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Item 7. Management’s Discussion and Analysis

2024-02-27 compared with 2023-02-27 · 465 added, 437 removed, 685 unchanged (57% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the other sections of this Form 10-K, including the consolidated financial statements and related notes contained in Item 8, and the discussion of risk factors that may affect future results in Item 1A.

The following discussion should be read in conjunction with the other sections of this Form 10-K, including our consolidated financial statements and related notes contained in Item 8, and the discussion of risk factors that may affect future results in Item 1A.

Additionally, refer to Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in our 2021 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020, which we filed with the SEC on February 25, 2022 and is incorporated by reference into this Form 10-K for the year ended December 31, 2022.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in our 2022 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, which we filed with the SEC on February 27, 2023 and is incorporated by reference into this Form 10-K.

In this MD&A section, we refer to the following “adjusted” financial measures:

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adjusted OCI margins;

adjusted net earnings attributable to Altria;

adjusted diluted earnings per share attributable to Altria;

adjusted net earnings;

adjusted diluted earnings per share (“EPS”);

and adjusted effective tax rates.

These adjusted financial measures are not required by, or calculated in accordance with, United States generally accepted accounting principles (“GAAP”) and may not be calculated the same as similarly titled measures used by other companies.

These adjusted financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.

We also refer to the ratio of debt-to-Consolidated EBITDA (earnings before interest, taxes, depreciation and amortization, as defined in our credit agreement, which includes certain adjustments).

These financial measures are not required by, or calculated in accordance with, United States generally accepted accounting principles (“GAAP”) and may not be calculated the same as similarly titled measures used by other companies.

These financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.

For a further description of these non-GAAP financial measures, see the Non-GAAP Financial Measures section below.

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tobacco consumers age 21+.

Our Vision by 2030 is to responsibly lead the transition of adult smokers to a smoke-free future.

Our Vision is to responsibly lead the transition of adult smokers to a smoke-free future.

We are Moving Beyond Smoking TM , leading the way in moving adult smokers away from cigarettes by taking action to transition millions to potentially less harmful choices - believing it is a substantial opportunity for adult tobacco consumers, our businesses and society.

As we execute on our Vision, we established our 2028 Enterprise Goals (“2028 Goals”) to provide our investors with specific metrics to measure our progress.

Our 2028 Goals are:

▪ Deliver a mid-single digits adjusted diluted EPS compounded annual growth rate in 2028 from a $4.84 base in 2022;

▪ A progressive dividend goal targeting mid-single digits dividend per share growth annually through 2028;

▪ Target a debt-to-Consolidated EBITDA ratio of approximately 2.0x;

▪ Maintain our leadership position in the U.S.

tobacco space;

▪ Maintain a total adjusted OCI margin of at least 60% in each year through 2028 while investing behind innovative smoke-free products.

Smoke-Free Portfolio

smoke-free volumes by at least 35% from our 2022 base of 800 million units by 2028;

▪ Approximately double our U.S.

smoke-free net revenues to $5 billion by 2028 from our 2022 base, with $2 billion sourced from innovative smoke-free products.

Long-Term Growth

▪ Compete internationally in the top innovative oral tobacco markets and develop a pathway to participate in heated tobacco and e-vapor markets;

▪ Enter non-nicotine categories with broad commercial distribution of at least five products by 2028.

See Operating Results by Business Segment and Liquidity and Capital Resources for additional information on total adjusted OCI margin and debt-to-Consolidated EBITDA, respectively.

Our wholly owned subsidiaries include leading manufacturers of both combustible and smoke-free products.

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cigar manufacturer.

Our smoke-free portfolio includes ownership of USSTC, the leading global MST manufacturer, and Helix, a leading manufacturer of oral nicotine pouches.

In smoke-free products, we own USSTC, the leading global MST manufacturer, Helix, a leading manufacturer of oral nicotine pouches and NJOY, currently the only e-vapor manufacturer with market authorizations from the FDA for a pod-based e-vapor product.

Additionally, we have a majority-owned joint venture, Horizon, for the U.S.

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commercialization rights to the IQOS System and Marlboro HeatSticks through April 2024.

Our investments in equity securities include ABI, the world’s largest brewer, Cronos, a leading Canadian cannabinoid company, and JUUL, a U.S.

based e-vapor company.

The brand portfolios of our tobacco operating companies include Marlboro , Black & Mild , Copenhagen , Skoal and on!

Trademarks and service marks related to Altria referenced in this Form 10-K are the property of Altria or our subsidiaries or are used with permission.

As of this filing, there are no products in the U.S.

marketplace from the joint venture or exclusive rights agreement.

On June 1, 2023, we acquired NJOY Holdings.

For further details, see Note 3.

Acquisition of NJOY to our consolidated financial statements in Item 8 (“Note 3”).

In March 2023, we entered into the Stock Transfer Agreement and, in exchange, we received a non-exclusive, irrevocable global license to certain of JUUL’s heated tobacco intellectual property.

The brand portfolios of our operating companies include Marlboro , Black & Mild , Copenhagen , Skoal , on!

Trademarks related to Altria referenced in this Form 10-K are the property of Altria or our subsidiaries or are used with permission.

Our investments in equity securities include ABI, the world’s largest brewer, and Cronos, a leading Canadian cannabinoid company.

For a description of Altria, see Item 1.

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In this MD&A section, we discuss factors that have impacted our business as of the date of this Form 10-K.

In addition, we are aware of certain trends and developments that could, individually or in the aggregate, have a material impact on our business, including the value of our investments in equity securities, in the future.

In this Trends and Developments section, we focus on the potential effects on our business resulting from the continued elevated rate of inflation, supply chain disruptions, ongoing geopolitical events and recent regulatory actions.

In addition, we are aware of and address, in this section and other MD&A sections, certain trends and developments that could, individually or in the aggregate, have a material impact on our business, including the value of our investments in equity securities, in the future.

We focus in this Trends and Developments section on the cumulative effects of inflation, geopolitical events, recent regulatory actions, supply chain disruptions and illegal flavored disposable e-vapor products and their effects or potential effects on our business, including impacts on adult tobacco consumers and their purchasing behaviors.

We continue to monitor the evolving macroeconomic and geopolitical landscapes.

High rates of inflation occurred in 2022, driven by increasing global energy, commodity and food prices, which were further exacerbated by other factors, including supply and demand imbalances, labor shortages and the Russian invasion of Ukraine.

High inflation, high gas prices and rising interest rates could continue to impact our business by negatively impacting adult tobacco consumers’ disposable income and future purchase behaviors.

During 2022, cigarette retail share for the industry discount segment increased.

We continue to expect potential fluctuations in discount product share for cigarettes and MST products as price sensitive adult tobacco consumers react to their economic conditions and will monitor the effect of these dynamics on adult tobacco consumers and their purchase behaviors, including overall tobacco product expenditures, mix between premium and discount brand purchases and adoption of smoke-free products.

Increases in inflation also have a direct and adverse impact on our MSA expense and other direct and indirect costs.

We expect inflation to continue at increased levels in 2023, and the extent of any effects on adult tobacco consumers’ purchase behaviors depends in part on the magnitude and duration of such increased inflation levels.

See Operating Results by Business Segment - Tobacco Space - Business Environment for additional information on evolving trends in the tobacco industry and the impacts to our business from increased inflation.

Volatility in domestic and global economies and disruptions in the supply and distribution chains are expected to continue in 2023, resulting from several factors, including the on-going impacts of inflation, supply and demand imbalances across many sectors such as energy and commodities, raw materials availability and geopolitical events.

We continue to work to mitigate the potential negative impacts of these macroeconomic and geopolitical dynamics on our businesses through, among other actions, proactive engagement with current and potential suppliers and distributors, the development of alternative sourcing strategies, entry into long-term supply contracts, evolution of our safety, health and environmental protocols at our facilities and prudent oversight of our liquidity.

See Operating Results by Business Segment - Tobacco Space - Business Environment for additional information on the supply chain and other impacts of the macroeconomic and geopolitical environment on our business.

While the annual rate of inflation declined during 2023, inflation remains above the Federal Reserve’s target of 2%, which is a key benchmark for the Federal Reserve in determining the timing and magnitude of changes to the federal funds rate.

We continue to observe discretionary income pressures on adult tobacco consumers as a result of the cumulative effects of inflation and higher consumer debt levels.

During 2023, cigarette retail share for the industry discount segment increased year-over-year.

We will continue to monitor the effect of these dynamics on adult tobacco consumer purchase behaviors, including overall tobacco product expenditures, mix between premium and discount brand purchases and adoption of smoke-free products.

We expect discretionary income pressures to continue to influence adult tobacco consumers’ purchase behaviors in 2024.

Inflation also has a direct and adverse impact on our direct and indirect costs.

In the e-vapor category, illegal flavored disposable product usage increased in 2023 and currently comprises over 50% of the e-vapor category.

The primary impacts of this trend have been an increase in the rate of cross-category movement among adult cigarette smokers, contributing to higher than expected domestic cigarette industry volume declines as well as declines in pod-based product volume within the e-vapor category.

Tobacco companies are subject to broad and evolving regulatory and legislative frameworks that could have a material impact on our business.

For example, the FDA has issued proposed product standards regarding menthol in cigarettes and characterizing flavors in cigars, and, in June 2022, the Biden Administration published plans for future potential regulatory actions that include the FDA’s plans to develop a proposed product standard that would establish a maximum nicotine level for cigarettes and certain other combustible tobacco products.

In addition, certain states and localities are considering or have passed legislation to ban flavors in one or more tobacco products, including California where a ban on the sale of most tobacco products with characterizing flavors became effective in December 2022.

See Operating Results by Business Segment - Tobacco Space - Business Environment for additional information on the nature, scope and potential impacts of regulatory and legislative developments.

In June 2022, the FDA issued marketing denial orders (“MDOs”) to JUUL ordering all of JUUL’s products currently marketed in the United States off the market.

In July 2022, the FDA administratively stayed the MDOs on a temporary basis, citing its determination that there are scientific issues unique to the JUUL PMTA that warrant additional agency review.

This administrative stay temporarily suspends the MDOs, and JUUL’s products currently remain on the market.

See Operating Results by Business Segment - Tobacco Space - Business Environment - FSPTCA and FDA Regulation - FDA Regulatory Actions - Electronic Nicotine Delivery System Products for additional information regarding the MDOs.

We considered, among other factors, the impact of the FDA’s actions in conducting our quarterly quantitative valuations of our investment in JUUL during 2022, which resulted in us recording non-cash, pre-tax unrealized losses of approximately $1.5 billion for the year ended December 31, 2022.

We will continue to monitor and consider developments in the FDA’s additional review, among other factors, in our quarterly quantitative valuations of JUUL.

The adverse macroeconomic and geopolitical landscapes have impacted global businesses, including ABI, and the global markets in 2022, and we expect this dynamic to continue in 2023.

ABI’s business has continued to be impacted by supply chain constraints across certain markets, foreign exchange rate fluctuations, inflation, commodity cost headwinds and the Russian invasion of Ukraine (as evidenced by ABI fully impairing its joint venture with exposure to Russia and Ukraine in the first quarter of 2022).

Additionally, the macroeconomic and geopolitical factors have contributed to significant changes in certain foreign exchange rates, including the Euro to USD exchange rate, and in the global equity markets.

We evaluated these and other factors related to the decline in the fair value of our equity investment in ABI below its carrying value, and concluded that the decline was other than temporary, which resulted in us recording a non-cash, pre-tax charge of $2.5 billion in the third quarter of 2022.

The fair value of our equity investment in ABI had share price and market valuation recovery during the fourth quarter of 2022.

See Note 5 and Critical Accounting Policies for additional information on our investments in equity securities.

In October 2022, we modified our heated tobacco portfolio of smoke-free products by (i) entering into an agreement with PMI to, among other things, transition and ultimately conclude our relationship with respect to the IQOS System in the United States and (ii) entering into a joint venture with Japan Tobacco for the U.S.

marketing and commercialization of heated tobacco stick products.

For further discussion of (i) the agreement with PMI, see Note 4, and (ii) the joint venture, see Item 1 and Note 1.

Background and Basis of Presentation to the consolidated financial statements in Item 8 (“Note 1”).

While the impairment of our equity investment in ABI and reduction in the estimated fair value of our equity investment in JUUL had a material adverse effect on our financial results in 2022, to date, our operating companies have not experienced any material adverse effects from the trends and developments discussed above.

Additionally, we do not believe that these trends and developments have impacted our ability to achieve our Vision.

For example, the FDA has submitted for final review proposed product standards regarding menthol in cigarettes and characterizing flavors in cigars, and the Biden Administration published plans for future potential regulatory actions that include the FDA’s plans to develop a proposed product standard that would establish a maximum nicotine level for cigarettes and certain other combustible tobacco products.

In California, where a ban on flavored nicotine products went into effect in late 2022, we continue to

observe indications of negative unintended consequences of the ban, such as adult tobacco consumer adoption of unregulated products and the development of illicit markets.

Volatility in domestic and global economies and disruptions in the supply and distribution chains are expected to continue in 2024, resulting from several factors, including supply and demand imbalances across many commodity sectors, raw materials availability and geopolitical events.

See Operating Results by Business Segment - Business Environment for additional information on the trends and developments discussed above.

ABI’s business has been and continues to be impacted by foreign exchange rate fluctuations, inflation and commodity cost headwinds.

We will continue to monitor these conditions and other factors as they could affect our equity earnings and dividends that we receive from ABI and the fair value of our investment in ABI.

See Note 7 for additional information on our investments in equity securities.

The trends and developments discussed above have not had a material adverse impact on our consolidated financial statements, but we continue to monitor these trends and developments and potential financial impacts.

Additionally, we do not believe that these trends and developments have materially impacted our ability to achieve our Vision.

As the trends and developments discussed above evolve and new ones emerge, we will continue to evaluate the potential impacts on our business, investments and Vision.

Consolidated Results of Operations

The changes in net earnings attributable to Altria and diluted earnings per share (“EPS”) attributable to Altria for the year ended December 31, 2022, from the year ended December 31, 2021, were due primarily to the following:

The changes in net earnings and diluted EPS for the year ended December 31, 2023, from the year ended December 31, 2022, were due primarily to the following:

(in millions, except per share data) Net Earnings Diluted EPS

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2022 NPM Adjustment Items

2021 Asset impairment, exit, implementation, acquisition and disposition-related costs

2022 Acquisition, disposition and integration-related items

2022 Tobacco and health and certain other litigation items

2022 JUUL changes in fair value

2022 ABI-related special items

2022 Cronos-related special items

2021 Loss on early extinguishment of debt

2022 Income tax items

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2023 NPM Adjustment Items

2022 Asset impairment, exit, implementation, acquisition and disposition-related costs

2023 Acquisition, disposition and integration-related items (26) (0.01)

2023 Tobacco and health and certain other litigation items

2022 JUUL changes in fair value

(1,455) (0.81)

2023 Loss on disposition of JUUL equity securities

2023 ABI-related special items

(2,010) (1.12)

2023 Cronos-related special items

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Subtotal 2023 special items

(2,978) (1.65)

Fewer shares outstanding — 0.07

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% Change 0.9 % 2.3 %

For a discussion of special items and other business drivers affecting the comparability of statements of earnings amounts and reconciliations of adjusted earnings attributable to Altria and adjusted diluted EPS attributable to Altria, see the Consolidated Operating Results section below.

For a discussion of special items and other business drivers affecting the comparability of statements of earnings amounts and reconciliations of adjusted earnings and adjusted diluted EPS, see the Consolidated Operating Results section below.

▪ Fewer Shares Outstanding:

Fewer shares outstanding were due to shares we repurchased under our share repurchase program.

Fewer shares outstanding were due to shares we repurchased under our share repurchase programs.

▪ Operations:

The increase of $209 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI and lower interest and other debt expense, net.

The increase of $47 million in operations (which excludes the impact of special items shown in the table above) was due primarily to:

▪ higher income from our investments in equity securities, net;

▪ higher OCI;

▪ lower interest and other debt expense, net;

partially offset by:

▪ lower net periodic benefit income;

▪ higher amortization of intangible assets (due primarily to the NJOY Transaction).

For further details, see the Consolidated Operating Results and Operating Results by Business Segment sections below.

2023 Forecasted Results

We expect our 2023 full-year adjusted diluted EPS to be in a range of $4.98 to $5.13, representing a growth rate of 3% to 6% over our 2022 full-year adjusted diluted EPS base of $4.84, as shown in the table below.

While the 2023 full-year adjusted diluted EPS guidance accounts for a range of scenarios, the external environment remains dynamic.

