795 10.8 19,267 17,621 9.3 Profit before financial result(EBIT)million 725 751 3.5 1,439 1,709 15.8 Profit before tax million 751 759 1.1 1,481 1,704 13.1 30.6.2024 31.12.2023 Change in%Portfolio leasing or credit finance vehicles 4,895,606 4,952,318 1.1 Business volume in balance sheet terms1 million 143,010 137,910 3.7 8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 1 Calculated on the basis of the lines items“Leased products”and“Receivables from sales financing”(cur-rent and non-current)of the Financial Services seg-ment balance sheet.2 The calculation only includes automobile markets in which the Financial Services segment is represented by a consolidated entity.19 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance Significant increase in new business in first half of year The number of new credit financing and leasing contracts signed between January and June 2024 went up significantly by 16.5%to a total of 849,908(2023:729,308 contracts).In addition to the attractive product portfolio,one of the reasons for this positive trend is the fact that the market has largely adjusted to high interest rates.In total,183,857 of the new con-tracts related to credit financing and leasing of pre-owned BMW Group ve-hicles,15.7%more than in the previous year(2023:158,935 contracts).The lease business experienced an 28.7%increase in the reporting period and accounted for 35.5%of all new business.Credit financing also went up( 10.8%)and accounted for 64.5%of new business.The total new business volume of all credit financing and leasing contracts increased significantly to 31,677 million in the reporting period(2023:26,797 million; 18.2%).The share of new BMW Group vehicles either leased or financed by the Financial Services segment stood at 41.2%1 at the end of the first half of the year(2023:37.5%; 3.7 percentage points).As at 30 June 2024,the Financial Services segment had 4,895,606 credit financed or leased vehicles on its books(31 December 2023:4,952,318 contracts;1.1%).The size of the contract portfolio was largely in line with the previous years level in Asia/Pacific/Middle East( 0.1%)and the Amer-icas(0.6%).A small increase of 2.2%was recorded in Europe,while the trend for the EU Bank2 was slightly negative(2.2%).In China,the size of the portfolio fell by 11.8%compared to the previous year due to a downturn in sales in the Automotive segment and the continuing high level of compe-tition in the financial services sector.Fleet business up slightly year on year Under the brand name Alphabet,the Financial Services segment offers fleet management-related credit financing and leasing contracts,as well as tai-lored services.As at 30 June,2024,this segment had contracts in place for a fleet of 730,432 vehicles(31 December 2023:720,094 contracts; 1.4%).In the second quarter 2024,Alphabet also acquired part of the BMW Groups own fleet and assumed responsibility for the management and marketing of these vehicles.The purpose of this move is to optimise the uti-lisation and remarketing of the vehicles involved.These activities will be con-tinuously expanded as part of the transition to the direct sales model in Eu-rope.As at 30 June 2024,the segment had a total of 7,025 such vehicles under management.Solid increase in dealership financing At the end of the reporting period,the total business volume of dealership financing stood at 19,859 million(31 December 2023:18,941 million; 4.8%).Profit before tax in reporting period affected by stabilisation in pre-owned vehicle market The Financial Services segment generated a profit before tax of 1,481 million in the reporting period(2023:1,704 million;13.1%).The decrease was largely due to lower revenues from the re-marketing of lease returns in light of the ongoing normalisation of the pre-owned vehicle market.The credit loss ratio for the entire credit portfolio was 0.25%in the reporting period(2023:0.15%).In balance sheet terms,business volume increased slightly to stand at 143,010 million at the end of the reporting period(31 December 2023:137,910 million; 3.7%).8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 1 The calculation only includes automobile markets in which the Financial Services segment is represented by a consolidated entity.2 EU Bank comprises BMW Bank GmbH with its branches in Italy,Spain and Portugal.20 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Financial Performance OTHER ENTITIES SEGMENT AND ELIMINATIONS Profit before tax in second quarter of Other Entities segment up on previous year The Other Entities segment recorded a profit before tax of 295 million in the second quarter(2023:245 million).Compared to the previous year,the change was mainly due to the improved net interest result.Increased eliminations in the second quarter At the level of Group profit before tax for the second quarter,eliminations decreased to a net positive amount of 78 million,down from 319 million in the corresponding period of the previous year,with the year-on-year change mainly reflecting the impact of the higher volume of eliminations due to the upturn in leasing business.Improvement in first half-year profit before tax of Other Entities segment due to market development of interest rate hedges The Other Entities segment recorded a profit before tax of 696 million in the first six months of the year(2023:profit before tax of 117 million).Market value developments arising on interest rate and foreign currency hedging instruments significantly improved the six-month result reported for the Other Entities segment.Six-month profit before tax eliminations down on previous year At the level of Group profit before tax for the six-month period,eliminations decreased to a net positive amount of 300 million,down from 649 mil-lion in the corresponding period of the previous year.As in the second quar-ter,the year-on-year change was mainly impacted by higher eliminations due to the upturn in leasing business.8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 21 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Outlook,Risk and Opportunity Management The Outlook and the Risk and Opportunity Management sections of this re-port present the expected development of the BMW Group over the remain-der of 2024 from the perspective of Group management.They contain for-ward-looking statements which are based on forecasts and assumptions which may be influenced by future unforeseen events.As a result,actual outcomes can deviate either positively or negatively from the expectations described below.For more information,please refer to the Outlook and Risks and Opportunities chapters of the 2023 BMW Group Report.OUTLOOK International automobile markets an overview In July 2024,the International Monetary Fund(IMF)left its forecast for global economic growth unchanged at 3.2spite ongoing geopolitical risk factors.Automobile markets are also forecasted to benefit from this pro-jected growth rate.It can therefore be assumed that the global supply of new vehicles will increase,particularly in light of the fact that international supply chains are unlikely to see any major disruption.The competitive environ-ment could also have an impact on pre-owned vehicle prices across the in-dustry.Outlook for the BMW Group assumptions and forecast The following outlook covers the forecast period of 2024 and is based on the composition of the BMW Group during that time.It is expected that a fall in inflation and stabilised interest rates in many countries will allow for a slight increase in demand in 2024.The number of vehicle deliveries is set to increase slightly against this backdrop and in light of the full availability of new models such as the BMW 7 Series and the BMW 5 Series,model launches such as the BMW X2*and the BMW X3*,and the renewal of the MINI product range.The Chinese market is currently lagging behind our expectations.However,the results of the“third plenum”in China have shown that the Chinese gov-ernment is taking the current economic situation seriously,targeting a qual-itative economic development and is taking action to,for example,increase domestic demand and mitigate the risks faced by the real estate sector.We see the drop in the benchmark interest rate from 22 July 2024 as the initial measure that will begin to bring some stability to the market.In the 2024 financial year,prices across the product range are expected to be in line with last years level.The BMW Group still expects commodity prices(particularly for battery-related raw materials and precious metals)to be lower than in the previous year.However,the BMW Group believes that geopolitical and trade tensions could result in uncertainty and volatility on commodity markets.Owing to high inflation in previous years,higher costs for employees and from the supply chain are expected in 2024.In addition,the continued implementation of the electrification and digitali-sation strategy will lead to greater R&D costs in 2024.Expenditure related to the NEUE KLASSE,such as the further development of the sixth genera-tion of battery technology and manufacturing preparations in the production network,will also impact the Groups earnings and result in greater capital expenditure.The situation in the Middle East became increasingly volatile with the recent developments in the Golan Heights.However,the conflict continues to have no significant effect on the BMW Groups business as the Group does not operate directly in that region.The BMW Group is monitoring developments.OUTLOOK,RISK AND OPPORTUNITY MANAGEMENT 8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management *Consumption and Carbon Disclosures.22 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Outlook,Risk and Opportunity Management The war in Ukraine and its potential implications for the BMW Groups course of business are also being closely monitored.All applicable re-strictions resulting from sanctions have been factored into the outlook.In view of the growing unpredictability of political developments,actual macro-economic and geopolitical developments in some regions may deviate from expectations.The outlook does not factor in any direct or indirect response which the Chi-nese government might take in response to the EUs preliminary tariffs on electric cars from China.Outlook for the BMW Group key performance indicators Deliveries of BMW,MINI and Rolls-Royce brand vehicles in the Automotive segment are expected to rise slightly year on year due to a slight increase in demand,full availability of new models and model launches.In this context,the share of all-electric vehicles relative to total deliveries is expected to in-crease significantly compared to 2023.An EBIT margin ranging between 8 and 10%is forecast for the Automotive segment in 2024.The RoCE for the Automotive segment is also being af-fected by the increasing investment in electrification and digitalisation,and is expected to be between 15 and 20%.The BMW Group expects to achieve its target of slightly reducing the carbon emissions generated by its EU new vehicle fleet by further improving the overall fuel consumption of its products and deploying an increasing number of vehicles with electric drivetrain systems.It is therefore expected that the BMW Group will continue to remain significantly under the legal limits.A moderate reduction is expected in carbon emissions from BMW Group plants per vehicle produced(Scope 1 and 2)due to increased production volumes and BMW making greater use of green energy.The stable demand situation can also be seen in the Motorcycles segment,where deliveries are predicted to increase slightly owing to the full availabil-ity of models,including the BMW R 1300 GS.The EBIT margin is expected to be between 8 and 10%and the segment RoCE between 21 and 26%.The RoE in the Financial Services segment is predicted to finish within a range between 15 and 18%due to the segments recently improved per-formance.The supply of and demand for pre-owned vehicles is still ex-pected to continue to stabilise over the course of the year.The BMW Group still expects income from remarketing lease returns to fall further as com-pared to 2023.Accordingly,Group profit before tax will decrease slightly.As the BMW Group continues to take a leading role among its competitors in the digitali-sation and electrification of the vehicle fleet and intends to strengthen this position,expenses and capital expenditure associated with future projects will remain high in the Automotive segment in 2024.The production net-work will also be expanded in 2024 in connection with the NEUE KLASSE.The aforementioned targets are to be met with a slight growth in the size of the workforce.Likewise,the share of women in management positions in the BMW Group is expected to increase slightly.The BMW Groups actual business performance may also deviate from cur-rent expectations due to the risks and opportunities discussed below in the Risk and Opportunity Management chapter.8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 23 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Outlook,Risk and Opportunity Management BMW Group key performance indicators The key performance indicators of the BMW Group provided below are based on the latest information and valuations available for the year 2024.2023 reported 2024 outlook 2024 outlook updated GROUP Profit before tax million 17,096 Slight decrease Workforce at year-end 154,950 Slight increase Share of women in management positions in the BMW Group .8 Slight increase AUTOMOTIVE SEGMENT EBIT margin%9.8 Between 8 and 10 Return on capital employed(RoCE) .2 Between 15 and 20 Deliveries units 2,554,183 Slight increase Share of all-electric vehicles in deliveries.7 Significant increase CO2 emissions EU new vehicle fleet1,2 g/km 102.1 Slight reduction CO2 emissions BMW Group locations per vehicle produced3 t 0.28 Moderate reduction MOTORCYCLES SEGMENT EBIT margin%8.1 Between 8 and 10 Return on capital employed(RoCE).1 Between 21 and 26 Deliveries units 209,066 Slight increase FINANCIAL SERVICES SEGMENT Return on equity(RoE).2 Between 14 and 17 Between 15 and 18 8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 1 EU-27 countries including Norway and Iceland;with effect from 2021,values are calculated on a converted basis in line with WLTP(Worldwide Harmonised Light Vehicles Test Procedure).2 Including an allowance for eco-innovations(amounts of minor significance).3 Efficiency ratio calculated on the basis of Scope 1 and Scope 2 carbon emissions(i.e.a market-based method according to GHG Protocol Scope 2 guidance;mainly based on the use of emission factors for elec-tricity,district heating and fuels of the VDA,each in the most current valid version:12/2023)and occasionally using local emissions factors;excluding climate-chang-ing gases other than carbon dioxide from vehicle pro-duction(BMW Group manufacturing sites and Motor-rad,but excluding partner plants and contract manu-facturers),as well as BMW Group non-manufacturing sites(e.g.research centres,sales centres,offices)di-vided by the number of vehicles produced(BMW Group manufacturing sites and partner plants,but excluding contract manufacturers).24 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Outlook,Risk and Opportunity Management RISK AND OPPORTUNITY MANAGEMENT The foundation of the BMW Groups business success lies in effectively managing risks and making use of any opportunities.This is based on an effective risk and opportunity management strategy,which enables the Group to react quickly and flexibly to changes in political,economic,environ-mental,social,technical or legal conditions.The general risk situation is evaluated on a regular basis.For more information about risks and opportunities and the methods used to manage them,please refer to the Risks and Opportunities chapter of the BMW Group Report 2023.8 General Economic Environment 9 Group Overview 12 Automotive Segment 18 Financial Services Segment 20 Other Entities Segment and Eliminations 21 Outlook 24 Risk and Opportunity Management 25 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information INTERIM GROUP FINANCIAL STATEMENTS 26 Income Statement for Group and Segments for the period from 1 January to 30 June 28 Condensed Statement of Comprehensive Income for Group for the period from 1 January to 30 June 29 Income Statement for Group and Segments for the period from 1 April to 30 June 31 Condensed Statement of Comprehensive Income for Group for the period from 1 April to 30 June 32 Balance Sheet for Group and Segments at 30 June 2024 36 Condensed Cash Flow Statement for Group and Segments for the period from 1 January to 30 June 37 Statement of Changes in Group Equity for the period from 1 January to 30 June 39 Notes to the Group Financial Statements 64 Responsibility Statement by the Companys Legal Representatives 65 Review Report 26 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Income Statement for Group and Segments FOR THE PERIOD FROM 1 APRIL TO 30 JUNE1Group Automotive Motorcycles in million Note 2024 2023 2024 2023 2024 2023 Revenues 05 36,944 37,219 32,070 31,630 989 988 Cost of sales 30,285 30,089 27,039 26,400 807 760Gross profit 6,659 7,130 5,031 5,230 182 228 Selling and administrative expenses 2,7722 2,6302 2,307 2,191 73 71Other operating income 06 273 231 244 213 1 2 Other operating expenses 06 283 388 284 354 1 Profit/loss before financial result 3,877 4,343 2,684 2,898 110 158 Result from equity accounted investments 3 96 3 96 Interest and similar income 07 165 166 358 336 1 3 Interest and similar expenses 07 103 144 354 380 1 2 Other financial result 08 75 47 58 18 Financial result 16 121 57 1581 Profit/loss before tax 3,861 4,222 2,627 2,740 110 159 Income taxes 09 1,156 1,264 787 827 33 48Net profit/loss 2,705 2,958 1,840 1,913 77 111 Attributable to non-controlling interests 92 153 92 147 Attributable to shareholders of BMW AG 2,613 2,805 1,748 1,766 77 111 Basic earnings per share of common stock in 4.15 4.39 Basic earnings per share of preferred stock in 4.16 4.40 Dilutive effects Diluted earnings per share of common stock in 4.15 4.39 Diluted earnings per share of preferred stock in 4.16 4.40 INCOME STATEMENT FOR GROUP AND SEGMENTS 1 Additional information:not subject to external auditor review.2 Includes general administrative expenses amounting to 1,293 million(2023:1,185 million).27 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Income Statement for Group and Segments FOR THE PERIOD FROM 1 APRIL TO 30 JUNE*Financial Services Other Entities Eliminations in million Note 2024 2023 2024 2023 2024 2023 Revenues 05 9,742 8,795 3 3 5,860 4,197Cost of sales 8,628 7,641 6,189 4,712 Gross profit 1,114 1,154 3 3 329 515 Selling and administrative expenses 394 369 14 1016 11 Other operating income 06 12 11 3 7 13 2 Other operating expenses 06 7 45 1 8 13 Profit/loss before financial result 725 751 8 1366 537 Result from equity accounted investments Interest and similar income 07 3 1,138 831 1,335 1,004Interest and similar expenses 07 2 793 5481,047 786 Other financial result 08 25 8 42 37 Financial result 26 8 303 246 288 218Profit/loss before tax 751 759 295 245 78 319 Income taxes 09 223 231 88 71 25 87Net profit/loss 528 528 207 174 53 232 Attributable to non-controlling interests 1 5 1 1 Attributable to shareholders of BMW AG 529 523 206 173 53 232 Basic earnings per share of common stock in Basic earnings per share of preferred stock in Dilutive effects Diluted earnings per share of common stock in Diluted earnings per share of preferred stock in INCOME STATEMENT FOR GROUP AND SEGMENTS*Additional information:not subject to external auditorreview.28 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Condensed Statement of Comprehensive Income for Group FOR THE PERIOD FROM 1 APRIL TO 30 JUNE*in miliion 2024 2023 Net profit/loss 2,705 2,958 Remeasurement of the net liability for defined benefit pensions plans 23 85 Items not expected to be reclassified to the income statement in the future 23 85 Marketable securities(at fair value through other comprehensive income)2 3 Derivative financial instruments 192 207 Costs of hedging 159 64 Other comprehensive income from equity accounted investments 2 4 Currency translation foreign operations 127 1,248 Items that can be reclassified to the income statement in the future 478 984 Other comprehensive income for the period after tax 501 899 Total comprehensive income 3,206 2,059 Total comprehensive income attributable to non-controlling interests 124 34 Total comprehensive income attributable to shareholders of BMW AG 3,082 2,025 CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR GROUP *Additional information:not subject to external auditor review.29 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Income Statement for Group and Segments FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE Group Automotive1 Motorcycles1 in million Note 2024 2023 2024 2023 2024 2023 Revenues 05 73,558 74,072 63,009 62,898 1,861 1,921 Cost of sales 60,335 59,170 53,166 51,890 1,507 1,481Gross profit 13,223 14,902 9,843 11,008 354 440 Selling and administrative expenses 5,2872 4,9892 4,399 4,150 139 131Other operating income 06 557 416 515 382 2 4 Other operating expenses 06 562 611 565 565 1 1 Profit/loss before financial result 7,931 9,718 5,394 6,675 216 312 Result from equity accounted investments 30 122 30 122 Interest and similar income 07 327 313 711 615 2 4 Interest and similar expenses 07 254 244 724 632 2 3 Other financial result 08 49 314 2132 Financial result 92 367 64 1071 Profit/loss before tax 8,023 9,351 5,330 6,568 216 313 Income taxes 09 2,367 2,731 1,571 1,934 64 92Net profit/loss 5,656 6,620 3,759 4,634 152 221 Attributable to non-controlling interests 252 395 252 378 Attributable to shareholders of BMW AG 5,404 6,225 3,507 4,256 152 221 Basic earnings per share of common stock in 8.57 9.70 Basic earnings per share of preferred stock in 8.58 9.71 Dilutive effects Diluted earnings per share of common stock in 8.57 9.70 Diluted earnings per share of preferred stock in 8.58 9.71 INCOME STATEMENT FOR GROUP AND SEGMENTS 1 Additional information:not subject to external auditor review.2 Includes general administrative expenses amounting to 2,484 million(2023:2,252 million).30 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Income Statement for Group and Segments FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE Financial Services*Other Entities*Eliminations*in million Note 2024 2023 2024 2023 2024 2023 Revenues 05 19,267 17,621 7 6 10,586 8,374Cost of sales 17,082 15,155 11,420 9,356 Gross profit 2,185 2,466 7 6 834 982 Selling and administrative expenses 746 704 25 1922 15 Other operating income 06 22 13 9 10 9 7 Other operating expenses 06 22 66 4 2 30 23 Profit/loss before financial result 1,439 1,709 13 5895 1,027 Result from equity accounted investments Interest and similar income 07 5 4 2,191 1,519 2,582 1,829Interest and similar expenses 07 5 6 1,510 1,0541,987 1,451 Other financial result 08 42 3 28 343 Financial result 42 5709 122 595 378Profit/loss before tax 1,481 1,704 696 117 300 649 Income taxes 09 435 501 205 34 92 170Net profit/loss 1,046 1,203 491 83 208 479 Attributable to non-controlling interests 1 16 1 1 Attributable to shareholders of BMW AG 1,047 1,187 490 82 208 479 Basic earnings per share of common stock in Basic earnings per share of preferred stock in Dilutive effects Diluted earnings per share of common stock in Diluted earnings per share of preferred stock in INCOME STATEMENT FOR GROUP AND SEGMENTS*Additional information:not subject to external auditorreview.31 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Condensed Statement of Comprehensive Income for Group FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE in miliion 2024 2023 Net profit/loss 5,656 6,620 Remeasurement of the net liability for defined benefit pensions plans 136 83 Items not expected to be reclassified to the income statement in the future 136 83 Marketable securities(at fair value through other comprehensive income)7 20 Derivative financial instruments 24278 Costs of hedging 262 159 Other comprehensive income from equity accounted investments 3 5 Currency translation foreign operations 398 1,885Items that can be reclassified to the income statement in the future 414 1,633Other comprehensive income for the period after tax 550 1,550Total comprehensive income 6,206 5,070 Total comprehensive income attributable to non-controlling interests 273 248 Total comprehensive income attributable to shareholders of BMW AG 5,933 4,822 CONDENSED STATEMENT OF COMPREHENSIVE INCOME FOR GROUP 32 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Balance Sheet for Group and Segments AT 30 JUNE 2024 Group Automotive*Motorcycles*in million Note 30.6.2024 31.12.2023 30.6.2024 31.12.2023 30.6.2024 31.12.2023 ASSETS Intangible assets 10 19,549 20,022 18,965 19,439 217 216 Property,plant and equipment 11 36,338 35,266 35,715 34,639 536 533 Leased products 44,957 43,118 Investments accounted for using the equity method 523 443 523 443 Other investments 1,206 1,197 14,699 14,697 Receivables from sales financing 52,653 50,517 Financial assets 12 1,045 1,387 500 588 Deferred tax 2,952 2,431 3,308 3,216 Other assets 1,592 1,537 2,458 2,296 20 18 Non-current assets 160,815 155,918 76,168 75,318 773 767 Inventories 26,851 23,719 25,235 22,121 892 905 Trade receivables 3,930 4,162 3,541 3,875 201 102 Receivables from sales financing 37,516 36,838 Financial assets 12 3,339 4,131 2,310 2,888 Current tax 13 1,315 1,199 724 911 Other assets 7,474 7,596 20,262 24,925 11 7 Cash and cash equivalents 17,856 17,327 14,114 13,590 41 36 Current assets 98,281 94,972 66,186 68,310 1,145 1,050 Total assets 259,096 250,890 142,354 143,628 1,918 1,817 BALANCE SHEET FOR GROUP AND SEGMENTS*Additional information:not subject to external auditorreview.33 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Balance Sheet for Group and Segments BALANCE SHEET FOR GROUP AND SEGMENTS AT 30 JUNE 2024 Financial Services*Other Entities*Eliminations*in million Note 30.6.2024 31.12.2023 30.6.2024 31.12.2023 30.6.2024 31.12.2023 ASSETS Intangible assets 10 366 366 1 1 Property,plant and equipment 11 87 94 Leased products 52,692 50,415 7,735 7,297 Investments accounted for using the equity method Other investments 25 28 23,125 23,084 36,643 36,612 Receivables from sales financing 52,802 50,657 149 140 Financial assets 12 234 256 398 643 87 100 Deferred tax 517 506 25 22 898 1,313 Other assets 2,844 2,852 36,986 35,249 40,716 38,878 Non-current assets 109,567 105,174 60,535 58,999 86,228 84,340 Inventories 724 693 Trade receivables 187 184 1 1 Receivables from sales financing 37,516 36,838 Financial assets 12 624 558 441 692 36 7 Current tax 13 139 102 452 186 Other assets 3,545 3,753 62,647 57,638 78,991 78,727 Cash and cash equivalents 3,236 3,090 465 611 Current assets 45,971 45,218 64,006 59,128 79,027 78,734 Total assets 155,538 150,392 124,541 118,127 165,255 163,074 *Additional information:not subject to external auditor review.34 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Balance Sheet for Group and Segments BALANCE SHEET FOR GROUP AND SEGMENTS AT 30 JUNE 2024 Group Automotive*Motorcycles*in million Note 30.6.2024 31.12.2023 30.6.2024 31.12.2023 30.6.2024 31.12.2023 EQUITY AND LIABILITIES Subscribed capital 14 639 639 Capital reserves 2,456 2,456 Revenue reserves 14 90,865 89,072 Accumulated other equity 1,970 2,071 Treasury shares 14 1,075 500 Equity attributable to shareholders of BMW AG 14 90,915 89,596 Non-controlling interests 2,559 3,327 Equity 93,474 92,923 55,610 61,971 Pension provisions 226 427 133 326 7 Other provisions 7,911 7,797 7,674 7,559 84 80 Deferred tax 3,192 2,797 3,153 2,601 Financial liabilities 16 57,726 52,880 2,857 2,726 1 2 Other liabilities 17 7,494 7,065 8,458 8,041 838 808 Non-current provisions and liabilities 76,549 70,966 22,275 21,253 923 897 Other provisions 9,606 9,240 8,967 8,547 134 128 Current tax 15 1,078 1,401 717 1,045 Financial liabilities 16 44,534 42,130 2,126 1,680 Trade payables 15,938 15,547 14,327 13,906 552 566 Other liabilities 17 17,917 18,683 38,332 35,226 309 226 Current provisions and liabilities 89,073 87,001 64,469 60,404 995 920 Total equity and liabilities 259,096 250,890 142,354 143,628 1,918 1,817 *Additional information:not subject to external auditor review.35 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Balance Sheet for Group and Segments AT 30 JUNE 2024 Financial Services*Other Entities*Eliminations*in million Note 30.6.2024 31.12.2023 30.6.2024 31.12.2023 30.6.2024 31.12.2023 EQUITY AND LIABILITIES Subscribed capital 14 Capital reserves Revenue reserves 14 Accumulated other equity Treasury shares 14 Equity attributable to shareholders of BMW AG 14 Non-controlling interests Equity 16,506 16,573 62,881 56,031 41,523 41,652 Pension provisions 15 17 78 77 Other provisions 153 158 Deferred tax 2,125 2,603 40 226 2,126 2,633 Financial liabilities 16 19,830 18,003 35,125 32,249 87 100 Other liabilities 17 38,525 36,848 759 485 41,086 39,117 Non-current provisions and liabilities 60,648 57,629 36,002 33,037 43,299 41,850 Other provisions 499 558 6 7 Current tax 15 260 141 101 215 Financial liabilities 16 26,585 25,392 15,859 15,065 36 7 Trade payables 1,057 1,071 2 4 Other liabilities 17 49,983 49,028 9,690 13,768 80,397 79,565 Current provisions and liabilities 78,384 76,190 25,658 29,059 80,433 79,572 Total equity and liabilities 155,538 150,392 124,541 118,127 165,255 163,074 BALANCE SHEET FOR GROUP AND SEGMENTS *Additional information:not subject to external auditor review.36 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Statement of Changes in Group Equity FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE Group Automotive*Financial Services*in million 2024 2023 2024 2023 2024 2023 Profit/loss before tax 8,023 9,351 5,330 6,568 1,481 1,704 Depreciation and amortisation of tangible,intangible and investment assets 4,368 4,551 4,299 4,479 14 17 Change in provisions 346 1,338 461 1,355 69 33Change in leased products and receivables from sales financing 3,635516 4,014512 Changes in working capital 1,861 3,399 1,713 3,535 43199 Other 3,087 2,659 1,022 1,687 444429 Cash inflow/outflow from operating activities 4,154 9,698 7,355 7,180 3,0752,828 Total investment in intangible assets and property,plant and equipment 5,040 3,992 4,971 3,911 6 4 Inflow/outflow from net investment in marketable securities and investments funds 567 21 592 8 2614 Other 96 133 95 128 Cash inflow/outflow from investing activities 4,569 4,104 4,474 4,031 3210 Cash inflow/outflow from financing activities 787 3,130 2,428 3733,181 3,293Effect of exchange rate on cash and cash equivalents 157 80171 65372 139Effect of changes in composition of Group on cash and cash equivalents 2727 Change in cash and cash equivalents 529 1,690 524 2,150 146 594Cash and cash equivalents as at 1 January 17,327 16,870 13,590 13,109 3,090 3,530 Cash and cash equivalents as at 30 June 17,856 18,560 14,114 15,259 3,236 2,936 CONDENSED CASH FLOW STATEMENT FOR GROUP AND SEGMENTS*Additional information:not subject to external auditorreview.37 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Statement of Changes in Group Equity FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE Accumulated other equity in million Note Subscribed capital Capital reserves Revenue reserves Translation differences Marketable securities Derivative financial instruments Cost of hedging 1 January 2024 14 639 2,456 89,072 2,083 29 699 658 Net profit 5,404 Other comprehensive income for the period after tax 136 361 7 188 227 Comprehensive income at 30 June 2024 5,540 361 7 188 227 Dividend payments 3,781 Treasury shares acquired Other changes 34 292 30 June 2024 14 639 2,456 90,865 1,722 36 219 431 Accumulated other equity in million Note Subscribed capital Capital reserves Revenue reserves Translation differences Marketable securities Derivative financial instruments Cost of hedging 1 January 2023 14 663 2,432 85,425 584 107 1,728 1,154 Net profit 6,225 Other comprehensive income for the period after tax 83 1,618 20 29 141 Comprehensive income at 30 June 2023 6,308 1,618 20 29 141 Dividend payments 5,430 Treasury shares acquired Other changes 39 84 30 June 2023 14 663 2,432 86,264 2,202 87 1,615 1,013 STATEMENT OF CHANGES IN GROUP EQUITY 38 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Statement of Changes in Group Equity FOR THE PERIOD FROM 1 JANUARY TO 30 JUNE in million Note Treasury shares Equity attributable to shareholders of BMW AG Non-controlling interests Total 1 January 2024 14 50089,596 3,327 92,923 Net profit 5,404 252 5,656 Other comprehensive income for the period after tax 529 21 550 Comprehensive income at 30 June 2024 5,933 273 6,206 Dividend payments 3,781 1,013 4,794Treasury shares acquired 575 575 575 Other changes 258 28 28630 June 2024 14 1,07590,915 2,559 93,474 in million Note Treasury shares Equity attributable to shareholders of BMW AG Non-controlling interests Total 1 January 2023 14 1,27887,125 4,163 91,288 Net profit 6,225 395 6,620 Other comprehensive income for the period after tax 1,403 147 1,550Comprehensive income at 30 June 2023 4,822 248 5,070 Dividend payments 5,430 38 5,468Treasury shares acquired 709 709 709 Other changes 123 70 19330 June 2023 14 1,98785,685 4,303 89,988 sTT STATEMENT OF CHANGES IN GROUP EQUITY 39 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Notes to the Group Financial Statements ACCOUNTING PRINCIPLES AND POLICIES 01 Basis of preparation The consolidated financial statements of Bayerische Motoren Werke Ak-tiengesellschaft,Munich,(BMW Group Financial Statements or Group Fi-nancial Statements)for the year ended 31 December 2023 were drawn up in accordance with International Financial Reporting Standards(IFRS),as endorsed by the European Union(EU),and the supplementary require-ments of 315e(1)of the German Commercial Code(HGB).The Interim Group Financial Statements(Interim Report)at 30 June 2024,which have been prepared in accordance with International Accounting Standard(IAS)34(Interim Financial Reporting),have been drawn up using,in all material respects,the same accounting methods as those utilised in the 2023 Group Financial Statements.The BMW Group applies the option of publishing con-densed group financial statements.All IFRIC interpretations issued by the IFRS Interpretations Committee which are mandatory on 30 June 2024 have been applied.The Interim Report also complies with German Account-ing Standard No.16(GAS 16)Interim Financial Reporting issued by the German Accounting Standards Committee e.V.(GASC).The reporting period for these Interim Group Financial Statements in ac-cordance with IAS 34 is the six-month period from 1 January 2024 to 30 June 2024.In addition,the income statement for the BMW Group and condensed statement of comprehensive income for the BMW Group as well as the notes disclosures for the period from 1 April 2024 to 30 June 2024 are presented for informational purposes,but were not within the scope of the external auditors review.Information regarding the Groups accounting principles and policies is con-tained in the notes to the Group Financial Statements within the 2023.The Group Financial Statements have been drawn up in euros.All amounts are disclosed in millions of euros(million)unless stated otherwise.De-tailed information on foreign currency translation is provided in the BMW Group Report 2023,note 04 to the Group Financial Statements.Key figures presented in the report have been rounded in accordance with standard commercial practise.In individual cases,this may mean that fig-ures do not add up exactly to the stated total and that percentages cannot be derived from the values shown.The income statement for the BMW Group and segments is presented using the cost of sales method.In order to provide a better insight into the results of operations,financial position and net assets of the BMW Group,and going beyond the require-ments of IFRS 8(Operating Segments),the Group Financial Statements also include an income statement and a balance sheet for the Automotive,Motorcycles,Financial Services and Other Entities segments.The Group Cash Flow Statement is supplemented by a statement of cash flows for the Automotive and Financial Services segments.Inter-segment transactions relate primarily to internal sales of products,the provision of funds for Group companies and the related interest.These items are eliminated on consoli-dation.More detailed information regarding the allocation of activities of the BMW Group to segments and a description of the segments is provided in the explanatory notes to segment information in the BMW Group Report 2023.The Interim Group Financial Statements at 30 June 2024 have been re-viewed by the Group auditors,PricewaterhouseCoopers GmbH Wirtschafts-prfungsgesellschaft,Frankfurt am Main,Munich office.NOTES TO THE GROUP FINANCIAL STATEMENTS xx Accounting Principles and Policies Xx Notes to the Income Statement Xx Notes to the Balance Sheet Xx Other Disclosures Xx Segment Informationen 39 Accounting Principles and Policies 42 Notes to the Income Statement 45 Notes to the Balance Sheet 48 Other Disclosures 58 Segment Information 40 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Notes to the Group Financial Statements 02 Group reporting entity The BMW Group Financial Statements to 30 June 2024 include Bayerische Motoren Werke Aktiengesellschaft(BMW AG)and all material subsidiaries over which BMW AG either directly or indirectly exercises control.This also includes 58 structured entities,consisting of asset-backed financing ar-rangements and special purpose funds.In some cases,contractual agree-ments are in place with the asset-backed securities companies to offset their losses in connection with residual value risks arising from the receivables sold to them.The following changes took place in the Group reporting entity during the first six months of 2024:Germany Foreign Total Included at 31 December 2023 20 187 207 Included for the first time in 2024 1 7 8 No longer included in 2024 1212 Included at 30 June 2024 21 182 203 BMW Fleet GmbH,Munich,which acquired part of the BMW Groups own fleet and assumed responsibility for the management and remarketing of these vehicles,was fully consolidated for the first time with effect from 31 March 2024.All other changes to the Group reporting entity are not significant in terms of the results of operations,financial position and net assets of the Group.03 Financial reporting rules(a)None of the new accounting standards and revisions to existing stand-ards which were applied for the first time in the first half of 2024 had a sig-nificant impact on the BMW Group Financial Statements.(b)The International Accounting Standards Board(IASB)published Stand-ard IFRS 18 Presentation and Disclosure in Financial Statements in April2024.This standard replaces IAS 1 and includes new rules regarding thestructure of the income statement,management performance measures,and the aggregation and disaggregation of items in the income statement.The new rules are mandatory for financial years beginning on or after 1 Jan-uary 2027.The BMW Group is analysing the impact of IFRS 18 the GroupFinancial Statements.Early adoption of IFRS 18 is not currently intended.Other financial reporting standards or revisions to standards issued by the IASB and not yet applied are not expected to have any significant impact on the BMW Group Financial Statements.39 Accounting Principles and Policies 42 Notes to the Income Statement 45 Notes to the Balance Sheet 48 Other Disclosures 58 Segment Information 41 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Notes to the Group Financial Statements 04 Other significant events Impairment tests An indication of the potential impairment of tangible and intangible assets existed at 30 June 2024 in that the Groups market capitalisation was lower than Group equity at that date.As a result,impairment tests were performed for the cash-generating units Automotive excluding BMW Brilliance,BMW Brilliance,Motorcycles and Financial Services.A detailed description of im-pairment test procedures and selected parameters is provided in note 06 to the Group Financial Statements in the BMW Group Report 2023.The following pre-tax discount rates were applied to measure the relevant values:in0.6.2024 31.12.2023 Automotive excluding BMW Brilliance 12.9 13.7 BMW Brilliance 14.5 15.6 Motorcycles 12.9 13.7 Financial Services 14.8 15.2 In conjunction with the impairment tests for cash-generating units,sensitiv-ity analyses are performed for the main assumptions in order to rule out that possible changes to the assumptions used to determine the recoverable amount would result in the requirement to recognise an impairment loss.Even in the case of a 10terioration in the individual measurement as-sumptions,the need to recognise an impairment loss did not arise.Russia-Ukraine war Major uncertainties remained at the end of the reporting period with respect to the ongoing Russia-Ukraine war.The sanctions already imposed as well as new sanctions,together with countermeasures taken,significantly re-strict economic activities with Russia and also have an impact on the Rus-sian companies of the BMW Group.The restrictions currently in place for payments mean that transfers of liquid funds from Russia are still limited.Developments in this area are reviewed by the BMW Group on a regular basis.In total,the Russian companies hold around 5%of the BMW Groups cash and cash equivalents.Foreign currency items denominated in Russian roubles were translated at 30 June 2024 at a closing rate of RUB 92.04 to the euro(31 December 2023:RUB 100.62).The BMW Group has been able to execute transac-tions at this rate.sTT 39 Accounting Principles and Policies 42 Notes to the Income Statement 45 Notes to the Balance Sheet 48 Other Disclosures 58 Segment Information 42 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Notes to the Group Financial Statements NOTES TO THE INCOME STATEMENT 05 Revenues Revenues by activity comprise the following:in million 2nd quarter 2024*2nd quarter 2023 1 January to 30 June 2024 1 January to 30 June 2023 Sales of products and related goods 27,150 28,184 54,333 56,273 Sales of products previously leased to customers 3,758 3,450 7,397 6,955 Income from lease instalments 3,097 3,025 6,157 5,834 Interest income on credit financing and finance leases 1,534 1,261 3,021 2,488 Revenues from service contracts,telematics and roadside assistance 1,027 860 1,909 1,744 Other income 378 439 741 778 Revenues 36,944 37,219 73,558 74,072 Revenues recognised from contracts with customers in accordance with IFRS 15 totalled 64,194 million(2023:65,613 million).These reve-nues are attributed to the first,second and fifth categories in the table.A proportion is also allocated to other income.An analysis of revenues by segment is shown in the segment information in note 23.Revenues from the sale of products and related goods are generated pri-marily in the Automotive segment and,to a lesser extent,in the Motorcycles segment.Revenues from the sales of products previously leased to custom-ers,income from lease instalments and interest income on loan financing are allocated to the Financial Services segment.Other income relates mainly to the Automotive segment and the Financial Services segment.Interest income on loan financing and finance leases includes interest cal-culated on the basis of the effective interest method totalling 2,298 million(2023:1,944 million).This interest income is not reported separately in the consolidated income statement as it is not significant compared to total Group revenues.06 Other operating income and expenses These line items principally include exchange gains and losses,gains and losses on the disposal of assets,income/expense from the reversal and recognition of impairment allowances and write-downs,as well as in-come/expense from the reversal of and allocation to provisions,including provisions for ongoing legal disputes,legal disputes that have been con-cluded and other legal risks.39 Accounting Principles and Policies 42 Notes to the Income Statement 45 Notes to the Balance Sheet 48 Other Disclosures 58 Segment Information*Additional information:not subject to external auditorreview.43 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Notes to the Group Financial Statements 07 Net interest result The net interest result comprises:in million 2nd quarter 2024*2nd quarter 2023 1 January to 30 June 2024 1 January to 30 June 2023 Other interest and similar income 165 163 326 308 thereof from subsidiaries 9 9 18 23 Net interest income on the net defined benefit liability for pension plans 3 1 5 Interest and similiar income 165 166 327 313 Net interest impact on other long-term provisions 53 112 142 162Net interest expense on the net defined benefit liability for pension plans 3 3 5 5 Other interest and similar expenses 47 29 107 77thereof to subsidiaries 1 1 2 2 Interest and similar expenses 103 144 254 244Net interest result 62 22 73 69 sTT 39 Accounting Principles and Policies 42 Notes to the Income Statement 45 Notes to the Balance Sheet 48 Other Disclosures 58 Segment Information*Additional information:not subject to external auditorreview.44 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Notes to the Group Financial Statements 08 Other financial result Other financial result developed as follows:in million 2nd quarter 2024*2nd quarter 2023 1 January to 30 June 2024 1 January to 30 June 2023 Result on investments 30 68 7 22Sundry other financial result 4521 56 292Other financial result 75 4749 314The result on investments was primarily affected by the measurement of investments held in the iVentures fund.The deterioration in sundry other financial result in the previous year was mainly due to changes in the fair value of stand-alone derivatives.09 Income taxes The effective tax rate for the six-month period to 30 June 2024 was 29.5%(2023:29.2%)and corresponds to the best estimate of the weighted aver-age annual income tax rate for the full year.This tax rate has been applied to the pre-tax profit for the period under report.sTT 39 Accounting Principles and Policies 42 Notes to the Income Statement 45 Notes to the Balance Sheet 48 Other Disclosures 58 Segment Information*Additional information:not subject to external auditorreview.45 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Notes to the Group Financial Statements NOTES TO THE BALANCE SHEET 10 Intangible assets Intangible assets mainly comprise capitalised development costs on vehicle,module and architecture projects as well as rights reacquired in conjunction with a business acquisition.Also included are subsidies for tool costs,li-cences,purchased development projects,emission allowances,software and purchased customer bases.in million 30.6.2024 31.12.2023 Development costs 12,532 12,344 Goodwill 1,499 1,487 thereof allocated to the Automotive excluding BMW Brilliance CGU 33 33 thereof allocated to the BMW Brilliance CGU 1,119 1,107 thereof allocated to the Financial Services CGU 347 347 Other intangible assets 5,518 6,191 Intangible assets 19,549 20,022 Intangible assets developed during the first six months of the year as fol-lows:in million 2024 2023 Development costs Additions 1,282 981 Amortisation 1,094 1,236 Other intangible assets Additions 24 83 Amortisation 718 754 sTT 11 Property,plant and equipment (including right-of-use assets from leases)Property,plant and equipment developed during the first six months as fol-lows:in million 2024 2023 Additions 3,432 3,148 Additions resulting from changes in the Group reporting entity 552 Depreciation 2,556 2,561 Disposals 40 202 Additions resulting from changes in the Group reporting entity in the previ-ous year arose on the first-time consolidation of BMW Manufacturing Hun-gary Kft.,Debrecen and comprised mainly assets under construction.Purchase commitments for property,plant and equipment(excluding right-of-use assets from leases)totalled 8,430 million(31 Decem-ber 2023:7,712 million).Government grants amounting to 9 million(30 June 2023:34 million)were deducted from the additions to the carrying amount of the relevant items of property,plant and equipment.12 Financial assets Financial assets comprise:in million 30.6.2024 31.12.2023 Derivate instruments 2,476 2,926 Marketable securities and investment funds 1,634 2,170 Loans to third parties 29 18 Other 245 404 Financial assets 4,384 5,518 sTT 39 Accounting Principles and Policies 42 Notes to the Income Statement 45 Notes to the Balance Sheet 48 Other Disclosures 58 Segment Information 46 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Notes to the Group Financial Statements 13 Income tax assets Current income taxes amounting to 1,315 million(31 December 2023:1,199 million)include 22 million(31 December 2023:29 million)that is expected to be settled after more than twelve months.Claims may be set-tled earlier than this depending on the timing of the underlying proceedings.14 Equity The Group Statement of Changes in Equity is shown in the Statement of Changes in Equity.Subscribed capital The number of shares of common stock issued by BMW AG at 30 June 2024 was 579,795,667 shares,each with a par value of 1,unchanged from 31 December 2023.The number of issued shares of preferred stock at that date was 58,920,408 shares,each with a par value of 1,un-changed from 31 December 2023.Unlike the shares of common stock,no voting rights are attached to the shares of preferred stock.Subscribed capital stood at 639 million,unchanged from 31 December 2023.All of the Companys stock is issued to bearer.Preferred stock bears an additional dividend of 0.02 per share.Revenue reserves In the second quarter 2024 BMW AG paid the dividend for the financial year 2023 amounting to 3,436 million for common stock and 345 million for preferred stock.Treasury shares At the Annual General Meeting of BMW AG held on 11 May 2022,the shareholders authorised the Board of Management to acquire treasury shares via the stock exchange,up to a maximum of 10%of the share capital in place at the date of the resolution or if this value is lower of the share capital in place at the time that the authorisation is exercised,and to redeem those shares without any further action required by the Annual General Meeting.The buyback authorisation remains valid until 10 May 2027.The Board of Management of BMW AG approved on 3 May 2023 a second share buyback programme to acquire treasury shares via the stock ex-change in accordance with the resolution from 11 May 2022.Under this programme,BMW AG will acquire shares of common and preferred stock amounting to a maximum of 1.65 billion and 0.35 billion respectively.This second programme will be completed by no later than 31 December 2025.Based on the second programme,a total of 8,891,035 shares of common stock at a total acquisition cost of 879 million and 2,165,696 shares of preferred stock at a total acquisition cost of 196 million had been bought back via the stock exchange up to 30 June 2024.Based on the authorisation granted by the Annual General Meeting on 11 May 2022,BMW AG has acquired shares equivalent to 5.51%of the share capital in place at 30 June 2024.15 Income tax liabilities Current income taxes amounting to 1,078 million(31 December 2023:1,401 million)include 113 million(31 December 2023:50 million)that is expected to be settled after more than twelve months.Liabilities may be settled earlier than this depending on the timing of the underlying pro-ceedings.xx Accounting Principles and Policies Xx Notes to the Income Statement Xx Notes to the Balance Sheet Xx Other Disclosures Xx Segment Informationen 39 Accounting Principles and Policies 42 Notes to the Income Statement 45 Notes to the Balance Sheet 48 Other Disclosures 58 Segment Information 47 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Notes to the Group Financial Statements 16 Financial Liabilities Financial liabilities of the BMW Group comprise the following:in million 30.6.2024 31.12.2023 Bonds 43,760 39,808 Asset-backed financing transactions 20,916 20,085 Liabilities from customer deposits(banking)18,490 18,016 Liabilities to banks 8,631 5,824 Derivative instruments 4,574 4,400 Lease liabilities 2,469 2,539 Commercial paper 2,295 3,292 Other 1,125 1,046 Financial liabilities 102,260 95,010 During the six-month period ended 30 June 2024,the BMW Group issued bonds totalling approximately 8.5 billion,refinancing itself via a variety of instruments,including two euro benchmark bonds,a 144A bond denomi-nated in US dollars,a bond denominated in Canadian dollars and a Panda bond in China.Asset-backed financing transactions with a total volume of around 6.8 billion were entered into or prolonged in the USA,Germany,the UK,Canada,Japan and South Korea.17 Other liabilities Other liabilities include contract liabilities relating to contracts with custom-ers amounting to 8,182 million(31 December 2023:7,998 million).The liabilities relate mainly to service and repair work as well as telematics services and roadside assistance agreed to be part of the sale of a vehicle(in some cases multi-component arrangements).sTT 39 Accounting Principles and Policies 42 Notes to the Income Statement 45 Notes to the Balance Sheet 48 Other Disclosures 58 Segment Information 48 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Notes to the Group Financial Statements OTHER DISCLOSURES 18 Research and development expenses Research and development expenses were as follows:in million 2nd quarter 2024*2nd quarter 2023 1 January to 30 June 2024 1 January to 30 June 2023 Research and development expenditure 2,195 1,842 4,169 3,396 Amortisation of capitalised development cost 540 606 1,094 1,236 New expenditure for capitalised development cost 746 602 1,282 981Research and development expenses 1,989 1,846 3,981 3,651 19 Contingent liabilities The following contingent liabilities existed at the balance sheet date:in million 30.6.2024 31.12.2023 Litigation 153 80 Guarantees 87 22 Investment subsidies 59 66 Other 1,967 1,801 Contingent liabilities 2,266 1,969 Other contingent liabilities mainly comprise risks relating to taxes and cus-toms duties.The BMW Group determines its best estimate of contingent liabilities on the basis of the information available at the date of preparation of the Group Financial Statements.This assessment may change over time and is ad-justed regularly on the basis of new information and circumstances.A part of the risks is covered by insurance.Since March 2019,the Chinese State Administration for Market Regulation is conducting an antitrust proceeding against BMW AG.In July 2024,the Brazilian antitrust authority launched an antitrust proceeding against BMW AG.The investigations each relate to largely the same facts which were the subject of a proceeding which was concluded by the European Commission in 2021(see note 10 to the BMW Group Financial Statements for the fi-nancial year 2021 included in the BMW Group Report 2021).Possible risks for the BMW Group in connection with the antitrust proceedings in China and Brazil cannot be currently foreseen,neither in terms of their outcome nor the amounts involved.In relation to these allegations several individual custom-ers lawsuits have been pending in South Korea in June 2018.In addition,claimants in a group litigation in England and Wales have brought damages claims based on the European Commissions decision.Further civil lawsuits based on the allegations are possible going forward.Further disclosures pursuant to IAS 37.86 cannot be provided at present.Beginning in 2014,regulatory authorities have ordered the BMW Group to recall various vehicle models in conjunction with airbags supplied by the Ta-kata group of companies.Provision for the costs involved has been recog-nised within warranty provisions.In addition to the risks already covered by warranty provisions,it cannot be ruled out that further vehicles of the BMW Group will be affected by future recall actions.Further disclosures pursuant to IAS 37.86 cannot be provided at present.39 Accounting Principles and Policies 42 Notes to the Income Statement 45 Notes to the Balance Sheet 48 Other Disclosures 58 Segment Information*Additional information:not subject to external auditorreview.49 BMW Group Half-Year Report 2024 BMW Group at a Glance Interim Group Management Report Interim Group Financial Statements Other Information Notes to the Group Financial Statements In May 2023,the National Highway Traffic Safety Administration(NHTSA),an agency of the US federal government,requested a recall of airbags in the USA that are equipped with airbag inflators produced by ARC Automotive.Further implications for the BMW Group in other regions outside of North America as well as implications from class action lawsuits,which have been brought in this context against the BMW Group in the USA and Canada,can-not be estimated at present.Further disclosures pursuant to IAS 37.86 can-not be provided at present.In March 2022,the European Commission(EC)conducted inspections at the premises of automobile manufacturers and associations located in sev-eral member states.In parallel,the EC sent out formal requests for infor-mation to several automobile manufacturers,including BMW AG.The in-spections and requests for information concern possible collusion in relation to the collection,treatment and recovery of end-of-life vehicles and light commercial vehicles.The inspections were conducted in coordination with the UK Competition and Markets Authority,which has initiated formal pro-ceedings in respect of the UK market.The competition authorities allege that car manufacturers(i)coordinated the remuneration to be paid to disman-tlers for the provision of their services and(ii)agreed that issues related to end-of-life vehicles should be dealt with in a non-competitive way.Appro-priate risk provisions were recognised in the second quarter 2022 in con-nection with these investigations.At the current stage of the investigations,further risks for the BMW Group in connection with the proceedings of the two authorities cannot be quantified at present.In December 2023,the South Korean anti-trust authority conducted an inspection at the premises of several car manufacturers,including BMW Korea and opened formal pro-ceedings in March 2024.In June 2024,the Chinese Antitrust Authority(SAMR)sent BMW AG a request for information.This will be answered within the set deadline.The investigation by the South Korean antitrust au-thority and the request for information by the Chinese Antitrust Authority have the same background as the investigations of the European Commis-sion and the UK Competition and Markets Authority.Due to the early stage of these investigations,it is also not possible to provide further information in this regard.Further disclosures pursuant to IAS 37.86 cannot be provided at present.Following a request for legal assistance from the Korean authorities in 2020 in connection with leaks in exhaust gas recirculation modules in BMW Group vehicles,the Munich public prosecutors office initiated an investigation and searched BMW Group offices in Munich and Steyr in June 2022.The pro-ceedings were finally concluded in March 2024 and BMW Group agreed to pay a fine.To the extent that aspects of this matter are under review by au-thorities,the BMW Group continues to cooper
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1Press Release Media relations:Victoire Grux Tel.: 33 6 04 52 16 55 Investor relations:Vincent Biraud Tel.: 33 1 47 54 50 87 Capgemini H1 2024 results H1 2024 revenues of 11,138 million,-2.5%year-on-year on a reported basis Growth at constant exchange rates*of-2.6%in H1 and-1.9%in Q2 Resilient Operating margin*at 12.4%,stable year-on-year Organic free cash flow*of 163 million,up 216 million year-on-year 2024 constant currency revenue growth target adjusted to-0.5%to-1.5%(was 0%to 3%)2024 operating margin and organic free cash flow targets confirmed Paris,July 26,2024 The Board of Directors of Capgemini SE,chaired by Paul Hermelin,convened yesterday in Paris to review and adopt the accounts1 of Capgemini Group for the first half of 2024.Aiman Ezzat,Chief Executive Officer of the Capgemini Group,said:“As expected,our growth trajectory started to improve in Q2 and is trending in the right direction in almost all businesses,sectors and regions.The recovery is particularly visible in North America.However,the slope of recovery in the second half will be affected by the recent deterioration of the outlook in the automotive and aerospace sectors and the slower recovery in financial services.In this context,we now expect a low single-digit constant currency exit rate,and target a constant currency growth rate of-0.5%to-1.5%for the full year.Despite this,we confirm our operating margin and free cash flow targets for the full year,demonstrating the resilience of the Group.Our leadership in AI services is clearly recognized by industry analysts.Generative AI is still driving many client discussions and we are engaging in larger programs to deploy uses cases at scale.We are currently working on over 350 new projects,and we have over 2,000 deals in the pipeline.We also scaled our capabilities,having trained more than 120,000 employees on generative AI tools and continue to invest in tools,assets and platforms.Client demand is primarily focused on improved efficiency and cost transformation.The traction for our value-added services in the fields of cloud,data&AI,sustainability,and intelligent industry remains strong.In an environment that remains soft in the short term,all our resources are mobilized around growth.As demonstrated by the performance of our Strategy&Transformation business,we are well positioned to capture the market upturn.”*The terms and Alternative Performance Measures marked with an(*)are defined and/or reconciled in the appendix to this press release.1 Limited review procedures on the interim consolidated financial statements have been completed.The auditors are in the process of issuing their report.2 Press Release 1ST HALF KEY FIGURES (in millions of euros)H1 2023 H1 2024 Change Revenues 11,426 11,138-2.5%Operating margin*1,413 1,384-2%as a%of revenues 12.4.4% 0 bp Operating profit 1,151 1,147-0%as a%of revenues 10.1.3% 20 bp Net profit(Group share)809 835 3sic earnings per share()4.70 4.88 4%Normalized earnings per share()*5.80 5.88 1%Organic free cash flow*-53 163 216 Net cash/(Net debt)*(3,244)(2,775)Capgemini generated revenues of 11,138 million in H1 2024,down-2.5%year-on-year on a reported basis and-2.6%at constant exchange rates*.On an organic basis(i.e.,restated for changes in Group scope and exchange rates),revenues contracted by-3.0%.As anticipated,the demand environment is starting slowly to improve.Having passed the trough in Q1,revenue growth rates improved in Q2 as expected,in all businesses and almost all regions and sectors.Q2 Group revenues thus contracted by-1.9%at constant exchange rates and-2.3%on an organic basis.In the first half of the year,clients remained focused on driving efficiency through cost transformation programs.Demand for non-strategic discretionary deals remains soft.In that context,Capgeminis most innovative services in Cloud,Data&AI and Intelligent Industry continued to enjoy solid traction.Bookings totaled 11,793 million in the first half of 2024,down-1.7%at constant exchange rates,leading to a book-to-bill ratio of 1.06 for the period.Booking trends also improved in Q2:at 6,138 million,Q2 bookings were stable year-on-year at constant currency and the book-to-bill ratio reached 1.09,which is above historical average and reflects ongoing robust commercial momentum.The operating margin*amounts to 1,384 million or 12.4%of revenues,a stable%year-on-year.The continued shift in Capgeminis mix of offerings towards more innovative and value-added services more than compensated for the inflation impact,illustrating the resilience of the Groups operating model.The investment in selling efforts to fuel future growth was offset by the improvement in gross margin,to 26.7%.Other operating income and expenses represent a net expense of 237 million,down by 25 million year-on-year.Consequently,the operating profit amounts to 1,147 million,almost flat year-on-year in value and up 20 basis points in%of Group revenues,to 10.3%.Net financial result is an income of 20 million compared with a 22 million expense in H1 2023,reflecting mainly higher interest income.The income tax expense is 326 million,up by 13 million.The effective tax rate is 28.0%in H1 2024,compared with 27.8%for the same period last year.Taking into account the share of profits of associates and non-controlling interests,the Group share in net profit for H1 2024 is up 3%year-on-year at 835 million.Basic earnings per share increased by 4%year-on-year to 4.88.Normalized earnings per share*stands at 5.88,compared with 5.80 in H1 2023.Finally,organic free cash flow*generation amounted to 163 million in H1 2024,compared with-53 million for the same period last year.Capgemini announced or closed four acquisitions since the beginning of the year.3 Press Release Total cash outflow for acquisitions amounted to 30 million in H1.The Group also paid dividends of 580 million(3.40 per share)and allocated 325 million(net)to share buybacks.OPERATIONS BY REGION At constant exchange rates,revenues in the North America region(28%of Group revenues in H1 2024)decreased by-5.4%year-on-year.The Financial Services,TMT(Telecoms,Media and Technology)and Consumer Goods&Retail sectors contributed the most to this decline,partly offset by growth in the Manufacturing sector.Operating margin increased to 15.5%,compared with 15.2%in H1 last year.Revenues in the United Kingdom and Ireland region(12%of Group revenues)declined by-2.8%,mostly driven by the Financial Services and Consumer Goods&Retail sectors.Conversely,the Energy&Utilities and Services sectors enjoyed a solid growth.Operating margin rose from 18.4%to 20.5%.Activity in France(20%of Group revenues)was down-2.7%.Solid momentum in the Public Sector was more than offset by visible softness in the TMT,Manufacturing and Financial Services sectors.Operating margin decreased from 11.1%in H1 last year to 9.1%.Revenues in the Rest of Europe region(31%of Group revenues)were virtually stable at-0.1%.The underlying sector performance proved quite contrasted,with a strong momentum in the Energy&Utilities and Public sectors offset by a visible contraction of the TMT sector.Operating margin increased to 11.1%,compared with 10.5%in H1 2023.Finally,revenues in the Asia-Pacific and Latin America region(9%of Group revenues)were down-1.6%.This contraction was mainly driven by the decline of the Financial Services sector,partly offset by the Consumer Goods&Retail and Public sectors which proved quite dynamic over the period.The region reported an operating margin of 10.5%,up from 10.2%in H1 last year.OPERATIONS BY BUSINESS At constant exchange rates,total revenues*of