We will continue to monitor conditions related to (i) the economy, including the impact of high inflation, rising interest rates and global supply chain disruptions, (ii) adult tobacco consumer dynamics, including disposable income, purchasing patterns and adoption of smoke-free products and (iii) regulatory and legislative developments.

Our 2023 full-year adjusted diluted EPS guidance range includes planned investments in support of our Vision, such as (i) continued smoke-free product research, development and regulatory preparation expenses, (ii) enhancement of our digital consumer engagement system and (iii) marketplace activities in support of our smoke-free products.

The guidance range also includes lower expected net periodic benefit income due to market factors, including higher interest rates, and the impact of the 2022 completion of the PMCC wind-down.

We expect our 2023 full-year adjusted effective tax rate will be in a range of 24.5% to 25.5%.

Reconciliation of 2022 Reported Diluted EPS to 2022 Adjusted Diluted EPS

2022 Reported diluted EPS $ 3.19

NPM Adjustment Items (0.03)

Tobacco and health and certain other litigation items 0.05

JUUL changes in fair value 0.81

ABI-related special items 1.12

Cronos-related special items 0.10

Income tax items (0.40)

2022 Adjusted diluted EPS $ 4.84

For a discussion of certain income and expense items in the table above, see the Consolidated Operating Results section below.

Our full-year adjusted diluted EPS forecast and full-year forecast for our adjusted effective tax rate exclude the impact of certain income and expense items, including those items noted in the Non-GAAP Financial Measures section below, that our management believes are not part of underlying operations.

Our management cannot estimate on a forward-looking basis the impact of these items on our reported diluted EPS or our reported effective tax rate because these items, which could be significant, may be unusual or infrequent, are difficult to predict and may be highly variable.

As a result, we do not provide a corresponding GAAP measure for, or reconciliation to, our adjusted diluted EPS forecast or our adjusted effective tax rate forecast.

Non-GAAP Financial Measures

While we report our financial results in accordance with GAAP, our management reviews OCI, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate the performance of, and allocate resources to, our segments.

Our management also reviews certain financial results, including OCI, OCI margins, net earnings attributable to Altria and diluted EPS, on an adjusted basis, which excludes certain income and expense items that our management believes are not part of underlying operations.

These items may include, for example, loss on early extinguishment of debt, restructuring charges, asset impairment charges, acquisition-related and disposition-related costs, equity investment-related special items (including any changes in fair value of our equity investment recorded at fair value and any changes in the fair value of related warrants and preemptive rights), certain income tax items, charges associated with tobacco and health and certain other litigation items, and resolutions of certain non-participating manufacturer (“NPM”) adjustment disputes under the MSA (such dispute resolutions are referred to as “NPM Adjustment Items”).

We report our financial results in accordance with GAAP.

However, our management also reviews certain financial results, including OCI, OCI margins, net earnings and diluted EPS, on an adjusted basis, which excludes certain income and expense items that our management believes are not part of underlying operations.

These items may include, for example, loss on early extinguishment of debt, restructuring charges, asset impairment charges, acquisition, disposition and integration-related items, equity investment-related special items (including any changes in fair value of our former equity investment in JUUL recorded at fair value), certain income tax items, charges associated with tobacco and health and certain other litigation items, and resolutions of certain non-participating manufacturer (“NPM”) adjustment disputes under the MSA (“NPM Adjustment Items”).

In addition, our management reviews the ratio of debt-to-Consolidated EBITDA, which we use as a factor to determine our ability to access the capital markets and make investments in pursuit of our Vision.

Consolidated EBITDA is calculated in accordance with our credit agreement (defined below in Liquidity and Capital Resources ) and includes certain adjustments.

Our management does not view any of these special items to be part of our underlying results as they may be highly variable, may be unusual or infrequent, are difficult to predict and can distort underlying business trends and results.

Our management also reviews income tax rates on an adjusted basis.

Our adjusted effective tax rate may exclude certain income tax items from our reported effective tax rate.

Our management believes that adjusted financial measures provide useful additional insight into underlying business trends and results, and provide a more meaningful comparison of year-over-year results.

Our management uses adjusted financial measures and regularly provides these to our chief operating decision maker (“CODM”) for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets.

These adjusted financial measures are not required by, or calculated in accordance with GAAP and may not be calculated the same as similarly titled measures

used by other companies.

Except as noted in the 2023 Forecasted Results section above, when we provide a non-GAAP measure in this Form 10-K, we also provide a reconciliation of that non-GAAP financial measure to the most directly comparable GAAP financial measure.

Our management also reviews income tax rates on an adjusted basis, which may exclude certain income tax items from our reported effective tax rate.

Our management believes that the foregoing financial measures provide useful additional insight into underlying business trends and results, and provide a more meaningful comparison of year-over-year results.

Our management uses these financial measures and regularly provides these to our chief operating decision maker (“CODM”) for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets.

The foregoing financial measures are not required by, or calculated in accordance with GAAP and may not be calculated the same as similarly titled measures used by other companies.

The foregoing financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP.

When we provide a non-GAAP measure in this Form 10-K, we also provide a reconciliation of that non-GAAP financial measure to the most directly comparable GAAP financial measure.

Discussion and Analysis

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For further discussion, see Note 4.

Revenues from Contracts with Customers to the consolidated financial statements in Item 8.

Revenues from Contracts with Customers to our consolidated financial statements in Item 8.

▪ Depreciation, Amortization, Impairment Testing and Asset Valuation:

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For purposes of recognition and measurement of an impairment for assets held for use, we group assets and liabilities at the lowest level for which cash flows are separately identifiable.

If we determine that an impairment exists, any related impairment loss is calculated based on fair value.

If we determine that an impairment exists, any related impairment loss is calculated

based on fair value.

We base impairment losses on assets to be disposed of, if any, on the estimated proceeds to be received, less costs of disposal.

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Oral nicotine pouches 55 —

E-vapor 1,614 —

Total $ 6,791 $ 11,443

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▪ no impairment charges were recorded;

▪ the estimated fair values of all reporting units and the indefinite-lived intangible assets within all reporting units substantially exceeded their carrying values, with the exception of the Skoal trademark within the MST and snus products reporting unit.

At December 31, 2022, the estimated fair value of the Skoal trademark exceeded its carrying value of $3.9 billion by approximately 12%.

Skoal ’s performance has been negatively impacted due in part to changes in adult tobacco consumers’ purchase behaviors resulting from adverse macroeconomic and geopolitical conditions.

These conditions contributed to a decrease in Skoal ’s revenue and operating company income for the year ended December 31, 2022 versus the prior year.

The growth of innovative tobacco products, including oral nicotine pouches, has also continued to impact Skoal ’s performance, and as adult tobacco consumers’ preferences continue to evolve, we expect consumers to increasingly move across tobacco categories.

In addition to the factors impacting Skoal ’s performance, rising U.S.

interest rates have resulted in an increase in the discount rate used in our estimate of fair value.

An additional 1% increase in the discount rate would have resulted in the estimated fair value exceeding its carrying value by approximately 2% at December 31, 2022.

If Skoal ’s revenue and operating company income continue to decrease, or if the discount rate used to estimate the fair value continues to increase, it could result in a material non-cash impairment of the Skoal trademark in future periods.

▪ the estimated fair values of the cigarettes, MST and snus products, cigars and oral nicotine pouches reporting units, and the indefinite-lived intangible assets within these reporting units substantially exceeded their carrying values, with the exception of the Skoal trademark within the MST and snus products reporting unit.

At December 31, 2023, the estimated fair value of the Skoal trademark exceeded its carrying value of $3.9 billion by approximately 6% ($0.2 billion).

MST products, including Skoal , have continued to be negatively impacted due in part to evolving adult tobacco consumer preferences, which has resulted in consumers increasingly moving across tobacco categories.

The accelerated growth of innovative tobacco products, including oral nicotine pouches, and the related increase in competitive activity among tobacco categories in 2023 continued to contribute to reductions in sales volumes for MST products, including Skoal .

We believe if there is further acceleration in the decline in sales volume for Skoal that results in material revenue declines, there may be a material adverse effect on the significant assumptions used in performing our valuation, including volume, revenue, income, perpetual growth rate and discount rate.

A hypothetical 1% increase to the discount rate used, our most sensitive assumption, would have resulted in an impairment charge to the Skoal intangible asset of approximately $150 million during 2023.

These adverse effects, including if Skoal ’s actual revenue and income or long-term outlook are significantly different from forecasted performance used to estimate the fair value or if the discount rate used to estimate the fair value increases, could result in a material non-cash impairment of our Skoal trademark in future periods, which could have a material adverse effect on our consolidated financial statements;

▪ as a result of the recent acquisition of NJOY, the fair value of the e-vapor reporting unit approximates its carrying value.

However, we performed a qualitative impairment assessment and concluded that it was more likely than not that the fair value of the e-vapor reporting unit exceeded its carrying value.

During 2022, our quantitative annual impairment test of goodwill and indefinite-lived intangible assets resulted in no impairment charges.

In 2022, we elected to unconditionally bypass the qualitative assessment and perform a single step quantitative assessment for all reporting units and indefinite-lived intangible assets.

In 2023, we elected to perform a qualitative assessment for certain of our reporting units and indefinite-lived intangible assets.

This qualitative assessment included the review of certain macroeconomic factors and entity-specific qualitative factors to determine if it was more likely than not that the fair values of our reporting units were below carrying value.

For certain of our other reporting units and indefinite-lived intangible assets, we elected to unconditionally bypass the qualitative assessment and perform a single step quantitative assessment.

We used an income approach to estimate the fair values of our reporting units and indefinite-lived intangible assets.

The income approach reflects the discounting of expected future cash flows to their present value at a rate of return that incorporates the risk-free rate for the use of those funds, the expected rate of inflation and the risks associated with realizing expected future cash flows.

The weighted-average discount rate used in performing the valuations was approximately 12%.

In performing the 2022 discounted cash flow analysis, we made various judgments, estimates and assumptions, the most significant of which were volume, income, operating margins, growth rates and discount rates.

The income approach reflects the discounting of expected future cash flows to their present value at a rate of return that incorporates the risk-

free rate for the use of those funds, the expected rate of inflation and the risks associated with realizing expected future cash flows.

The weighted-average discount rate used in performing the valuations was 10.7%.

In performing the 2023 discounted cash flow analysis, we made various judgments, estimates and assumptions, the most significant of which were volume, revenue, income, operating margins, perpetual growth rates and discount rates.

The analysis incorporated assumptions used in our long-term financial forecast, which is used by our management to evaluate business and financial performance, including allocating resources and evaluating results relative to setting employee compensation targets.

The assumptions incorporated the highest and best use of our indefinite-lived intangible assets and also included perpetual growth rates for periods beyond the long-term financial forecast.

The perpetual growth rate used in performing all of the valuations was 2%.

The perpetual growth rates used in performing the valuations ranged from 1% to 2%.

Fair value calculations are sensitive to changes in these estimates and assumptions, some of which relate to broader macroeconomic conditions outside of our control.

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The following factors have the most potential to impact our assumptions and thus the expected future cash flows and, therefore, our impairment conclusions:

general macroeconomic and geopolitical conditions;

regulatory developments;

changes in category growth rates as a result of changing adult tobacco consumer preferences;

general macroeconomic conditions;

governmental actions, including FDA regulatory actions and inaction;

changes in category growth (decline) rates as a result of changing adult tobacco consumer preferences;

success of planned new product expansions;

competitive activity;

unfavorable outcomes with respect to litigation proceedings, including actions brought against us alleging patent infringement;

and income and excise taxes.

For further discussion of these factors, see Operating Results by Business Segment - Tobacco Space - Business Environment below.

For further discussion of these factors, see Operating Results by Business Segment - Business Environment below.

While our management believes that the estimated fair values of each reporting unit and indefinite-lived intangible asset at December 31, 2023 are reasonable, actual performance in the short-term or long-term could be significantly different from forecasted performance, which could result in impairment charges in future periods.

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We use certain factors to make this determination, including (i) the duration and magnitude of the fair value decline, (ii) the financial condition and near-term prospects of the investee and (iii) our intent and ability to hold our investment until recovery to its carrying value.

We account for our investment in JUUL as an investment in an equity security and measure our investment in JUUL at fair value on our consolidated balance sheet at December 31, 2022.

Our consolidated statements of earnings include any cash dividends received from our investment in JUUL (none received to date) and any changes in the estimated fair value of our investment, which is calculated quarterly.

Investment in ABI

At December 31, 2022, our equity investment in ABI consisted of 185 million restricted shares of ABI (the “Restricted Shares”) and 12 million ordinary shares of ABI.

The fair value of our equity investment in ABI is based on:

(i) unadjusted quoted prices in active markets for ABI’s ordinary shares and was classified in Level 1 of the fair value hierarchy and (ii) observable inputs other than Level 1 prices, such as quoted prices for similar assets for the Restricted Shares, and was classified in Level 2 of the fair value hierarchy.

We can convert the Restricted Shares to ordinary shares at our discretion.

Therefore, the fair value of each Restricted Share is based on the value of an ordinary share.

The fair value of our equity investment in ABI at December 31, 2022 and 2021 was $11.9 billion (carrying value of $9.0 billion) and $11.9 billion (carrying value of $11.1 billion), respectively, which was above its carrying value by approximately 33% and 7% at December 31, 2022 and 2021, respectively.

At February 23, 2023, the fair value of our equity investment in ABI was $12.0 billion, which exceeded its carrying value by approximately 33%.

We will continue to monitor our investment in ABI, including the impact of macroeconomic and geopolitical factors on ABI’s business and market valuation.

Investment in JUUL

At December 31, 2022, the estimated fair value of our investment in JUUL was $250 million, as compared with $1.7 billion at December 31, 2021.

In June 2022, the FDA issued MDOs to JUUL ordering all of JUUL’s products currently marketed in the United States off the market.

In July 2022, the FDA administratively stayed the MDOs on a temporary basis, citing its determination that there are scientific issues unique to the JUUL PMTAs that warrant additional review.

This administrative stay temporarily suspended the MDOs, and JUUL’s products remain on the market.

The decrease in the estimated fair value of our investment in JUUL for the year ended December 31, 2022 was primarily driven by (i) a decrease in the likelihood of a favorable outcome from the FDA for JUUL’s products that are currently marketed in the United States, which have received MDOs and are under additional administrative review, (ii) a decrease in the likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, which could result in JUUL seeking protection under bankruptcy or other insolvency laws, (iii) projections of higher operating expenses resulting in lower long-term operating margins, (iv) projections of lower JUUL revenues in the United States over time due to lower JUUL volume assumptions and (v) an increase in the discount rate due to changes in market factors, partially offset by the effect of passage of time on the projected cash flows.

We use an income approach to estimate the fair value of our investment in JUUL.

The income approach reflects the discounting of future cash flows for the United States and international markets at a rate of return that incorporates the risk-free rate for the use of those funds, the expected rate of inflation and the risks associated with realizing future cash flows.

In determining the fair value of our investment in JUUL, we made certain judgments, estimates and assumptions, the most significant of which were likelihood of certain potential regulatory and liquidity outcomes, sales volume, operating margins, discount rates and perpetual growth rates.

All significant inputs used in the valuation are classified in Level 3 of the fair value hierarchy.

Additionally, in determining these significant assumptions, we made judgments regarding:

(i) the likelihood of certain potential regulatory actions impacting the e-vapor category and specifically whether the FDA will ultimately authorize JUUL’s products, which have received MDOs and are under additional administrative review;

(ii) the likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, the absence of which could result in JUUL seeking protection under bankruptcy or other insolvency laws;

(iii) the risk created by the number and types of legal cases pending against JUUL;

(iv) expectations for the future state of the e-vapor category, including competitive dynamics;

and (v) the timing of international expansion plans.

Due to these uncertainties, our future cash flow projections of JUUL are based on a range of scenarios that consider certain potential regulatory, liquidity and market outcomes.

Although our discounted cash flow analyses were based on assumptions that our management considered reasonable and were based on the best available information at the time that the analyses were developed, there is significant judgment used in determining future cash flows.

If the following factors, in isolation, significantly deviate from current expectations, we believe that they have the potential to

materially impact our significant assumptions of the likelihood of certain potential regulatory and liquidity outcomes, sales volume, operating margins, discount rates and perpetual growth rates, and thus potentially materially increase our valuation of our investment in JUUL:

▪ favorable regulatory and legislative developments at the international, federal, state and local levels such as FDA authorization of (i) existing JUUL products that have received MDOs from the FDA and that are now under additional administrative review or (ii) future tobacco product applications for JUUL’s flavored e-vapor products, which are currently not permitted in the market without FDA authorization;

▪ JUUL’s ability to maintain adequate financing to fund projected cash needs;

▪ favorable developments related to litigation;

▪ favorable financial and market performance, including substantial changes in competitive dynamics.