Strategy&Transformation services(9%of the Groups total revenues in H1 2024)increased by 2.7%year-on-year at constant exchange rates.Client demand for strategic consulting on their transition towards a more digital and sustainable model is supplemented by their growing interest in exploring the broad GenAI opportunity.Total revenues of Applications&Technology services(62%of the Groups total revenues and Capgeminis core business)declined by-3.4%.Lastly,Operations&Engineering(29%of the Groups total revenues)total revenues decreased by-1.8%.OPERATIONS IN Q2 2024 Revenue growth rates started to improve in Q2 in all businesses and almost all regions and sectors.Group revenues totaled 5,611 million,-1.9%year-on-year at constant exchange rates and-2.3%on an organic basis.As expected,North America is the region which improved the most in Q2 with a revenue contraction limited to-3.7%at constant exchange rates compared with-7.1%posted in Q1,mainly driven by an improvement in the TMT sector-although still contracting in Q2.The Rest of Europe region posted slight growth of 0.4%,with continued momentum in the Energy&Utilities sector,while the Financial Services and Services sectors returned to growth.Revenues in the United Kingdom and Ireland decreased by-2.5%,with softness in the Financial Services and Consumer Goods&Retail sectors partly offset by a dynamic Energy&Utilities sector.Activity decreased by-2.7%in France despite a solid momentum in the Public Sector.Finally,revenues in the Asia-Pacific and Latin America region declined moderately at-1.6%.4 Press Release HEADCOUNT The Groups total headcount stands at 336,900 as at June 30,2024,down-4%year-on-year and virtually stable since the end of March.The offshore workforce stands at 192,500 employees or 57%of the total headcount.BALANCE SHEET Capgeminis balance sheet structure was relatively unchanged in H1 2024.Cash and cash equivalents and cash management assets represent 2.9 billion as at June 30,2024.Taking into account total borrowings of 5.7 billion,Capgeminis net debt*stands at 2.8 billion as at June 30,2024,compared with 3.2 billion as at June 30,2023 and 2.0 billion as at December 31,2023.SUSTAINABILITY In terms of environmental sustainability,Capgemini has been accelerating its internal sustainability upskilling program through its own Sustainability Campus.In June,the Group made the Sustainability awareness module mandatory to all employees,starting in August 2024.Capgemini was recognized again by an Ecovadis Platinum rating in recognition of its sustainability achievement,with an overall score of 87 points out of 100,up 7 points from last year,and remained part of the CDP(Carbon Disclosure Project)A-List.The Group also extended the scope of its Energy Command Center(ECC)in India in partnership with Schneider Electric,from 8 campuses(operated since 2022)to 23 campuses and more than 70 buildings.In addition,the ECC is now offered as a service,leveraging Capgeminis and Schneider Electrics joint expertise in energy optimization to help organizations accelerate their transition towards smarter and more sustainable energy management.In terms of diversity and inclusion,Capgemini is continuing to shape inclusive futures for all.The Group recently launched the 2nd cohort of EmpowHer,its sponsorship program to bring women to executive leadership positions.In February,Capgemini published its D&I policy,illustrating its focus and commitments.In May,the Group launched its fourth global employee network group,CulturALL,which celebrates the rich heritage,unique customs,and traditions that each employee brings to the table,with 160 nationalities across over 50 countries represented within the Group.In addition,Capgemini has been recognized as one of the Best Places to Work for People with Disabilities this year.OUTLOOK The Groups financial targets for 2024 are updated as follows:Revenue growth of-0.5%to-1.5%at constant currency(was 0%to 3%);Operating margin of 13.3%to 13.6%(unchanged);Organic free cash flow of around 1.9 billion(unchanged).The inorganic contribution to growth should be around half a point(was ranging from a marginal impact up to 1 point).CONFERENCE CALL Aiman Ezzat,Chief Executive Officer,accompanied by Nive Bhagat,Chief Financial Officer,and Olivier Sevillia,Chief Operating Officer,will present this press release during a conference call in English to be held today at 8.00 a.m.Paris time(CET).You can follow this conference call live via webcast at the following link.A replay will also be available for a period of one year.All documents relating to this publication will be posted on the Capgemini investor website at https:/ Press Release PROVISIONAL CALENDAR October 30,2024 Q3 2024 revenues February 18,2025 FY 2024 results April 29,2025 Q1 2025 revenues May 7,2025 Shareholders Meeting DISCLAIMER This press release may contain forward-looking statements.Such statements may include projections,estimates,assumptions,statements regarding plans,objectives,intentions and/or expectations with respect to future financial results,events,operations and services and product development,as well as statements,regarding future performance or events.Forward-looking statements are generally identified by the words“expects”,“anticipates”,“believes”,“intends”,“estimates”,“plans”,“projects”,“may”,“would”,“should”or the negatives of these terms and similar expressions.Although Capgeminis management currently believes that the expectations reflected in such forward-looking statements are reasonable,investors are cautioned that forward-looking statements are subject to various risks and uncertainties(including,without limitation,risks identified in Capgeminis Universal Registration Document available on Capgeminis website),because they relate to future events and depend on future circumstances that may or may not occur and may be different from those anticipated,many of which are difficult to predict and generally beyond the control of Capgemini.Actual results and developments may differ materially from those expressed in,implied by or projected by forward-looking statements.Forward-looking statements are not intended to and do not give any assurances or comfort as to future events or results.Other than as required by applicable law,Capgemini does not undertake any obligation to update or revise any forward-looking statement.This press release does not contain or constitute an offer of securities for sale or an invitation or inducement to invest in securities in France,the United States or any other jurisdiction.ABOUT CAPGEMINI Capgemini is a global business and technology transformation partner,helping organizations to accelerate their dual transition to a digital and sustainable world,while creating tangible impact for enterprises and society.It is a responsible and diverse group of 340,000 team members in more than 50 countries.With its strong over 55-year heritage,Capgemini is trusted by its clients to unlock the value of technology to address the entire breadth of their business needs.It delivers end-to-end services and solutions leveraging strengths from strategy and design to engineering,all fueled by its market leading capabilities in AI,cloud and data,combined with its deep industry expertise and partner ecosystem.The Group reported 2023 global revenues of 22.5 billion.Get the Future You Want| *APPENDIX3F2 BUSINESS CLASSIFICATION Strategy&Transformation includes all strategy,innovation and transformation consulting services.Applications&Technology brings together“Application Services”and related activities and notably local technology services.Operations&Engineering encompasses all other Group businesses.These comprise Business Services(including Business Process Outsourcing and transaction services),all Infrastructure and Cloud services,and R&D and Engineering services.2 Note that in the appendix,certain totals may not equal the sum of amounts due to rounding adjustments.6 Press Release DEFINITIONS Organic growth or like-for-like growth in revenues is the growth rate calculated at constant Group scope and exchange rates.The Group scope and exchange rates used are those for the reported period.Exchange rates for the reported period are also used to calculate growth at constant exchange rates.Reconciliation of growth rates Q1 2024 Q2 2024 H1 2024 Organic growth -3.6%-2.3%-3.0%Changes in Group scope 0.3 pts 0.4 pts 0.4 pts Growth at constant exchange rates-3.3%-1.9%-2.6%Exchange rate fluctuations-0.2 pts 0.4 pts 0.1 pts Reported growth-3.5%-1.5%-2.5%When determining activity trends by business and in accordance with internal operating performance measures,growth at constant exchange rates is calculated based on total revenues,i.e.,before elimination of inter-business billing.The Group considers this to be more representative of activity levels by business.As its businesses change,an increasing number of contracts require a range of business expertise for delivery,leading to a rise in inter-business flows.Operating margin is one of the Groups key performance indicators.It is defined as the difference between revenues and operating costs.It is calculated before“Other operating income and expense”which include amortization of intangible assets recognized in business combinations,expenses relative to share-based compensation(including social security contributions and employer contributions)and employee share ownership plan,and non-recurring revenues and expenses,notably impairment of goodwill,negative goodwill,capital gains or losses on disposals of consolidated companies or businesses,restructuring costs incurred under a detailed formal plan approved by the Groups management,the cost of acquiring and integrating companies acquired by the Group,including earn-outs comprising conditions of presence,and the effects of curtailments,settlements and transfers of defined benefit pension plans.Normalized net profit is equal to profit for the year(Group share)adjusted for the impact of items recognized in“Other operating income and expense”,net of tax calculated using the effective tax rate.Normalized earnings per share is computed like basic earnings per share,i.e.,excluding dilution.Organic free cash flow is equal to cash flow from operations less acquisitions of property,plant,equipment and intangible assets(net of disposals)and repayments of lease liabilities,adjusted for cash out relating to the net interest cost.Net debt(or net cash)comprises(i)cash and cash equivalents,as presented in the Consolidated Statement of Cash Flows(consisting of short-term investments and cash at bank)less bank overdrafts,and also including(ii)cash management assets(assets presented separately in the Consolidated Statement of Financial Position due to their characteristics),less(iii)short-and long-term borrowings.Account is also taken of(iv)the impact of hedging instruments when these relate to borrowings,intercompany loans,and own shares.7 Press Release RESULTS BY REGION Revenues Year-on-year growth Operating margin rate H1 2024(in millions of euros)Reported At constant exchange rates H1 2023 H1 2024 North America 3,108 -5.5%-5.4.2.5%United Kingdom and Ireland 1,380 -0.4%-2.8.4 .5%France 2,245 -2.7%-2.7.1%9.1%Rest of Europe 3,470 -0.1%-0.1.5.1%Asia-Pacific and Latin America 935 -3.7%-1.6.2.5%TOTAL 11,138 -2.5%-2.6.4.4%OPERATIONS BY BUSINESS Total revenues Year-on-year growth H1 2024(%of Group revenues)At constant exchange rates in Total revenues of the business Strategy&Transformation 9% 2.7%Applications&Technology 62%-3.4%Operations&Engineering 29%-1.8%SUMMARY INCOME STATEMENT AND OPERATING MARGIN(in millions of euros)H1 2023 H1 2024 Change Revenues 11,426 11,138-2.5%Operating expenses(10,013)(9,754)Operating margin 1,413 1,384-2%as a%of revenues 12.4.4%-Other operating income and expense(262)(237)Operating profit 1,151 1,147-as a%of revenues 10.1.3% 20 bp Net financial income/(expense)(22)20 Income tax income/(expense)(313)(326)Share of associates(4)(3)(-)Non-controlling interests(3)(3)Net profit(Group share)809 835 3%NORMALIZED AND DILUTED EARNINGS PER SHARE (in millions of euros)H1 2023 H1 2024 Change Average number of shares outstanding 171,947,414 170,981,563 BASIC EARNINGS PER SHARE(in euros)4.70 4.88 4%Diluted average number of shares outstanding 178,089,362 177,293,357 DILUTED EARNINGS PER SHARE(in euros)4.54 4.71 4%(in millions of euros)H1 2023 H1 2024 Change Net profit(Group share)809 835 3fective tax rate,excluding exceptional tax expenses 27.8(.0%(-)Other operating income and expenses,net of tax 189 171 Normalized profit for the period 998 1,006 1%Average number of shares outstanding 171,947,414 170,981,563 NORMALIZED EARNINGS PER SHARE(in euros)5.80 5.88 1%8 Press Release CHANGE IN CASH AND CASH EQUIVALENTS AND ORGANIC FREE CASH FLOW (in millions of euros)H1 2023 H1 2024 Net cash from operating activities 244 456 Acquisitions of property,plant and equipment and intangible assets,net of disposals(125)(135)Net interest cost(24)(14)Repayments of lease liabilities(148)(144)ORGANIC FREE CASH FLOW(53)163 Other cash flows from(used in)investing and financing activities(481)(1,171)Increase(decrease)in cash and cash equivalents(534)(1,008)Effect of exchange rate fluctuations(70)60 Opening cash and cash equivalents,net of bank overdrafts 3,795 3,517 Closing cash and cash equivalents,net of bank overdrafts 3,191 2,569 NET DEBT (in millions of euros)June 30,2023 December 31,2023 June 30,2024 Cash and cash equivalents 3,195 3,536 2,572 Bank overdrafts(4)(19)(3)Cash and cash equivalents,net of bank overdrafts 3,191 3,517 2,569 Cash management assets 575 161 367 Long-term borrowings(5,663)(5,071)(4,276)Short-term borrowings and bank overdrafts(1,339)(675)(1,421)(-)Bank overdrafts 4 19 3 Borrowings,excluding bank overdrafts(6,998)(5,727)(5,694)Derivative instruments(12)2(17)NET CASH/(NET DEBT)(3,244)(2,047)(2,775)
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended December 2,2023OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from _ to _Commission File Number:001-39350Albertsons Companies,Inc.(Exact name of registrant as specified in its charter)Delaware47-4376911(State or other jurisdiction of incorporation or organization)(I.R.S.Employer Identification No.)250 Parkcenter Blvd.Boise,Idaho 83706(Address of principal executive offices and zip code)(208)395-6200(Registrants telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of each classTrading Symbol(s)Name of each exchange on which registeredClass A common stock,$0.01 par valueACINew York Stock ExchangeIndicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 duringthe preceding 12 months(or for such shorter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements forthe past 90 days.Yes NoIndicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T(232.405 of this chapter)during the preceding 12 months(or for such shorter period that the registrant was required to submit suchfiles).Yes NoIndicate by check mark whether the registrant is a large accelerated filer,an accelerated filer,a non-accelerated filer,a smaller reporting company,or anemerging growth company.See the definitions of large accelerated filer,accelerated filer,smaller reporting company and emerging growth company inRule 12b-2 of the Exchange Act.Large accelerated filerAccelerated filerNon-accelerated filerSmaller reporting companyEmerging growth companyIf an emerging growth company,indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new orrevised financial accounting standards provided pursuant to Section 13(a)of the Exchange Act.Indicate by check mark whether the registrant is a shell company(as defined in Rule 12b-2 of the Exchange Act).Yes NoAs of January 5,2024,the registrant had 576,039,866 shares of Class A common stock,par value$0.01 per share,outstanding.Albertsons Companies,Inc.and SubsidiariesPART I-FINANCIAL INFORMATIONPageItem 1-Condensed Consolidated Financial Statements(unaudited)Condensed Consolidated Balance Sheets3Condensed Consolidated Statements of Operations and Comprehensive Income4Condensed Consolidated Statements of Cash Flows5Condensed Consolidated Statements of Stockholders Equity6Notes to Condensed Consolidated Financial Statements8Item 2-Managements Discussion and Analysis of Financial Condition and Results of Operations21Item 3-Quantitative and Qualitative Disclosures About Market Risk34Item 4-Controls and Procedures34PART II-OTHER INFORMATIONItem 1-Legal Proceedings36Item 1A-Risk Factors36Item 2-Unregistered Sales of Equity Securities and Use of Proceeds36Item 3-Defaults Upon Senior Securities37Item 4-Mine Safety Disclosures37Item 5-Other Information37Item 6-Exhibits37SIGNATURES38Table of ContentsPART I-FINANCIAL INFORMATIONItem 1-Condensed Consolidated Financial Statements(unaudited)Albertsons Companies,Inc.and SubsidiariesCondensed Consolidated Balance Sheets(in millions,except share data)(unaudited)December 2,2023February 25,2023ASSETSCurrent assetsCash and cash equivalents$222.7$455.8 Receivables,net828.4 687.6 Inventories,net5,175.8 4,782.0 Other current assets435.0 345.0 Total current assets6,661.9 6,270.4 Property and equipment,net9,417.1 9,358.7 Operating lease right-of-use assets5,926.3 5,879.1 Intangible assets,net2,450.8 2,465.4 Goodwill1,201.0 1,201.0 Other assets839.4 993.6 TOTAL ASSETS$26,496.5$26,168.2 LIABILITIESCurrent liabilitiesAccounts payable$4,119.2$4,173.1 Accrued salaries and wages1,276.5 1,317.4 Current maturities of long-term debt and finance lease obligations737.8 1,075.7 Current maturities of operating lease obligations674.1 664.8 Other current liabilities1,049.9 1,197.8 Total current liabilities7,857.5 8,428.8 Long-term debt and finance lease obligations7,797.0 7,834.4 Long-term operating lease obligations5,514.1 5,386.2 Deferred income taxes794.6 854.0 Other long-term liabilities2,006.0 2,008.4 Commitments and contingenciesSeries A convertible preferred stock,$0.01 par value;1,750,000 shares authorized,no shares issued and outstanding as ofDecember 2,2023 and 50,000 shares issued and outstanding as of February 25,2023 45.7 Series A-1 convertible preferred stock,$0.01 par value;1,410,000 shares authorized,no shares issued and outstanding as ofDecember 2,2023 and February 25,2023 STOCKHOLDERS EQUITYUndesignated preferred stock,$0.01 par value;96,840,000 shares authorized,no shares issued as of December 2,2023 andFebruary 25,2023 Class A common stock,$0.01 par value;1,000,000,000 shares authorized,594,390,891 and 590,968,600 shares issued as ofDecember 2,2023 and February 25,2023,respectively5.9 5.9 Class A-1 convertible common stock,$0.01 par value;150,000,000 shares authorized,no shares issued as of December 2,2023 and February 25,2023 Additional paid-in capital2,109.2 2,072.7 Treasury stock,at cost,18,397,745 and 21,300,945 shares held as of December 2,2023 and February 25,2023,respectively(304.2)(352.2)Accumulated other comprehensive income68.7 69.3 Retained earnings(accumulated deficit)647.7(185.0)Total stockholders equity2,527.3 1,610.7 TOTAL LIABILITIES AND STOCKHOLDERS EQUITY$26,496.5$26,168.2 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.3Table of ContentsAlbertsons Companies,Inc.and SubsidiariesCondensed Consolidated Statements of Operations and Comprehensive Income(in millions,except per share data)(unaudited)12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Net sales and other revenue$18,557.3$18,154.9$60,898.2$59,384.6 Cost of sales13,360.0 13,033.2 43,996.7 42,713.3 Gross margin5,197.3 5,121.7 16,901.5 16,671.3 Selling and administrative expenses4,607.3 4,532.0 15,215.7 14,883.9 Loss(gain)on property dispositions and impairmentlosses,net23.9 7.3 43.1(86.1)Operating income566.1 582.4 1,642.7 1,873.5 Interest expense,net116.3 84.3 383.1 313.0 Other(income)expense,net(6.7)1.7(14.6)(23.5)Income before income taxes456.5 496.4 1,274.2 1,584.0 Income tax expense95.1 120.9 228.7 381.6 Net income$361.4$375.5$1,045.5$1,202.4 Other comprehensive income(loss),net of taxRecognition of pension(loss)gain(1.0)0.1(3.5)0.4 Other0.8(0.1)2.9(3.3)Other comprehensive(loss)income$(0.2)$(0.6)$(2.9)Comprehensive income$361.2$375.5$1,044.9$1,199.5 Net income per Class A common shareBasic net income per Class A common share$0.63$0.20$1.82$1.74 Diluted net income per Class A common share0.62 0.20 1.80 1.72 Weighted average Class A common shares outstanding(in millions)Basic576.2 534.6 575.2 525.4 Diluted581.1 538.6 580.5 529.8 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.4Table of ContentsAlbertsons Companies,Inc.and SubsidiariesCondensed Consolidated Statements of Cash Flows(in millions)(unaudited)40 weeks endedDecember 2,2023December 3,2022Cash flows from operating activities:Net income$1,045.5$1,202.4 Adjustments to reconcile net income to net cash provided by operating activities:Loss(gain)on property dispositions and impairment losses,net43.1(86.1)Depreciation and amortization1,359.9 1,380.9 Operating lease right-of-use assets amortization510.7 500.7 LIFO expense87.8 181.4 Deferred income tax(116.5)101.3 Contributions to pension and post-retirement benefit plans,net of(income)expense(17.0)(34.9)Gain on interest rate swaps and energy hedges,net(6.1)(12.9)Deferred financing costs12.0 13.0 Equity-based compensation expense80.5 96.6 Other operating activities(8.6)1.9 Changes in operating assets and liabilities:Receivables,net(139.4)(143.8)Inventories,net(481.6)(735.4)Accounts payable,accrued salaries and wages and other accrued liabilities54.1 33.6 Operating lease liabilities(424.3)(412.0)Self-insurance assets and liabilities31.3 49.6 Other operating assets and liabilities(300.6)(64.3)Net cash provided by operating activities1,730.8 2,072.0 Cash flows from investing activities:Payments for property,equipment and intangibles,including lease buyouts(1,535.0)(1,566.9)Proceeds from sale of assets201.3 99.4 Other investing activities4.9(11.2)Net cash used in investing activities(1,328.8)(1,478.7)Cash flows from financing activities:Proceeds from issuance of long-term debt,including ABL facility150.0 1,400.0 Payments on long-term borrowings,including ABL facility(500.7)(200.5)Payments of obligations under finance leases(45.4)(46.4)Dividends paid on common stock(207.1)(190.9)Dividends paid on convertible preferred stock(0.8)(50.2)Employee tax withholding on vesting of restricted stock units(37.1)(42.9)Other financing activities2.5 5.3 Net cash(used in)provided by financing activities(638.6)874.4 Net(decrease)increase in cash and