While our management believes that the recorded value of our investment in JUUL at December 31, 2022 represents our best estimate of the fair value of the investment, JUUL’s actual performance in the short term or long term could be significantly different from forecasted performance due to changes in the factors noted above.

Additionally, the value of our investment in JUUL could be significantly impacted by changes in the discount rate, which could be caused by numerous factors, including changes in market inputs, as well as risks specific to JUUL, including the outcome of the FDA’s additional review of the JUUL PMTAs that have received MDOs and favorable or unfavorable developments related to JUUL’s liquidity and litigation environment.

For additional information on our investments in equity securities, including impairments of our investments in ABI and Cronos and estimated changes in fair value of our JUUL investment, see Note 5.

For further discussion of our investments in equity securities, see Note 7.

▪ Marketing Costs:

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Legal Proceedings of this Form 10-K (“Item 3”), legal proceedings covering a wide range of matters are pending or threatened in various U.S.

and foreign jurisdictions against Altria and our subsidiaries, including PM USA, as well as their respective indemnitees and our investees.

and foreign jurisdictions against Altria and our subsidiaries, including PM USA, as well as their respective indemnitees.

In 1998, PM USA and certain other tobacco product manufacturers entered into the MSA with 46 states, the District of Columbia and certain United States territories to settle asserted and unasserted health care cost recovery and other claims.

PM USA and certain other U.S.

tobacco product manufacturers had previously entered into agreements to settle similar claims brought by Mississippi, Florida, Texas and Minnesota (together with the MSA, the “State Settlement Agreements”).

tobacco product manufacturers had previously entered into agreements to settle similar claims brought by Mississippi, Florida, Texas and Minnesota (together with the MSA, “State Settlement Agreements”).

PM USA’s portion of ongoing adjusted payments and legal fees is based on its relative share of the settling manufacturers’ domestic cigarette shipments, including roll-your-own cigarettes, in the year preceding that in which the payment is due.

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(i) management has concluded that it is not probable that a loss has been incurred in any pending litigation;

(ii) management is unable to estimate the possible loss or range of loss that could result from an unfavorable outcome in any pending case;

and (iii) accordingly, management has not provided any amounts in the consolidated financial statements for unfavorable outcomes, if any.

(ii) management is unable to estimate the possible loss or range of loss that could

result from an unfavorable outcome in any pending case;

and (iii) accordingly, management has not provided any amounts in our consolidated financial statements for unfavorable outcomes, if any.

We expense litigation defense costs as incurred and include such costs in marketing, administration and research costs in our consolidated statements of earnings.

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We subsequently amortize the gains or losses and prior service costs or credits recorded as components of other comprehensive earnings (losses) into net periodic benefit cost (income) in future years.

Due to changes in market factors, our discount rate assumptions for our pension and postretirement plans obligations increased to 5.6% for these plans at December 31, 2022 from 3.0% and 2.9%, respectively, at December 31, 2021.

Due to changes in market factors, our discount rate assumptions for our pension and postretirement plans obligations decreased to 5.3% and 5.2%, respectively, at December 31, 2023 from 5.6% for these plans at December 31, 2022.

We presently anticipate net pre-tax pension and postretirement income of approximately $50 million in 2024 versus net pre-tax income of $73 million in 2023.

This decrease is due primarily to:

(i) higher discount rates resulting in net higher interest and service costs;

(ii) lower estimated return on assets due to lower fair value of plan assets at December 31, 2022;

partially offset by (iii) lower amortization of net unrecognized losses in 2023.

(i) lower expected income on plan assets;

and (ii) higher amortization of net unrecognized losses in 2024;

partially offset by (iii) lower discount rates resulting in lower interest costs.

Assuming no change to the shape of the yield curve, a 50 basis point decrease (increase) in our discount rates would increase (decrease) our pension and postretirement expense by approximately $10 million.

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For additional information see Note 17.

Benefit Plans to the consolidated financial statements in Item 8 (“Note 15”).

Benefit Plans to our consolidated financial statements in Item 8 (“Note 17”).

▪ Income Taxes:

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For additional information on income taxes, see Note 15.

Income Taxes to the consolidated financial statements in Item 8 (“Note 13”).

Income Taxes to our consolidated financial statements in Item 8 (“Note 15”).

Consolidated Operating Results

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Oral tobacco products 112 119

All other — 2

Excise taxes on products $ 3,981 $ 4,408

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Operating income $ 11,547 $ 11,919

As discussed further in Note 14, our CODM reviews OCI to evaluate the performance of, and allocate resources to, our segments.

Our management believes it is appropriate to disclose this measure to help investors analyze the business performance and trends of our business segments.

The following table provides a reconciliation of adjusted net earnings attributable to Altria and adjusted diluted EPS attributable to Altria for the years ended December 31:

(in millions of dollars, except per share data) Earnings before Income Taxes Provision for Income Taxes Net Earnings Net Earnings Attributable

to Altria Diluted EPS

As discussed further in Note 16, our CODM reviews OCI, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate the performance of, and allocate resources to, our segments.

Our management believes it is appropriate to disclose this measure to help investors analyze our business performance and trends.

The following table provides a reconciliation of adjusted net earnings and adjusted diluted EPS for the years ended December 31:

(in millions of dollars, except per share data) Earnings before Income Taxes Provision for Income Taxes Net Earnings Diluted EPS

2023 Reported $ 10,928 $ 2,798 $ 8,130 $ 4.57

NPM Adjustment Items (50) (12) (38) (0.02)

Asset impairment, exit, implementation, acquisition and disposition-related costs 11 2 9 9 —

Acquisition, disposition and integration-related items 35 9 26 0.01

Tobacco and health and certain other litigation items

430 107 323 0.18

JUUL changes in fair value 1,455 — 1,455 1,455 0.81

Loss on disposition of JUUL equity securities 250 — 250 0.14

ABI-related special items 89 19 70 0.03

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NPM Adjustment Items (68) (17) (51) (0.03)

Asset impairment, exit, implementation, acquisition and disposition-related costs 120 21 99 99 0.05

Acquisition, disposition and integration-related items 11 2 9 —

Tobacco and health and certain other litigation items 131 33 98 0.05

JUUL changes in fair value 1,455 — 1,455 0.81

ABI-related special items 2,544 534 2,010 1.12

Cronos-related special items 186 — 186 0.10

Loss on early extinguishment of debt 649 153 496 496 0.27

Income tax items — 729 (729) (0.40)

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For a discussion of NPM Adjustment Items and a breakdown of these items by segment, see Health Care Cost Recovery Litigation in Note 19 and NPM Adjustment Items in Note 16, respectively.

▪ Asset Impairment, Exit, Implementation, Acquisition and Disposition-Related Costs:

For a discussion of acquisition and disposition-related costs in our oral tobacco products segment and former wine segment for the year ended December 31, 2021, see Acquisition-Related Costs and Ste.

Michelle Transaction in Note 14.

▪ Acquisition, Disposition and Integration-Related Items:

For a discussion of acquisition and integration-related costs and disposition-related interest income for the year ended December 31, 2023, see Note 3 and Note 6, respectively.

▪ Tobacco and Health and Certain Other Litigation Items:

For a discussion of tobacco and health and certain other litigation items and a breakdown of these costs by segment, see Note 19 and Tobacco and Health and Certain Other Litigation Items in Note 16, respectively.

▪ JUUL Changes in Fair Value:

We recorded non-cash, pre-tax unrealized losses from investments in equity securities in our consolidated statements of earnings as a result of changes in the estimated fair value of our investment in JUUL of $1,455 million for the year ended December 31, 2022.

We did not record a change in the estimated fair value of our investment in JUUL for the year ended December 31, 2021.

We recorded corresponding adjustments to the JUUL tax valuation allowance in 2022.

▪ Loss on Disposition and Changes in Fair Value of JUUL Equity Securities:

We recorded a non-cash, pre-tax loss of $250 million related to the disposition of our former investment in JUUL for the year ended December 31, 2023 as (income) losses from investments in equity securities in our consolidated statement of earnings.

We recorded non-cash, pre-tax unrealized losses of $1,455 million for the year ended December 31, 2022, as (income) losses from investments in equity securities in our consolidated statement of earnings as a result of decreases in the estimated fair value of our former investment in JUUL.

We recorded corresponding adjustments to the JUUL tax valuation allowance in 2023 and 2022.

For further discussion, see Note 7 and Note 15.

▪ ABI-Related Special Items:

We recorded net pre-tax losses of $2,544 million and $6,203 million from our equity investment in ABI for the years ended December 31, 2022 and 2021, respectively, substantially all of which related to non-cash impairments of our equity investment in ABI of $2,541 million and $6,157 million, for the years ended December 31, 2022 and 2021, respectively.

We recorded net pre-tax losses of $89 million from our equity investment in ABI for the year ended December 31, 2023, consisting primarily of mark-to-market losses on certain ABI financial instruments associated with its share commitments and a loss on ABI’s sale of certain brands and associated assets in the United States.

We recorded net pre-tax losses of $2,544 million from our equity investment in ABI for the year ended December 31, 2022, substantially all of which related to our non-cash impairment of our equity investment in ABI.

For further discussion, see Note 7.

These amounts include our respective share of the amounts recorded by ABI and additional adjustments related to (i) conversion from international financial reporting standards to GAAP and (ii) adjustments to our investment required under the equity method of accounting.

The ABI-related special items include our respective share of the amounts recorded by ABI and additional adjustments related to (i) the conversion of ABI-related special items from international financial reporting standards to GAAP and (ii) adjustments to our investment required under the equity method of accounting.

▪ Cronos-Related Special Items:

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Total Cronos-related special items - (income) expense $ 29 $ 186

(1) Amounts are related to the non-cash change in the fair value of the warrant (which we irrevocably abandoned in the fourth quarter of 2022) and certain anti-dilution protections (the “Fixed-price Preemptive Rights”) acquired in the Cronos transaction.

(2) Amounts include our share of special items recorded by Cronos and additional adjustments, if required under the equity method of accounting, related to our investment in Cronos including the $107 million and $205 million non-cash, pre-tax impairments of our investment in Cronos in 2022 and 2021, respectively.

(1) Amounts include our share of special items recorded by Cronos and additional adjustments, if required under the equity method of accounting, related to our investment in Cronos including our $107 million non-cash pre-tax impairment of our investment in Cronos in 2022.

We recorded corresponding adjustments to the Cronos tax valuation allowance in 2023 and 2022 relating to the special items.

For further discussion, see Note 7 and Note 15.

▪ Loss on Early Extinguishment of Debt:

We recorded pre-tax losses of $649 million for the year ended December 31, 2021, as a result of the completion of debt tender offers for and redemption of certain of our long-term senior unsecured notes.

For further discussion, see Note 8.

Long-Term Debt to the consolidated financial statements in Item 8 (“Note 8”).

▪ Income Tax Items:

We recorded income tax items of $729 million for the year ended December 31, 2022, due primarily to the release of valuation allowances on deferred tax assets related to a portion of our investment in JUUL and our Cronos warrant (which we irrevocably abandoned in the fourth quarter of 2022) due to the anticipated ability to utilize these losses.

We recorded expense of $32 million for income tax items for the year ended December 31, 2023, due primarily to tax expense associated with a tax basis adjustment related to our investment in ABI.

We recorded income of $729 million for income tax items for the year ended December 31, 2022, due primarily to tax benefits associated with the release of valuation allowances on deferred tax assets related to a portion of our former investment in JUUL and our Cronos warrant (which we irrevocably abandoned in 2022) due to the anticipated ability to utilize these losses.

For further discussion, see Note 15.

2023 Compared with 2022

Net revenues, which include excise taxes billed to customers, decreased $917 million (3.5%), due primarily to the sale of our wine business in October 2021 and lower net revenues in the smokeable products segment.

Cost of sales decreased $677 million (9.5%), due primarily to lower shipment volume in our smokeable products segment and the sale of our wine business, partially offset by higher manufacturing costs and higher per unit settlement charges.

Net revenues, which include excise taxes billed to customers, decreased $613 million (2.4%), due primarily to lower net revenues in the smokeable products segment, partially offset by higher net revenues in the oral tobacco products segment.

Cost of sales decreased $224 million (3.5%), due primarily to lower shipment volume in our smokeable products segment, partially offset by higher per unit settlement charges, higher manufacturing costs and lower NPM Adjustment Items in our smokeable products segment.

Excise taxes on products decreased $427 million (9.7%), due primarily to lower shipment volume in our smokeable products segment.

Marketing, administration and research costs decreased $105 million (4.3%), due primarily to the sale of our wine business (including lower disposition-related costs), lower spending associated with the IQOS System heated tobacco business , lower general corporate expenses and acquisition-related costs in 2021 in our oral tobacco products segment, partially offset by higher costs in our smokeable products segment.

Operating income increased $359 million (3.1%), due primarily to higher operating results in our smokeable products segment and lower general corporate expenses.

Interest and other debt expense, net decreased $104 million (9.0%), due primarily to lower interest costs as a result of debt maturities and refinancing activities and higher interest income due to higher rates and interest associated with the sale of the IQOS System commercialization rights.

(Income) losses from investments in equity securities, which were favorable $2,338 million (39.1%), were positively impacted by favorable special items from our investment in ABI (primarily due to a lower non-cash impairment of ABI) and lower losses from Cronos-related special items, partially offset by non-cash, unrealized losses resulting from the changes in the estimated fair value of our investment in JUUL in 2022.

Provision for income taxes increased $276 million (20.5%), due primarily to higher pre-tax earnings, partially offset by favorable income tax items and the state tax treatment of the impairment charges on our equity investment in ABI.

For further discussion, see Note 13.

Reported net earnings attributable to Altria of $5,764 million increased $3,289 million (100.0%+), due primarily to lower losses from investments in equity securities, favorable income tax items, the loss on early extinguishment of debt in 2021, higher operating income, lower losses on Cronos-related financial instruments and lower interest and other debt expense, net.

Reported basic and diluted EPS attributable to Altria of $3.19 each increased by 100.0%+ due to higher reported net earnings attributable to Altria and fewer shares outstanding.

Adjusted net earnings attributable to Altria of $8,742 million increased $223 million (2.6%), due primarily to higher OCI and lower interest and other debt expense, net.

Adjusted diluted EPS attributable to Altria of $4.84 increased by 5.0%, due to higher adjusted net earnings attributable to Altria and fewer shares outstanding.

Marketing, administration and research costs increased $410 million (17.6%), due primarily to higher general corporate expenses, which included charges related to agreements in 2023 to resolve certain JUUL-related litigation and shareholder derivative lawsuits as discussed in Note 19, and acquisition-related costs and higher amortization of intangible assets both associated with the NJOY Transaction.

Operating income decreased $372 million (3.1%), due primarily to higher general corporate expenses and higher amortization of intangible assets, partially offset by higher operating results in our oral tobacco products segment.

Interest and other debt expense, net decreased $69 million (6.5%), due primarily to higher interest income including higher rates, the sale of the IQOS System commercialization rights and favorable NPM Adjustment Items and lower interest expense due to net changes in debt, partially offset by 2023 interest expense and fees for the term loan facility associated with the NJOY Transaction.

For additional information related to the term loan facility and the sale of the IQOS System, see Liquidity and Capital Resources .

Net periodic benefit income, excluding service cost, decreased by $57 million (31.0%), due to higher discount rates resulting in higher interest costs and lower estimated return on assets due to lower fair value of plan assets at December 31, 2022, partially offset by lower amortization of net unrecognized losses in 2023.

For additional information, see Note 17.

(Income) losses from investments in equity securities, which were favorable $3,884 million (100%+), were positively impacted by favorable results from our equity investment in ABI (due primarily to our non-cash impairment of our investment in ABI in 2022), lower charges related to our former investment in JUUL equity securities and lower losses from our Cronos-related special items.

Provision for income taxes increased $1,173 million (72.2%), due primarily to lower pre-tax earnings in 2022 associated with our non-cash impairment of our investment in ABI and the release of valuation allowances in 2022 on deferred tax assets related to a portion of our former investment in JUUL.

Reported net earnings of $8,130 million increased $2,366 million (41.0%), due primarily to favorable results from our investments in equity securities and lower interest and other debt expense, net, partially offset by lower operating income, unfavorable income tax items and lower net periodic benefit income.

Reported basic and diluted EPS of $4.57, each increased by 43.3%, due to higher reported net earnings and fewer shares outstanding.

Adjusted net earnings of $8,822 million increased $80 million (0.9%), due primarily to higher income from our investments in equity securities, higher OCI, lower adjusted tax rate and lower interest and other debt expense, net, partially offset by lower net periodic benefit income and higher amortization.

Adjusted diluted EPS of $4.95 increased by 2.3%, due to higher adjusted net earnings and fewer shares outstanding.

Operating Results by Business Segment

Tobacco Space

Business Environment

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▪ restrictions and requirements imposed by the FSPTCA, and restrictions and requirements (and related enforcement actions) that have been, and in the future will be, imposed by the FDA;

▪ the FDA’s failure to effectively address illegal e-vapor products on the market;

▪ actual and proposed excise tax increases, as well as changes in tax structures and tax stamping requirements;

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▪ increased efforts by tobacco control advocates and other private sector entities (including retail establishments) to further restrict the availability and use of tobacco products or the ability to communicate with consumers through third-party digital platforms;

▪ changes in adult tobacco consumer purchase behavior, which is influenced by various factors such as macroeconomic conditions (including inflation), excise taxes and price gap relationships, may result in adult tobacco consumers switching to lower-priced tobacco products;

▪ the highly competitive nature of all tobacco categories, including competitive disadvantages related to cigarette price increases attributable to the settlement of certain litigation and the proliferation of innovative tobacco products, such as e-vapor and oral nicotine pouch products;

▪ illicit trade in tobacco products;

▪ changes in adult tobacco consumer purchase behavior, which is influenced by various factors such as macroeconomic conditions (including inflation), excise taxes and price gap relationships, each of which may result in adult tobacco consumers switching to lower-priced tobacco products and lower shipment volumes;

▪ the highly competitive nature of all tobacco categories, including competitive disadvantages related to the impact on cigarette prices due to the settlement of certain healthcare cost recovery litigation and the proliferation of innovative tobacco products, such as e-vapor and oral nicotine pouch products;

▪ illicit trade in tobacco products, including illegal e-vapor products;

▪ potential adverse changes in prices, availability and quality of tobacco, other raw materials and component parts, including as a result of changes in macroeconomic and geopolitical conditions.

In addition to and in connection with the foregoing, evolving adult tobacco consumer preferences continue to impact the tobacco industry.

In addition to and in connection with the foregoing, evolving adult tobacco consumer preferences continue to impact the tobacco industry, including negatively impacting cigarette and MST shipment volumes.

We believe that a significant number of adult tobacco consumers switch among tobacco categories, use multiple forms of tobacco products and try innovative tobacco products, such as e-vapor products and oral nicotine pouches.

Adult smokers continue to transition from cigarettes to exclusive use of smoke-free tobacco product alternatives, which aligns with our Vision.

We work to meet these evolving adult tobacco consumer preferences over time by developing, manufacturing, marketing and distributing products both within and outside the United States through innovation and other growth strategies (including, where appropriate, arrangements with, or investments in, third parties).

O ver the past two years, the legislative and regulatory activities discussed below negatively impacted growth in the e-vapor category.

Due to the uncertainty these challenges have created and continue to create in the marketplace, the e-vapor category experienced an estimated volume decline of 1.2% for the year ended December 31, 2022 compared to 2021.

In the fourth quarter of 2022, e-vapor industry volumes declined by 4% sequentially and declined by 7% versus the same period in 2021 as a result of FDA regulatory actions with respect to JUUL, which are discussed below.

Oral nicotine pouch retail share of the total oral tobacco category grew significantly from 15.3% for the year ended December 31, 2021 to 21.8% for the year ended December 31, 2022.

The oral nicotine pouch category continues to be increasingly competitive.

In addition, oral nicotine pouch growth has sourced in significant part from smokeless tobacco and cigarette consumers.

We are monitoring the sale and distribution of synthetic nicotine products, including in the form of e-vapor products and oral nicotine pouches.

As a result of recent amendments to the U.S.

Food, Drug and Cosmetic Act, synthetic nicotine products are now subject to FDA regulatory oversight, as discussed further below.

We believe FDA regulatory actions, which may be subject to legal challenges, will further impact the competitive environment.

We believe the innovative tobacco product categories will continue to be dynamic due to competition, adult tobacco consumer exploration of a variety of tobacco product options, adult tobacco consumer perceptions of the relative risks of smoke-free products compared to cigarettes, FDA determinations on product applications, FDA enforcement activity and legislative actions.

For the year ended December 31, 2022, we estimate that, when adjusted for trade inventory movements and other factors, domestic cigarette industry volume declined by 8.0%.

We expect 2023 cigarette industry volume trends to be most influenced by (i) disposable income, purchasing patterns and adoption of smoke-free products, (ii) macroeconomic conditions (including inflation, gasoline prices and unemployment levels), (iii) cross-category movement and (iv) regulatory and legislative (including excise tax) developments.

Macroeconomic conditions (including a high inflationary environment) can impact adult tobacco consumer purchasing behavior.

For example, economic downturns have coincided with adult tobacco consumers modifying purchase behavior at retail, potentially reducing the amount of their regular brand purchases or selecting discount products and other lower priced tobacco brands.

Beginning in January 2022, the Omicron variant of COVID-19 impacted consumer purchasing behavior, resulting in a short-term decrease in retail trips and tobacco sales volume.

In addition, gas prices increased during the second and third quarters of 2022 due in part to the Russian invasion of Ukraine before decreasing during the fourth quarter.

Increases in inflation as a result of macroeconomic and geopolitical conditions put pressure on discretionary income as the Consumer Price Index reached a 40 year high in June 2022 and rose 6.5% for all items during the year ended December 31, 2022.

Throughout 2022, these economic headwinds were partially offset by positive wage inflation, increases in federal tax refund payments and low unemployment in comparison to the year ended December 31, 2021.

We believe that adult tobacco consumers adapted their purchasing patterns across a variety of goods and services to compensate for the pressures on disposable income.

As price sensitive adult tobacco consumers react to their economic conditions, we expect potential fluctuations in discount product share for cigarettes and MST products.

However, if macroeconomic conditions or other factors cause greater than expected discount share growth or a reduction in purchases at retail, such factors could have a material adverse effect on our business, results of operations, cash flows or financial position, including an adverse effect on the carrying value of our assets such as our tobacco product trademarks.

For the fourth quarter of 2023, we estimate that, when adjusted for trade inventory movements, calendar differences and other factors, domestic cigarette industry volume declined by 8% versus the fourth quarter of 2022 and over the last 12 months.

We believe these declines primarily are attributable to the historic secular rate of decline, the growth of illegal flavored disposable e-vapor products and continued macroeconomic pressures on adult tobacco consumers.

We continue to estimate that the growth of illegal flavored disposable e-vapor products, which we discuss in more detail below, contributed to cigarette industry volume declines in a range of 1.5% to 2.5% over the last 12 months.

By design, these illegal flavored disposable e-vapor products are largely distributed through non-traditional, untracked retail channels, and this is a trend we will continue to carefully monitor.

The macroeconomic pressures on adult tobacco consumers and seasonal trends in the discount segment influenced discount share performance.

For the fourth quarter of 2023, the discount share of the cigarette category was 28.6%, an increase of 0.4 share points sequentially versus the third quarter of 2023 and an increase of 0.9 share points versus the fourth quarter of 2022.

For the full year 2023, the discount segment share of the cigarette category grew to 28.3%, an increase of 1.4 share points versus the full year 2022.

Marlboro share was 42.2% in the fourth quarter of 2023, reflecting a decrease of 0.1 share point as compared to the third quarter of 2023 and unchanged from the fourth quarter of 2022.

For the full year 2023, Marlboro share was 42.1%, a decrease of 0.4 share points compared to the full year 2022.

Marlboro continued to increase share in the premium segment of the industry to 59.2% in the fourth quarter of 2023, an increase of 0.3 share points versus the third quarter of 2023 and an increase of 0.8 share points versus the fourth quarter of 2022.

We expect cigarette industry volume trends for 2024 to be most influenced by (i) continued macroeconomic and discretionary income pressures for adult tobacco consumers (including inflation, gasoline prices and unemployment levels), (ii) cross-category movement, including to illegal e-vapor products, and (iii) regulatory and legislative (including excise tax) developments.

nicotine pouch category continued to grow significantly throughout the fourth quarter of 2023 to 35.9% of the U.S.

oral tobacco category, an increase of 11.8 share points versus the fourth quarter of 2022.

maintained year over year share momentum through the full year 2023 to achieve 6.8% of the total oral tobacco category, an increase of 1.8 share points versus the full year 2022.

For the fourth quarter of 2023, on!

share was 6.9% of the total oral tobacco category, an increase of 1.1 share points when compared to the fourth quarter of 2022 and unchanged sequentially.

Oral nicotine pouch growth primarily has sourced from adult smokeless tobacco and cigarette consumers, negatively impacting smokeless and cigarette product volumes.

For the fourth quarter 2023, the traditional smokeless category (including MST and Snus) share of the total oral tobacco category declined to 64.1%, down 11.8 share points versus the fourth quarter of 2022.

Copenhagen had an oral tobacco category share of 21.7% for the fourth quarter of 2023, a decrease of 4.5 share points when compared to the fourth quarter of 2022.

The e-vapor category grew approximately 35% in 2023, driven by illicit flavored disposable products, which currently represent over 50% of the e-vapor category.

Pod-based products represent between 15% and 20% of the category and declined approximately 15% in 2023 versus 2022.

For the fourth quarter of 2023, reported shipment volume of NJOY ACE was approximately 10.4 million pods.

By December 2023, NJOY ACE distribution grew to approximately 75,000 stores, and NJOY ACE is currently distributed in the top 25 convenience store chains by e-vapor volume.

The NJOY share of the e-vapor category reached 3.7% in the fourth quarter of 2023, an increase of 0.3 share points sequentially.

Despite improving macroeconomic conditions, discretionary income pressures persisted for adult tobacco consumers through the fourth quarter of 2023 due to the cumulative effect of inflation and pressure on discretionary income.

In January 2023, the consumer price index (“CPI”) was 6.4%, seasonally unadjusted, significantly below the prior year peak of 9.1% in June 2022 but exceeding the Federal

Reserve’s target of 2%.

In total, between 2022 and 2023, the Federal Reserve took 11 consecutive rate increases to move interest rates to a range of 5.25% to 5.5% by July 2023.

In response to rising interest rates through the year, inflation continued to ease sequentially to a December 2023 rate of 3.4%.

Despite recent CPI declines, tobacco product price increases over time have continued to act as a headwind for adult tobacco consumers.

Similar to inflation trends, gas prices throughout 2023 were much lower than 2022.

However, they remained consistently above $3.00 month over month.

The average gas price for 2023 was $3.52 per gallon, a decrease of $0.44 compared to the previous year.

Gas prices peaked leading into August to $3.84, then started to decrease, reaching the lowest levels in over two years to $3.13 by December 2023.

In addition, low unemployment and stable wage inflation continued through 2023.

We continue to monitor changing conditions within the tobacco business environment and impacts on our business.

For example, we monitor changes in macroeconomic conditions that increase discretionary income pressures on adult tobacco consumers, which can impact domestic cigarette industry volume decline and discount segment share growth and reduce purchases at retail.

We are also monitoring growth of illegal flavored disposable e-vapor products and the related negative impact on domestic cigarette and e-vapor industry volumes.

In addition, the growth of the nicotine pouch category has reduced the size of the MST category and could impact the carrying value of our assets such as our tobacco product trademarks.

Changes in these and other conditions could have a material adverse effect on our business, results of operations, cash flows or financial position.

FSPTCA and FDA Regulation

▪ The Regulatory Framework:

The FSPTCA, its implementing regulations and its 2016 deeming regulations establish broad FDA regulatory authority over all tobacco products and, among other provisions:

The FSPTCA and its related regulations establish broad FDA regulatory authority over all tobacco products and, among other provisions:

▪ impose restrictions on the advertising, promotion, sale and distribution of tobacco products (see Final Tobacco Marketing Rule below);

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If the FDA were to change its position at some later date, Middleton would have the opportunity to bring another lawsuit.

In March 2022, the U.S.

Effective April 2022, the U.S.

Congress expanded the statutory definition of tobacco products to include products containing nicotine derived from any source, including synthetic nicotine.

The amendment became effective in April 2022.

See Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement below for additional information on the effects of the statutory change.

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▪ restricts the use of non-tobacco trade and brand names on cigarettes and smokeless tobacco products;

(1) “Smokeless tobacco,” as used in this section of this Form 10-K, refers to smokeless tobacco products first regulated by the FDA in 2009, including MST.

It excludes oral nicotine pouches, which were first regulated by the FDA in 2016.

▪ prohibits sampling of all tobacco products except that sampling of smokeless tobacco products is permitted in qualified adult-only facilities;

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▪ requires the development by the FDA of graphic warnings for cigarettes, establishes warning requirements for other tobacco products, and gives the FDA the authority to require new warnings for any type of tobacco product (see FDA Regulatory Actions - Graphic Warnings below).

Subject to certain limitations arising from legal challenges, the Final Tobacco Marketing Rule took effect in June 2010 for cigarettes and smokeless tobacco products, in August 2016 for all other tobacco products, including e-vapor and oral nicotine pouch products containing tobacco-derived nicotine, and in April 2022 for tobacco products, including e-vapor and oral nicotine pouch products, that contain synthetic nicotine.

(1) “Smokeless tobacco,” as used in this section of this Form 10-K, refers to smokeless tobacco products first regulated by the FDA in 2009, including MST.

It excludes oral nicotine pouches, which were first regulated by the FDA in 2016.

▪ Rulemaking and Guidance:

From time to time, the FDA issues proposed regulations and guidance, which may be issued in draft or final form, generally involve public comment and may include scientific review.

From time to time, the FDA issues proposed regulations and guidance, which may be issued in draft or final form, that generally involve public comment and may include scientific review.

The FDA also may request comments on broad topics through an Advanced Notice of Proposed Rulemaking (“ANPRM”).

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The FDA’s implementation of the FSPTCA and related regulations and guidance also may have an impact on enforcement efforts by states, territories and localities of their laws and regulations as well as of the State Settlement Agreements (see State Settlement Agreements below).

Such enforcement efforts may adversely affect our operating companies’ ability to market and sell regulated tobacco products in those states, territories and localities.

▪ FDA’s Comprehensive Plan for Tobacco and Nicotine Regulation:

In July 2017, the FDA announced a “Comprehensive Plan for Tobacco and Nicotine Regulation” (“Comprehensive Plan”) designed to strike a balance between regulation and encouraging the development of innovative tobacco products that may be less risky than cigarettes.

Since then, the FDA has issued additional information about its Comprehensive Plan in response to concerns associated with the rise in the use of e-vapor products by youth and the potential youth appeal of flavored tobacco products (see FDA Regulatory Actions - Underage Access and Use of Certain Tobacco Products below).

As part of the Comprehensive Plan, the FDA:

▪ issued ANPRMs relating to potential product standards for nicotine in cigarettes, flavors in all tobacco products (including menthol in cigarettes and characterizing flavors in all cigars) and, for e-vapor products, to protect against known public health risks such as concerns about youth exposure to liquid nicotine;

▪ took actions to restrict youth access to e-vapor products;

▪ reconsidered the processes used by the FDA to review certain reports and new product applications.

In December 2022, the Reagan-Udall Foundation published a report on its operational evaluation of the FDA’s Center for Tobacco Products.

Among other recommendations, the report urges the FDA to clearly define product pathways, accelerate PMTA decision-making, take enforcement actions against manufacturers and products that violate the law and address the need for risk communications to tobacco consumers.

Such enforcement efforts may adversely affect our operating companies’ ability to market and sell tobacco products in those states, territories and localities.

▪ FDA’s Five-Year Strategic Plan for Tobacco and Nicotine Regulation:

In December 2023, in response to the Reagan-Udall Foundation’s report of its operational evaluation of the FDA’s Center for Tobacco Products, the FDA released its five-year strategic plan to address concerns raised by the report.

The Reagan-Udall Report urged the FDA to clearly define product pathways, accelerate PMTA decision-making, address the need for health risk communications to tobacco consumers and take enforcement actions against manufacturers and products that violate the law.

The FDA’s five-year strategic plan lists five goals:

▪ develop, advance and communicate comprehensive and impactful tobacco regulations and guidance;

▪ ensure timely, clear and consistent product application review;

▪ strengthen compliance of regulated industry using all available tools, including robust enforcement actions;

▪ enhance knowledge and understanding of the risks associated with tobacco product use;

▪ advance operational excellence.

Although the FDA, in conjunction with other federal entities, has increased enforcement activity, prior insufficient enforcement actions against certain product categories that violate the law, including disposable and flavored e-vapor products and products targeted to minors, allowed such products to proliferate on the market.

In addition, the FDA’s failure to clearly define product pathways and accelerate PMTA decision making has resulted in a market with few authorized smoke-free products available to adult tobacco consumers.