cash equivalents and restricted cash(236.6)1,467.7 Cash and cash equivalents and restricted cash at beginning of period463.8 2,952.6 Cash and cash equivalents and restricted cash at end of period$227.2$4,420.3 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.5Table of ContentsAlbertsons Companies,Inc.and SubsidiariesCondensed Consolidated Statements of Stockholders Equity(in millions,except share data)(unaudited)Class A Common StockAdditionalpaid-incapitalTreasury StockAccumulatedothercomprehensiveincomeRetainedearnings(accumulateddeficit)TotalstockholdersequitySharesAmountSharesAmountBalance as of February 25,2023590,968,600$5.9$2,072.7 21,300,945$(352.2)$69.3$(185.0)$1,610.7 Equity-based compensation 27.7 27.7 Shares issued and employee taxwithholding on vesting of restrictedstock units3,059,905 (33.1)(33.1)Convertible preferred stockconversions (2,903,200)48.0 (2.3)45.7 Cash dividends declared on commonstock($0.12 per common share)(69.0)(69.0)Dividends accrued on convertiblepreferred stock (0.3)(0.3)Net income 417.2 417.2 Other comprehensive income,net oftax 1.1 1.1 Other activity 1.0 (1.0)Balance as of June 17,2023594,028,505$5.9$2,068.3 18,397,745$(304.2)$70.4$159.6$2,000.0 Equity-based compensation 22.2 22.2 Shares issued and employee taxwithholding on vesting of restrictedstock units199,441 (2.0)(2.0)Cash dividends declared on commonstock($0.12 per common share)(69.0)(69.0)Net income 266.9 266.9 Other comprehensive loss,net of tax (1.5)(1.5)Other activity 1.1 (1.1)Balance as of September 9,2023594,227,946$5.9$2,089.6 18,397,745$(304.2)$68.9$356.4$2,216.6 Equity-based compensation 20.4 20.4 Shares issued and employee taxwithholding on vesting of restrictedstock units162,945 (2.0)(2.0)Cash dividends declared on commonstock($0.12 per common share)(69.1)(69.1)Net income 361.4 361.4 Other comprehensive loss,net of tax (0.2)(0.2)Other activity 1.2 (1.0)0.2 Balance as of December 2,2023594,390,891$5.9$2,109.2 18,397,745$(304.2)$68.7$647.7$2,527.3 6Table of ContentsAlbertsons Companies,Inc.and SubsidiariesCondensed Consolidated Statements of Stockholders Equity(in millions,except share data)(unaudited)Class A Common StockAdditionalpaid-incapitalTreasury StockAccumulatedothercomprehensiveincomeRetainedearnings(accumulateddeficit)TotalstockholdersequitySharesAmountSharesAmountBalance as of February 26,2022587,904,283$5.9$2,032.2 99,640,065$(1,647.4)$69.0$2,564.9$3,024.6 Equity-based compensation 35.3 35.3 Shares issued and employee taxwithholding on vesting of restrictedstock units2,479,845 (37.3)(37.3)Convertible preferred stockconversions (32.5)(40,863,977)675.6 643.1 Cash dividends declared on commonstock($0.12 per common share)(63.0)(63.0)Dividends accrued on convertiblepreferred stock (13.7)(13.7)Net income 484.2 484.2 Other comprehensive loss,net of tax (2.8)(2.8)Other activity 0.5 (0.3)0.2 Balance as of June 18,2022590,384,128$5.9$1,998.2 58,776,088$(971.8)$66.2$2,972.1$4,070.6 Equity-based compensation 27.9 27.9 Shares issued and employee taxwithholding on vesting of restrictedstock units179,020 (3.0)(3.0)Convertible preferred stockconversions (1.2)(1,475,483)24.4 23.2 Cash dividends declared on commonstock($0.12 per common share)(63.7)(63.7)Dividends accrued on convertiblepreferred stock (10.4)(10.4)Net income 342.7 342.7 Other comprehensive loss,net of tax (0.1)(0.1)Other activity 0.6 (0.8)(0.2)Balance as of September 10,2022590,563,148$5.9$2,022.5 57,300,605$(947.4)$66.1$3,239.9$4,387.0 Equity-based compensation 27.3 27.3 Shares issued and employee taxwithholding on vesting of restrictedstock units364,650 (2.6)(2.6)Convertible preferred stockconversions (1.7)(2,090,287)34.6 32.9 Special dividend declared($6.85 pershare)31.3 (3,952.6)(3,921.3)Cash dividends declared on commonstock($0.12 per common share)(64.2)(64.2)Dividends accrued on convertiblepreferred stock (14.3)(14.3)Net income 375.5 375.5 Other activity 0.2 (1.5)(1.3)Balance as of December 3,2022590,927,798$5.9$2,077.0 55,210,318$(912.8)$66.1$(417.2)$819.0 The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.7Table of ContentsAlbertsons Companies,Inc.and SubsidiariesNotes to Condensed Consolidated Financial Statements(unaudited)NOTE 1-BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESBasis of PresentationThe accompanying interim Condensed Consolidated Financial Statements include the accounts of Albertsons Companies,Inc.and itssubsidiaries(the Company).All significant intercompany balances and transactions were eliminated.The Condensed Consolidated BalanceSheet as of February 25,2023 is derived from the Companys annual audited Consolidated Financial Statements,which should be read inconjunction with these Condensed Consolidated Financial Statements and which are included in the Companys Annual Report on Form 10-K forthe fiscal year ended February 25,2023,filed with the Securities and Exchange Commission(the SEC)on April 25,2023.Certain informationin footnote disclosures normally included in annual financial statements was condensed or omitted for the interim periods presented inaccordance with accounting principles generally accepted in the United States of America(GAAP).In the opinion of management,the interimdata includes all adjustments,consisting of normal recurring adjustments,necessary for a fair statement of the results for the interim periods.Theinterim results of operations and cash flows are not necessarily indicative of those results and cash flows expected for the year.The Companysresults of operations are for the 12 and 40 weeks ended December 2,2023 and December 3,2022.Significant Accounting PoliciesRestricted cash:Restricted cash is included in Other current assets or Other assets depending on the remaining term of the restriction andprimarily relates to surety bonds and funds held in escrow.The Company had$4.5 million and$8.0 million of restricted cash as of December 2,2023 and February 25,2023,respectively.Inventories,net:Substantially all of the Companys inventories consist of finished goods valued at the lower of cost or market and net of vendorallowances.The Company primarily uses the retail inventory or cost method to determine inventory cost before application of any last-in,first-out(LIFO)adjustment.Interim LIFO inventory costs are based on managements estimates of expected year-end inventory levels and inflationrates.The Company recorded LIFO expense of$27.6 million and$64.5 million for the 12 weeks ended December 2,2023 and December 3,2022,respectively,and$87.8 million and$181.4 million for the 40 weeks ended December 2,2023 and December 3,2022,respectively.Equity method investments:The Companys equity method investments included an equity interest in Mexico Foods Parent LLC and LaFabrica Parent LLC(El Rancho),a Texas-based specialty grocer.During the first quarter of fiscal 2023,El Rancho exercised its contractualoption to repurchase the Companys 45%ownership interest in El Rancho and the Company received proceeds of$166.1 million.As a result,theCompany realized a gain of$10.5 million during the first quarter of fiscal 2023,included in Other(income)expense,net.Convertible Preferred Stock:During the first quarter of fiscal 2023,the remaining 50,000 shares of the Companys Series A convertiblepreferred stock(Series A preferred stock)were converted into 2,903,200 shares of the Companys Class A common stock.As a result,theCompany has issued in the aggregate,101,611,902 shares of Class A common stock to holders of Series A preferred stock and Series A-1convertible preferred stock(Series A-1 preferred stock and together with the Series A preferred stock,the Convertible Preferred Stock).These non-cash conversions represent 100%of the originally issued Convertible Preferred Stock.As of December 2,2023,no shares ofConvertible Preferred Stock are outstanding.Concurrent with the issuance and sale of the Convertible Preferred Stock during the first quarter of fiscal 2020,a consolidated real estatesubsidiary of the Company entered into a real estate agreement with an affiliate of the holders of the Convertible Preferred Stock.Under theterms of the real estate agreement,the Company placed fee owned real estate properties into its real estate subsidiary and contributed$36.5million of cash into a restricted escrow account,with a total value of$2.9 billion(165%of the liquidation preference of the ConvertiblePreferred8Table of ContentsStock at the time of issue).The real estate agreement provided that the Company may release properties and/or cash from the restricted escrowaccount if the holders of Convertible Preferred Stock convert their shares into Class A common stock,provided that certain conversionthresholds are met.Due to the conversion of 100%of the originally issued Convertible Preferred Stock discussed above,all real estate propertiesand cash have been released from the restricted escrow account and transferred to the Company.As of December 2,2023,no assets of theCompany were held in the restricted escrow account.Income taxes:Income tax expense was$95.1 million,representing a 20.8fective tax rate,for the 12 weeks ended December 2,2023.TheCompanys effective tax rate for the 12 weeks ended December 2,2023 differs from the federal income tax statutory rate of 21%primarily due toan increase in federal tax credits.Income tax expense was$120.9 million,representing a 24.4fective tax rate,for the 12 weeks endedDecember 3,2022.The Companys effective tax rate for the 12 weeks ended December 3,2022 differs from the federal income tax statutory rateof 21%primarily due to state income taxes,reduced by federal tax credits.Income tax expense was$228.7 million,representing a 17.9fective tax rate,for the 40 weeks ended December 2,2023.The Companyseffective tax rate for the 40 weeks ended December 2,2023 differs from the federal income tax statutory rate of 21%primarily due to thereduction of a reserve of$49.7 million for an uncertain tax position due to the expiration of a foreign statute during the first quarter of fiscal2023,federal tax credits,as well as discrete benefits recognized for state income taxes.Income tax expense was$381.6 million,representing a24.1fective tax rate,for the 40 weeks ended December 3,2022.The Companys effective tax rate for the 40 weeks ended December 3,2022differs from the federal income tax statutory rate of 21%primarily due to state income taxes,reduced by federal tax credits.Segments:The Company and its subsidiaries offer grocery products,general merchandise,health and beauty care products,pharmacy,fuel andother items and services in its stores or through digital channels.The Companys operating divisions are geographically based,have similareconomic characteristics and similar expected long-term financial performance.The Companys operating segments and reporting units are its 12operating divisions,which are reported in one reportable segment.Each reporting unit constitutes a business for which discrete financialinformation is available and for which management regularly reviews the operating results.Across all operating segments,the Company operatesprimarily one store format.Each division offers through its stores and digital channels the same general mix of products with similar pricing tosimilar categories of customers,has similar distribution methods,operates in similar regulatory environments and purchases merchandise fromsimilar or the same vendors.Revenue recognition:Revenues from the retail sale of products are recognized at the point of sale or delivery to the customer,net of returns andsales tax.Pharmacy sales are recorded upon the customer receiving the prescription.Third-party receivables from pharmacy sales were$439.3million and$313.5 million as of December 2,2023 and February 25,2023,respectively,and are recorded in Receivables,net.For digital relatedsales,which primarily include home delivery and Drive Up&Go curbside pickup,revenues are recognized upon either pickup in store ordelivery to the customer and may include revenue for separately charged delivery services.The Company records a contract liability whenrewards are earned by customers in connection with the Companys loyalty programs.As rewards are redeemed or expire,the Company reducesthe contract liability and recognizes revenue.The contract liability balance was immaterial as of December 2,2023 and February 25,2023.The Company records a contract liability when it sells its own proprietary gift cards.The Company records a sale when the customer redeemsthe gift card.The Companys gift cards do not expire.The Company reduces the contract liability and records revenue for the unused portion ofgift cards(breakage)in proportion to its customers pattern of redemption,which the Company determined to be the historical redemption rate.The Companys contract liability related to gift cards was$121.1 million and$115.0 million as of December 2,2023 and February 25,2023,respectively.9Table of ContentsDisaggregated RevenuesThe following table represents Net sales and other revenue by product type(dollars in millions):12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Amount(1)%of TotalAmount(1)%of TotalAmount(1)%of TotalAmount(1)%of TotalNon-perishables(2)$9,242.8 49.8%$9,255.2 51.0%$30,566.5 50.2%$29,705.7 50.0%Fresh(3)5,709.0 30.8 5,762.6 31.7 19,517.7 32.0 19,588.6 33.0 Pharmacy2,282.8 12.3 1,724.4 9.5 6,323.9 10.4 5,124.2 8.6 Fuel1,046.7 5.6 1,111.1 6.1 3,573.9 5.9 3,968.6 6.7 Other(4)276.0 1.5 301.6 1.7 916.2 1.5 997.5 1.7 Net sales and otherrevenue$18,557.3 100.0%$18,154.9 100.0%$60,898.2 100.0%$59,384.6 100.0%(1)Digital related sales are included in the categories to which the revenue pertains.(2)Consists primarily of general merchandise,grocery,dairy and frozen foods.(3)Consists primarily of produce,meat,deli and prepared foods,bakery,floral and seafood.(4)Consists primarily of wholesale revenue to third parties,commissions and other miscellaneous revenue.Recently issued accounting standards:In November 2023,the Financial Accounting Standards Board(FASB)issued Accounting StandardsUpdate(ASU)2023-07,Segment Reporting Topic(280):Improvements to Reportable Segment Disclosure.The ASU improves reportablesegment disclosure requirements,primarily through enhanced disclosures about significant segment expenses.The amendments in this ASU areeffective for fiscal years beginning after December 15,2023,and interim periods within fiscal years beginning after December 15,2024 on aretrospective basis.Early adoption is permitted.The Company is currently evaluating the impact of this ASU on its Consolidated FinancialStatements and related disclosures.In December 2023,the FASB issued ASU 2023-09,Income Taxes(Topic 740):Improvements to Income Tax Disclosures.The ASU enhancesthe transparency and decision usefulness of income tax disclosures and is effective for annual periods beginning after December 15,2024 on aprospective basis.Early adoption is permitted.The Company is currently evaluating the impact of this ASU on its Consolidated FinancialStatements and related disclosures.NOTE 2-MERGER AGREEMENTOn October 13,2022,the Company,The Kroger Co.(Kroger or Parent)and Kettle Merger Sub,Inc.,a wholly owned subsidiary of Parent(Merger Sub),entered into an Agreement and Plan of Merger(the Merger Agreement),pursuant to which Merger Sub will be merged withand into the Company(the Merger),with the Company surviving the Merger as the surviving corporation and a direct,wholly ownedsubsidiary of Parent.Pursuant to the Merger Agreement,each share of Class A common stock issued and outstanding immediately prior to the effective time of theMerger(the Effective Time),shall be converted automatically at the Effective Time into the right to receive from Parent$34.10 per share incash,without interest.The$34.10 per share consideration to be paid by Parent would be reduced by the special cash dividend of$6.85 per shareof Class A common stock(the Special Dividend),which was declared on October 13,2022 and paid on January 20,2023.At the Effective Time,each outstanding equity award denominated in shares of Class A common stock will be converted into a correspondingaward with respect to shares of Parent common stock(the Converted Awards).The Converted Awards will remain outstanding and subject tothe same terms and conditions(including vesting and10Table of Contentsforfeiture terms)as were applied to the corresponding Company equity award immediately prior to the Effective Time;provided that anyCompany equity award with a performance-based vesting condition will have such vesting condition deemed satisfied at(i)the greater of targetperformance and actual performance(for such awards subject to an open performance period at the Effective Time)and(ii)target performance(for such awards subject to a performance period that begins after the Effective Time).For purposes of the conversion described above,thenumber of shares of Parent common stock subject to a Converted Award will be based upon the number of shares of Class A common stocksubject to such Company equity award immediately prior to the Effective Time multiplied by an exchange ratio equal to(i)$34.10 less theSpecial Dividend,divided by(ii)the average closing price of shares of Parent common stock for five trading days preceding the Closing.In connection with obtaining the requisite regulatory clearance necessary to consummate the Merger,the Company and Parent expect to makedivestitures of stores owned by the Company and Parent to a third party.As described in the Merger Agreement and subject to the outcome of thedivestiture process and negotiations with applicable government authorities,the Company was prepared to establish a Company subsidiary(SpinCo)as part of this process.If utilized,the common stock or interests in SpinCo would be distributed to Company stockholders no laterthan the closing of the Merger(the Closing)and SpinCo would operate as a standalone public company,or the equity of Spinco would becontributed to a trust for later distribution to Company stockholders.As described in more detail below,on September 8,2023,the Company andKroger announced that they entered into a comprehensive divestiture plan with C&S Wholesale Grocers,LLC(C&S).As a result of thecomprehensive divestiture plan announced with C&S,Kroger has exercised its right under the Merger Agreement to sell what would have beenthe SpinCo business to C&S.Consequently,the creation of SpinCo and spin-off previously contemplated by the Company and Kroger is nolonger a requirement under the Merger Agreement and will no longer be pursued by the Company and Kroger.On September 8,2023,the Company and Kroger announced that the parties had entered into a definitive agreement,dated September 8,2023,with C&S for the sale of select stores,banners,distribution centers,offices and private label brands to C&S.The stores will be divested byKroger following the Closing.The definitive agreement has customary representations and warranties and covenants of a transaction of its type.The transaction is subject to fulfillment of customary closing conditions,including clearance by the Federal Trade Commission and thecompletion of the proposed Merger.The Merger Agreement provides for certain termination rights for the Company and Parent,including by mutual written consent,and if theClosing does not occur on or prior to January 13,2024(the Outside Date),the Outside Date may be extended by either party for up to 270 daysin the aggregate.The Parent will be obligated to pay a termination fee of$600 million if the Merger Agreement is terminated by either party inconnection with the occurrence of the Outside Date,and,at the time of such termination,all closing conditions other than regulatory approvalhave been satisfied.NOTE 3-FAIR VALUE MEASUREMENTSThe accounting guidance for fair value established a framework for measuring fair value and established a three-level valuation hierarchy fordisclosure of fair value measurement.The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability atthe measurement date.The three levels are defined as follows:Level 1-Quoted prices in active markets for identical assets or liabilities;Level 2-Inputs other than quoted prices included within Level 1 that are either directly or indirectly observable;andLevel 3-Unobservable inputs in which little or no market activity exists,requiring an entity to develop its own assumptions that marketparticipants would use to value the asset or liability.11Table of ContentsFair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between marketparticipants at the measurement date.The following table presents certain assets which were measured at fair value on a recurring basis as of December 2,2023(in millions):Fair Value MeasurementsTotalQuoted prices inactive markets for identical assets(Level 1)Significantobservableinputs(Level 2)Significantunobservableinputs(Level 3)Assets:Short-term investments(1)$20.0$5.0$15.0$Non-current investments(2)171.3 77.4 93.9 Derivative contracts(3)4.2 4.2 Total$195.5$82.4$113.1$(1)Primarily relates to Mutual Funds(Level 1)and Certificates of Deposit(Level 2).Included in Other current assets.(2)Primarily relates to investments in publicly traded stock and Exchange-Traded Funds(Level 1)and certain equity investments,U.S.Treasury Notes and Corporate Bonds(Level 2).Included in Other assets.(3)Primarily relates to energy derivative contracts.Included in Other assets.The following table presents certain assets which were measured at fair value on a recurring basis as of February 25,2023(in millions):Fair Value MeasurementsTotalQuoted prices inactive markets for identical assets(Level 1)Significantobservableinputs(Level 2)Significantunobservableinputs(Level 3)Assets:Short-term investments(1)$21.4$4.6$16.8$Non-current investments(2)99.3 99.3 Derivative contracts(3)1.5 1.5 Total$122.2$4.6$117.6$(1)Primarily relates to Mutual Funds(Level 1)and Certificates of Deposit(Level 2).Included in Other current assets.(2)Primarily relates to certain equity investments,U.S.Treasury Notes and Corporate Bonds(Level 2).Included in Other assets.(3)Primarily relates to energy derivative contracts and interest rate swaps.Included in Other assets.The Company records cash and cash equivalents,restricted cash,accounts receivable and accounts payable at cost.The recorded values of thesefinancial instruments approximate fair value based on their short-term nature.The estimated fair value of the Companys debt,including current maturities,was based on Level 2 inputs,being market quotes or values forsimilar instruments,and interest rates currently available to the Company for the issuance of debt with similar terms and remaining maturities asa discount rate for the remaining principal payments.As of December 2,2023,the fair value of total debt was$7,841.7 million compared to thecarrying value of$8,134.3 million,excluding debt discounts and deferred financing costs.As of February 25,2023,the fair value of total debtwas$8,009.1 million compared to the carrying value of$8,483.7 million,excluding debt discounts and deferred financing costs.12Table of ContentsAssets Measured at Fair Value on a Non-Recurring BasisThe Company measures certain assets at fair value on a non-recurring basis,including long-lived assets and goodwill,which are evaluated forimpairment.Long-lived assets include store-related assets such as property and equipment,operating lease assets and certain intangible assets.The inputs used to determine the fair value of long-lived assets and a reporting unit are considered Level 3 measurements due to their subjectivenature.NOTE 4-LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONSThe Companys long-term debt and finance lease obligations as of December 2,2023 and February 25,2023,net of unamortized debt discountsof$34.3 million and$37.5 million,respectively,and deferred financing costs of$45.1 million and$53.2 million,respectively,consisted of thefollowing(in millions):December 2,2023February 25,2023Senior Unsecured Notes due 2026 to 2030,interest rate range of 3.25%to 7.50%$6,503.9$6,496.4 Safeway Inc.Notes due 2027 to 2031,interest rate range of 7.25%to 7.4575.3 374.9 New Albertsons L.P.Notes due 2026 to 2031,interest rate range of 6.52%to 8.70G9.3 476.2 ABL Facility650.0 1,000.0 Other financing obligations30.0 28.8 Mortgage notes payable,secured16.4 16.7 Finance lease obligations479.9 517.1 Total debt8,534.8 8,910.1 Less current maturities(737.8)(1,075.7)Long-term portion$7,797.0$7,834.4 ABL FacilityAs of December 2,2023,$650.0 million remained outstanding under the ABL Facility as the Company repaid$500.0 million and borrowed$150.0 million during the 40 weeks ended December 2,2023,and letters of credit(LOC)issued under the LOC sub-facility was$47.8 million.As of February 25,2023,there was$1,000.0 million outstanding under the ABL Facility and LOC issued under the LOC sub-facility was$53.3million.During the 12 and 40 weeks ended December 2,2023,the average interest rate on the ABL Facility was approximately 6.7%and 6.5%,respectively.13Table of ContentsNOTE 5-EMPLOYEE BENEFIT PLANSPension and Other Post-Retirement BenefitsThe following table provides the components of net pension and post-retirement(income)expense(in millions):12 weeks endedPensionOther post-retirement benefitsDecember 2,2023December 3,2022December 2,2023December 3,2022Estimated return on plan assets$(22.8)$(21.5)$Service cost4.0 4.6 Interest cost19.3 11.9 0.1 0.1 Amortization of prior service cost0.1 0.1 Amortization of net actuarial(gain)loss(1.2)0.2(0.3)(0.1)(Income)expense,net$(0.6)$(4.7)$(0.2)$40 weeks endedPensionOther post-retirement benefitsDecember 2,2023December 3,2022December 2,2023December 3,2022Estimated return on plan assets$(75.8)$(71.5)$Service cost13.3 15.3 Interest cost64.3 39.6 0.4 0.3 Amortization of prior service cost0.3 0.3 Amortization of net actuarial(gain)loss(4.2)0.5(0.8)(0.3)(Income)expense,net$(2.1)$(15.8)$(0.4)$The Company contributed$4.1 million and$14.5 million to its defined pension plans and post-retirement benefit plans during the 12 and 40weeks ended December 2,2023,respectively.For the 12 and 40 weeks ended December 3,2022,the company contributed$14.1 million and$19.1 million,respectively.At the Companys discretion,additional funds may be contributed to the defined benefit pension plans that aredetermined to be beneficial to the Company.The Company currently anticipates contributing an additional$3.4 million to these plans for theremainder of fiscal 2023.Multiemployer Pension PlansARP Act:The American Rescue Plan Act(ARP Act),which was signed into law on March 11,2021,established a special financial assistance(SFA)program for financially troubled multiemployer pension plans.During the 12 weeks ended December 3,2022,the Pension BenefitGuaranty Corporation issued the final rule with respect to the SFA program which allowed for both additional funding and the investment of onethird of the SFA funds into return-seeking investments.Based on the final rule,on August 8,2022,the Combined Plan submitted a supplementedapplication for additional funding of approximately$120 million.The Combined Plan is expected to remain solvent and therefore the Companycurrently does not expect to have any funding requirements for the Excess Plan.As a result,during the second quarter of fiscal 2022,theCompany recorded a non-cash pre-tax gain of$19.0 million to remove the pension liability for the Excess Plan.For additional information,including a description and definition of the Combined Plan,as well as the impact on the Excess Plan,as defined therein,see Part IIItem 8.Financial Statements and Supplementary DataNote 12 of the Companys Annual Report on Form 10-K for the fiscal year ended February 25,2023.14Table of ContentsNOTE 6-COMMITMENTS AND CONTINGENCIES AND OFF BALANCE SHEET ARRANGEMENTSGuaranteesLease Guarantees:The Company may have liability under certain operating leases that were assigned to third parties.If any of these thirdparties fail to perform their obligations under the leases,the Company could be responsible for the lease obligation.Because of the widedispersion among third parties and the variety of remedies available,the Company believes that if an assignee became insolvent,it would nothave a material effect on the Companys financial condition,results of operations or cash flows.The Company also provides guarantees,indemnifications and assurances to others in the ordinary course of its business.Legal ProceedingsThe Company is subject from time to time to various claims and lawsuits,including matters involving trade practices,personnel andemployment issues,lawsuits alleging violations of state and/or federal wage and hour laws,real estate disputes,personal injury,antitrust claims,packaging or product claims,claims related to the sale of drug or pharmacy products,such as opioids,intellectual property claims and otherproceedings arising in or outside of the ordinary course of business.Some of these claims or suits purport,or may be determined,to be classactions and/or seek substantial damages.It is the opinion of the Companys management that although the amount of liability with respect tocertain of the matters described herein cannot be ascertained at this time,any resulting liability of these and other matters,including any punitivedamages,will not have a material adverse effect on the Companys business or overall financial condition.The Company continually evaluates its exposure to loss contingencies arising from pending or threatened litigation and believes it has madeprovisions where the loss contingency is probable and can be reasonably estimated.Nonetheless,assessing and predicting the outcomes of thesematters involves substantial uncertainties.While management currently believes that the aggregate estimated liabilities currently recorded arereasonable,it remains possible that differences in actual outcomes or changes in managements evaluation or predictions could arise that could bematerial to the Companys results of operations or cash flows.False Claims Act:Two qui tam actions alleging violations of the False Claims Act(FCA)have been filed against the Company and itssubsidiaries.Violations of the FCA are subject to treble damages and penalties of up to a specified dollar amount per false claim.In United States ex rel.Proctor v.Safeway,filed in the United States District Court for the Central District of Illinois,the relator alleges thatSafeway overcharged federal government healthcare programs by not providing the federal government,as part of its usual and customaryprices,the benefit of discounts given to customers in pharmacy membership discount and price-matching programs.The relator filed hiscomplaint under seal on November 11,2011,and the complaint was unsealed on August 26,2015.The relator amended the complaint on March31,2016.On June 12,2020,the District Court granted Safeways motion for summary judgment,holding that the relator could not prove thatSafeway acted with the intent required under the FCA,and judgment was issued on June 15,2020.On July 10,2020,the relator filed a motion toalter or amend the judgment and to supplement the record,which Safeway opposed.On November 13,2020,the District Court denied relatorsmotion,and on December 11,2020,relator filed a notice of appeal.The Seventh Circuit Court of Appeals affirmed the judgment in theCompanys favor on April 5,2022.On August 3,2022,relators filed a petition seeking review by the U.S.Supreme Court.In United States ex rel.Schutte and Yarberry v.SuperValu,New Albertsons,Inc.,et al.,also filed in the Central District of Illinois,the relatorsallege that defendants(including various subsidiaries of the Company)overcharged15Table of Contentsfederal government healthcare programs by not providing the federal government,as a part of usual and customary prices,the benefit ofdiscounts given to customers who requested that defendants match competitor prices.The complaint was originally filed under seal and amendedon November 30,2015.On August 5,2019,the District Court granted relators motion for partial summary judgment,holding that price-matchedprices are the usual and customary prices for those drugs.On July 1,2020,the District Court granted the defendants motions for summaryjudgment and dismissed the case,holding that the relator could not prove that defendants acted with the intent required under the FCA.Judgmentwas issued on July 2,2020.On July 9,2020,the relators filed a notice of appeal.On August 12,2021,the Court of Appeals for the SeventhCircuit affirmed the grant of summary judgment in the Companys favor.On September 23,2021,the relators filed a petition for rehearing enbanc with the Seventh Circuit.On December 3,2021,the Seventh Circuit denied relators petition.On April 1,2022,relators filed a petitionseeking review by the U.S.Supreme Court.The U.S.Supreme Court decided to hear the appeals filed by the relators in Proctor and Schutte.The Supreme Court consolidated the two casesfor the purpose of hearing the appeal.The Supreme Court heard oral arguments on April 18,2023.On June 1,2023,the Supreme Court issued anopinion adverse to the Company that reversed the lower courts rulings.On July 3,2023,the Supreme Court issued the order remanding bothcases back to the Court of Appeals for the Seventh Circuit for further review.On July 27,2023,the Court of Appeals remanded both cases backto the U.S.District Court for the Central District of Illinois.On August 22,2023,the District Court-as to Schutte-set a pretrial conference forMarch 4,2024,and a trial date of April 29,2024.At the same July 27 hearing,the District Court also gave the defendants leave to file motionsfor summary judgment on a schedule to be agreed upon.On October 11,2023,the Company and co-defendant filed a motion for summaryjudgment.On the same day,the relators filed motions for partial summary judgment.Both sides motions are pending.The District Court has notset any trial date for Proctor as of yet,and no motions are pending in that case.In both of the above cases,the federal government previously investigated the relators allegations and declined to intervene.The relators electedto pursue their respective cases on their own and in each case have alleged FCA damages in excess of$100 million before trebling and excludingpenalties.The Company is vigorously defending each of these matters.The Company has recorded an estimated liability for these matters.Pharmacy Benefit Manager(PBM)Litigation:The Company(including its subsidiary,Safeway Inc.)is a defendant in a lawsuit filed onJanuary 21,2021,in Minnesota state court,captioned Health Care Service Corp.et al.v.Albertsons Companies,LLC,et al.The actionchallenges certain prescription-drug prices reported by the Company to a pharmacy benefit manager,Prime Therapeutics LLC(Prime),whichin turn contracted with the health-insurer plaintiffs to adjudicate and process prescription-drug reimbursement claims.On December 7,2021,the Company filed a motion to dismiss the complaint.On January 14,2022,the court denied the Companys motion todismiss as to all but one count,plaintiffs claim of negligent misrepresentation.On January 21,2022,the Company and co-defendantSUPERVALU,Inc.(SUPERVALU)filed a third-party complaint against Prime,asserting various claims,including:indemnification,fraud andunjust enrichment.On February 17,2022,the Company filed in the Minnesota Court of Appeals an interlocutory appeal of the denial of theirmotion to dismiss on personal jurisdiction grounds(the Jurisdictional Appeal).On February 24,2022,the Company and SUPERVALU filed inthe trial court an unopposed motion to stay proceedings,pending the resolution of the Jurisdictional Appeal.The parties agreed on March 6,2022,to an interim stay in the trial court pending a ruling on the unopposed motion to stay proceedings.On September 6,2022,the MinnesotaCourt of Appeals denied the Jurisdictional Appeal and affirmed the trial courts denial of the Companys motion to dismiss.On October 6,2022,the Company and SUPERVALU filed a petition seeking review by the Minnesota Supreme Court.On November 23,2022,the MinnesotaSupreme Court denied that petition.The Company and co-defendant SUPERVALU filed an answer to the complaint on January 23,2023.OnMarch 9,2023,Prime moved to dismiss the third-party complaint filed by the Company and SUPERVALU.The court heard oral arguments onthe motion on May 11,2023.On August 9,2023,the court denied Primes motion as to 16 of the 17 counts in the third-party complaint.On16Table of ContentsSeptember 18,2023,Prime filed an answer to the third-party complaint;on the same day,the Company and SUPERVALU filed an amendedthird-party complaint.The Company is vigorously defending the claims filed against it,and the Company also intends to prosecute its claims against Prime with equalvigor.The Company has recorded an estimated liability for this matter.Opioid Litigation:The Company is one of dozens of companies that have been named as defendants in lawsuits filed by various plaintiffs,including counties,cities,Native American tribes,and hospitals,alleging that defendants contributed to the national opioid epidemic.At present,the Company is named in approximately 90 suits pending in various state courts as well as in the United States District Court for the NorthernDistrict of Ohio,where over 2,000 cases against various defendants have been consolidated as Multi-District Litigation pursuant to 28 U.S.C.1407.Most of the cases naming the Company have been stayed pending multiple bellwether trials,including one involving the Company inTarrant County(Texas).The Tarrant County matter is currently in discovery.The relief sought by the various plaintiffs in these matters includescompensatory damages,abatement and punitive damages as well as injunctive relief.Prior to the start of a state-court trial that was scheduled for September 6,2022,the Company reached an agreement to settle with the state ofNew Mexico.The New Mexico counties and municipal entities that filed 14 additional lawsuits,including Santa Fe County,agreed to the termsof the settlement.Thus,all 15 cases filed by New Mexico entities have been dismissed as a result of the settlement.The Company has alsoexecuted an agreement to settle three matters pending in Nevada state court.The Company recorded a liability of$21.5 million for thesettlements of the cases in New Mexico and Nevada,which was paid by our insurers in the fourth quarter of fiscal 2022.With respect to theremaining pending state-court claims,which may not be covered by insurance,several are proceeding through discovery with none scheduled fortrial in 2023.The Company believes that it has substantial factual and legal defenses to these claims and is vigorously defending these matters.At this stage in the proceedings,the Company is unable to determine the probability of the outcome of these remaining matters or the range ofreasonably possible loss,if any.The Company has also received,subpoenas,Civil Investigative Demands(CIDs)and other requests for documents and information from theU.S.Department of Justice and certain state Attorneys General,and has had preliminary discussions with the Department of Justice with respectto purported violations of the federal Controlled Substances Act and the FCA in dispensing prescriptions.The Company has been cooperatingwith the government with respect to these requests for information.Oregon Class Action:A class action lawsuit entitled Schearon Stewart and Jason Stewart v.Safeway Inc.was filed in Circuit Court,County ofMultnomah,State of Oregon.Plaintiffs have alleged that Safeway engaged in unfair trade practices,in violation of Oregons Unlawful TradePractices Act(ORS 646.608),regarding the sale of certain meat products in 2015 and 2016 in the state of Oregon with its Buy One,Get OneFree and similar promotions.On February 17,2023,plaintiffs and Safeway executed an agreement which settled all claims in the lawsuit for$107.0 million.The settlementincluded a claim administration process whereby affected customers,who do not elect to opt-out of the settlement,filed a claim to participate inthe settlement.The court granted final approval of the class settlement by way of an order dated July 20,2023.The Company had a liabilityrecorded equal to the amount of the settlement,and the Company paid the settlement on September 11,2023.Plated Litigation:On September 1,2020,a complaint was filed in Delaware Court of Chancery,by which complaint ShareholderRepresentative Services LLC,solely in its capacity as agent for the former shareholders and rightsholders of DineInFresh,Inc.d/b/a Plated(Plated),sued the Company.Plaintiff alleged that,following the Companys acquisition of Plated,pursuant to a September 19,2017 Agreementand Plan of Merger,the Company intentionally engaged in conduct to prevent Plated from reaching certain milestones that would have resultedin post-acquisition consideration paid to Plateds former shareholders and rightsholders.Plaintiff alleged breach of17Table of Contentscontract,breach of the implied covenant of good faith and fair dealing,and fraudulent inducement.On October 21,2020,the Company filed amotion to dismiss the complaint.On June 7,2021,the Court granted the motion in part,dismissing all claims except for the breach-of-contractclaim.The Company has reached an agreement in principle to settle the case.The parties are jointly working on finalizing a settlementagreement.The Company recorded a liability equal to the amount of the settlement.Other CommitmentsIn the ordinary course of business,the Company enters into various supply contracts to purchase products for resale and purchase and servicecontracts for fixed asset and information technology commitments.These contracts typically include volume commitments or fixed expirationdates,termination provisions and other standard contractual considerations.NOTE 7-OTHER COMPREHENSIVE INCOME OR LOSSTotal comprehensive earnings are defined as all changes in stockholders equity during a period,other than those from investments by ordistributions to the stockholders.Generally,for the Company,total comprehensive income equals net income plus or minus adjustments forpension and other post-retirement liabilities.Total comprehensive earnings represent the activity for a period,net of tax.While total comprehensive earnings are the activity in a period and are largely driven by net earnings in that period,accumulated othercomprehensive income or loss(AOCI)represents the cumulative balance of other comprehensive income,net of tax,as of the balance sheetdate.Changes in the AOCI balance by component are shown below(in millions):40 weeks ended December 2,2023TotalPension and Post-retirement benefitplansOtherBeginning AOCI balance$69.3$71.7$(2.4)Other comprehensive income before reclassifications3.9 3.9 Amounts reclassified from accumulated other comprehensive income(1)(4.7)(4.7)Tax benefit(expense)0.2 1.2(1.0)Current-period other comprehensive(loss)income,net of tax(0.6)(3.5)2.9 Ending AOCI balance$68.7$68.2$0.5 18Table of Contents40 weeks ended December 3,2022TotalPension and Post-retirement benefitplansOtherBeginning AOCI balance$69.0$67.1$1.9 Other comprehensive loss before reclassifications(4.4)(4.4)Amounts reclassified from accumulated other comprehensive income(1)0.5 0.5 Tax benefit(expense)1.0(0.1)1.1 Current-period other comprehensive(loss)income,net of tax(2.9)0.4(3.3)Ending AOCI balance$66.1$67.5$(1.4)(1)These amounts are included in the computation of net pension and post-retirement(income)expense.For additional information,see Note 5-Employee Benefit Plans.NOTE 8-NET INCOME PER CLASS A COMMON SHAREThe Company calculates basic and diluted net income per Class A common share using the two-class method.The two-class method is anallocation formula that determines net income per Class A common share for each share of Class A common stock and Convertible PreferredStock,a participating security,according to dividends declared and participation rights in undistributed earnings.Under this method,all earnings(distributed and undistributed)are allocated to Class A common shares and Convertible Preferred Stock based on their respective rights toreceive dividends.The holders of Convertible Preferred Stock participate in cash dividends that the Company pays on its common stock to theextent that such cash dividends exceed$206.25 million per fiscal year and shares of Convertible Preferred Stock remain outstanding as of theapplicable record date to participate in such dividends.In applying the two-class method to interim periods,the Company allocates income to itsquarterly periods independently and discretely from its year-to-date and annual periods.Basic net income per Class A common share iscomputed by dividing net income allocated to Class A common stockholders by the weighted average number of Class A common sharesoutstanding for the period,including Class A common shares to be issued with no prior remaining contingencies prior to issuance.Diluted netincome per Class A common share is computed based on the weighted average number of shares of Class A common stock outstanding duringeach period,plus potential Class A common shares considered outstanding during the period,as long as the inclusion of such awards is notantidilutive.Potential Class A common shares consist of unvested restricted stock units(RSUs),restricted common stock(RSAs)andConvertible Preferred Stock,using the more dilutive of either the two-class method or as-converted stock method.Performance-based RSUs areconsidered dilutive when the related performance criterion has been met.19Table of ContentsThe components of basic and diluted net income per Class A common share were as follows(in millions,except per share data):12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Basic net income per Class A common shareNet income$361.4$375.5$1,045.5$1,202.4 Special Dividend on Convertible Preferred Stock(252.2)(252.2)Accrued dividends on Convertible Preferred Stock(14.2)(0.3)(38.3)Earnings allocated to Convertible Preferred Stock (0.7)Net income allocated to Class A common stockholders-Basic$361.4$109.1$1,044.5$911.9 Weighted average Class A common shares outstanding-Basic(1)576.2 534.6 575.2 525.4 Basic net income per Class A common share$0.63$0.20$1.82$1.74 Diluted net income per Class A common shareNet income allocated to Class A common stockholders-Diluted$361.4$109.1$1,044.5$911.9 Weighted average Class A common shares outstanding-Basic(1)576.2 534.6 575.2 525.4 Dilutive effect of:Restricted stock units and awards4.9 4.0 5.3 4.4 Weighted average Class A common shares outstanding-Diluted(2)581.1 538.6 580.5 529.8 Diluted net income per Class A common share$0.62$0.20$1.80$1.72(1)The number of Class A common shares remaining to be issued for the 12 and 40 weeks ended December 2,2023 and December 3,2022 were not material.