▪ Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement:

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Subsequent FDA rules also provide a Supplemental PMTA pathway designed to increase the efficiency of submission and review for modified versions of previously authorized products.

The FDA pre-market authorization enforcement policy varies based on product type and date of availability in the market, specifically:

The FDA pre-market authorization enforcement policy varies based on product type and date of availability on the market, specifically:

▪ Pre-existing Tobacco Products are exempt from the pre-market authorization requirement;

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▪ tobacco products containing nicotine from any source other than tobacco ( e.g.

, synthetic nicotine) that were on the market between March 15, 2022 and April 14, 2022 and are not Pre-existing Tobacco Products are generally products for which a

manufacturer must have filed a PMTA by May 14, 2022.

, synthetic nicotine) that were on the market between March 15, 2022 and April 14, 2022 and are not Pre-existing Tobacco Products are generally products for which a manufacturer must have filed a PMTA by May 14, 2022.

A manufacturer was permitted to keep such a product on the market until July 13, 2022 provided that a PMTA was filed by May 14, 2022.

Thereafter, unless the FDA granted the product a marketing order, the product is unlawful and subject to possible FDA enforcement.

Modifications to currently marketed products, including modifications that result from, for example, changes to the quantity of tobacco product(s) in a package, a manufacturer being unable to acquire ingredients or a supplier being unable to maintain the consistency required in ingredients, could trigger the FDA’s pre-market review processes.

Through these processes, a manufacturer could receive (i) a “not substantially equivalent” determination, (ii) a denial of a PMTA or (iii) a marketing order withdrawal by the FDA on one or more products, which would require the removal of the product or products from the market.

Modifications to currently marketed products, including modifications that result from, for example, changes to the quantity of tobacco product(s) in a package, a manufacturer being unable to acquire ingredients or a supplier or contract manufacturer being unable to maintain the consistency required in ingredients or manufacturing processes, could trigger the FDA’s pre-market review processes.

Additionally, a manufacturer may be unable to maintain consistency in manufacturing processes as it increases the scale of its manufacturing operations in response to market expansion or product introduction.

These circumstances could cause a manufacturer to receive (i) a “not substantially equivalent” determination or (ii) a denial or withdrawal of a PMTA, either of which could result in a product being removed from the market.

In addition, new scientific data continues to be developed relating to innovative tobacco products, which could impact the FDA’s determination as to whether a product is, or continues to be, appropriate for the protection of public health and could, therefore, result in the removal of one or more products from the market.

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These products can remain on the market during FDA review through court-allowed, case-by-case discretion, so long as the report or application was timely filed with the FDA.

In September 2022, the FDA represented that it had resolved more than 99% of the timely applications it had received, with the vast majority resulting in a denial.

A number of the denials are subject to litigation challenges initiated by the affected manufacturers.

In September 2022, the FDA represented that it had resolved more than 99% of the timely applications it had received, the vast majority of which were for e-vapor products and resulted in denials.

A number of the denials are subject to challenges initiated by the affected manufacturers.

For those products still under FDA review, it is uncertain when and for how long the FDA may permit continued marketing and sale of those products pursuant to its case-by-case discretion.

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In addition, as of February 23, 2024, Middleton has received market orders or exemptions that cover over 99% of its cigar product volume.

JUUL submitted PMTAs for its e-vapor device and the related tobacco and menthol flavors in July 2020.

In June 2022, the FDA issued MDOs to JUUL for all of JUUL’s products currently marketed in the United States.

These MDOs are currently stayed.

See FDA Regulatory Actions - Electronic Nicotine Delivery System Products below for further discussion.

In April 2019, the FDA authorized the PMTA for the IQOS System and in July 2020, the FDA authorized the marketing of this system as an MRTP with a reduced exposure claim.

In April 2019, the FDA authorized the PMTA for the IQOS System, and in July 2020, the FDA authorized the marketing of this system as a modified risk tobacco product (“MRTP”) with a reduced exposure claim.

In December 2020, the FDA authorized the PMTA for IQOS 3, an updated version of the IQOS devices, and in March 2022 authorized the marketing of the IQOS 3 device as an MRTP with the same reduced exposure claim.

We have agreed to assign the exclusive U.S.

commercialization rights to the IQOS System to PMI effective April 2024 in exchange for a total cash payment of approximately $2.7 billion (plus interest).

In January 2023, the FDA authorized PMTAs for three new tobacco-flavored varieties of Marlboro HeatSticks .

In September 2021, in connection with a patent dispute, the ITC issued a cease and desist order, effective as of November 29, 2021, banning (i) the importation of the IQOS devices, Marlboro HeatSticks and infringing components into the United States and (ii) the sale, marketing and distribution of such imported products in the United States.

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For a further discussion of the ITC decision, see Note 19.

In October 2022, we agreed to assign the exclusive U.S.

commercialization rights to the IQOS System to PMI effective April 2024 in exchange for a total cash payment of approximately $2.7 billion (plus interest).

government has asserted that the agreement to assign those rights required district court approval and was subject to PMI becoming bound by a court-ordered injunction against engaging in certain conduct and requiring the communication of corrective statements.

The issue has yet to be litigated before the district court.

In October 2021, the FDA authorized the marketing and sale of four of USSTC’s Verve oral nicotine products, including Green Mint and Blue Mint varieties, representing the first flavored product authorizations issued by the FDA for newly deemed innovative products.

These products are not currently marketed or sold.

In March 2023, the FDA authorized USSTC to communicate a modified risk claim about its Copenhagen Classic Snuff MST product.

This product is not currently marketed or sold.

The authorized claim for Copenhagen Classic Snuff is “IF YOU SMOKE, CONSIDER THIS:

Switching completely to this product from cigarettes reduces risk of lung cancer.” USSTC’s authorization to use this claim is subject to the FDA’s post-market surveillance requirements described below.

In June 2023, we completed our acquisition of NJOY Holdings, the parent of NJOY.

As a result of the acquisition, NJOY became a wholly owned subsidiary of Altria, and we gained full global ownership of NJOY’s e-vapor product portfolio, including NJOY ACE , currently the only pod-based e-vapor product with market authorizations from the FDA, and NJOY DAILY , which also has a market authorization.

In March 2020, NJOY submitted PMTAs to the FDA with respect to two NJOY ACE menthol products and two NJOY DAILY menthol products, all four of which remain pending.

The FDA issued marketing denial orders (“MDOs”) for four NJOY ACE and four NJOY DAILY flavored products.

NJOY filed for a supervisory review by the FDA of the marketing denial orders for the NJOY ACE and NJOY DAILY flavored products, all of which are pending.

Post-Market Surveillance :

Manufacturers that receive product authorizations through the PMTA process must adhere to the FDA post-market record keeping and reporting requirements, as detailed in market orders and in the final PMTA rule that went into effect in November 2021.

This includes notification of all marketing activities.

The requirements include prior notification of marketing activities.

The FDA may amend requirements of a market order or withdraw the market order based on this information if, among other reasons, it determines that the continued marketing of the products is no longer appropriate for the protection of the public health.

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An unfavorable determination on an application, the withdrawal by the FDA of a prior marketing order or other changes in FDA regulatory requirements could result in the removal of products from the market.

These manufacturers would have the option of marketing their products that have received FDA pre-market authorization or Pre-existing Tobacco Products.

A “not substantially equivalent” determination, a denial of a PMTA or a marketing order withdrawal by the FDA on one or more products (which would require the removal of the product or products from the market) could have a material adverse impact on our business, results of operations, cash flows or financial position.

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In March 2020, the FDA issued a final rule requiring 11 textual warnings accompanied by color graphics depicting certain negative health consequences of smoking on cigarette packaging and advertising.

The final rule was set to become effective on October 6, 2023.

However, PM USA and other cigarette manufacturers filed lawsuits challenging the final rule on substantive and procedural grounds.

PM USA and other cigarette manufacturers filed lawsuits challenging the final rule on substantive and procedural grounds.

In December 2022, the U.S.

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For example, we advocated raising the minimum legal age to purchase all tobacco products to 21 at the federal and state levels to further address underage use, which is now federal law.

We continue to advocate in states that have not yet raised the minimum legal age to purchase all tobacco products to 21.

See Federal, State and Local Legislation to Increase the Legal Age to Purchase Tobacco Products below for further discussion.

In addition, through our retailer incentive program, stores representing over 80% of PM USA’s cigarette volume have implemented point-of-sale age validation technology.

Additionally, the FDA issued final guidance in April 2020, stating that it intends to prioritize enforcement action against certain product categories, including cartridge-based, flavored e-vapor products and products targeted to minors.

Additionally, the FDA issued final guidance in April 2020, stating that it intended to prioritize enforcement action against certain product categories, including pod-based, flavored e-vapor products and products targeted to minors.

More recently, the FDA has taken limited enforcement action aimed at manufacturers and retailers of certain disposable flavored electronic nicotine delivery system products.

However, despite recent increases in enforcement activity, the FDA’s lack of sufficient enforcement actions against product categories that violate the law, including disposable and flavored e-vapor products and products targeted to minors, have allowed such products to proliferate on the market.

▪ Electronic Nicotine Delivery System Products :

In June 2022, the FDA issued MDOs to JUUL ordering all of JUUL’s products currently marketed in the United States off the market.

JUUL filed a petition for review of the MDOs with the U.S.

Court of Appeals for the D.C.

JUUL subsequently moved the D.C.

Circuit for a temporary administrative stay of the MDOs, which the court granted to provide sufficient opportunity for the court to consider JUUL’s emergency motion for a stay pending the court’s consideration of JUUL’s challenge to the MDOs.

In July 2022, the FDA administratively stayed the MDOs on a temporary basis, citing its determination that there are scientific issues unique to the JUUL PMTAs that warrant additional review.

This administrative stay temporarily suspends the MDOs, and JUUL’s products remain on the market.

The proceedings in the U.S.

Court of Appeals for the D.C.

Circuit are being held in abeyance pending completion of the FDA’s additional review, and JUUL has withdrawn its motion for an emergency stay with respect to the MDOs, without prejudice to refiling at a later date.

In light of these developments, the D.C.

Circuit dissolved the administrative stay it had previously granted and directed the parties to file motions to govern further proceedings within 14 days of FDA’s completion of its additional review process.

▪ As of February 23, 2023, many manufacturers of menthol and other flavored e-vapor products received MDOs for failure to provide sufficiently strong product-specific scientific evidence to demonstrate that the benefit of their products to adult smokers overcomes the risk that their products pose to youth.

As of February 23, 2024, many manufacturers of menthol and other flavored e-vapor products have received MDOs for failure to provide sufficiently strong product-specific scientific evidence to demonstrate that the benefit of their products to adult smokers overcomes the risk that their products pose to youth.

The FDA has communicated in these MDOs that vapor products with non-tobacco flavors present unique questions relevant to the FDA’s “Appropriate for the Protection of Public Health” standard and that successful applications require strong, product-specific evidence.

A number of these manufacturers are appealing the MDOs for their products.

A number of these manufacturers are challenging the MDOs for their products.

In January 2024, the U.S.

Court of Appeals for the Fifth Circuit ruled that the FDA processes and procedures for addressing e-vapor PMTAs violated federal law and that, among other things, the FDA had failed to give applicants fair notice of, and repeatedly changed positions with respect to, the information required to obtain a PMTA.

The court decided the case en banc , with all judges on the court hearing the

Courts of Appeal have upheld adverse FDA determinations, and there are pending requests that the U.S.

Supreme Court review these decisions.

▪ Potential Product Standards

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In March 2018, the FDA issued an ANPRM seeking comments on the potential public health benefits and any possible adverse effects of lowering nicotine in combustible cigarettes to non-addictive or minimally addictive levels.

Among other issues, the FDA sought comments on (i) whether smokers would

compensate by smoking more cigarettes to obtain the same level of nicotine as with their current product and (ii) whether the proposed rule would create an illicit trade of cigarettes containing nicotine at levels higher than a non-addictive threshold that may be established by the FDA.

Among other issues, the FDA sought comments on (i) whether smokers would compensate by smoking more cigarettes to obtain the same level of nicotine as with their current product and (ii) whether the proposed rule would create an illicit trade of cigarettes containing nicotine at levels higher than a non-addictive threshold that may be established by the FDA.

The FDA also sought comments on whether a nicotine product standard should apply to other combustible tobacco products, including cigars.

In January 2023, the Biden Administration published its Fall 2022 Unified Regulatory Agenda, which includes the FDA’s plans to propose, by October 2023, a product standard that would establish a maximum nicotine level in cigarettes and other combustible tobacco products.

In December 2023, the Biden Administration published its Fall 2023 Unified Regulatory Agenda, which includes the FDA’s plans to propose, by April 2024, a product standard that would establish a maximum nicotine level in cigarettes and other combustible tobacco products.

Any proposed product standard would proceed through the rulemaking process, which we believe will take multiple years to complete.

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(i) banning menthol in cigarettes and (ii) banning all characterizing flavors (including menthol) in cigars.

The Biden Administration’s Fall 2022 Unified Regulatory Agenda includes the FDA’s plans to complete rulemaking with respect to these proposed product standards by the end of 2023.

The Biden Administration’s Fall 2023 Unified Regulatory Agenda includes the FDA’s plans to complete rulemaking with respect to these proposed product standards by March 2024.

The FDA has not completed rulemaking with respect to either proposed product standard, but in October 2023 submitted the two proposed product standards to the White House Office of Management and Budget for review.

We submitted comments during the notice-and-comment period and plan to continue engaging with the FDA through the rulemaking process.

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In January 2017, the FDA proposed a product standard for NNN levels in finished smokeless tobacco products.

If any one or more of the foregoing potential product standards were to become final and was appealed and upheld in the courts, it could have a material adverse effect on our business, results of operations, cash flows or financial position, including a material adverse effect on the carrying value of our assets such as our cigar trademarks.

▪ Good Manufacturing Practices:

The FSPTCA requires that the FDA promulgate good manufacturing practice regulations (referred to by the FDA as “Requirements for Tobacco Product Manufacturing Practice”) for tobacco product manufacturers, but does not specify a timeframe for such regulations.

Compliance with any such regulations could result in increased costs, which could have a material adverse effect on our business, results of operations, cash flows or financial position.

In March 2023, the FDA, pursuant to the requirements of the FSPTCA, issued a proposed rule setting forth requirements for tobacco product manufacturers regarding the manufacture, design, packing and storage of their products.

This proposed rule establishes a framework of good manufacturing practices, including by:

▪ establishing tobacco product design and development controls;

▪ ensuring that finished and bulk tobacco products are manufactured according to established specifications;

▪ minimizing the manufacture and distribution of tobacco products that do not meet specifications;

▪ requiring manufacturers to take appropriate measures to prevent contamination of tobacco products;

▪ requiring investigation and identification of products that do not meet specifications and requiring manufacturers to institute appropriate corrective actions, such as a recall;

▪ establishing the ability to trace all components or parts, ingredients, additives and materials, as well as each batch of finished or bulk tobacco products, to aid in investigations of those that do not meet specifications.

We engaged with the FDA through the rulemaking process, including during the notice-and-comment period, which closed in October 2023.

If the proposed rule were to take effect, compliance with these requirements could result in increased costs.

▪ Impact on Our Business;

Compliance Costs and User Fees:

FDA regulatory actions under the FSPTCA could have a material adverse effect on our business, results of operations, cash flows or financial position in various ways.

Additional FDA regulatory actions under the FSPTCA could have a material adverse effect on our business, results of operations, cash flows or financial position in various ways.

For example, actions by the FDA could:

▪ impact the consumer acceptability of tobacco products;

▪ delay, discontinue or prevent the sale or distribution of existing, new or modified tobacco products;

▪ discontinue, delay or prevent the sale or distribution of existing, new or modified tobacco products;

▪ limit adult tobacco consumer choices;

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Between the end of 1998 and February 23, 2024, the weighted-average state cigarette excise tax increased from $0.36 to $1.90 per pack.

No state enacted new legislation increasing cigarette excise taxes in 2022, and, as of February 23, 2023, no state has enacted new legislation increasing excise taxes in 2023.

Only one state, New York, enacted new legislation increasing excise taxes in 2023.

As of February 23, 2024, no states have enacted excise tax increases in 2024.

However, various increases are under consideration or have been proposed.

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As of February 23, 2024, the federal government, 23 states, Puerto Rico, Philadelphia, Pennsylvania and Cook County, Illinois have adopted a weight-based tax methodology for MST.

North Carolina has passed legislation that will cause the state to adopt a weight-based tax methodology for MST in July 2025.

An increasing number of states and localities also are imposing excise taxes on e-vapor products and oral nicotine pouches.