(2)For the 40 weeks ended December 2,2023 and the 12 and 40 weeks ended December 3,2022,0.4 million,37.6 million and 45.2 million potential common sharesoutstanding related to Convertible Preferred Stock were antidilutive,respectively.The number of potential Class A common shares outstanding related to RSUs and RSAsthat were antidilutive for the 12 and 40 weeks ended December 2,2023 and December 3,2022 were not material.20Table of ContentsItem 2-Managements Discussion and Analysis of Financial Condition and Results of OperationsFORWARD-LOOKING STATEMENTS AND FACTORS THAT IMPACT OUR OPERATING RESULTS AND TRENDSThis Form 10-Q contains forward-looking statements within the meaning of the federal securities laws.The forward-looking statementsinclude our current expectations,assumptions,estimates and projections about our business,our industry and the outcome of the Merger.Theyinclude statements relating to our future operating or financial performance which the Company believes to be reasonable at this time.You canidentify forward-looking statements by the use of words such as outlook,may,should,could,estimates,predicts,potential,continue,anticipates,believes,plans,expects,future and intends and similar expressions which are intended to identify forward-looking statements.These statements are not guarantees of future performance and are subject to numerous risks and uncertainties which are beyond our control anddifficult to predict and could cause actual results to differ materially from the results expressed or implied by the statements.Risks anduncertainties that could cause actual results to differ materially from such statements include:changes in macroeconomic conditions and uncertainty regarding the geopolitical environment;rates of food price inflation or deflation,as well as fuel and commodity prices;changes in market interest rates;changes in consumer behavior and spending due to the impact of macroeconomic factors,including the expiration of student loanpayment deferments;changes in wage rates,ability to attract and retain qualified associates and negotiate acceptable contracts with labor unions;failure to achieve productivity initiatives,unexpected changes in our objectives and plans,inability to implement our strategies,plans,programs and initiatives,or enter into strategic transactions,investments or partnerships in the future on terms acceptable to us,or at all;uncertainties related to the Merger,including our ability to close the transactions contemplated by the Merger Agreement,and the impactof the costs related to the Merger;erosion of consumer confidence as a result of the Merger and the transactions contemplated by the Merger Agreement;litigation related to the transactions contemplated by the Merger Agreement;restrictions on our ability to operate as a result of the Merger Agreement;challenges in attracting,retaining and motivating our employees until the closing of the Merger;availability and cost of goods used in our food products;challenges with our supply chain;operational and financial effects resulting from cyber incidents,including outages in the cloud environment and the effectiveness ofbusiness continuity plans during a ransomware or other cyber incident;and continued reduction in administering COVID-19 vaccines and dispensing test kits.All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by these cautionarystatements and risk factors.Forward-looking statements contained in this Form 10-Q reflect our view only as of the date of this Form 10-Q.Weundertake no obligation,other than as required by law,to update or revise any forward-looking statements,whether as a result of newinformation,future events or otherwise.In evaluating our financial results and forward-looking statements,you should carefully consider the risks and uncertainties more fully describedin the Risk Factors section or other sections in our reports filed with the SEC21Table of Contentsincluding the most recent annual report on Form 10-K and any subsequent periodic reports on Form 10-Q and current reports on Form 8-K.As used in this Form 10-Q,unless the context otherwise requires,references to Albertsons,the Company,we,us and our refer toAlbertsons Companies,Inc.and,where appropriate,its subsidiaries.NON-GAAP FINANCIAL MEASURESWe define EBITDA as GAAP earnings(net loss)before interest,income taxes,depreciation and amortization.We define Adjusted EBITDA asearnings(net loss)before interest,income taxes,depreciation and amortization,further adjusted to eliminate the effects of items managementdoes not consider in assessing our ongoing core performance.We define Adjusted net income as GAAP Net income adjusted to eliminate theeffects of items management does not consider in assessing our ongoing core performance.We define Adjusted net income per Class A commonshare as Adjusted net income divided by the weighted average diluted Class A common shares outstanding,as adjusted to reflect all RSUs andRSAs outstanding at the end of the period,as well as the conversion of Convertible Preferred Stock when it is antidilutive for GAAP.SeeResults of Operations for further discussion and a reconciliation of Adjusted EBITDA,Adjusted net income and Adjusted net income per ClassA common share.EBITDA,Adjusted EBITDA,Adjusted net income and Adjusted net income per Class A common share(collectively,the Non-GAAPMeasures)are performance measures that provide supplemental information we believe is useful to analysts and investors to evaluate ourongoing results of operations,when considered alongside other GAAP measures such as net income,operating income,gross margin and netincome per Class A common share.These Non-GAAP Measures exclude the financial impact of items management does not consider inassessing our ongoing core operating performance,and thereby provide useful measures to analysts and investors of our operating performanceon a period-to-period basis.Other companies may have different definitions of Non-GAAP Measures and provide for different adjustments,andcomparability to our results of operations may be impacted by such differences.We also use Adjusted EBITDA for board of director and bankcompliance reporting.Our presentation of Non-GAAP Measures should not be construed as an inference that our future results will be unaffectedby unusual or non-recurring items.Non-GAAP Measures should not be considered as measures of discretionary cash available to us to invest in the growth of our business.Wecompensate for these limitations by relying primarily on our GAAP results and using Non-GAAP Measures only for supplemental purposes.22Table of ContentsTHIRD QUARTER OF FISCAL 2023 OVERVIEWWe are one of the largest food retailers in the United States,with 2,271 stores across 34 states and the District of Columbia as of December 2,2023.We operate 24 banners including Albertsons,Safeway,Vons,Pavilions,Randalls,Tom Thumb,Carrs,Jewel-Osco,Acme,Shaws,StarMarket,United Supermarkets,Market Street,Haggen,Kings Food Markets and Balduccis Food Lovers Market,with approximately 290,000talented and dedicated employees,as of December 2,2023,who serve on average 35.0 million customers each week.Additionally,as ofDecember 2,2023,we operated 1,726 pharmacies,1,332 in-store branded coffee shops,401 associated fuel centers,22 dedicated distributioncenters,19 manufacturing facilities and various digital platforms.Merger AgreementOn October 13,2022 Albertsons Companies,Inc.(the Company),The Kroger Co.(Kroger or Parent)and Kettle Merger Sub,Inc.,awholly owned subsidiary of Parent(Merger Sub),entered into an Agreement and Plan of Merger(the Merger Agreement),pursuant to whichMerger Sub will be merged with and into the Company(the Merger),with the Company surviving the Merger as the surviving corporation anda direct,wholly owned subsidiary of Parent.Pursuant to the Merger Agreement,each share of Class A common stock of the Company issued and outstanding immediately prior to theeffective time of the Merger(the Effective Time),shall be converted automatically at the Effective Time into the right to receive from Parent$34.10 per share in cash,without interest.The$34.10 per share cash payment is subject to reduction as a result of the Special Dividend paid onJanuary 20,2023 as described in Note 2-Merger Agreement in the unaudited interim Condensed Consolidated Financial Statements locatedelsewhere in this Form 10-Q.In connection with the Merger,on September 8,2023,the Company and Kroger announced that the parties had entered into a definitiveagreement,dated September 8,2023,with C&S Wholesale Grocers,LLC(C&S)for the sale of select stores,banners,distribution centers,offices and private label brands to C&S.Also on September 8,2023,Kroger notified the Company that,in accordance with the MergerAgreement,Kroger intends to sell the SpinCo Business(as defined in the Merger Agreement)to C&S.As a result,the creation of SpinCo andspin-off previously contemplated by the Company and Kroger is no longer a requirement under the Merger Agreement and will no longer bepursued by the Company and Kroger.Details regarding the definitive agreement with C&S can be found in the Form 8-K filed on September 8,2023 and the joint press release issued by the Company and Kroger on September 8,2023.The Company has filed with the SEC a definitive information statement on Schedule 14C with respect to the approval of the Merger and hasmailed the definitive information statement to the Companys stockholders.You may obtain copies of all documents filed by the Company withthe SEC regarding this transaction,free of charge,at the SECs website,www.sec.gov or from the Companys website athttps:/ of ContentsThird quarter of fiscal 2023 highlightsIn summary,our financial and operating highlights for the third quarter of fiscal 2023 include:Identical sales increased 2.9%Digital sales increased 21%Loyalty members increased 17%to 38.5 millionNet income of$361 million,or$0.62 per Class A common shareAdjusted net income of$462 million,or$0.79 per Class A common shareAdjusted EBITDA of$1,107 millionStoresThe following table shows stores operating,opened and closed during the periods presented:12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Stores,beginning of period2,272 2,272 2,271 2,276 Opened2 1 5 2 Closed(3)(3)(5)(8)Stores,end of period2,271 2,270 2,271 2,270 The following table summarizes our stores by size:Number of storesPercent of TotalRetail Square Feet(1)Square FootageDecember 2,2023December 3,2022December 2,2023December 3,2022December 2,2023December 3,2022Less than 30,000217 218 9.6%9.6%4.9 5.0 30,000 to 50,000778 779 34.34.32.6 32.6 More than 50,0001,276 1,273 56.1V.1u.4 75.2 Total Stores2,271 2,270 100.00.02.9 112.8(1)In millions,reflects total square footage of retail stores operating at the end of the period.24Table of ContentsRESULTS OF OPERATIONSComparison of the Third Quarter of Fiscal 2023 and the First 40 weeks of Fiscal 2023 to the Third Quarter of Fiscal 2022 and the First 40weeks of Fiscal 2022.The following tables and related discussion set forth certain information and comparisons regarding the components of our CondensedConsolidated Statements of Operations for the 12 and 40 weeks ended December 2,2023(third quarter of fiscal 2023 and first 40 weeks offiscal 2023)and 12 and 40 weeks ended December 3,2022(third quarter of fiscal 2022 and first 40 weeks of fiscal 2022)(dollars inmillions,except per share data).12 weeks endedDecember 2,2023%of SalesDecember 3,2022%of SalesNet sales and other revenue$18,557.3 100.0%$18,154.9 100.0%Cost of sales13,360.0 72.0 13,033.2 71.8 Gross margin5,197.3 28.0 5,121.7 28.2 Selling and administrative expenses4,607.3 24.8 4,532.0 25.0 Loss on property dispositions and impairment losses,net23.9 0.1 7.3 Operating income566.1 3.1 582.4 3.2 Interest expense,net116.3 0.6 84.3 0.5 Other(income)expense,net(6.7)1.7 Income before income taxes456.5 2.5 496.4 2.7 Income tax expense95.1 0.5 120.9 0.7 Net income$361.4 2.0%$375.5 2.0sic net income per Class A common share$0.63$0.20 Diluted net income per Class A common share0.62 0.20 40 weeks endedDecember 2,2023%of SalesDecember 3,2022%of SalesNet sales and other revenue$60,898.2 100.0%$59,384.6 100.0%Cost of sales43,996.7 72.2 42,713.3 71.9 Gross margin16,901.5 27.8 16,671.3 28.1 Selling and administrative expenses15,215.7 25.0 14,883.9 25.1 Loss(gain)on property dispositions and impairment losses,net43.1 0.1(86.1)(0.1)Operating income1,642.7 2.7 1,873.5 3.1 Interest expense,net383.1 0.6 313.0 0.5 Other income,net(14.6)(23.5)Income before income taxes1,274.2 2.1 1,584.0 2.6 Income tax expense228.7 0.4 381.6 0.6 Net income$1,045.5 1.7%$1,202.4 2.0sic net income per Class A common share$1.82$1.74 Diluted net income per Class A common share1.80 1.72 Net Sales and Other RevenueNet sales and other revenue increased 2.2%to$18,557.3 million for the third quarter of fiscal 2023 from$18,154.9 million for the third quarterof fiscal 2022.The increase in Net sales and other revenue was driven by our 2.9%increase in identical sales,with growth in pharmacy salesdriving the identical sales increase.We also continued to grow our digital business during the third quarter of fiscal 2023.25Table of ContentsNet sales and other revenue increased 2.5%to$60,898.2 million for the first 40 weeks of fiscal 2023 from$59,384.6 million for the first 40weeks of fiscal 2022.The increase in Net sales and other revenue was primarily driven by our 3.7%increase in identical sales,with growth inpharmacy sales,retail price inflation across most categories and increasing digital sales being the primary contributors to the identical salesincrease.The increase in Net sales and other revenue was partially offset by lower fuel sales.Identical Sales,Excluding FuelIdentical sales include stores operating during the same period in both the current year and the prior year,comparing sales on a daily basis.Direct to consumer digital sales are included in identical sales,and fuel sales are excluded from identical sales.Acquired stores become identicalon the one-year anniversary date of the acquisition.Identical sales for the 12 and 40 weeks ended December 2,2023 and the 12 and 40 weeksended December 3,2022,respectively,were:12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Identical sales,excluding fuel2.9%7.9%3.7%7.3%The following table represents Net sales and other revenue by product type(dollars in millions):12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Amount(1)%of TotalAmount(1)%of TotalAmount(1)%of TotalAmount(1)%of TotalNon-perishables(2)$9,242.8 49.8%$9,255.2 51.0%$30,566.5 50.2%$29,705.7 50.0%Fresh(3)5,709.0 30.8 5,762.6 31.7 19,517.7 32.0 19,588.6 33.0 Pharmacy2,282.8 12.3 1,724.4 9.5 6,323.9 10.4 5,124.2 8.6 Fuel1,046.7 5.6 1,111.1 6.1 3,573.9 5.9 3,968.6 6.7 Other(4)276.0 1.5 301.6 1.7 916.2 1.5 997.5 1.7 Net sales and otherrevenue$18,557.3 100.0%$18,154.9 100.0%$60,898.2 100.0%$59,384.6 100.0%(1)Digital related sales are included in the categories to which the revenue pertains.(2)Consists primarily of general merchandise,grocery,dairy and frozen foods.(3)Consists primarily of produce,meat,deli and prepared foods,bakery,floral and seafood.(4)Consists primarily of wholesale revenue to third parties,commissions and other miscellaneous revenue.Gross MarginGross margin represents the portion of Net sales and other revenue remaining after deducting Cost of sales during the period,including purchaseand distribution costs.These costs include,among other things,purchasing and sourcing costs,inbound freight costs,product quality testingcosts,warehouse and distribution costs,Own Brands program costs and digital-related delivery and handling costs.Advertising,promotionalexpenses and vendor allowances are also components of Cost of sales.Gross margin rate decreased to 28.0%during the third quarter of fiscal 2023 compared to 28.2%during the third quarter of fiscal 2022.Excluding the impact of fuel and LIFO expense,gross margin rate decreased 64 basis points26Table of Contentscompared to the third quarter of fiscal 2022.Pharmacy operations and increases in shrink were the primary drivers of the decrease,partiallyoffset by our procurement and sourcing productivity initiatives.Gross margin rate decreased to 27.8%during the first 40 weeks of fiscal 2023 compared to 28.1%during the first 40 weeks of fiscal 2022.Excluding the impact of fuel and LIFO expense,gross margin rate decreased 66 basis points compared to the first 40 weeks of fiscal 2022.Therate decrease was primarily driven by pharmacy operations,increases in shrink,and an increase in promotional activity in the first quarter offiscal 2023 relative to the first quarter of fiscal 2022.Our procurement and sourcing productivity initiatives partially offset these decreases in ourgross profit rate.The gross margin rate decrease in the third quarter of fiscal 2023 and first 40 weeks of fiscal 2023 related to pharmacy operations was primarilydue to growth in pharmacy sales and a lower margin rate on COVID-19 vaccines.In addition,the benefits from our productivity initiativesallowed us to provide incremental targeted price investments to our customers during the third quarter of fiscal 2023 and first 40 weeks of fiscal2023.Selling and Administrative ExpensesSelling and administrative expenses consist primarily of store level costs,including wages,employee benefits,rent,depreciation and utilities,inaddition to certain back-office expenses related to our corporate and division offices.Selling and administrative expenses decreased to 24.8%of Net sales and other revenue during the third quarter of fiscal 2023 compared to 25.0%during the third quarter of fiscal 2022.Excluding the impact of fuel,Selling and administrative expenses as a percentage of Net sales and otherrevenue decreased 28 basis points.The decrease in Selling and administrative expenses as a percentage of Net sales and other revenue wasprimarily attributable to lower employee costs,which includes the benefit of ongoing productivity initiatives,and lower depreciation andamortization,partially offset by an increase in operating expenses related to the expansion of our digital and omnichannel capabilities,ongoingMerger-related costs,increased store occupancy costs and additional third-party store security services.Selling and administrative expenses decreased to 25.0%of Net sales and other revenue during both the first 40 weeks of fiscal 2023 compared to25.1%during the first 40 weeks of fiscal 2022.Excluding the impact of fuel,Selling and administrative expenses as a percentage of Net salesand other revenue decreased 32 basis points during the first 40 weeks of fiscal 2023 compared to the first 40 weeks of fiscal 2022.The decreasein Selling and administrative expenses as a percentage of Net sales and other revenue was primarily attributable to sales leverage of employeecosts,which includes the benefit of ongoing productivity initiatives,lower depreciation and amortization and lower legal and regulatory accrualsand settlements,partially offset by ongoing Merger-related costs,an increase in operating expenses related to the expansion of our digital andomnichannel capabilities and additional third-party store security services.Loss(Gain)on Property Dispositions and Impairment Losses,NetFor the third quarter of fiscal 2023,net loss on property dispositions and impairment losses was$23.9 million,primarily driven by the write-offof certain technology assets,partially offset by net gains from the sale of assets.For the third quarter of fiscal 2022,net loss on propertydispositions and impairment losses was$7.3 million,driven by$3.9 million of asset impairments and$3.4 million of losses primarily from thedisposal of assets.For the first 40 weeks of fiscal 2023,net loss on property dispositions and impairment losses was$43.1 million,primarily driven by the write-offof certain technology assets,partially offset by net gains from the sale of assets.For the first 40 weeks of fiscal 2022,net gain on propertydispositions and impairment losses was$86.1 million,27Table of Contentsdriven by$91.2 million of gains primarily from the sale of real estate assets,partially offset by$5.1 million of asset impairments.Interest Expense,NetInterest expense,net was$116.3 million during the third quarter of fiscal 2023 compared to$84.3 million during the third quarter of fiscal 2022.The increase in interest expense,net was primarily attributable to lower interest income,as well as higher average outstanding borrowings andhigher average interest rates.The weighted average interest rate during the third quarter of fiscal 2023 was 5.6%,excluding deferred financingcosts and original issue discount,compared to 5.3%during the third quarter of fiscal 2022.Interest expense,net was$383.1 million during the first 40 weeks of fiscal 2023 compared to$313.0 million during the first 40 weeks of fiscal2022.The increase in interest expense,net was primarily attributable to higher average outstanding borrowings and higher average interest rates,as well as lower interest income.The weighted average interest rate during the first 40 weeks of fiscal 2023 was 5.6%,excluding amortizationand write-off of deferred financing costs and original issue discount,compared to 5.3%during the first 40 weeks of fiscal 2022.Other(Income)Expense,NetFor the third quarter of fiscal 2023,other income,net was$6.7 million compared to other expense,net of$1.7 million for the third quarter offiscal 2022.Other income,net during the third quarter of fiscal 2023 was primarily driven by realized and unrealized gains from non-operatinginvestments and non-service cost components of net pension and post-retirement income,partially offset by unrealized losses from non-operating investments.Other expense,net during the third quarter of fiscal 2022 was primarily driven by unrealized losses from non-operatinginvestments,partially offset by non-service cost components of net pension and post-retirement income and income related to our equityinvestment.For the first 40 weeks of fiscal 2023,other income,net was$14.6 million compared to$23.5 million for the first 40 weeks of fiscal 2022.Otherincome,net during the first 40 weeks of fiscal 2023 was primarily driven by non-service cost components of net pension and post-retirementincome,realized and unrealized gains from non-operating investments and income related to our equity interest and gain on sale of El Rancho inthe first quarter of fiscal 2023,partially offset by realized and unrealized losses from non-operating investments.Other income,net during thefirst 40 weeks of fiscal 2022 was primarily driven by non-service cost components of net pension and post-retirement income and income relatedto our equity investment,partially offset by unrealized losses from non-operating investments.Income TaxesIncome tax expense was$95.1 million,representing a 20.8fective tax rate,for the third quarter of fiscal 2023.Income tax expense was$120.9 million,representing a 24.4fective tax rate,for the third quarter of fiscal 2022.The favorability in the effective income tax rate in thethird quarter of fiscal 2023 was primarily due to an increase in federal tax credits.Income tax expense was$228.7 million,representing a 17.9fective tax rate,for the first 40 weeks of fiscal 2023.Income tax expense was$381.6 million,representing a 24.1fective tax rate,for the first 40 weeks of fiscal 2022.The favorability in the effective income tax rate forthe first 40 weeks of fiscal 2023 was driven by the reduction of a reserve of$49.7 million for an uncertain tax position due to the expiration of aforeign statute during the first quarter of fiscal 2023,federal tax credits,as well as discrete benefits recognized for state income taxes.28Table of ContentsNet Income and Adjusted Net IncomeNet income was$361.4 million,or$0.62 per Class A common share,during the third quarter of fiscal 2023 compared to$375.5 million,or$0.20per Class A common share,during the third quarter of fiscal 2022.Net income per Class A common share during the third quarter of fiscal 2022includes a$0.45 per share reduction related to the Special Dividend attributable to holders of Convertible Preferred Stock on an as-convertedbasis.Adjusted net income was$462.3 million,or$0.79 per Class A common share,during the third quarter of fiscal 2023 compared to$505.1million,or$0.87 per Class A common share,during the third quarter of fiscal 2022.Net income was$1,045.5 million,or$1.80 per Class A common share,during the first 40 weeks of fiscal 2023 compared to$1,202.4 million,or$1.72 per Class A common share,during the first 40 weeks of fiscal 2022.The first 40 weeks of fiscal 2023 included the$49.7 million or$0.09per share benefit related to the reduction in the reserve for an uncertain tax position.Adjusted net income was$1,375.7 million,or$2.34 perClass A common share(which includes the tax benefit discussed above),during the first 40 weeks of fiscal 2023 compared to$1,505.4 million,or$2.59 per Class A common share,during the first 40 weeks of fiscal 2022.Adjusted EBITDAFor the third quarter of fiscal 2023,Adjusted EBITDA was$1,106.5 million,or 6.0%of Net sales and other revenue,compared to$1,158.0million,or 6.4%of Net sales and other revenue,for the third quarter of fiscal 2022.For the first 40 weeks of fiscal 2023,Adjusted EBITDA was$3,401.9 million,or 5.6%of Net sales and other revenue,compared to$3,626.8 million,or 6.1%of Net sales and other revenue for the first 40weeks of fiscal 2022.29Table of ContentsReconciliation of Non-GAAP MeasuresThe following tables reconcile Net income to Adjusted net income,and Net income per Class A common share to Adjusted net income per ClassA common share(in millions,except per share data):12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Numerator:Net income$361.4$375.5$1,045.5$1,202.4 Adjustments:(Gain)loss on interest rate swaps and energy hedges,net(d)(0.7)2.0(6.1)(12.9)Business transformation(1)(b)12.3 17.2 37.9 64.5 Equity-based compensation expense(b)23.3 33.4 80.5 96.6 Loss(gain)on property dispositions and impairmentlosses,net23.9 7.3 43.1(86.1)LIFO expense(a)27.6 64.5 87.8 181.4 Government-mandated incremental COVID-19pandemic related pay(2)(b)1.0 10.8 Merger-related costs(3)(b)35.9 14.4 124.2 23.8 Certain legal and regulatory accruals and settlements,net(b)(6.7)(6.7)43.7 Amortization of debt discount and deferred financingcosts(c)3.6 3.9 11.9 12.9 Amortization of intangible assets resulting fromacquisitions(b)11.0 11.7 37.5 39.1 Combined Plan(b)(19.0)Miscellaneous adjustments(4)(f)3.4 16.4 24.0 46.1 Tax impact of adjustments to Adjusted net income(32.7)(42.2)(103.9)(97.9)Adjusted net income$462.3$505.1$1,375.7$1,505.4 Denominator:Weighted average Class A common shares outstanding-diluted581.1 538.6 580.5 529.8 Adjustments:Convertible Preferred Stock(5)37.6 0.4 45.2 Restricted stock units and awards(6)6.9 6.6 6.4 6.1 Adjusted weighted average Class A common sharesoutstanding-diluted588.0 582.8 587.3 581.1 Adjusted net income per Class A common share-diluted$0.79$0.87$2.34$2.59 30Table of Contents12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Net income per Class A common share-diluted$0.62$0.20$1.80$1.72 Convertible Preferred Stock(5)0.45 0.37 Non-GAAP adjustments(7)0.18 0.23 0.57 0.53 Restricted stock units and awards(6)(0.01)(0.01)(0.03)(0.03)Adjusted net income per Class A common share-diluted$0.79$0.87$2.34$2.59 The following table is a reconciliation of Adjusted net income to Adjusted EBITDA:12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Adjusted net income(8)$462.3$505.1$1,375.7$1,505.4 Tax impact of adjustments to Adjusted net income32.7 42.2 103.9 97.9 Income tax expense95.1 120.9 228.7 381.6 Amortization of debt discount and deferred financingcosts(c)(3.6)(3.9)(11.9)(12.9)Interest expense,net116.3 84.3 383.1 313.0 Amortization of intangible assets resulting fromacquisitions(b)(11.0)(11.7)(37.5)(39.1)Depreciation and amortization(e)414.7 421.1 1,359.9 1,380.9 Adjusted EBITDA$1,106.5$1,158.0$3,401.9$3,626.8(1)Includes costs associated with third-party consulting fees related to our operational priorities and associated business transformation.(2)Represents incremental COVID-19 related pay legislatively required in certain municipalities in which we operate.(3)Primarily relates to third-party legal and advisor fees and retention program expense related to the proposed Merger and costs in connection with our previously-announcedBoard-led review of potential strategic alternatives.(4)Miscellaneous adjustments include the following(see table below):12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Non-cash lease-related adjustments$1.7$1.4$2.0$3.4 Lease and lease-related costs for surplus and closedstores4.3 4.7 15.1 17.4 Net realized and unrealized(gain)loss on non-operating investments(3.4)13.7 0.9 19.4 Other(i)0.8(3.4)6.0 5.9 Total miscellaneous adjustments$3.4$16.4$24.0$46.1(i)Primarily includes adjustments for unconsolidated equity investments and other costs not considered in our core performance.(5)Represents the conversion of Convertible Preferred Stock to the fully outstanding as-converted Class A common shares as of the end of each respective period,for periods inwhich the Convertible Preferred Stock is antidilutive under GAAP.(6)Represents incremental unvested RSUs and unvested RSAs to adjust the diluted weighted average Class A common shares outstanding during each respective period to thefully outstanding RSUs and RSAs as of the end of each respective period.(7)Reflects the per share impact of Non-GAAP adjustments for each period.See the reconciliation of Net income to Adjusted net income above for further details.(8)See the reconciliation of Net income to Adjusted net income above for further details.31Table of ContentsNon-GAAP adjustment classifications within the Condensed Consolidated Statements of Operations:(a)Cost of sales(b)Selling and administrative expenses(c)Interest expense,net(d)(Gain)loss on interest rate swaps and energy hedges,net:12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Cost of sales$(0.5)$2.8$(4.3)$(2.7)Selling and administrative expenses(0.2)0.5(1.8)(1.6)Other(income)expense,net(1.3)(8.6)Total(Gain)loss on interest rate swaps and energyhedges,net$(0.7)$2.0$(6.1)$(12.9)(e)Depreciation and amortization:12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Cost of sales$40.9$39.5$125.9$129.2 Selling and administrative expenses373.8 381.6 1,234.0 1,251.7 Total Depreciation and amortization$414.7$421.1$1,359.9$1,380.9(f)Miscellaneous adjustments:12 weeks ended40 weeks endedDecember 2,2023December 3,2022December 2,2023December 3,2022Selling and administrative expenses$7.3$6.5$29.2$20.9 Other(income)expense,net(3.9)9.9(5.2)25.2 Total Miscellaneous adjustments$3.4$16.4$24.0$46.1 LIQUIDITY AND CAPITAL RESOURCESThe following table sets forth the major sources and uses of cash and cash equivalents and restricted cash for each period(in millions):40 weeks endedDecember 2,2023December 3,2022Cash and cash equivalents and restricted cash at end of period$227.2$4,420.3 Cash flows provided by operating activities1,730.8 2,072.0 Cash flows used in investing activities(1,328.8)(1,478.7)Cash flows(used in)provided by financing activities(638.6)874.4 Net Cash Provided by Operating ActivitiesNet cash provided by operating activities was$1,730.8 million for the first 40 weeks of fiscal 2023 compared to$2,072.0 million for the first 40weeks of fiscal 2022.The decrease in cash flow from operations compared to the first 40 weeks of fiscal 2022 was due to a decrease in AdjustedEBITDA and more cash paid for income taxes,interest,legal settlements and ongoing Merger-related costs during the first 40 weeks of fiscal2023,partially offset by changes in working capital.32Table of ContentsNet Cash Used in Investing ActivitiesNet cash used in investing activities was$1,328.8 million for the first 40 weeks of fiscal 2023 compared to$1,478.7 million for the first 40weeks of fiscal 2022.For the first 40 weeks of fiscal 2023,cash used in investing activities consisted primarily of payments for property,equipment and intangibles of$1,535.0 million,partially offset by proceeds from the sale of assets of$201.3 million,primarily related to the sale of our equity interest in ElRancho during the first quarter of fiscal 2023.Payments for property,equipment and intangibles in the first 40 weeks of fiscal 2023 included thecompletion of 115 remodels,the opening of five new stores and continued investment in our digital and technology platforms.For the first 40weeks of fiscal 2022,cash used in investing activities consisted primarily of payments for property,equipment and intangibles of$1,566.9million,partially offset by proceeds from the sale of assets of$99.4 million,primarily related to real estate.Payments for property,equipmentand intangibles in the first 40 weeks of fiscal 2022 included continued investment in our digital and technology platforms,the completion of 135remodels and the opening of two new stores.Net Cash(Used in)Provided by Financing ActivitiesNet cash used in financing activities was$638.6 million during the first 40 weeks of fiscal 2023 compared to net cash provided by financingactivities of$874.4 million during the first 40 weeks of fiscal 2022.Net cash used in financing activities during the first 40 weeks of fiscal 2023 consisted primarily of the$500.0 million partial repayment of theABL Facility,dividends paid on our Class A common stock and tax withholding payments on vesting of restricted stock units,partially offset by$150.0 million of proceeds from the issuance of debt under the ABL Facility.Net cash provided by financing activities during the first 40 weeksof fiscal 2022 consisted primarily of the$1.4 billion borrowing,which was used with cash on hand to fund the payment of the Special Dividend,partially offset by the$200.0 million subsequent partial repayment of the ABL Facility and dividends paid on our Class A common stock andConvertible Preferred Stock,as well as tax withholding payments on vesting of restricted stock units.DividendsWe have established a dividend policy pursuant to which we intend to pay a quarterly dividend on our Class A common stock.Cash dividendspaid on our Class A common stock were$207.1 million($0.36 per common share)and$190.9 million($0.36 per common share)during the first40 weeks of fiscal 2023 and first 40 weeks of fiscal 2022,respectively.On January 9,2024,we announced the next quarterly dividend paymentof$0.12 per share of Class A common stock to be paid on February 9,2024 to stockholders of record as of the close of business on January 26,2024.During the first quarter of fiscal 2023,the conversion of the remaining Convertible Preferred Stock was completed.The holders of ConvertiblePreferred Stock were entitled to a quarterly dividend at a rate per annum of 6.75%of the liquidation preference per share of the ConvertiblePreferred Stock.In addition,the holders of Convertible Preferred Stock participate in cash dividends that we pay on our common stock to theextent that such cash dividends exceed$206.25 million per fiscal year and shares of Convertible Preferred Stock remain outstanding as of theapplicable record date to participate in such dividends.Cash dividends paid to holders of the Convertible Preferred Stock were$0.8 million and$50.2 million during the first 40 weeks of fiscal 2023 and first 40 weeks of fiscal 2022,respectively.On October 13,2022,we declared the Special Dividend,payable to stockholders of record,including holders of Series A convertible preferredstock on an as-converted basis,as of the close of business on October 24,2022,and was to be paid on November 7,2022.As of December 3,2022,the Special Dividend of$3,921.3 million was33Table of Contentsrecorded in Special dividend payable on the Condensed Consolidated Balance Sheets,and was subsequently paid on January 20,2023.LiquidityBased on current operating trends,we believe that we have significant sources of cash to meet our liquidity needs for the next 12 months and forthe foreseeable future,including cash on hand,cash flows from operating activities and other sources of liquidity,including borrowings underour ABL Facility.We estimate our liquidity needs over the next 12 months to be in the range of$5.0 billion to$5.7 billion.This includes$650.0million related to outstanding borrowings under our ABL Facility for which we may,at our discretion,elect to pay all or a portion of theoutstanding balance within the next 12 months;and anticipated requirements for incremental working capital,incremental Merger costs,capitalexpenditures,pension obligations,interest payments,quarterly dividends on Class A common stock,operating leases and finance leases.Inaddition,we may enter into refinancing and sale leaseback transactions from time to time.We believe we have adequate cash flow to continue tomaintain our current debt ratings and to respond effectively to competitive conditions.As of December 2,2023,we had$650.0 million in borrowings outstanding under our ABL Facility and total availability of$3,302.2 million(netof letter of credit usage).See Note 4 Long-Term Debt and Finance Lease Obligations located elsewhere in this Form 10-Q for furtherdiscussion.CRITICAL ACCOUNTING POLICIESThe preparation of Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions thataffect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the Consolidated FinancialStatements and the reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimates.Wehave chosen accounting policies that we believe are appropriate to report accurately and fairly our operating results and financial position,andwe apply those accounting policies in a fair and consistent manner.See the Critical Accounting Policies section included in our Annual Report onForm 10-K for the fiscal year ended February 25,2023,filed with the SEC on April 25,2023,for a discussion of our significant accountingpolicies.RECENTLY ISSUED AND RECENTLY ADOPTED ACCOUNTING STANDARDSSee Note 1-Basis of Presentation and Summary of Significant Accounting Policies of our unaudited interim Condensed Consolidated FinancialStatements located elsewhere in this Form 10-Q.Item 3-Quantitative and Qualitative Disclosures About Market RiskThere have been no material changes in our exposure to market risk from the information provided in our Annual Report on Form 10-K for thefiscal year ended February 25,2023,filed with the SEC on April 25,2023.Item 4-Controls and ProceduresBased on their evaluation of our disclosure controls and procedures(as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act of1934(the Exchange Act)as of the end of the period covered by this Form 10-Q,our Principal Executive Officer and Principal FinancialOfficer concluded our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports thatwe file or submit under the Exchange Act is recorded,processed,summarized and reported within the time periods specified in the SECs rulesand forms and is accumulated and communicated to management,including our Principal Executive Officer and Principal Financial Officer,asappropriate,to allow timely decisions regarding required disclosure.34Table of ContentsChanges in Internal Control over Financial ReportingThere were no changes in our internal control over financial reporting during the third quarter of fiscal 2023 that have materially affected,or arereasonably likely to materially affect,our internal control over financial reporting.35Table of ContentsPART II-OTHER INFORMATIONItem 1-Legal ProceedingsThe Company is subject from time to time to various claims and lawsuits arising in the ordinary course of business,including lawsuits involvingtrade practices,lawsuits alleging violations of state and/or federal wage and hour laws(including alleged violations of meal and rest period lawsand alleged misclassification issues),real estate disputes and other matters.Some of these claims or suits purport or may be determined to beclass actions and/or seek substantial damages.It is the opinion of the Companys management that although the amount of liability with respectto certain of the matters described in this Form 10-Q cannot be ascertained at this time,any resulting liability of these and other matters,including any punitive damages,will not have a material adverse effect on the Companys business or overall financial condition.See the mattersunder the caption Legal Proceedings in Note 6-Commitments and Contingencies and Off Balance Sheet Arrangements in the unaudited interimCondensed Consolidated Financial Statements located elsewhere in this Form 10-Q.The Company continually evaluates its exposure to loss contingencies arising from pending or threatened litigation and believes it has madeprovisions where the loss contingency is probable and can be reasonably estimated.Nonetheless,assessing and predicting the outcomes of thesematters involves substantial uncertainties.While management currently believes that the aggregate estimated liabilities currently recorded arereasonable,it remains possible that differences in actual outcomes or changes in managements evaluation or predictions could arise that could bematerial to the Companys results of operations or cash flows.Environmental MattersOur operations are subject to regulation under environmental laws,including those relating to waste management,air emissions and undergroundstorage tanks.In addition,as an owner and operator of commercial real estate,we may be subject to liability under applicable environmentallaws for clean-up of contamination at our facilities.SEC regulations require us to disclose certain environmental matters arising under federal,state or local environmental provisions if we reasonably believe that such proceedings may result in monetary sanctions above a stated threshold.Pursuant to SEC regulations,we use a threshold of$1 million for purposes of determining whether disclosure of any such proceedings isrequired.Item 1A-Risk FactorsThere have been no material changes to the risk factors previously included in our Annual Report on Form 10-K for the fiscal year endedFebruary 25,2023,filed with the SEC on April 25,2023,under the heading Risk Factors.Item 2-Unregistered Sales of Equity Securities and Use of Proceeds(a)Unregistered Sales of Equity SecuritiesNone.(b)Use of ProceedsNone.(c)Purchases of Equity SecuritiesNone.36Table of ContentsItem 3-Defaults Upon Senior SecuritiesNone.Item 4-Mine Safety DisclosuresNot Applicable.Item 5-Other InformationIn the third quarter of fiscal 2023,none of the Companys directors or officers adopted or terminated a Rule 10b5-1 trading arrangement or anon-Rule 10b5-1 trading arrangement,as defined in Item 408(a)of Regulation S-K.Item 6-Exhibits31.1 Certification of the Principal Executive Offic
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