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impose requirements regarding lobbying activities;

limit the industry’s ability to challenge certain tobacco

control and underage use laws;

limit the industry’s ability to challenge certain tobacco control and underage use laws;

and provide for the dissolution of certain tobacco-related organizations and place restrictions on the establishment of any replacement organizations.

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▪ International, Federal, State and Local Regulation:

Various states and localities have enacted or proposed legislation that imposes restrictions on tobacco products (including cigarettes, smokeless tobacco, cigars, e-vapor products and oral nicotine pouches), such as legislation that (i) prohibits the sale of all tobacco products or certain tobacco categories, such as e-vapor, (ii) prohibits the sale of tobacco products with characterizing flavors, such as menthol cigarettes and flavored e-vapor products, (iii) requires the disclosure of health information separate from or in addition to federally mandated health warnings and (iv) restricts commercial speech or imposes additional restrictions on the marketing or sale of tobacco products.

Various states and localities have enacted or proposed legislation that imposes restrictions on tobacco products (including cigarettes, smokeless tobacco, cigars, e-vapor products and oral nicotine pouches), such as legislation that (i) prohibits the sale of all tobacco products or certain tobacco categories, such as e-vapor, (ii) prohibits the sale of tobacco products with characterizing flavors, such as menthol cigarettes and flavored e-vapor products, (iii) requires the disclosure of health information separate from or in addition to federally mandated health warnings, (iv) restricts commercial speech or imposes additional restrictions on the marketing or sale of tobacco products and (v) requires manufacturers of e-vapor products to certify that they are in compliance with FDA requirements to be allowed to sell in the state.

The legislation varies in terms of the type of tobacco products, the conditions under which such products are or would be restricted or prohibited, and exceptions to the restrictions or prohibitions.

For example, a number of proposals involving characterizing flavors would prohibit smokeless tobacco products with characterizing flavors without providing an exception for mint- or wintergreen-flavored products.

As of February 23, 2023, multiple states and localities are considering legislation to ban flavors in one or more tobacco products, and six states (California, Massachusetts, New Jersey, Utah, New York and Illinois) and the District of Columbia have passed such legislation.

As of February 23, 2024, multiple states and localities are considering legislation to ban flavors in one or more tobacco products, and six states (California, Massachusetts, New Jersey, New York, Rhode Island and Utah) and the District of Columbia have passed such legislation.

Some of these states, such as New York, Utah and Illinois, exempt certain products that have received FDA market authorization through the PMTA pathway.

The legislation in California, which became effective in December 2022, bans the sale of most tobacco products with characterizing flavors, including menthol, mint and wintergreen.

Massachusetts passed legislation capping the amount of nicotine in e-vapor products.

Similar legislation is pending in two other states.

Massachusetts passed legislation capping the amount of nicotine in e-vapor products, and Utah capped the amount of nicotine in e-vapor products by administrative rule.

Legislation relating to this issue is pending in Utah and two other states.

Similar restrictions to those enacted or proposed in various U.S.

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We have challenged and will continue to challenge certain federal, state and local legislation and other governmental action, including through litigation.

Certain legislation imposing restrictions on tobacco products, such as state laws requiring manufacturers of e-vapor products to certify that they are in compliance with federal law in order to sell products in the state, aligns with our Vision, and we actively engage with lawmakers in support of such legislation.

It is possible, however, that legislation, regulation or other governmental action could be enacted or implemented that could have a material adverse impact on our business, results of operations, cash flows or financial position.

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▪ Federal, State and Local Legislation to Increase the Legal Age to Purchase Tobacco Products:

After a number of states and localities proposed and enacted legislation to increase the minimum age to purchase all tobacco products, including e-vapor products, in December 2019, the federal government passed legislation increasing the minimum age to purchase all tobacco products, including e-vapor products, to 21 nationwide.

After a number of states and localities proposed and enacted legislation to increase the minimum age to purchase all tobacco products, including e-vapor

products, in December 2019, the federal government passed legislation increasing the minimum age to purchase all tobacco products, including e-vapor products, to 21 nationwide.

As of February 23, 2024, 42 states, the District of Columbia and Puerto Rico have enacted laws increasing the legal age to purchase tobacco products to 21.

Although an increase in the minimum age to purchase tobacco products may have a negative impact on our operating companies’ sales volumes, as discussed above under Underage Access and Use of Certain Tobacco Products, we support raising the minimum legal age to purchase all tobacco products to 21 at the federal and state levels, reflecting our longstanding commitment to combat underage tobacco use.

Although an increase in the minimum age to purchase tobacco products may have a negative impact on our operating companies’ sales volumes, we support raising the minimum legal age to purchase all tobacco products to 21 at the federal and state levels, as discussed above under Underage Access and Use of Certain Tobacco Products , reflecting our longstanding commitment to combat underage tobacco use.

▪ Health Effects of Tobacco Products, Including E-vapor Products:

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Surgeon General and public health authorities worldwide in making decisions concerning the use of tobacco products, including e-vapor products.

It is not possible to predict the results of ongoing scientific research or the types of future scientific research into the health risks of tobacco exposure and the impact of such research on legislation and regulation.

Most jurisdictions within the United States have restricted smoking in public places and some have restricted vaping in public places.

Some public health groups have called for, and various jurisdictions have adopted or proposed, bans on smoking and vaping in outdoor places, in private apartments and in cars transporting children.

▪ Other Legislation or Governmental Initiatives:

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require tax stamping of smokeless tobacco products;

require the use of state tax stamps using

data encryption technology;

require the use of state tax stamps using data encryption technology;

and further restrict the sale, marketing and advertising of cigarettes and other tobacco products.

Such legislation may be subject to constitutional or other challenges on various grounds, which may or may not be successful.

In addition, if the COVID-19 pandemic resurges, state and local governments may reimpose additional health and safety requirements for all businesses, which could result in the potential temporary closure of certain businesses and facilities.

In addition, if a pandemic or similar health emergency occurs, state and local governments may reimpose additional health and safety requirements for all businesses, which could result in the potential temporary closure of certain businesses and facilities.

It is possible that tobacco manufacturing and other facilities and the facilities of our suppliers, our suppliers’ suppliers and our trade partners could be subject to additional government-mandated temporary closures and restrictions.

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From time to time, we are subject to governmental investigations on a range of matters.

(i) the FTC issued a Civil Investigative Demand (“CID”) to us while conducting its antitrust review of our investment in JUUL seeking information regarding, among other things, our role in the resignation of JUUL’s former chief executive officer and the hiring by JUUL of any current or former Altria director, executive or employee (see Note 17 for a description of the FTC’s administrative complaint against us and JUUL);

For example, we currently are, or recently have been, subject to a number of governmental investigations with respect to our former investment in JUUL, which we divested in March 2023, including the following:

(i) the FTC issued a Civil Investigative Demand to us while conducting its antitrust review of our former investment in JUUL seeking information regarding, among other things, our role in the resignation of JUUL’s former chief executive officer and the hiring by JUUL of any current or former Altria director, executive or employee (see Note 19 for a description of the FTC’s administrative complaint against us and JUUL);

(ii) the SEC commenced an investigation relating to our acquisition, disclosures and accounting controls in connection with the JUUL investment;

and (iii) the New York State Office of the Attorney General and the Commonwealth of Massachusetts Office of the Attorney General, separately, issued independent subpoenas to us seeking documents relating to our investment in and provision of services to JUUL.

Additionally, JUUL is currently under investigation by various federal and state agencies, including the SEC, the FDA and the FTC, and state attorneys general.

Such investigations vary in scope but at least some include JUUL’s marketing practices, particularly as such practices relate to youth, and we may be asked in the context of those investigations to provide information concerning our investment in JUUL or relating to our marketing of Nu Mark LLC e-vapor products.

In December 2022, JUUL and 33 states and Puerto Rico finalized a settlement regarding an investigation of JUUL’s marketing practices.

Pursuant to the settlement, JUUL will pay approximately $440 million to the states and territory over a period of six to 10 years and refrain from certain marketing practices.

As of February 23, 2023, one state has opted out of the multistate settlement in objection to certain conditions.

We remain a party to lawsuits initiated by the attorneys general of Alaska, Hawaii, Minnesota and New Mexico.

JUUL is also named in other attorneys general lawsuits in which we currently are not named.

For a discussion of our disposition of our interest in JUUL, see Note 7.

We are a party to lawsuits initiated by the attorneys general of Hawaii and New Mexico relating to our former investment in JUUL.

In April 2023 and January 2024, we agreed to settle the lawsuits initiated by the attorneys general of Minnesota and Alaska, respectively.

Private Sector Activity on Tobacco Products

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the sale of tobacco products in the United States that are intended for sale outside the country;

the sale of untaxed tobacco products over the Internet and by other means designed to avoid the collection of applicable taxes;

untaxed tobacco products over the Internet and by other means designed to avoid the collection of applicable taxes;

the sale of unregulated products;

and diversion into one taxing jurisdiction of tobacco products intended for sale in another.

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Counterfeit versions of our products can negatively affect adult tobacco consumer experiences with and opinions of those brands.

Illegal disposable e-vapor products may be designed to appeal to youth and are manufactured without scientific standards, exposing consumers to undocumented risks.

Illicit trade in tobacco products also harms law-abiding wholesalers and retailers by depriving them of lawful sales and undermines the significant investment we have made in legitimate distribution channels.

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We communicate with wholesale and retail trade members regarding illicit trade in tobacco products and how we can help prevent such activities, enforce wholesale and retail trade programs and policies that address illicit trade in tobacco products and, when necessary, litigate to protect our trademarks.

We also engage with the FDA and other government agencies to advocate for a well-regulated U.S.

tobacco industry that embraces harm reduction and the enforcement of existing regulatory frameworks.

Prohibitory policies, such as California’s ban on the sale of flavored tobacco products, which went into effect in 2022, can have unintended negative consequences, including the proliferation of counterfeit and unregulated products.

We actively engage with regulators, state and federal lawmakers, our trade partners and other stakeholders to bring awareness to these issues.

When appropriate, we also take legal action to protect our lawful e-vapor product business, such as the lawsuit we filed in federal court in California against manufacturers of illegal e-vapor products in October 2023.

Although all but one defendant was dismissed from this suit without prejudice on procedural grounds in January 2024, we intend to continue pursuing this litigation.

Price, Availability and Quality of Tobacco, Other Raw Materials, Ingredients and Component Parts

Shifts in crops (such as those driven by economic conditions and adverse weather patterns), government restrictions and mandated prices, production control programs, economic trade sanctions, import duties and tariffs, international trade disruptions, inflation, geopolitical instability, climate and environmental changes and disruptions due to man-made or natural disasters may increase the cost or reduce the supply or quality of tobacco, other raw materials, ingredients or component parts used to manufacture our operating

companies’ products.

Any significant change in such factors could restrict our ability to continue manufacturing and marketing existing products or impact adult consumer product acceptability and have a material adverse effect on our business and profitability.

Any significant change in such factors could negatively impact our ability to continue manufacturing and marketing existing products, increase our costs or negatively impact adult tobacco consumer product acceptability and have a material adverse effect on our business and profitability.

As with other agricultural commodities, tobacco price, quality and availability can be influenced by variations in weather patterns, including those caused by climate change, and macroeconomic conditions and imbalances in supply and demand, among other factors.

For varieties of tobacco only available in limited geographies, government-mandated prices and production control programs, political instability or government prohibitions on the import or export of tobacco in certain countries pose additional risks to price, availability and quality.

In addition, as consumer demand increases for smoke-free products and decreases for combustible products, the volume of tobacco leaf required for production may decrease, resulting in reduced demand.

The reduced demand for tobacco leaf may result in the reduced supply and availability of domestic tobacco as growers divert resources to other crops or cease farming.

The unavailability or unacceptability of any one or more particular varieties of tobacco leaf necessary to manufacture our operating companies’ products could restrict our ability to continue marketing existing products or impact adult tobacco consumer product acceptability, which could result in increased costs to us.

Current macroeconomic conditions and geopolitical instability (including high inflation, high gas prices, rising interest rates, labor shortages, supply and demand imbalances and the Russian invasion of Ukraine) are causing worldwide disruptions and delays to supply chains and commercial markets, which limit access to, and increase the cost of, raw materials, ingredients and component parts (for example, tobacco leaf and resins and aluminum used in our packaging).

We are implementing various strategies to help secure sufficient supplies of raw materials, ingredients and component parts for production.

In addition, government taxes, restrictions and prohibitions on the sale and use of certain products may limit access to, and increase the costs of, raw materials and component parts and, potentially, impede our ability to sell certain of our operating companies’ products.

For example, additional taxes on the use of certain single-use plastics have been proposed by the U.S.

Congress, which, if passed, could increase the costs of, and impair our ability to, source certain materials used in the packaging for our operating companies’ products.

In addition, as consumer demand increases for innovative smoke-free products and decreases for combustible and MST products, the volume of tobacco leaf required for production of these products has decreased, resulting in reduced tobacco leaf demand.

Reduced demand for tobacco leaf may result in the reduced supply and availability of domestic tobacco, as growers divert resources to other crops or cease farming, and increased costs.

The unavailability or unacceptability of any one or more particular varieties of tobacco leaf or the unavailability of nicotine extract necessary to manufacture our operating companies’ products could negatively impact our ability to continue marketing existing products or impact adult tobacco consumer product acceptability, which could have a material adverse effect on our business and profitability.

In addition, the nicotine used in our operating companies’ innovative smoke-free products is extracted from tobacco produced in one country.

If we are unable to identify alternate sources of nicotine for our companies’ innovative products, we could be exposed to supply risk.

Current macroeconomic conditions and geopolitical instability (including inflation, high interest rates, labor shortages, supply and demand imbalances and geopolitical instability and international armed conflict) have caused and continue to cause worldwide disruptions and delays to supply chains and commercial markets, which limit access to, and increase the cost of, raw materials, ingredients and component parts (for example, tobacco leaf and resins and aluminum used in our packaging).

We have implemented and continue to implement various strategies to help secure sufficient supplies of raw materials, ingredients and component parts for production.

For example, certain states have passed extended producer responsibility legislation concerning packaging.

Because certain of our products’ packaging consists of single-use plastics, single-use plastic bans and extended producer responsibility mandates could result in bans on some of our product packaging or our products and adversely impact our costs and revenues.

Additional taxes and limitations on the use of certain single-use plastics have been proposed by the U.S.

Congress and various state and local governments.

These existing and potential

future laws and regulations could increase the costs of, and impair our ability to, source certain materials used in the packaging for our products.

We work to mitigate these risks by maintaining inventory levels of certain tobacco varieties that cover several years, purchasing raw materials, ingredients and component parts from disperse geographic regions throughout the world and entering into long-term contracts with some of our tobacco growers and direct material suppliers.

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Operating Results

The following table provides reconciliations of reported OCI to adjusted OCI for our reportable segments, all other category and total OCI and provides the related OCI margins:

For the Year Ended December 31, 2023

(in millions) Smokeable Products Oral Tobacco Products All Other Total

Net revenues $ 21,756 $ 2,667 $ 60 $ 24,483

Excise taxes (3,869) (112) — (3,981)

Revenues net of excise taxes $ 17,887 $ 2,555 $ 60 $ 20,502

Reported OCI $ 10,670 $ 1,722 $ (74) $ 12,318

NPM Adjustment Items (29) — — (29)

Tobacco and health and certain other litigation items 69 — — 69

Adjusted OCI $ 10,710 $ 1,722 $ (74) $ 12,358

Reported OCI margin (1)

59.7 % 67.4 % (100.0) % 60.1 %

Adjusted OCI margin (1)

59.9 % 67.4 % (100.0) % 60.3 %

(1) Reported and adjusted OCI margins are calculated as reported and adjusted OCI, respectively, divided by revenues net of excise taxes.

smoke-free portfolio reported the following results for 2023:

▪ Smoke-free volumes of approximately 806 million units were essentially flat when compared to 2022;

▪ Total smoke-free net revenues were $2.7 billion, which includes net revenues from innovative smoke-free products of $165 million.

Smokeable Products Segment

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2023 Compared with 2022

Net revenues, which include excise taxes billed to customers, decreased $390 million (1.7%), due primarily to lower shipment volume ($2,506 million), partially offset by higher pricing ($2,083 million), which includes lower promotional investments.

Reported OCI increased $294 million (2.8%), due primarily to higher pricing, which includes lower promotional investments, partially offset by lower shipment volume ($1,525 million), higher costs ($247 million) and higher per unit settlement charges.

Adjusted OCI increased $302 million (2.9%), due primarily to higher pricing, which includes lower promotional investments, partially offset by lower shipment volume, higher costs and higher per unit settlement charges.

Net revenues, which include excise taxes billed to customers, decreased $720 million (3.2%), due primarily to lower shipment volume ($2,394 million), partially offset by higher pricing ($1,667 million), which includes higher promotional investments.

Reported OCI decreased $18 million (0.2%), due primarily to lower shipment volume ($1,490 million), higher per unit settlement charges and lower NPM Adjustment Items ($34 million), mostly offset by higher pricing, which includes higher promotional investments.

Adjusted OCI decreased $16 million (0.1%), due primarily to lower shipment volume, higher per unit settlement charges and higher costs ($43 million), mostly offset by higher pricing, which includes higher promotional investments.

Marketing, administration and research costs for the smokeable products segment include PM USA’s cost of administering and litigating product liability claims.

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For further discussion on these matters, see Note 19 and Item 3.

For the years ended December 31, 2022 and 2021, product liability defense costs for PM USA were $133 million and $111 million, respectively.

Product liability defense costs for our smokeable products segment increased primarily due to the increase in trials and related preparation over the previous year.

Cases that were previously postponed as a result of court closures due to the COVID-19 pandemic in 2021 were resumed in 2022 and new cases were filed.

Since regular trial activity has resumed, we expect future product liability defense costs for our smokeable products segment to approximate $150 million, which reflects spending levels similar to 2019.

For the years ended December 31, 2023 and 2022, product liability defense costs for PM USA were $133 million.

The factors that have influenced past product liability costs are expected to continue to influence future costs.

We do not expect future product liability defense costs for our smokeable products segment to be significantly different from product liability defense costs incurred in 2023.

Shipment Volume and Retail Share Results

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Cigarettes shipment volume includes Marlboro ;

Other premium brands, such as Virginia Slims , Parliament , Benson & Hedges and Nat’s ;

Other premium brands, such as Virginia Slims , Parliament and Benson & Hedges ;

and Discount brands, which include L&M , Basic and Chesterfield.

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Total cigarettes 46.9 % 47.9 %

Retail share results for cigarettes are based on data from IRI/Management Science Associates, Inc., a tracking service that uses a sample of stores and certain wholesale shipments to project market share and depict share trends.

This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes.

For other trade classes selling cigarettes, retail share is based on shipments from wholesalers to retailers through the Store Tracking Analytical Reporting System (“STARS”).

Retail share results for cigarettes are based on data from Circana, Inc.

and Circana Group, L.P.

(“Circana”), as well as, Management Science Associates, Inc.

Circana is a newly formed company reflecting the recent merger of IRI and NPD Group, Inc.

Circana maintains a blended retail service that uses a sample of stores and certain wholesale shipments to project market share and depict share trends.

Similar to prior reporting, this service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes.

For other trade classes selling cigarettes, retail share is based on shipments from wholesalers to retailers through the Store Tracking Analytical Reporting System (“STARS”), as provided by Management Science Associates, Inc.

This service is not designed to capture sales through other channels, including the internet, direct mail and some illicitly tax-advantaged outlets.

It is IRI’s standard practice to periodically refresh its services, which could restate retail share results that were previously released in this service.

For a discussion of volume trends and factors that impact volume and retail share performance, see Tobacco Space - Business Environment above.

It is the standard practice of retail services to periodically refresh their retail scan services, which could restate retail share results that were previously released in these services.

For a discussion of volume trends and factors that impact volume and retail share performance, see Business Environment above.

2023 Compared with 2022

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 9.7%, driven primarily by the industry’s decline rate and retail share losses (both of which were impacted by macroeconomic pressures on adult tobacco consumers’ disposable income) and calendar differences, partially offset by trade inventory movements.

When adjusted for calendar differences and trade inventory movements, our smokeable products segment’s reported domestic cigarettes shipment volume decreased by an estimated 9.5%.

When adjusted for trade inventory movements, calendar differences and other factors, total estimated domestic cigarette industry volume decreased by an estimated 8%.

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 9.9%, driven primarily by the industry’s decline rate (impacted by macroeconomic pressures on adult tobacco consumers’ disposable income and the growth of illicit e-vapor products) and retail share losses, partially offset by trade inventory movements.

When adjusted for trade inventory movements, our smokeable products segment’s domestic cigarettes shipment volume decreased by an estimated 10%.

When adjusted for trade inventory movements and other factors, total estimated domestic cigarette industry volume decreased by an estimated 8%.

Shipments of premium cigarettes accounted for 94.8% and 93.6% of our smokeable products segment’s reported domestic cigarettes shipment volume for 2023 and 2022, respectively.

Our smokeable products segment’s reported cigar shipment volume decreased 4.0%, driven primarily by macroeconomic pressures on adult tobacco consumers’ disposable income, trade inventory movements and other factors.

Marlboro ’s retail share of the total cigarette category was 42.5%, a decrease of 0.4 share points, primarily due to increased macroeconomic pressures on adult tobacco consumers’ disposable income and increased competitive activity.

However, Marlboro ’s share of the premium segment grew to 58.2%, an increase of 0.5 share points.

Total cigarettes industry discount category retail share increased 1.4 share points to 26.9%, primarily due to increased macroeconomic pressures on adult tobacco consumers’ disposable income and increased competitive activity.

For a discussion regarding discount category dynamics in 2022 and the economic conditions, including a high inflationary environment, that impact adult tobacco consumer purchasing behavior, see Operating Results by Business Segment - Tobacco Space - Business Environment - Summary above.

Our cigar reported shipment volume increased by 2.8%.

Marlboro ’s retail share of the total cigarette category was 42.1%, a decrease of 0.4 share points, due primarily to increased macroeconomic pressures on adult tobacco consumers’ disposable income and increased competitive activity.

Total cigarettes industry discount category retail share increased 1.4 share points to 28.3%, due to increased macroeconomic pressures on adult tobacco consumers’ disposable income.

For a discussion regarding discount category dynamics in 2023 and the economic conditions, including a high inflationary environment, that impact adult tobacco consumer purchasing behavior, see Operating Results by Business Segment - Business Environment - Summary above.

Pricing Actions

PM USA and Middleton executed the following pricing and promotional allowance actions during 2023 and 2022:

▪ Effective October 15, 2023, PM USA increased the list price of Marlboro , L&M and Basic by $0.17 per pack.

PM USA also increased the list price of all its other cigarette brands by $0.22 per pack.

▪ Effective July 23, 2023, PM USA increased the list price of Marlboro , L&M and Basic by $0.16 per pack.

PM USA also increased the list price of all its other cigarette brands by $0.21 per pack.

▪ Effective June 11, 2023, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.15 per five-pack.

▪ Effective April 23, 2023, PM USA increased the list price of Marlboro , L&M and Basic by $0.15 per pack.

PM USA also increased the list price of all its other cigarette brands by $0.20 per pack.

▪ Effective January 22, 2023, PM USA increased the list price of Marlboro , L&M , Basic and Chesterfield by $0.15 per pack.

PM USA also increased the list price of all its other cigarette brands by $0.20 per pack.

▪ Effective October 16, 2022, PM USA increased the list price of Marlboro , L&M , Basic and Chesterfield by $0.15 per pack.

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▪ Effective January 9, 2022, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.13 per five-pack.

▪ Effective December 12, 2021, PM USA increased the list price of Marlboro , L&M and Chesterfield by $0.15 per pack.

In addition, PM USA increased the list price of all of its other cigarette brands by $0.20 per pack.

▪ Effective August 15, 2021, PM USA increased the list price of Marlboro , L&M and Chesterfield by $0.14 per pack.

In addition, PM USA increased the list price of all of its other cigarette brands by $0.17 per pack.

▪ Effective January 24, 2021, PM USA increased the list price on all of its cigarette brands by $0.14 per pack.

▪ Effective January 10, 2021, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.07 per five-pack.

▪ Effective January 22, 2023, PM USA increased the list price of Marlboro , L&M , Basic and Chesterfield by $0.15 per pack.

▪ Effective January 14, 2024, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) , L&M and Basic by $0.15 per pack.

PM USA also increased the list price of all its other cigarette brands by $0.20 per pack.

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Revenues net of excise taxes $ 2,555 $ 2,461

Reported OCI $ 1,632 $ 1,659

Asset impairment, exit, implementation, acquisition and disposition-related costs — 37

Adjusted OCI $ 1,632 $ 1,696

Reported OCI margins (1)

66.3 % 67.0 %

Adjusted OCI margins (1)

Reported and Adjusted OCI $ 1,722 $ 1,632

Reported and Adjusted OCI margins (1)

67.4 % 66.3 %

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2023 Compared with 2022

Net revenues, which include excise taxes billed to customers, decreased $28 million (1.1%) due primarily to lower shipment volume and a higher percentage of on!

shipment volume relative to MST (“volume/mix”) versus 2021 ($104 million), partially offset by higher pricing ($86 million), which includes higher promotional investments in on!.

Reported OCI decreased $27 million (1.6%), due primarily to lower volume/mix ($116 million) and higher costs ($26 million), partially offset by higher pricing, which includes higher promotional investments in on!

, and acquisition-related costs in 2021 ($37 million).

Adjusted OCI decreased $64 million (3.8%), due primarily to lower volume/mix and higher costs, partially offset by higher pricing, which includes higher promotional investments in on!

Net revenues, which include excise taxes billed to customers, increased $87 million (3.4%) due primarily to higher pricing ($190 million), partially offset by lower shipment volume and a higher percentage of on!

shipment volume relative to MST (“volume/mix”) versus 2022 ($100 million).

Reported and adjusted OCI increased $90 million (5.5%), due primarily to higher pricing and lower costs , partially offset by lower volume/mix ($104 million).

Shipment Volume and Retail Share Results

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Total oral tobacco products 782.9 800.6

Other primarily includes Red Seal and Husky .

Oral tobacco products shipment volume includes cans and packs sold, as well as promotional units, but excludes international volume, which is currently not material to our oral tobacco products segment.

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Our oral tobacco products segment’s retail share results exclude international volume, which is currently not material to our oral tobacco products segment.

Retail share results for oral tobacco products are based on data from IRI InfoScan, a tracking service that uses a sample of stores to project market share and depict share trends.

Retail share results for oral tobacco products are based on data from Circana, a tracking service that uses a sample of stores to project market share and depict share trends.

This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes on the number of cans and packs sold.

Oral tobacco products is defined by IRI as MST, snus and oral nicotine pouches.

Oral tobacco products are defined by Circana as MST, snus and oral nicotine pouches.

New types of oral tobacco products, as well as new packaging configurations of existing oral tobacco products, may or may not be equivalent to existing MST products on a can-for-can basis.

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Because this service represents retail share performance only in key trade channels, it should not be considered a precise measurement of actual retail share.

It is IRI’s standard practice to periodically refresh its InfoScan services, which could restate retail share results that were previously released in this service.

For a discussion of volume trends and factors that impact volume and retail share performance, see Tobacco Space - Business Environment above.

It is the standard practice of retail services to periodically refresh their retail scan services, which could restate retail share results that were previously released in these services.

For a discussion of volume trends and factors that impact volume and retail share performance, see Business Environment above.

2023 Compared with 2022

Our oral tobacco products segment’s reported domestic shipment volume decreased 2.4%, driven primarily by retail share losses, trade inventory movements and calendar differences, partially offset by the industry’s growth rate and other factors.

When adjusted for trade inventory movements and calendar differences, our oral tobacco products segment’s reported domestic shipment volume decreased by an estimated 2%.

Total oral tobacco products category industry volume increased by an estimated 1% for the six months ended December 31, 2022, primarily driven by growth in oral nicotine pouches, partially offset by declines in MST volumes (which includes the impact of macroeconomic pressures on adult tobacco consumers’ disposable income).

Our oral tobacco products segment’s retail share was 46.4%, and Copenhagen continued to be the leading oral tobacco brand with a retail share of 27.0%.

Share declines for MST products were primarily driven by the share growth of oral nicotine pouches.

Our oral tobacco products segment’s reported domestic shipment volume decreased 2.2%, driven primarily by retail share losses in MST, partially offset by the industry’s growth rate, trade inventory movements and other factors.

When adjusted for trade inventory movements and calendar differences, our oral tobacco products segment’s domestic shipment volume decreased by an estimated 2.5%.

Total oral tobacco products category industry volume increased by an estimated 7.5% for the six months ended December 31, 2023, driven primarily by growth in oral nicotine pouches, partially offset by declines in MST volumes.

Our oral tobacco products segment’s retail share was 42.8%, as share declines for MST products were driven primarily by the category share growth of oral nicotine pouches.

nicotine pouch category grew to 31.0% of the U.S.

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In addition, on!

share of the nicotine pouch category grew to 23.0%, an increase of 6.1 share points versus the prior year.

’s share of the nicotine pouch category was 22.0%.

Pricing Actions

USSTC executed the following pricing actions during 2022 and 2021:

USSTC and Helix executed the following pricing actions during 2023 and 2022:

▪ Effective August 22, 2023, USSTC increased the list price on its Copenhagen, Red Seal and Skoal brands by $0.09 per can.

In addition, USSTC decreased the list price on select Husky brands by $0.18 per can.

▪ Effective July 23, 2023, Helix increased the list price on its on!

brand by $0.09 per can.

▪ Effective April 25, 2023, USSTC increased the list price on its Copenhagen popular price products , Red Seal and Husky brands by $0.09 per can.

In addition, USSTC increased the list price on its Skoal brands and on the balance of its Copenhagen brands by $0.10 per can.

▪ Effective January 24, 2023, USSTC increased the list price on its Copenhagen, Skoal, Red Seal and Husky brands by $0.09 per can.

▪ Effective July 26, 2022, USSTC increased the list price on its Copenhagen popular price products by $0.13 per can.

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USSTC also increased the list price on its Husky brand by $0.12 per can.

▪ Effective October 26, 2021, USSTC increased the list price on its Copenhagen and Skoal brands by $0.08 per can.

USSTC also increased the list price on its Husky brand by $0.12 per can.

In addition, USSTC decreased the price on its Red Seal brand by $0.17 per can.

▪ Effective June 29, 2021, USSTC increased the list price on its Skoal Blend products by $0.46 per can.

USSTC also increased the list price on its Red Seal and Copenhagen brands and the balance of its Skoal products by $0.05 per can.

In addition, USSTC decreased the price on its Husky brand by $1.65 per can.

▪ Effective March 2, 2021, USSTC increased the list price on its Skoal Blend products by $0.16 per can.

USSTC also increased the list price on its Husky , Red Seal and Copenhagen brands and the balance of its Skoal products by $0.08 per can.

▪ Effective January 24, 2023, USSTC increased the list price on its Copenhagen, Skoal, Red Seal and Husky brands by $0.09 per can.

▪ Effective January 23, 2024, USSTC increased the list price on its Copenhagen , Skoal and Red Seal brands by $0.11 per can.

Our NJOY e-vapor business is reported in our all other category.

Reported domestic shipment volumes since June 1, 2023 through December 31, 2023 for NJOY consumables (1) and devices were approximately 23.0 million units and 1.3 million units, respectively.

In 2023, we strengthened NJOY’s global supply chain to provide sustainable support for the anticipated volume increase associated with our NJOY ACE expansion plans and do not anticipate capacity constraints as we execute our initial expansion plans.

We expanded NJOY ACE distribution to a total of 75,000 stores by the end of 2023, an increase of 40,000 stores since the completion of the NJOY Transaction.

These stores represent approximately 75% of e-vapor volume and 55% of cigarette volume sold in traditional retail.

(1) E-vapor shipment volume includes NJOY ACE pods and DAILY disposables.

Liquidity and Capital Resources

We are a holding company that is primarily dependent on the capital resources of our subsidiaries to satisfy our liquidity requirements.

Our access to the operating cash flows of our wholly owned subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany loans.

At December 31, 2022, our significant wholly owned subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests.

Our access to the operating cash flows of our subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany loans.

At December 31, 2023, our significant subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests.

In addition, we receive cash dividends on our interest in ABI and will continue to do so as long as ABI pays dividends.

At December 31, 2023, we had $3.7 billion of cash and cash equivalents.

In addition to having access to the operating cash flows of our wholly owned subsidiaries, our capital resources include access to credit markets in the form of commercial paper, availability under our $3.0 billion Credit Agreement (as defined below), which we use for general corporate purposes, and access to credit markets through the issuance of long-term senior unsecured notes.

In addition to having access to the operating cash flows of our subsidiaries, our capital resources include access to credit markets in the form of commercial paper, availability under our $3.0 billion Credit Agreement (as defined below), which we use for general corporate purposes, and access to credit markets through the issuance of long-term senior unsecured notes.

For additional information, see Capital Markets and Other Matters below.

In addition to funding current operations, we primarily use our net cash from operating activities for payment of dividends, share repurchases under our share repurchase programs, repayment of debt, acquisitions of or investments in businesses and assets, and capital expenditures.

We believe our cash and cash equivalents balance, along with our future cash flows from operations, capacity for borrowings under the Credit Agreement and access to credit and capital markets, provide sufficient liquidity to meet the needs of our business operations and to satisfy our projected cash requirements for the next 12 months and the foreseeable future.

We believe our cash and cash equivalents balance, along with our future cash flows from operations, capacity for borrowings under our Credit Agreement and access to credit and capital markets, provide sufficient liquidity to meet the needs of our business operations and to satisfy our projected cash requirements for the next 12 months and the foreseeable future.

Capital Markets and Other Matters

Credit Ratings - Our cost and terms of financing and our access to commercial paper markets may be impacted by applicable credit ratings.

The impact of credit ratings on the cost of borrowings under the Credit Agreement is discussed in Note 7.

Short-Term Borrowings and Borrowing Arrangements to the consolidated financial statements in Item 8 (“Note 7”).

The impact of credit ratings on the cost of borrowings under our Credit Agreement is discussed in Note 9.

Short-Term Borrowings and Borrowing Arrangements to our consolidated financial statements in Item 8 (“Note 9”).

At December 31, 2023, the credit ratings and outlook for our indebtedness by major credit rating agencies were:

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(“Moody’s”) P-2 A3 Stable

Standard & Poor’s Financial Services LLC (“S&P”) A-2 BBB Stable

Standard & Poor’s Financial Services LLC (“S&P”) A-2 BBB Positive (1)

Fitch Ratings Inc.

F2 BBB Stable

(1) On June 16, 2023, S&P changed its outlook for our indebtedness to Positive from Stable.

Credit Lines - From time to time, we have short-term borrowing needs to meet our working capital requirements arising from the timing of annual MSA payments, quarterly income tax payments and quarterly dividend payments, and generally use our commercial paper program to meet those needs.

In August 2022, we entered into an extension and amendment to our $3.0 billion senior unsecured 5-year revolving credit agreement (as amended, the “Credit Agreement”).

At December 31, 2022, we had availability under the Credit Agreement for borrowings of up to an aggregate principal amount of $3.0 billion, and we were in compliance with the covenants in the Credit Agreement.

We expect to continue to meet the covenants in the Credit Agreement.

We monitor the credit quality of our bank group and are not aware of any potential non-performing credit provider in that group.

In October 2023, we entered into a new senior unsecured 5-year revolving credit agreement for borrowings of up to an aggregate principal amount of $3.0 billion (“Credit Agreement”) and terminated our prior credit agreement.

At December 31, 2023, we had availability under our Credit Agreement for borrowings of up to an aggregate principal amount of $3.0 billion, and we were in compliance with the covenants in our Credit Agreement.

We expect to continue to meet the covenants in our Credit Agreement.

We monitor the credit quality of our bank group and do not know of any potential non-performing credit provider in that group.

For further discussion on short-term borrowings, see Note 9.

Any commercial paper issued by us and borrowings under the Credit Agreement are guaranteed by PM USA.

For further discussion, see Supplemental Guarantor Financial Information below and Note 8.

Debt - At December 31, 2022 and 2021, our total debt was $26.7 billion and $28.0 billion, respectively.

In August 2022, we repaid in full our 2.850% senior unsecured notes in the aggregate principal amount of $1.1 billion at maturity.

Term Loan Facility - In June 2023, we entered into a $2.0 billion term loan facility and borrowed the full amount available to fund a portion of the cash payments paid at closing in connection with the NJOY Transaction.

We repaid the term loan facility in full in July 2023.

For further details on the term loan facility, see Note 9.

Long-Term Debt - At December 31, 2023 and 2022, our total long-term debt was $26.2 billion and $26.7 billion, respectively.

During 2023, our long-term debt activity included the following:

▪ Debt Issuance - In November 2023, we issued USD denominated senior unsecured notes in the aggregate principal amount of $1.0 billion.

The net proceeds from the notes are being used for general corporate purposes, which included the repayment of notes in the first quarter of 2024 discussed below.

▪ Debt Repayment - In February and May 2023, we repaid in full at maturity, respectively, (i) senior unsecured Euro notes in the aggregate principal amount of $1.3 billion (€1.25 billion) and (ii) senior unsecured notes in the aggregate principal amount of $218 million.

In January and February 2024, we repaid in full at maturity senior unsecured notes in the aggregate principal amount of $776 million and $345 million, respectively.

All of our long-term debt outstanding at December 31, 2023 and 2022 was fixed-rate debt.

The weighted-average coupon interest rate on total long-term debt was approximately 4.0% at December 31, 2022 and 2021.

In February 2023, we repaid in full our 1.000% senior unsecured Euro notes in the aggregate principal amount of $1.3 billion (€1.25 billion) at maturity.

At December 31, 2023 and 2022, the weighted-average coupon interest rate on total long-term debt was approximately 4.3% and 4.0%, respectively.

For further details on long-term debt, see Note 10.

Altria and PMI Purchase Agreement;

Altria and Japan Tobacco Joint Venture

▪ In October 2022, we entered into an agreement with PMI to, among other things, transition and ultimately conclude our relationship with respect to the IQOS System in the United States.

We received a payment of $1.0 billion and expect to receive an additional payment of $1.7 billion (plus interest) by July 2023 for a total cash payment of approximately $2.7 billion (plus interest).

We expect to use the cash proceeds for several items, which may include investments in pursuit of our Vision, repayment of debt, share repurchases and general corporate purposes.

▪ In October 2022, we entered into a joint venture with Japan Tobacco for the U.S.

marketing and commercialization of heated tobacco stick products.

We hold a 75% economic interest in Horizon, the joint venture entity, with Japan Tobacco having a 25% economic interest.

We are responsible for making initial capital contributions to Horizon of up to $150 million, as needed by the joint venture to fund operations.

Any additional capital contributions made to Horizon after the initial $150 million will be split according to economic ownership.

For further discussion of these events, see Item 1, Note 1 and Note 4.

Long-Term Debt to our consolidated financial statements in Item 8 (“Note 10”).

At December 31, 2023, our debt-to-Consolidated net earnings and debt-to-Consolidated EBITDA ratios were calculated as follows:

For the Twelve Months Ended December 31, 2023

(in millions)

Consolidated net earnings $ 8,130

Interest and other debt expense, net 989

Provision for income taxes 2,798

Depreciation and amortization 272

EBITDA 12,189

(Income) loss from investments in equity securities and noncontrolling interests, net (243)

Dividends from less than 50% owned affiliates 163

Consolidated EBITDA $ 12,109

Current portion of long-term debt $ 1,121

Long-term debt 25,112

Total Debt $ 26,233

Total Debt / Consolidated net earnings 3.2

Total Debt / Consolidated EBITDA 2.2

NJOY Acquisition - On June 1, 2023, we funded the NJOY Transaction cash payments at closing of approximately $2.75 billion (net of cash acquired), through a combination of a $2.0 billion term loan facility (discussed above), the issuance of commercial paper and available cash.

We may also be obligated to pay up to $500 million in additional cash payments that are contingent on receipt of FDA authorizations with respect to certain NJOY products.

For further discussion, see Note 3.

IQOS Purchase Agreement - In 2022, we entered into an agreement with PMI to, among other things, transition and ultimately conclude our relationship with respect to the IQOS System in the United States.

We received a payment of $1.0 billion in 2022 and an additional payment of approximately $1.8 billion (including interest) in July 2023.

For further discussion, see Item 1 and Note 6.

In October 2023, we filed a registration statement on Form S-3 with the SEC, under which we may offer debt securities or warrants to purchase debt securities from time to time over a three-year period from the date of filing.

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From time to time, we also issue lines of credit to affiliated entities.

In addition, as discussed below in Supplemental Guarantor Financial Information and in Note 8, PM USA has issued guarantees relating to our obligations under our outstanding debt securities, borrowings under the Credit Agreement and amounts outstanding under the commercial paper program.

As further discussed in Note 19, as part of the supplier financing program, Altria guarantees the financial obligations of ALCS under the financing program agreement.

In addition, as discussed below in Supplemental Guarantor Financial Information and in Note 10, PM USA guarantees our obligations under our outstanding debt securities, any borrowings under our Credit Agreement and any amounts outstanding under our commercial paper program.

These items have not had, and are not expected to have, a significant impact on our liquidity.

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For information on annual debt maturities and interest payments, see Note 10.

Purchase Obligations - we have entered into purchase obligations for inventory and production costs (such as raw materials, indirect materials and services, contract manufacturing, packaging, storage and distribution) and other commitments for projected needs to be

used in the normal course of business.

Purchase Obligations - We have entered into purchase obligations for inventory and production costs (such as raw materials, indirect materials and services, contract manufacturing, packaging, storage and distribution) and other commitments for projected needs to be used in the normal course of business.

Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transaction.

Most arrangements are cancelable without a significant penalty and with short notice (usually 30 days).

At December 31, 2022, purchase obligations for inventory and production costs for the next 12 months were $841 million and $925 million thereafter.

At December 31, 2022, we had $598 million of other purchase obligation commitments for marketing, capital expenditures, information technology and professional services, which occur through the ordinary course of business.

Substantially all of these commitments are expected to be satisfied within 12 months.

At December 31, 2023, purchase obligations for inventory and production costs for the next 12 months were $0.9 billion and $2.5 billion thereafter.

At December 31, 2023, we had $0.7 billion of other purchase obligation commitments for marketing, capital expenditures, information technology and professional services, which occur through the ordinary course of business.

The majority of these commitments are expected to be satisfied within 12 months.

Accounts payable and accrued liabilities are reflected on our consolidated balance sheet at December 31, 2023 and are excluded from the amounts above.

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Based on current agreements, estimated market share, estimated annual industry volume decline rates and inflation rates, the estimated amounts that we may charge to cost of sales for payments related to State Settlement Agreements and FDA user fees are $3.4 billion on average for the next three years.

These amounts exclude the potential impact of any NPM Adjustment Items.

The estimated amount for 2024 includes settling plaintiffs’ attorneys’ fees.

We expect PM USA’s obligations under the State Settlement Agreements to pay these fees will terminate in the fourth quarter of 2024.

In addition, the amount excludes the potential impact of any NPM Adjustment Items.

The estimated amounts due under the State Settlement Agreements charged to cost of sales in each year are generally paid in April of the following year.

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The future payment amounts discussed above are estimates, and actual payment amounts will differ to the extent underlying assumptions differ from actual future results.

For further discussion on the potential impact of inflation on future payments, see Operating Results by Business Segment - Tobacco Space - State Settlement Agreements .

For further discussion on the potential impact of inflation on future payments, see Operating Results by Business Segment - State Settlement Agreements .

Litigation-Related Deposits and Payments - With respect to certain adverse verdicts currently on appeal, to obtain stays of judgments pending appeals, as of December 31, 2023, PM USA had posted appeal bonds totaling $35 million, which have been collateralized with restricted cash that is included in assets on our consolidated balance sheet.

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Equity and Dividends

As discussed in Note 10.

Stock Plans to the consolidated financial statements in Item 8, during 2022 we granted an aggregate of 1.2 million restricted stock units and 0.2 million performance stock units to eligible employees.

At December 31, 2022, the number of shares to be issued upon vesting of restricted stock units and performance stock units was not significant.

Dividends paid in 2022 and 2021 were approximately $6.6 billion and $6.4 billion, respectively, an increase of 2.4%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase program.

Dividends paid in 2023 and 2022 were approximately $6.8 billion and $6.6 billion, respectively, an increase of 2.7%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase programs.

In the third quarter of 2023, our Board of Directors declared a 4.3% increase in the quarterly dividend rate to $0.98 per share of our common stock versus the previous rate of $0.94 per share.

Our current annualized dividend rate is $3.92 per share.

We maintained our long-term objective of a dividend payout ratio target of approximately 80% of our adjusted diluted EPS.

In the first quarter of 2023, we established a new progressive dividend goal targeting mid-single digits dividend per share growth annually through 2028.

Future dividend payments remain subject to the discretion of our Board.

For a discussion of our share repurchase programs, see Note 11.

Capital Stock to the consolidated financial statements in Item 8 and Part II, Item 5.

Capital Stock to our consolidated financial statements in Item 8 and Part II, Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in this Form 10-K.

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During 2023, net cash provided by operating activities was $9.3 billion compared with $8.3 billion during 2022.

This decrease was due primarily to the sale of our wine business in October 2021.

We had a working capital deficit at December 31, 2022 and 2021.

Our management believes that we have the ability to fund working capital deficits with cash provided by operating activities, borrowings under the Credit Agreement and access to the credit and capital markets.

This increase was due primarily to lower payments for income taxes and State Settlement Agreements.

We had a working capital deficit at December 31, 2023 and 2022, and believe we have the ability to fund working capital deficits with cash provided by operating activities, borrowings under our Credit Agreement and access to the credit and capital markets.

Cash Provided by/Used in Investing Activities

During 2022, net cash provided by investing activities was $0.8 billion compared with $1.2 billion during 2021.

This decrease was due primarily to proceeds from the Ste.

Michelle Transaction in 2021, the purchase of certain intellectual property in 2022, lower proceeds from finance asset sales and higher capital expenditures, partially offset by proceeds from the sale of IQOS System commercialization rights in 2022.

Capital expenditures for 2022 increased 21.3% to $205 million.

Capital expenditures were higher due primarily to increased investing in on!

manufacturing capacity, partially offset by the sale of the wine business.

During 2023, net cash used in investing activities was $1.3 billion compared with net cash provided by investing activities of $0.8 billion during 2022.

This change was due primarily to the payments for the NJOY Transaction in 2023, partially offset by higher proceeds received from the sale of IQOS System commercialization rights.

Capital expenditures for 2023 decreased 4.4% to $196 million.

We expect capital expenditures for 2024 to be in the range of $175 million to $225 million, which are expected to be funded from operating cash flows.

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During 2023, net cash used in financing activities was $8.4 billion compared with $9.5 billion during 2022.

This decrease was due primarily to the following:

▪ repayment of $1.5 billion in full of our senior unsecured notes at scheduled maturity in May 2021;

▪ 2021 debt tender offers and redemption transactions, which included net proceeds of $5.5 billion from the issuance of long-term senior unsecured notes used to repurchase and redeem $5.0 billion of our senior unsecured notes and payment of $0.6 billion for related premiums and fees;

▪ purchase of the remaining 20% interest in Helix in 2021;

partially offset by:

▪ repayment of $1.1 billion in full of our senior unsecured notes at scheduled maturity in August 2022;

▪ higher repurchases of common stock in 2022;

▪ higher dividends paid in 2022.

This decrease was due primarily to the issuance of long-term debt in 2023 and lower share repurchases, partially offset by higher repayments of long-term debt and higher dividends paid on our common stock.

New Accounting Guidance Not Yet Adopted

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Supplemental Guarantor Financial Information

PM USA (the “Guarantor”), which is a 100% owned subsidiary of Altria Group, Inc.

(the “Parent”), has guaranteed the Parent’s obligations under its outstanding debt securities, borrowings under its Credit Agreement and amounts outstanding under its commercial paper program (the “Guarantees”).

Pursuant to the Guarantees, the Guarantor fully and unconditionally guarantees, as primary obligor, the payment and performance of the Parent’s obligations under the guaranteed debt instruments (the “Obligations”), subject to release under certain customary circumstances as noted below.

PM USA (“Guarantor”), which is a 100% owned subsidiary of Altria Group, Inc.

(“Parent”), has guaranteed the Parent’s obligations under its outstanding debt securities, borrowings under its Credit Agreement and amounts outstanding under its commercial paper program (“Guarantees”).

Pursuant to the Guarantees, the Guarantor fully and unconditionally guarantees, as primary obligor, the payment and performance of the Parent’s obligations under the guaranteed debt instruments (“Obligations”), subject to release under certain customary circumstances as noted below.

The Guarantees provide that the Guarantor guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of the Obligations.

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For the Year Ended December 31, 2023

Guarantor (2)

Net revenues $ — $ 20,608

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Net earnings (losses) (11,433) 7,579

(1) For the year ended December 31, 2022, net earnings (losses) includes $231 million of intercompany interest income from non-guarantor subsidiaries.

(1) For the year ended December 31, 2023, net earnings (losses) include an approximate $10.8 billion loss related to the cancellation of certain interests in a non-guarantor subsidiary, $309 million of intercompany interest income from non-guarantor subsidiaries and $389 million of interest expense from non-guarantor subsidiaries.

(2) For the year ended December 31, 2023, net earnings (losses) include $245 million of intercompany interest income from non-guarantor subsidiaries.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis