What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-02-27 · 596 added, 704 removed, 1463 unchanged (47% of the section changed)

12 unchanged sentences

Finished product 340 266

Income taxes 496 103

Other current assets 117 138

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Other 1,902 1,299

Deferred gain from the sale of IQOS System commercialization rights

Dividends payable 1,735 1,685

39 unchanged sentences

(Income) losses from investments in equity securities ( 243 ) 3,641 5,979

Impairment of JUUL equity securities — — 2,600

Loss on Cronos-related financial instruments — 15 148

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Net earnings $ 8,130 $ 5,764 $ 2,475

Net losses attributable to noncontrolling interests — — 13

Net earnings attributable to Altria $ 5,764 $ 2,475 $ 4,467

Per share data:

Basic and diluted earnings per share attributable to Altria $ 3.19 $ 1.34 $ 2.40

Basic and diluted earnings per share $ 4.57 $ 3.19 $ 1.34

See notes to consolidated financial statements.

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Other comprehensive earnings (losses), net of deferred income taxes

285 1,285 ( 1,477 )

Comprehensive earnings $ 8,228 $ 6,049 $ 3,760

Comprehensive losses attributable to noncontrolling interests — — 13

Comprehensive earnings attributable to Altria $ 6,049 $ 3,760 $ 2,990

See notes to consolidated financial statements.

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Deferred income tax provision (benefit) ( 230 ) ( 947 ) ( 1,160 )

Unrecognized tax benefit (1)

1,111 16 ( 21 )

(Income) losses from investments in equity securities ( 243 ) 3,641 5,979

1 unchanged sentence

Loss on Cronos-related financial instruments — 15 148

Impairment of JUUL equity securities — — 2,600

Loss on early extinguishment of debt — — 649

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Proceeds from the sale of IQOS System commercialization rights

1,700 1,000 —

Proceeds from the Ste.

Michelle Transaction, net of cash transferred — — 1,176

Acquisition of NJOY, net of cash acquired ( 2,751 ) — —

Other, net ( 36 ) ( 13 ) 205

Net cash provided by (used in) investing activities ( 1,283 ) 782 1,212

(1) 2023 relates to unrecognized tax benefit from the ordinary loss for cash tax purposes with respect to a portion of our tax basis associated with our former investment in JUUL.

For further discussion, see Note 15.

Income Taxes .

(2) 2023 amounts are net of the effects from the NJOY Transaction.

For further details, see Note 3.

Acquisition of NJOY .

2021 amounts reflect changes from operations for Ste.

1 unchanged sentence

Michelle Transaction.

(2) 2020 primarily reflects inventory-related amounts associated with the wine business strategic reset.

For further discussion, see Note 14.

Segment Reporting .

See notes to consolidated financial statements.

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for the years ended December 31 ,

2023 2022 2021

Cash Provided by (Used in) Financing Activities

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— — ( 6,490 ) — — — ( 6,490 )

Repurchases of common stock — — — — ( 1,675 ) — ( 1,675 )

— ( 77 ) — — — ( 82 ) ( 159 )

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Repurchases of common stock — — — — ( 1,000 ) — ( 1,000 )

— — — — — 50 50

Other — — — — ( 8 ) — ( 8 )

Balances, December 31, 2023 $ 935 $ 5,906 $ 31,094 $ ( 2,673 ) $ ( 38,802 ) $ 50 $ ( 3,490 )

(1) Represents the non-cash contribution made by JTIUH to Horizon in 2022 and the purchase of the remaining noncontrolling interest in Helix ROW and Helix in 2020 and 2021, respectively.

(1) Represents the non-cash contribution made by JTIUH to Horizon in 2022 and the purchase of the remaining noncontrolling interest in Helix in 2021.

For additional information, see Note 1.

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Smokeless Tobacco Company LLC (“USSTC”), is engaged in the manufacture and sale of moist smokeless tobacco products (“MST”) and snus products;

and Helix Innovations LLC (“Helix”), which operates in the United States and Canada, and Helix Innovations GmbH and its affiliates (“Helix ROW”), which operate internationally in the rest-of-world, are engaged in the manufacture and sale of oral nicotine pouches.

Other wholly owned subsidiaries included Altria Group Distribution Company, which provides sales and distribution services to our domestic tobacco operating companies;

Altria Client Services LLC (“ALCS”), which provides various support services to our companies in areas such as legal, regulatory, consumer engagement, finance, human resources and external affairs;

and Philip Morris Capital Corporation (“PMCC”), which completed the wind-down of its portfolio of finance assets in 2022 and had no finance assets remaining at December 31, 2022.

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 by our subsidiaries.

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.

In October 2022, Altria, through PM USA, entered into a joint venture with JTI (US) Holding, Inc.

Helix Innovations LLC (“Helix”), which operates in the United States and Canada, and Helix Innovations GmbH and its affiliates (“Helix ROW”), which operate internationally in the rest-of-world, are engaged in the manufacture and sale of oral nicotine pouches;

and NJOY, LLC (“NJOY”), which is engaged in the manufacture and sale of e-vapor products.

Other wholly owned subsidiaries included Altria Group Distribution Company (“AGDC”), which provides sales and distribution services to our domestic operating companies;

and Altria Client Services LLC (“ALCS”), which provides various support services to our companies in areas such as legal, regulatory, research and product development, consumer engagement, finance, human resources and external affairs.

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 by our subsidiaries.

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.

As discussed in Note 3.

Acquisition of NJOY , on June 1, 2023, we completed our acquisition of NJOY Holdings, Inc.

(“NJOY Holdings”), the parent of NJOY.

As a result of the acquisition, NJOY became a wholly owned subsidiary of Altria.

In March 2023, we entered into a stock transfer agreement with JUUL Labs, Inc.

(“Stock Transfer Agreement”) pursuant to which we transferred to JUUL Labs, Inc.

(“JUUL”) all of our beneficially owned JUUL equity securities.

In exchange, we received a non-exclusive, irrevocable global license to certain of JUUL’s heated tobacco intellectual property (“JUUL Heated Tobacco IP”).

In October 2022, we entered into a joint venture with JTI (US) Holding, Inc.

(“JTIUH”), a subsidiary of Japan Tobacco Inc., for the U.S.

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The joint venture entity, Horizon Innovations LLC (“Horizon”), is structured to exist in perpetuity and is responsible for the U.S.

commercialization of HTS products owned by either party.

PM USA holds a 75 % economic interest in Horizon, with JTIUH having a 25 % economic interest.

We included the 2022 financial results of Horizon, which were immaterial, in our consolidated financial statements, with the 25 % economic interest held by JTIUH reported on our consolidated balance sheet as a noncontrolling interest.

In October 2021, UST sold its subsidiary, International Wine & Spirits Ltd.

marketing and commercialization of HTS products owned by either party.

At December 31, 2023 we owned a 75 % economic interest in Horizon;

JTIUH owned the remaining 25 % economic interest.

In October 2021, we sold International Wine & Spirits Ltd.

(“IWS”), which included Ste.

Michelle Wine Estates Ltd.

Michelle”) in an all-cash transaction with a net purchase price of approximately $ 1.2 billion and the assumption of certain liabilities of IWS and its subsidiaries (the “Ste.

Michelle”), in an all-cash transaction with a net purchase price of approximately $ 1.2 billion and the assumption of certain liabilities of IWS and its subsidiaries (“Ste.

Michelle Transaction”).

In December 2020 and April 2021, we purchased the remaining 20 % interest in (i) Helix ROW and (ii) Helix, respectively.

The total purchase price of the December 2020 and April 2021 transactions was approximately $ 250 million.

At December 31, 2022, we had investments in the following equity securities:

Anheuser-Busch InBev SA/NV (“ABI”);

Cronos Group Inc.

and JUUL Labs, Inc.

At December 31, 2023, we had investments in Anheuser-Busch InBev SA/NV (“ABI”) and Cronos Group Inc.

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

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▪ Basis of Presentation:

The consolidated financial statements include Altria, as well as our wholly owned and majority-owned subsidiaries.

Our consolidated financial statements include Altria, as well as our wholly owned and majority-owned subsidiaries.

We account for our investments in equity securities in which we have the ability to exercise significant influence over the operating and financial policies of the investee, including ABI and Cronos, under the equity method of accounting using a one-quarter lag.

We account for our investment in the equity securities of JUUL at fair value.

We accounted for our former investment in the equity securities of JUUL at fair value.

All intercompany transactions and balances have been eliminated.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of net revenues and expenses during the reporting periods.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the dates of our financial statements and the reported amounts of net revenues and expenses during the reporting periods.

Significant estimates and assumptions include, among other things, pension and benefit plan assumptions, lives and valuation assumptions for goodwill, other intangible assets and investments in equity securities, marketing programs and income taxes.

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Certain immaterial prior year amounts have been reclassified to conform with the current year’s presentation.

On January 1, 2022, we adopted Accounting Standards Update (“ASU”) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU No.

This guidance simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity.

On January 1, 2023, we adopted Accounting Standards Update (“ASU”) 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU No.

This guidance updates how an entity recognizes and measures contract assets and contract liabilities acquired in a business combination.

Our adoption of ASU No.

2020-06 did not have a material impact on our consolidated financial statements.

2021-08 had no impact on our consolidated financial statements or related disclosures.

Additionally, on January 1, 2023, we adopted ASU 2022-04, Liabilities-Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations (“ASU No.

This guidance requires that a buyer in a supplier finance program disclose sufficient qualitative and quantitative information about the program to allow a user of financial statements to understand the program’s nature, activity during the period, changes from period to period and potential magnitude.

For further discussion, see Note 5.

S upplier Financing .

Summary of Significant Accounting Policies

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We adjust such accruals as new information develops or circumstances change.

Compliance with environmental laws and regulations, including the payment of any remediation and compliance costs or damages and the making of related expenditures, has not had, and is not expected to have, a material adverse effect on our consolidated results of operations, capital expenditures, financial position or cash flows.

Compliance with environmental laws and regulations, including the payment of any remediation and compliance costs or damages and the making of related expenditures, has not had a material adverse effect on our consolidated results of operations, capital expenditures, financial position or cash flows.

Contingencies - Environmental Regulation .

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▪ Inventories:

We use the last-in, first-out (“LIFO”) method to determine the cost of substantially all our tobacco inventories.

We use the last-in, first-out (“LIFO”) method to determine the cost of the majority of our inventories.

We determine the cost of the remaining inventories using the first-in, first-out (“FIFO”) and average cost methods.

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We determined the cost of approximately 76 % and 79 % of our inventories at December 31, 2023 and 2022, respectively, using the LIFO method.

The recorded LIFO amounts of our inventories were approximately $ 0.7 billion and $ 0.6 billion lower than the current cost of our inventories at December 31, 2022 and 2021, respectively.

The recorded LIFO amounts of our inventories were approximately $ 0.7 billion lower than the current cost of our inventories at December 31, 2023 and 2022.

▪ Investments in Equity Securities:

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We elected to account for our investments in ABI and Cronos under the equity method of accounting.

Our share of equity (income) losses and other adjustments associated with these equity investments are included in (income) losses from investments in equity securities in our consolidated statements of earnings.

We report the carrying value for each of our equity investments in ABI and Cronos in investments in equity securities on our consolidated balance sheets.

Our share of equity (income) losses and other adjustments associated with these investments are included in (income) losses from investments in equity securities in our consolidated statements of earnings.

We report the carrying value for each of our investments in ABI and Cronos in investments in equity securities on our consolidated balance sheets.

We report equity method investments accounted for under the equity method of accounting at cost and adjust these investments each period for our share of (income) losses and dividends paid, if any.

We report our share of ABI’s and Cronos’s results using a one-quarter lag because results are not available in time for us to record them in the concurrent period.

At the end of each reporting period, we review our equity investments accounted for under the equity method of accounting for impairment by comparing the fair value of each of our investments to their carrying value.

If the carrying value of an

investment exceeds its fair value and the loss in value is other than temporary, we consider the investment impaired, reduce its carrying value to its fair value and record the impairment in our consolidated statements of earnings in the period identified.

At the end of each reporting period, we review our investments accounted for under the equity method of accounting for impairment by comparing the fair value of each of our investments to their carrying value.

If the carrying value of an investment exceeds its fair value and the loss in value is other than temporary, we consider the investment impaired, reduce its carrying value to its fair value and record the impairment in our consolidated statements of earnings in the period identified.

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.

Beginning September 30, 2022, we account for our investment in JUUL as an investment in an equity security and measure our investment in JUUL at fair value.

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

Investments in Equity Securities for additional information on how we have historically accounted for our investment in JUUL.

Investments in Equity Securities for additional information on our accounting policy for our former investment in JUUL.

▪ Litigation Contingencies and Costs:

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PM USA receives payment in advance of a customer obtaining control of the product.

USSTC and Helix receive substantially all payments within one business day of the customer obtaining control of the product.

USSTC and Helix receive substantially all payments within one business day of a customer obtaining control of the product.

NJOY receives substantially all payments within 30 days of a customer obtaining control of the product.

We include amounts due from customers in receivables on our consolidated balance sheets.

▪ Supplier Financing:

We facilitate a voluntary supplier financing program under which participating suppliers may elect to sell receivables due from us to a third-party financial institution.

Our payments are made on the terms originally negotiated with the supplier, and we have no economic interest in a supplier’s sale of a receivable.

All outstanding balances under the supplier financing program are recorded in accounts payable on our consolidated balance sheets.

▪ New Accounting Guidance Not Yet Adopted:

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Standards Description Effective Date for Public Entity Effect on Financial Statements

ASU 2021-08 Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

The guidance updates how an entity recognizes and measures contract assets and contract liabilities acquired in a business combination.

Acquirers will now account for related revenue contracts in accordance with Topic 606 as if it had originated the contract.

The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022.

We do not expect our adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

ASU 2022-03 Fair Value Measurement (Topic 820):

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We do not expect our adoption of this guidance to have a material impact on our consolidated financial statements and related disclosures.

ASU 2023-07 Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

The guidance will require disclosure of incremental segment information on an annual and interim basis.

The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

We are in the process of evaluating the impact of this guidance on our consolidated financial statements and related disclosures.

ASU 2023-09 Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

The guidance will require additional income tax disclosures, primarily related to the rate reconciliation and income taxes paid information.

The guidance is effective for fiscal years beginning after December 15, 2024.

We are in the process of evaluating the impact of this guidance on our consolidated financial statements and related disclosures.

Acquisition of NJOY

On June 1, 2023, we acquired NJOY Holdings (“NJOY Transaction”), which provided us with 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 U.S.

Food and Drug Administration (“FDA”).

The total consideration for the NJOY Transaction of approximately $ 2.9 billion, consisted of approximately $ 2.75 billion in cash payments (net of cash acquired) plus the fair value of up to $ 500 million in additional cash payments that are contingent on receipt of FDA authorizations with respect to certain NJOY products.

The fair value of these contingent payments on the acquisition date and at December 31, 2023 was approximately $ 130 million, which is included in the total consideration.

We funded the NJOY Transaction cash payments through a combination of a $ 2.0 billion term loan facility, the issuance of commercial paper and available cash.

For further discussion regarding the term loan facility, see Note 9.

Short-Term Borrowings and Borrowing Arrangements .

We accounted for this acquisition as a business combination.

NJOY’s financial position and results of operations beginning June 1, 2023 have been consolidated with our consolidated financial results and included in the all other category.

Segment Reporting .

The fair value estimates of the assets acquired and liabilities assumed are preliminary and subject to adjustments during the measurement period (up to one year following the acquisition date).

The primary areas of accounting for the NJOY Transaction that are not yet finalized relate to the fair value of certain intangible assets acquired, contingent liabilities, residual goodwill and any related tax impact.

During the measurement period, we will adjust preliminary valuations assigned to assets and liabilities if new information is obtained about facts and circumstances that existed as of the NJOY Transaction date, that, if known, would have resulted in revised values for these items as of that date.

The impact of all changes, if any, that do not qualify as measurement period adjustments will be included in current period earnings.

The following amounts represent the preliminary estimates for purchase price allocation to assets acquired and liabilities assumed in the NJOY Transaction, which will be finalized by the end of the measurement period:

(in millions)

Cash and cash equivalents $ 22

Receivables 7

Inventories 19

Other assets 7

Property, plant and equipment 16

Other intangible assets:

Developed technology (amortizable) 1,000

Trademarks (amortizable) 230

Supplier agreements (amortizable)

Accounts payable ( 7 )

Accrued liabilities ( 20 )

Deferred income taxes ( 167 )

Total identifiable net assets 1,287

Total consideration 2,901

The excess of the total consideration over the identifiable net assets acquired in the NJOY Transaction primarily reflects the value of future growth opportunities in the e-vapor category.

No ne of the goodwill or other intangible assets is deductible for tax purposes.

The significant assumptions used in determining the preliminary fair values of the identifiable intangible assets included volume growth rates, operating margins, the assessment of acquired technology life cycles, discount rates, as well as other factors.

We determined the preliminary fair values of the identifiable intangibles assets using an income approach.

The fair value measurements were primarily based on significant inputs that are not observable in the market, such as discounted cash flow analyses, and thus are classified in Level 3 of the fair value hierarchy.

We amortize the intangible assets over a weighted-average period of approximately 17 years.

In determining the estimated fair value of contingent payments, we made certain judgments, estimates and assumptions, the most significant of which was the likelihood of certain potential regulatory outcomes.

Contingent payments are classified in Level 3 of the fair value hierarchy.

Costs incurred for the NJOY Transaction are recognized as expenses in the period in which the costs are incurred.

For the year ended December 31, 2023, we incurred costs related to the NJOY Transaction of $ 72 million, substantially all of which were acquisition-related costs, consisting primarily of transaction costs and financing fees, which were included in corporate expense and interest and other debt expense, net, respectively, in our consolidated statement of earnings.

Revenues from Contracts with Customers

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Segment Reporting .

We calculate substantially all cash discounts, offered to customers for prompt payment, as a flat rate per unit based on agreed-upon payment terms.

Prior to the first quarter of 2021 for USSTC and the third quarter of 2021 for PM USA, cash discounts were calculated as a percentage of the list price based on historical experience and agreed-upon payment terms.

We record receivables net of the cash discounts on our consolidated balance sheets.

We calculate substantially all cash discounts, offered to customers for prompt payment, as a flat rate per unit based on agreed-upon payment terms and record receivables net of the cash discounts on our consolidated balance sheets.

We record payments received by our businesses in advance of product shipment as deferred revenue.

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At December 31, 2023 and 2022, there were no differences between amounts recorded as deferred revenue from contracts with customers and amounts subsequently recognized as revenue.

Receivables (excluding receivable from the sale of IQOS System commercialization rights) were $ 48 million and $ 47 million at December 31, 2022 and 2021, respectively.

At December 31, 2022 and 2021, there were no expected differences between amounts recorded and subsequently received, and we did not record an allowance for credit losses against these receivables.

Receivables were $ 71 million and $ 48 million at December 31, 2023 and 2022, respectively, which in 2022 excluded the receivable from the sale of the IQOS Tobacco Heating System (“ IQOS System”) commercialization rights, discussed in Note 6.

Goodwill and Other Intangibles, net .

At December 31, 2023 and 2022, there were no expected differences between amounts recorded and subsequently received, and we did no t record an allowance for credit losses against these receivables.

We record an allowance for returned goods, which is included in other accrued liabilities on our consolidated balance sheets.

It is USSTC’s policy to accept authorized sales returns from its customers for products that have passed the freshness date printed on product packaging due to the limited shelf life of USSTC’s MST and snus products.

It is USSTC’s policy to accept authorized sales returns from its customers for products that have passed the freshness date printed on product

packaging due to the limited shelf life of USSTC’s MST and snus products.

We record estimated sales returns, which are based principally on historical volume and return rates, as a reduction to revenues.

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These differences, if any, have not had a material impact on our consolidated financial statements.

Supplier Financing

We facilitate a voluntary supplier financing program through a third-party intermediary under which participating suppliers may elect to sell receivables due from us to participating third-party financial institutions at the sole discretion of both the suppliers and the financial institutions (“Program”).

Our responsibility is limited to making payment on the terms originally negotiated with our supplier, regardless of whether our supplier sells its receivable to a financial institution.

We pay the third-party intermediary a nominal fee to administer the Program.

Under the terms of the agreement with our third-party intermediary, ALCS has a direct obligation to pay the participating financial institutions or the participating suppliers when payment obligations are due, unless such obligations are satisfied by the applicable ALCS affiliate.

Additionally, Altria guarantees the obligations of ALCS to those parties.

We do not enter into agreements with any of the participating financial institutions in connection with the Program.

The range of payment terms we negotiate with our suppliers is consistent, irrespective of whether a supplier participates in the Program.

The payment terms that we have with our suppliers range up to 120 days.

We have no economic interest in a supplier’s sale of a receivable.

Once a qualifying supplier elects to participate in the Program and reaches an agreement with a participating third-party financial institution, the qualifying supplier elects which individual invoices they sell to the financial institution.

All outstanding balances under the Program are recorded in accounts payable on our consolidated balance sheets, and the associated payments are included in operating activities within our consolidated statements of cash flows.

A reconciliation of the beginning and ending confirmed outstanding obligations was as follows:

For the Year Ended December 31, 2023

(in millions)

Confirmed outstanding obligations at beginning of year $ 8

Invoices confirmed during the year 244

Confirmed invoices paid during the year ( 133 )

Confirmed outstanding obligations at end of year $ 119

Goodwill and Other Intangible Assets, net

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$ 14,284 $ 598 $ 12,854 $ 470

At December 31, 2022, substantially all of our indefinite-lived intangible assets consisted of (i) MST and snus trademarks of $ 8.8 billion, which consists of Copenhagen , Skoal and other MST and snus trademarks of $ 4.0 billion, $ 3.9 billion and $ 0.9 billion, respectively, and (ii) cigar trademarks of $ 2.6 billion from our 2009 acquisition of UST and 2007 acquisition of Middleton, respectively.

Definite-lived intangible assets, which consist primarily of intellectual property, certain cigarette trademarks and customer relationships, are amortized over a weighted-average period of 20 years.

Pre-tax amortization expense for definite-lived intangible assets during the years ended December 31, 2022, 2021 and 2020, was $ 73 million, $ 72 million and $ 72 million, respectively.

Annual amortization expense for each of the next five years is estimated to be approximately $ 75 million, assuming no additional transactions occur that require the amortization of intangible assets.

In October 2022, ALCS and Altria (solely with respect to certain provisions thereunder) entered into an agreement with Triaga, Inc.

(“Triaga”), a subsidiary of Philip Morris International Inc.

(“PMI”), and PMI (solely with respect to certain provisions thereunder), to, among other things, transition and ultimately conclude our relationship with respect to the IQOS Tobacco Heating System (“ IQOS System”) in the United States.

Under the terms of the agreement, Triaga paid ALCS $ 1.0 billion upon entry into the agreement and is obligated to make an additional payment of $ 1.7 billion (plus interest thereon from the effective date of October 19, 2022 at a per annum rate equal to 6 %) to ALCS by July 15, 2023, for a total cash payment of approximately $ 2.7 billion (plus interest).

For the consideration received, ALCS has agreed to assign to Triaga exclusive U.S.

commercialization rights to the IQOS System effective April 30, 2024.

PMI will not have access to the Marlboro brand name or other brand assets, as PM USA owns the Marlboro trademark in the United States.

As a result of the agreement, we recorded (i) a pre-tax $ 2.7 billion deferred gain, which we expect to recognize in earnings when we relinquish our rights to the IQOS System, (ii) a $ 1.7 billion receivable and (iii) a $ 21 million interest receivable on our consolidated balance sheet at December 31, 2022.

For the year ended December 31, 2022, we recorded $ 21 million of interest income in our consolidated statement of earnings.

For the year ended December 31, 2022, we recorded $ 1.0 billion in cash received upon entry into the agreement.

At December 31, 2023, substantially all of our indefinite-lived intangible assets consisted of (i) MST and snus trademarks of $ 8.8 billion, which consists of Copenhagen , Skoal and other MST and snus trademarks of $ 4.0 billion, $ 3.9 billion and $ 0.9 billion, respectively, from our 2009 acquisition of UST, and (ii) cigar trademarks of $ 2.6 billion from our 2007 acquisition of Middleton.

Definite-lived intangible assets, consisting primarily of intellectual property (which includes developed technology), certain cigarette trademarks, e-vapor trademarks, customer relationships and supplier agreements, are amortized over a weighted-average period of approximately 18 years.

Pre-tax amortization expense for definite-lived intangible assets, which includes the impact of the NJOY Transaction, during the years ended December 31, 2023, 2022 and 2021, was $ 128 million, $ 73 million and $ 72 million, respectively.

We estimate our annual amortization expense for each of the next five years to be approximately $ 165 million, assuming no additional transactions occur that require the amortization of intangible assets or impacts of any measurement period adjustments related to the NJOY Transaction.

In July 2023, we received the remaining payment of approximately $ 1.8 billion (including interest) from Philip Morris International Inc.

(“PMI”) as part of the 2022 agreement with PMI to, among other things, transition and ultimately conclude our relationship with respect to the IQOS System in the United States (“Remaining PMI Payment”).

In 2022, we received $ 1.0 billion from PMI upon entering into the agreement.

For the years ended December 31, 2023 and 2022, we recorded disposition-related interest income for the Remaining PMI Payment of $ 54 million and $ 21 million, respectively, in our consolidated statements of earnings.

At December 31, 2023, our consolidated balance sheet included a pre-tax $ 2.7 billion deferred gain, which we expect to recognize in earnings when we relinquish our rights to the IQOS System effective April 30, 2024.

The changes in goodwill and net carrying amount of intangible assets were as follows:

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Acquisitions (1)

Dispositions (2)

1,614 1,430 — 151

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$ 6,791 $ 13,686 $ 5,177 $ 12,384

(1) Acquisitions of certain intellectual property related to other tobacco products, which included a $ 50 million non-cash contribution made by JTIUH to Horizon.

For additional information regarding Horizon, see Note 1.

Background and Basis of Presentation .

(2) Dispositions related to the Ste.

Michelle Transaction.

Background and Basis of Presentation .

(1) Substantially all of the 2023 amounts are attributable to the NJOY Transaction.

For additional information regarding the NJOY Transaction, see Note 3.

Acquisition of NJOY .

The 2022 amounts are attributable to acquisitions of certain intellectual property related to other tobacco products, which included a $ 50 million non-cash contribution made by JTIUH to Horizon.

During 2023, 2022 and 2021, our annual impairment test of goodwill and indefinite-lived intangible assets resulted in no impairment charges.

At December 31, 2023 and 2022, there were no accumulated impairment losses related to goodwill.

Based on our annual impairment analysis performed as of October 1, 2023, the estimated fair value of the Skoal trademark within the MST and snus products reporting unit, which was determined using a discounted cash flow model, exceeded its carrying value of $ 3.9 billion as of December 31, 2023 by approximately 6 % ($ 0.2 billion).

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

Investments in Equity Securities

The carrying amount of our investments consisted of the following at December 31:

The carrying amount of our current and former investments consisted of the following at December 31:

(in millions) 2023 2022

$ 9,676 $ 8,975

Cronos 335 375

$ 10,011 $ 9,600

(1) Our investment in Cronos at December 31, 2021 consisted of our equity method investment in Cronos of $ 617 million and also included the Cronos warrant and the Fixed-price Preemptive Rights (collectively, “Investment in Cronos”), which were measured at fair value.

We irrevocably abandoned the Cronos warrant on December 15, 2022, and the Fixed-price Preemptive Rights had no value at December 31, 2022.

See below for further discussion.

(Income) losses from investments in equity securities consisted of the following:

(Income) losses from our current and former investments in equity securities consisted of the following:

For the Years Ended December 31,

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$ ( 539 ) $ 1,973 $ 5,564

213 415 ( 12 )

(Income) losses from investments under equity method of accounting ( 493 ) 2,186 5,979

1,455 — ( 100 )

(Income) losses from investments in equity securities $ ( 243 ) $ 3,641 $ 5,979

(1) Includes our share of amounts recorded by our investees and additional adjustments, if required, related to (i) the conversion from international financial reporting standards to GAAP and (ii) adjustments to our investment required under the equity method of accounting.

(2) Investment in JUUL is accounted for as an investment in an equity security measured at fair value.

See below for further discussion.

(2) Represents loss as a result of the disposition of our JUUL equity securities discussed below.

(3) Represents the estimated change in fair value.

Prior to the disposition of our JUUL equity securities on March 3, 2023, we accounted for our former investment in JUUL as an investment in an equity security measured at fair value.

Investees’ summarized financial data for our equity method investments was as follows:

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Long-term liabilities $ 91,791 $ 3 $ 96,497 $ 8

Convertible Preferred Stock $ — $ — $ — $ 715

Noncontrolling interests

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(1) Reflects a one-quarter lag.

Other Investments reflect summarized financial data of Cronos, as well as JUUL’s financial data for the periods during which we accounted for our investment in JUUL as an equity method investment under the fair value option.

Other Investments reflect summarized financial data of Cronos, as well as JUUL’s financial data for the periods during which we accounted for our former investment in JUUL as an equity method investment under the fair value option.

Investment in ABI

At December 31, 2022, we had an approximate 10.0 % ownership interest in ABI, consisting of 185 million restricted shares of ABI (the “Restricted Shares”) and 12 million ordinary shares of ABI.

The Restricted Shares:

At December 31, 2023, we had an approximate 10 % ownership interest in ABI, consisting of 185 million restricted shares of ABI (“Restricted Shares”) and 12 million ordinary shares of ABI.

Our Restricted Shares:

▪ are unlisted and not admitted to trading on any stock exchange;

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▪ have director nomination rights with respect to ABI.

As of this filing, we have not elected to convert our Restricted Shares into ordinary shares of ABI.

We have not elected to convert our Restricted Shares into ordinary shares of ABI.

We account for our investment in ABI under the equity method of accounting because we have the ability to exercise significant influence over the operating and financial policies of ABI, including having active representation on ABI’s board of directors and certain ABI board committees.

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We report our share of ABI’s results using a one-quarter lag because ABI’s results are not available in time for us to record them in the concurrent period.

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.

The fair value of our 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 our 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.

At December 31, 2021, the fair value of our equity investment in ABI was $ 11.9 billion (carrying value of $ 11.1 billion), which exceeded its carrying value by $ 0.8 billion or approximately 7 %.

In the second quarter of 2022, the fair value declined below its carrying value and at June 30, 2022, the fair value was below its carrying value by $ 1.1 billion or approximately 9 %.

We concluded that the decline in fair value below its carrying value was temporary and, therefore, we did not record an impairment charge at that time.

At September 30, 2022, the fair value of our equity investment in ABI of $ 9.0 billion was below its carrying value by $ 2.5 billion or approximately 22 %.

We concluded that the decline in fair value at September 30, 2022 was other than temporary as we anticipated that the full recovery to the carrying value would take longer than previously expected.

In reaching this conclusion, we evaluated the factors related to the fair value decline, including the macroeconomic and geopolitical factors that have significantly impacted certain foreign exchange rates and global equity markets.

As a result of our conclusion, we recorded a non-cash, pre-tax impairment charge of

$ 2.5 billion during the third quarter of 2022, which was recorded to (income) losses from investments in equity securities in our consolidated statements of earnings.

This impairment charge reflected the difference between the fair value of our equity investment in ABI using ABI’s share price and the Euro to U.S dollar exchange rate at September 30, 2022 and the carrying value of our equity investment in ABI at September 30, 2022.

After recording the impairment charge, each of the fair value and carrying value at September 30, 2022 was $ 9.0 billion.

At December 31, 2022, the fair value of our equity investment in ABI was $ 11.9 billion (carrying value of $ 9.0 billion), which exceeded its carrying value by approximately 33 %.

At September 30, 2021, the fair value of our equity investment in ABI of $ 11.2 billion declined below its carrying value by $ 6.2 billion or approximately 35 %.

We concluded that the decline in fair value at September 30, 2021 was other than temporary.

As a result of our conclusion, we recorded a non-cash, pre-tax impairment charge of $ 6.2 billion during the third quarter of 2021, which was recorded to (income) losses from investments in equity securities in our consolidated statements of earnings.

After recording the impairment charge, each of the fair value and carrying value at September 30, 2021 was $ 11.2 billion.

At December 31, 2022, the carrying value of our equity investment in ABI exceeded its share of ABI’s net assets attributable to equity holders of ABI by approximately $ 2.5 billion.

The fair value of our investment in ABI at December 31, 2023 and 2022 was $ 12.7 billion and $ 11.9 billion, respectively, which exceeded its carrying value of $ 9.7 billion and $ 9.0 billion by approximately 32 % and 33 %, respectively.

At September 30, 2022 and 2021, the fair value of our investment in ABI had declined below its carrying value by $ 2.5 billion and $ 6.2 billion or approximately 22 % and 35 %, respectively.

We determined the declines in fair value to be other than temporary and recorded non-cash, pre-tax impairment charges of $ 2.5 billion and $ 6.2 billion during the third quarter of 2022 and 2021, respectively, which were recorded to (income) losses from investments in equity securities in our consolidated statements of earnings for the years ended December 31, 2022 and 2021, respectively.

At December 31, 2023, the carrying value of our investment in ABI exceeded its share of ABI’s net assets attributable to equity holders of ABI by approximately $ 2.5 billion.

Substantially all of this difference is comprised of goodwill and other indefinite-lived intangible assets (consisting primarily of trademarks).

Investment in JUUL

In December 2018, we made an investment in JUUL for $ 12.8 billion and received a 35 % economic interest in JUUL through non-voting shares, which we converted at our election into voting shares in November 2020 (“Share Conversion”), and a security convertible into additional non-voting or voting shares, as applicable, upon settlement or exercise of certain JUUL convertible securities (the “JUUL Transaction”).

At December 31, 2022, we had a 35 % economic ownership interest in JUUL, consisting of 42 million voting shares.

We are subject to a standstill restriction under which we may not acquire additional JUUL shares above our 35 % interest and may not sell or transfer any of our JUUL shares until December 20, 2024.

Furthermore, at the time of the investment, we agreed to non-competition obligations generally requiring that we participate in the e-vapor business only through JUUL.

In January 2020, we amended certain JUUL Transaction agreements and entered into a new cooperation agreement.

One of the provisions in the amendments was the option to be released from our non-compete obligation under certain circumstances, including if the carrying value of our investment in JUUL was not more than 10 % of its initial carrying value of $ 12.8 billion.

At June 30, 2022, the carrying value of our investment in JUUL was $ 450 million, which was less than 10 % of our initial carrying value of $ 12.8 billion.

As a result, in September 2022, we exercised our option to be released from our JUUL non-competition obligations, resulting in (i) the permanent termination of our non-competition obligations to JUUL, (ii) the loss of our JUUL board designation rights (other than the right to designate one independent director so long as our ownership continues to be at least 10 %), our preemptive rights, our consent rights and certain other rights with respect to our investment in JUUL and (iii) the conversion of our JUUL shares to single vote common stock, significantly reducing our voting power.

We do not currently intend to exercise our remaining governance rights or to vote our JUUL shares other than as a passive investor.

Additionally, as part of the amendment to certain JUUL Transaction agreements in January 2020, we agreed not to pursue any claims against JUUL for indemnification or reimbursement except for any non-contractual claims for contribution or indemnity where a judgment has been entered against us and JUUL with respect to certain litigation in which we and JUUL are both defendants against third-party plaintiffs.

In April 2020, the U.S.

Federal Trade Commission (“FTC”) issued an administrative complaint challenging our investment in JUUL.

In February 2022, the administrative law judge dismissed the FTC’s complaint.

FTC complaint counsel appealed that decision to the FTC, which appeal remains pending.

For further discussion, see Note 17.

Contingencies - Antitrust Litigation .

In June 2022, the U.S.

Food and Drug Administration (“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 PMTAs that warrant additional review.

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

Following Share Conversion in the fourth quarter of 2020, we elected to account for our equity method investment in JUUL under the fair value option.

In making this election, we believed measuring our investment at fair value provided quarterly transparency to investors as to the fair market value of our investment in JUUL, given the changes and volatility in the e-vapor category since our initial investment, as well as the lack of publicly available information regarding JUUL’s business or a market-derived valuation.

As a result of our loss of certain rights due to our exercise of our option to be released from our JUUL non-competition obligations in the third quarter of 2022, we determined that we no longer have the ability to exercise significant influence over the operating and financial policies of JUUL.

Therefore, we are no longer able to account for our investment in JUUL as an equity method investment.

Beginning with the period ended September 30, 2022, we account for our investment in JUUL as an investment in an equity security.

We will continue to measure our investment in JUUL at fair value, in accordance with GAAP.

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.

The following table provides a reconciliation of the beginning and ending balance of our investment in JUUL, which is classified in Level 3 of the fair value hierarchy:

Investment in Cronos

At December 31, 2023, we had a 41.1 % ownership interest in Cronos, consisting of 156.6 million shares, which we account for under the equity method of accounting.

We report our share of Cronos’s results using a one-quarter lag because Cronos’s results are not available in time for us to record them in the concurrent period.

The fair value of our investment in Cronos is based on unadjusted quoted prices in active markets for Cronos’s common shares and was classified in Level 1 of the fair value hierarchy.

At December 31, 2023, the fair value of our investment in Cronos was less than its carrying value by $ 8 million or approximately 2 %.

Based on our evaluation of the duration and magnitude of the fair value decline, our evaluation of Cronos’s financial condition (including its cash position) and near-term prospects, and our intent and ability to hold our investment in Cronos until recovery, we concluded that the decline in fair value of our investment in Cronos below its carrying value is temporary and, therefore, no impairment was recorded.

At December 31, 2022, the fair value of our investment in Cronos exceeded its carrying value by $ 22 million or approximately 6 %.

At June 30, 2022 and December 31, 2021, the fair value of our investment in Cronos was less than its carrying value by approximately 20 % and 25 %, respectively.

We determined the declines in fair value to be other than temporary and recorded non-cash, pre-tax impairment charges of $ 107 million and $ 205 million in the second quarter of 2022 and the fourth quarter of 2021, respectively, which were recorded to (income) losses from investments in equity securities in our consolidated statements of earnings for years ended December 31, 2022 and 2021, respectively.

As part of our investment in Cronos, prior to December 15, 2022, we also owned a warrant that provided us the ability to purchase an additional approximate 10 % of common shares of Cronos at a per share exercise price of Canadian dollar (“CAD”) $ 19.00 , which would have expired on March 8, 2023.

On December 15, 2022, we irrevocably abandoned the Cronos warrant, and we no longer owned the warrant as of December 31, 2022.

For the years ended December 31, 2022 and 2021, we recorded $ 15 million and $ 148 million, respectively, representing non-cash, pre-tax unrealized losses on Cronos-related financial instruments, substantially all of which related to changes in the fair value of the Cronos warrant.

Former Investment in JUUL

In December 2018, we made an investment in JUUL for $ 12.8 billion and received a 35 % economic interest in JUUL through non-voting shares, which we converted at our election into voting shares in November 2020, and a security convertible into additional non-voting or voting shares, as applicable, upon settlement or exercise of certain JUUL convertible securities.

At the time of the investment, we agreed to non-competition obligations generally requiring that we participate in the e-vapor business only through JUUL.

In September 2022, we exercised our option to be released from our JUUL non-competition obligations, resulting in (i) the permanent termination of our non-competition obligations to JUUL, (ii) the loss of our JUUL board designation rights (other than the right to designate one independent director so long as our ownership continued to be at least 10 %), our preemptive rights, our consent rights and certain other rights with respect to our investment in JUUL and (iii) the conversion of our JUUL shares to single vote common stock, significantly reducing our voting power.

As discussed in Note 1.

Background and Basis of Presentation , in March 2023 we entered into the Stock Transfer Agreement with JUUL under which we transferred to JUUL all of our beneficially owned JUUL equity securities and, in exchange, received the JUUL Heated Tobacco IP.

In addition, all other agreements between us and JUUL were terminated or we were removed as parties thereto, other than certain litigation-related agreements and a license agreement relating to our non-trademark licensable intellectual property rights in the e-vapor field, which remain in force solely with respect to our e-vapor intellectual property as of or prior to March 3, 2023.

Following the conversion of certain non-voting shares of JUUL into voting shares in the fourth quarter of 2020, we elected to account for our investment in JUUL under the fair value option.

As a result of our loss of certain rights due to our exercise of our option to be released from our JUUL non-competition obligations in the third quarter of 2022, we determined that we no longer had the ability to exercise significant influence over the operating and financial policies of JUUL.

Therefore, we were no longer able to account for our investment in JUUL as an equity method investment.

Beginning with the period ended September 30, 2022 and until March 3, 2023, when we transferred to JUUL all of our beneficially owned JUUL equity securities, we accounted for our former investment in JUUL as an investment in an equity security.

Our consolidated statements of earnings include any changes in the estimated fair value of our former investment, which were calculated quarterly.

The following table provides a reconciliation of the beginning and ending balance of our former investment in JUUL, which was classified in Level 3 of the fair value hierarchy prior to the disposition of our JUUL equity securities:

(in millions) Investment Balance

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Balance at December 31, 2022 250

Unrealized gains (losses) included in (income) losses from investments in equity securities ( 1,455 )

Non-cash, pre-tax (loss) on disposition included in (income) losses from investments in equity securities ( 250 )

Balance at December 31, 2023 $ —

Prior to Share Conversion, we accounted for our investment in JUUL as an investment in an equity security.

Since the JUUL shares do not have a readily determinable fair value, we elected to measure our investment in JUUL at its cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

There were no upward or downward adjustments to the carrying value of our investment in JUUL resulting from observable price changes in orderly transactions since the JUUL Transaction through the date of Share Conversion.

In addition, prior to Share Conversion, we reviewed our investment in JUUL for impairment by performing a qualitative assessment of impairment indicators on a quarterly basis in connection with the preparation of our financial statements.

If this qualitative assessment indicated that our investment in JUUL may be impaired, a quantitative assessment was performed.

If the quantitative assessment indicated the estimated fair value of the investment was less than its carrying value, the investment was written down to its estimated fair value.

2023 Financial Activity

▪ For the year ended December 31, 2022, we recorded non-cash, pre-tax unrealized losses of $ 1,455 million as a result of changes in the estimated fair value of our investment in JUUL.

The decrease in the estimated fair value 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 now 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.

2021 Financial Activity

▪ For the year ended December 31, 2021, we recorded no change in the estimated fair value of our investment in JUUL.

During the year ended December 31, 2021, the estimated fair value was primarily impacted by our projections of lower JUUL revenues in the United States over time due to lower JUUL volume assumptions offset by (i) the effect of passage of time on the projected cash flows and (ii) a decrease in the discount rate due to changes in market factors.

▪ For the year ended December 31, 2023, we recorded a non-cash, pre-tax loss on the disposition of our JUUL equity securities of $ 250 million as a result of transferring to JUUL all of our beneficially owned JUUL equity securities pursuant to the Stock Transfer Agreement.

Additionally, we considered specific facts and circumstances around the nature of the JUUL Heated Tobacco IP and determined that the fair value of such intellectual property was not material to our consolidated financial statements as of the date of the transaction.

As a result, we did not record an asset associated with this intellectual property on our consolidated balance sheet.

The primary drivers of this conclusion were (i) our rights to the JUUL Heated Tobacco IP being non-exclusive, (ii) there being no product or technology transferred to us associated with the JUUL Heated Tobacco IP and (iii) there being no connection between the JUUL Heated Tobacco IP and our current product development plans.

2022 Financial Activity

▪ We recorded a non-cash pre-tax unrealized gain of $ 100 million for the fourth quarter and year ended December 31, 2020 as a result of an increase in the estimated fair value of our investment in JUUL.

▪ In September 2020, JUUL announced a strategic update, which included its plans for a significant global workforce reduction, its evaluation of its resource allocation and the possibility of exiting various international markets.

As part of the preparation of our financial statements for the period ended September 30, 2020, we performed a qualitative assessment of impairment indicators for our investment in JUUL and determined that JUUL’s strategic update was an indicator of impairment at September 30, 2020, given the significant deterioration in JUUL’s business prospects.

Given the existence of this impairment indicator, we performed a quantitative valuation of our investment in JUUL during the third quarter of 2020 and recorded a non-cash, pre-tax impairment charge of $ 2.6 billion for the year ended December 31, 2020, reported as impairment of JUUL equity securities in our consolidated statements of earnings.

The impairment charge was driven by our projections of lower JUUL revenues over time due to lower pricing assumptions and delays in JUUL achieving previously forecasted operating margin performance.

These drivers were the result of (i) JUUL’s revised international expansion plans and (ii) the evolving U.S.

e-vapor category and associated competitive dynamics.

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 U.S.

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

In determining the estimated fair value of our investment in JUUL, in 2022, 2021 and 2020, 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 the (i) 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 now under additional administrative review;

(ii) 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;

▪ For the year ended December 31, 2022, we recorded non-cash, pre-tax unrealized losses of $ 1,455 million as a result of changes in the estimated fair value of our former investment in JUUL.

The decrease in the estimated fair value was primarily driven by (i) a decrease in the likelihood of a favorable outcome from the FDA for JUUL’s products that were marketed in the United States, which had received marketing denial orders (“MDOs”) in June 2022 and were under additional administrative review at the time of our subsequent quarterly valuations, (ii) a decrease in the likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, which could have resulted 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 used an income approach to estimate the fair value of our former investment in JUUL.

The income approach reflected the discounting of future cash flows for the U.S.

and international markets at a rate of return that incorporated 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 estimated fair value of our former investment in JUUL, in 2022 and 2021, 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 were classified in Level 3 of the fair value hierarchy.

Additionally, in determining these significant assumptions, we made judgments regarding the (i) likelihood of certain potential regulatory actions impacting the e-vapor category and specifically whether the FDA would ultimately authorize JUUL’s products, which had received the MDOs in June 2022 and were under additional administrative review at the time of our subsequent quarterly valuations;

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

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

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and (v) 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.

Investment in Cronos

At December 31, 2022, we had a 41.1 % ownership interest in Cronos, consisting of 156.6 million shares, which we account for under the equity method of accounting.

Our ownership percentage decreased from 41.8 % at December 31, 2021 due to the issuance of additional shares by Cronos.

We report our share of Cronos’s results using a one-quarter lag because Cronos’s results are not available in time for us to record them in the concurrent period.

The fair value of our equity method investment in Cronos is based on unadjusted quoted prices in active markets for Cronos’s common shares and was classified in Level 1 of the fair value hierarchy.

At December 31, 2021, each of the fair value and carrying value of our equity method investment in Cronos was $ 617 million.

In the second quarter of 2022, the fair value of our equity method investment in Cronos declined below its carrying value and had not recovered as of June 30, 2022.

At June 30, 2022, the fair value was less than its carrying value by approximately 20 %.

We concluded that the decline in fair value was other than temporary.

As a result, we recorded a non-cash, pre-tax impairment charge of $ 107 million in the second quarter of 2022, which was recorded to (income) losses from investments in equity securities in our consolidated statements of earnings.

The impairment charge reflects the difference between the fair value of our equity method investment in Cronos using Cronos’s share price and the Canadian dollar (“CAD”) to U.S.

dollar exchange rate at June 30, 2022 and the carrying value of our equity method investment in Cronos at June 30, 2022.

After recording the impairment charge, each of the fair value and carrying value at June 30, 2022 was $ 437 million.

At December 31, 2022, the fair value of our equity method investment in Cronos exceeded its carrying value by $ 22 million or approximately 6 %.

At December 31, 2021, the fair value of our equity method investment in Cronos was less than its carrying value by approximately 25 %.

We concluded that the decline in fair value at December 31, 2021 was other than temporary.

As a result, we recorded a non-cash, pre-tax impairment charge of $ 205 million for the year ended December 31, 2021, which was recorded to (income) losses from investments in equity securities in our consolidated statement of earnings.

After recording the impairment charge, each of the fair value and carrying value at December 31, 2021 was $ 617 million.

As part of our Investment in Cronos, at December 31, 2022, we also owned anti-dilution protections to purchase Cronos common shares, exercisable each quarter upon dilution, to maintain our ownership percentage.

Certain of the anti-dilution protections provide us the ability to purchase additional Cronos common shares at a per share exercise price of CAD $ 16.25 upon the occurrence of specified events (“Fixed-price Preemptive Rights”).

Based on our assumptions as of December 31, 2022, we estimate the Fixed-price Preemptive Rights allows us to purchase up to an additional approximately 7 million common shares of Cronos.

Prior to December 15, 2022, we also owned a warrant providing us the ability to purchase an additional approximate 10 % of common shares of Cronos at a per share exercise price of CAD $ 19.00 , which would have expired on March 8, 2023.

On December 15, 2022, we irrevocably abandoned the Cronos warrant, and we no longer owned the warrant as of December 31, 2022.

The Fixed-price Preemptive Rights are derivative financial instruments, which are required to be recorded at fair value and are classified in Level 3 of the fair value hierarchy.

Prior to irrevocably abandoning the Cronos warrant on December 15, 2022, the Cronos warrant was also a derivative financial instrument recorded at fair value.

We record in our consolidated statements of earnings any changes in the fair values of the Fixed-price Preemptive Rights and Cronos warrant as gains or losses on Cronos-related financial instruments in the periods in which the changes occur.

We recorded non-cash, pre-tax unrealized losses, representing these changes, as follows:

For the Years Ended December 31,

(in millions) 2022 2021 2020

Fixed-price Preemptive Rights $ 1 $ 23 $ 45

Cronos warrant 14 125 95

Total $ 15 $ 148 $ 140

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

Financial Instruments

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To manage this risk, we may designate certain foreign exchange contracts, including cross-currency swap contracts and forward contracts (collectively, “foreign currency contracts”), and Euro denominated unsecured long-term notes (“foreign currency denominated debt”) as net investment hedges of our investment in ABI.

In May 2021, all outstanding foreign currency contracts matured and, at December 31, 2022 and 2021, we had no outstanding foreign currency contracts.

At December 31, 2023 and 2022, we had no outstanding foreign currency contracts.

When we have foreign currency contracts in effect, counterparties are domestic and international financial institutions.

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Our estimate of the fair value of our total long-term debt is based on observable market information derived from a third-party pricing source and is classified in Level 2 of the fair value hierarchy.

The decrease in the fair value of our long-term debt was primarily driven by (i) rising interest rates in 2022, (ii) the August 2022 $ 1.1 billion repayment at maturity of senior unsecured notes and (iii) changes in Euro denominated debt resulting from the strengthening of the U.S.

dollar versus the Euro during 2022.

Net Investment Hedging

The pre-tax effects of our net investment hedges on accumulated other comprehensive losses and our consolidated statements of earnings were as follows:

(Gain) Loss Recognized in Accumulated Other Comprehensive Losses (Gain) Loss Recognized

in Net Earnings

The pre-tax effects of our net investment hedges on accumulated other comprehensive losses were as follows:

(Gain) Loss Recognized in Accumulated Other Comprehensive Losses

For the Years Ended December 31,

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Total $ 108 $ ( 281 ) $ ( 375 )

In addition, we recognized a pre-tax (gain) of our net investment hedges of $( 7 ) million on the foreign currency contracts for the year ended December 31, 2021 in our consolidated statement of earnings.

We recognized changes in the fair value of the foreign currency contracts and in the carrying value of the foreign currency denominated debt due to changes in the Euro to U.S.

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At December 31, 2023 and 2022, we had no short-term borrowings.

In August 2022, we entered into an extension and amendment (the “Extension and Amendment”) to our $ 3.0 billion senior unsecured 5-year revolving credit agreement (as amended, the “Credit Agreement”).

The Extension and Amendment (i) extended the maturity date of the Credit Agreement from August 1, 2024 to August 1, 2025 and (ii) amended the Credit Agreement to update the benchmark interest rate to a rate based on the Term Secured Overnight Financing Rate (“Term SOFR”) and make certain other market updates.

other terms and conditions of the Credit Agreement remain in full force and effect.

The Credit Agreement is used for general corporate purposes.

At December 31, 2022 and 2021, we had availability under the Credit Agreement for borrowings of up to an aggregate principal amount of $ 3.0 billion.

Pricing for interest and fees under the Credit Agreement may be modified in the event of a change in the rating of our long-term senior unsecured debt.

We expect interest rates on borrowings under the Credit Agreement to be based on the Term SOFR plus a percentage based on the higher of the ratings of our long-term senior unsecured debt from Moody’s Investors Service, Inc.

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 at the closing of the NJOY Transaction.

In July 2023, upon receipt of the Remaining PMI Payment, we repaid the term loan facility in full.

For additional information regarding the NJOY Transaction and the Remaining PMI Payment, see Note 3.

Acquisition of NJOY and Note 6.

Goodwill and Other Intangible Assets, net , respectively.

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, which was scheduled to expire on August 1, 2025 (“Prior Credit Agreement”).

Our Credit Agreement expires on October 24, 2028 and includes an option, subject to certain conditions, for us to extend our Credit Agreement for two additional one -year periods.

We intend to use any borrowings under our Credit Agreement for general corporate purposes.

At December 31, 2023 and 2022, we had availability under our Credit Agreement and our Prior Credit Agreement, as applicable, for borrowings of up to an aggregate principal amount of $ 3.0 billion.

Pricing for interest and fees under our Credit Agreement may be modified in the event of a change in the rating of our long-term senior unsecured debt.

We expect interest rates on borrowings under our Credit Agreement to be based on the Term Secured Overnight Financing Rate plus a percentage based on the higher of the ratings of our long-term senior unsecured debt from Moody’s Investors Service, Inc.

(“Moody’s”) and Standard & Poor’s Financial Services LLC (“S&P”).

The applicable percentage for borrowings under the Credit Agreement at December 31, 2022 was 1.0 % based on our long-term senior unsecured debt ratings on that date.

The Credit Agreement does not include any other rating triggers or any provisions that could require the posting of collateral.

The Credit Agreement includes various covenants, one of which requires us to maintain a ratio of consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) to Consolidated Interest Expense of not less than 4.0 to 1.0, calculated as of the end of the applicable quarter on a rolling four quarters basis.

At December 31, 2022, the ratio of consolidated EBITDA to Consolidated Interest Expense, calculated in accordance with the Credit Agreement, was 11.0 to 1.0.

At December 31, 2022, we were in compliance with our covenants in the Credit Agreement.

The terms “Consolidated EBITDA” and “Consolidated Interest Expense,” each as defined in the Credit Agreement, include certain adjustments.

In March 2020, due to the uncertainty at that time in the global capital markets, including the commercial paper markets, resulting from the COVID-19 pandemic, we elected to borrow the full $ 3.0 billion available under the Credit Agreement as a precautionary measure to increase our cash position and preserve financial flexibility.

In June 2020, we repaid the full amount outstanding under the Credit Agreement using the net proceeds from the issuance of long-term senior unsecured notes issued in May 2020 and available cash.

Any commercial paper issued by us and borrowings under the Credit Agreement are guaranteed by PM USA as further discussed in Note 8.

The applicable percentage for borrowings under our Credit Agreement at December 31, 2023 was 1.0 % based on our long-term senior unsecured debt ratings on that date.

Our Credit Agreement does not include any other rating triggers or any provisions that could require the posting of collateral.

Our Credit Agreement includes various covenants, one of which requires us to maintain a ratio of consolidated earnings before interest, taxes, depreciation and amortization (“EBITDA”) to Consolidated Interest Expense of not less than 4.0 to 1.0, calculated as of the end of the applicable quarter on a rolling four quarters basis.

At December 31, 2023, we were in compliance with our covenants in our Credit Agreement.

The terms “Consolidated EBITDA” and “Consolidated Interest Expense,” each as defined in our Credit Agreement, include certain adjustments.

PM USA guarantees any borrowings under our Credit Agreement and any amounts outstanding under our commercial paper program.

For further discussion of PM USA’s guarantees, see Note 10.

Long-Term Debt.

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$ 25,112 $ 25,124

(1) Weighted-average coupon interest rate of and 4.4 % at December 31, 2022 and 2021.

(2) Weighted-average coupon interest rate of 2.0 % at December 31, 2022 and 2021.

(1) Weighted-average coupon interest rate of 4.5 % and 4.4 % at December 31, 2023 and 2022, respectively.

(2) Weighted-average coupon interest rate of 2.5 % and 2.0 % at December 31, 2023 and 2022, respectively.

At December 31, 2023, our outstanding long-term debt consisted of the following:

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Type Face Value Interest Rate Issuance Maturity

Euro notes € 1,250 1.000 % February 2019 February 2023

USD notes $ 218 2.950 % May 2013 May 2023

USD notes $ 776 4.000 % October 2013 January 2024

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Euro notes € 1,000 2.200 % February 2019 June 2027

USD notes $ 500 6.200 % November 2023 November 2028

USD notes $ 1,906 4.800 % February 2019 February 2029

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USD notes $ 500 6.875 % November 2023 November 2033

USD notes $ 177 9.950 % November 2008 November 2038

USD notes $ 208 10.200 % February 2009 February 2039

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At December 31, 2023 and 2022, accrued interest on long-term debt of $ 410 million and $ 411 million, respectively, was included in other accrued liabilities on our consolidated balance sheets.

In August 2022, we repaid in full our 2.850 % senior unsecured notes in the aggregate principal amount of $ 1.1 billion at maturity.

For a discussion of the fair value of our long-term debt and the designation of our Euro denominated senior unsecured notes as a net investment hedge of our investment in ABI, see Note 8.

Financial Instruments .

▪ Long-Term Debt Activity:

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.

The notes contain the following terms:

▪ $ 0.5 billion at 6.200 %, due 2028, interest payable semiannually beginning May 1, 2024;

▪ $ 0.5 billion at 6.875 %, due 2033, interest payable semiannually beginning May 1, 2024.

In February and May 2023, respectively, we repaid in full the aggregate principal amounts at maturity of the following:

▪ $ 1.3 billion (€ 1.25 billion) of our senior unsecured Euro denominated notes at 1.000 %;

▪ $ 218 million of our senior unsecured notes at 2.950 %.

In January 2024, we repaid in full our 4.000 % senior unsecured notes in the aggregate principal amount of $ 776 million at maturity.

All of our notes are senior unsecured obligations and rank equally in right of payment with all of our existing and future senior unsecured indebtedness.

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▪ 2021 Debt Tender Offers and Redemption:

During the first quarter of 2021, we completed debt tender offers to purchase for cash certain of our long-term senior unsecured notes in an aggregate principal amount of $ 4,042 million.

Details of the debt tender offers were as follows:

(in millions) Principal Amount of Notes Purchased

2.850 % Notes due 2022

2.950 % Notes due 2023

4.000 % Notes due 2024

3.800 % Notes due 2024

4.400 % Notes due 2026

4.800 % Notes due 2029

9.950 % Notes due 2038

10.200 % Notes due 2039

6.200 % Notes due 2059

During the first quarter of 2021, we also redeemed all of our outstanding 3.490 % senior unsecured notes due to mature in 2022 in the aggregate principal amount of $ 1.0 billion.

During the first quarter of 2021, we (i) completed debt tender offers to purchase for cash certain of our senior unsecured notes in an aggregate principal amount of $ 4,042 million and (ii) redeemed all of our outstanding 3.490 % senior unsecured notes due to mature in 2022 in the aggregate principal amount of $ 1.0 billion.

As a result of the debt tender offers and redemption, during the first quarter of 2021, we recorded pre-tax losses on early extinguishment of debt of $ 649 million, which included premiums and fees of $ 623 million and the write-off of unamortized debt discounts and debt issuance costs of $ 26 million.

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 Guarantees:

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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The Parent is a holding company;

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

Neither the Guarantor nor other 100% owned subsidiaries of the Parent that are not guarantors of the Obligations are limited by contractual obligations on their ability to pay cash dividends or make other distributions with respect to their equity interests.

For a discussion of the fair value of our long-term debt and the designation of our Euro denominated senior unsecured notes as a net investment hedge of our investment in ABI, see Note 6.

Financial Instruments .

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

Neither the Guarantor nor other subsidiaries of the Parent that are not guarantors of the Obligations are limited by contractual obligations on their ability to pay cash dividends or make other distributions with respect to their equity interests.

Capital Stock

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— 412,569 412,569

Repurchases of common stock — ( 35,656,116 ) ( 35,656,116 )

Balances, December 31, 2021 2,805,961,317 ( 982,785,699 ) 1,823,175,618

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▪ Share Repurchases:

In January 2021, our Board of Directors authorized a $ 2.0 billion share repurchase program that it expanded to $ 3.5 billion in October 2021 (as expanded, the “January 2021 share repurchase program”).

In January 2021, our Board of Directors authorized a $ 2.0 billion share repurchase program that it expanded to $ 3.5 billion in October 2021 (as expanded, “January 2021 share repurchase program”).

We completed the January 2021 share repurchase program in December 2022.

In January 2023, our Board of Directors authorized a new $ 1.0 billion share repurchase program.

In January 2023, our Board of Directors authorized a $ 1.0 billion share repurchase program (“January 2023 share repurchase program”).

We completed the January 2023 share repurchase program in December 2023.

In January 2024, our Board of Directors authorized a new $ 1.0 billion share repurchase program, which we expect to complete by December 31, 2024.

The timing of share repurchases under this program depends upon marketplace conditions and other factors, and the program remains subject to the discretion of our Board.

Our total share repurchase activity was as follows for the years ending December 31:

January 2021 Share Repurchase Program

January 2023 Share Repurchase Program January 2021 Share Repurchase Program

(in millions, except per share data) 2023 2022 2021 Total

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$ 43.96 $ 47.83 $ 46.97 $ 47.42

We did no t repurchase any shares in 2020.

In 2020, our Board of Directors adopted, and shareholders approved, the Altria Group, Inc.

2020 Performance Incentive Plan (the “2020 Plan”) under which we may grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance stock units (“PSUs”) and other stock-based awards, as well as cash-based annual and long-term incentive awards to our employees.

2020 Performance Incentive Plan (“2020 Plan”) under which we may grant stock options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance stock units (“PSUs”) and other stock-based awards, as well as cash-based annual and long-term incentive awards to our employees.

Any awards granted under the 2020 Plan may be in the form of performance-based awards, including PSUs subject to the achievement or satisfaction of performance goals and performance cycles.

We may issue up to 25 million shares of common stock under the 2020 Plan.

In addition, under the 2015 Stock Compensation Plan for Non-Employee Directors (the “Directors Plan”), we may grant up to one million shares of common stock to members of the Board of Directors who are not employees of Altria.

In addition, under the 2015 Stock Compensation Plan for Non-Employee Directors (“Directors Plan”), we may grant up to one million shares of common stock to members of the Board of Directors who are not employees of Altria.

At December 31, 2023, we had 20,432,234 and 589,927 shares available to be granted under the 2020 Plan and the Directors Plan, respectively.

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(in millions) 2023 2022 2021

Net earnings attributable to Altria $ 5,764 $ 2,475 $ 4,467

Net earnings $ 8,130 $ 5,764 $ 2,475

Distributed and undistributed earnings attributable to share-based awards

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Earnings for basic and diluted EPS $ 8,113 $ 5,751 $ 2,464

Weighted-average shares for basic EPS

1,804 1,845 1,858

contingently issuable PSUs

Weighted-average shares for diluted EPS

1,804 1,845 1,859

Weighted-average shares for basic and diluted EPS 1,777 1,804 1,845

Unvested share-based payment awards that contain non-forfeitable rights to dividends or dividend equivalents are participating securities and, therefore, are included in our EPS calculation pursuant to the two-class method.

Other Comprehensive Earnings/Losses

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deferred income taxes

92 ( 60 ) 26 58

Other comprehensive earnings (losses), net of deferred income taxes

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Deferred income taxes

( 22 ) 18 — ( 4 )

Amounts reclassified to net earnings, net of

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Balances, December 31, 2023 $ ( 1,493 ) $ ( 1,195 ) $ 15 $ ( 2,673 )

(1) Primarily reflected our share of ABI’s currency translation adjustments and the impact of our designated net investment hedges related to our equity investment in ABI.

(1) Primarily reflects our share of ABI’s currency translation adjustments and the impact of our designated net investment hedges related to our investment in ABI.

For further discussion of designated net investment hedges, see Note 8.

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( 26 ) 88 122

39 ( 85 ) ( 76 )

Currency Translation Adjustments and Other (3)

Pre-tax amounts reclassified from accumulated other comprehensive losses to net earnings $ 13 $ 2 $ 81

(1) Amounts were included in net defined benefit plan costs.

(1) Amounts are included in net periodic benefit income, excluding service cost.

For further details, see Note 17.

Benefit Plans.

(2) Amounts were included in (income) losses from investments in equity securities.

(2) Amounts are included in (income) losses from investments in equity securities.

For further information, see Note 7.

Investments in Equity Securities.

(3) 2021 amounts were included in marketing, administration and research costs and are related to the Ste.

(3) 2021 amounts are included in marketing, administration and research costs and are related to the Ste.

Michelle Transaction.

For further details, see Note 15.

Benefit Plans.

In August 2022, the U.S.

Government enacted legislation commonly referred to as the Inflation Reduction Act.

The main provisions of the Inflation Reduction Act that we anticipate may impact us are (i) a 15% corporate alternative minimum tax (“Corporate AMT”) and (ii) a 1% excise tax on share repurchases, which we expect to record in equity on our consolidated statements of stockholders’ equity (deficit), in each case effective for tax years beginning after December 31, 2022.

We will be considered an “applicable corporation” for purposes of the new Corporate AMT.

Our regular federal income tax liability will generally exceed our Corporate AMT liability.

Certain unique circumstances, however, may result in a Corporate AMT liability, including when tax losses are reported in a different year than book losses.

Government enacted legislation commonly referred to as the Inflation Reduction Act that became effective January 1, 2023.

The main provisions of the Inflation Reduction Act that impact us are:

(i) a 15% corporate alternative minimum tax (“Corporate AMT”) and (ii) a 1% excise tax on share repurchases, which is recorded in equity on our consolidated statements of stockholders’ equity (deficit).

We are considered an “applicable corporation” for purposes of Corporate AMT.

We expect our regular federal income tax liability will generally exceed our Corporate AMT liability;

however, certain unique circumstances may result in our Corporate AMT liability exceeding our regular federal income tax liability, including when tax losses are reported in a different year than book losses.

For the year ended December 31, 2023, we made estimated payments based on a Corporate AMT liability as a result of tax losses we intend to claim related to our former investment in JUUL, as discussed below.

Earnings (losses) before income taxes and provision (benefit) for income taxes consisted of the following:

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federal income tax statute of limitations remains open for the year 2017 and forward, with years 2017 through 2020 currently under examination by the Internal Revenue Service (“IRS”) as part of an audit conducted in the ordinary course of business.

State statutes of limitations generally remain open for the year 2017 and forward.

State statutes of limitations will also generally remain open for the year 2017 and forward.

Certain of our state tax returns are currently under examination by various states as part of routine audits conducted in the ordinary course of business.

A reconciliation of the beginning and ending amount of unrecognized tax benefits was as follows:

A reconciliation of the beginning and ending unrecognized tax benefits was as follows:

For the Years Ended December 31,

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Balance at end of year $ 1,608 $ 69 $ 53

The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2022 was $ 44 million, along with $ 25 million affecting deferred taxes.

The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2023, was $ 35 million, along with $ 1,573 million affecting deferred taxes, a portion of which would also impact the effective tax rate due to the release of a valuation allowance, as discussed below.

The amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate at December 31, 2022, was $ 44 million, along with $ 25 million affecting deferred taxes.

For the year ended December 31, 2023, we recognized a $ 6.4 billion ordinary loss for cash tax purposes with respect to a portion of our tax basis associated with our former investment in JUUL.

For financial statement purposes, we fully reserved for the tax benefit associated with this ordinary loss by recording an unrecognized tax benefit, pending the IRS’s review of our tax position.

We recorded a tax benefit associated with the ordinary loss of $ 1,505 million and a reduction to our current income taxes payable.

We also recorded a $ 1,548 million increase in a long-term liability for unrecognized tax benefits related to this tax position, partially offset by a $ 43 million deferred federal benefit for state taxes.

There was no impact to our consolidated statement of earnings.

In addition, the $ 1,548 million increase in unrecognized tax benefits was partially offset by $ 428 million associated with an indirect deferred tax benefit caused by our estimated Corporate AMT credit carryforward, resulting in a net increase of $ 1,120 million in other liabilities on our consolidated balance sheet at December 31, 2023.

If recognized for financial statement purposes in a future period, this unrecognized tax benefit would impact the effective tax rate due to the release of a valuation allowance against this temporary difference.

At December 31, 2023, 2022 and 2021, the amount of accrued interest and penalties on our consolidated balance sheets was $ 36 million, $ 18 million and $ 11 million, respectively.

For the years ended December 31, 2022, 2021 and 2020, we recognized in our consolidated statements of earnings $ 8 million, $( 4 ) million and $ 4 million, respectively, of gross interest (income) expense associated with uncertain tax positions.

For the years ended December 31, 2023, 2022 and 2021, we recognized in our consolidated statements of earnings $ 20 million, $ 8 million and $( 4 ) million, respectively, of gross interest (income) expense and penalties associated with uncertain tax positions.

We recognize accrued interest and penalties associated with uncertain tax positions as part of the tax provision.

We are subject to income taxation in many jurisdictions.

Unrecognized tax benefits reflect the difference between tax positions taken or expected to be taken on income tax returns and the amounts recognized in the financial statements.

Unrecognized tax benefits reflect the differences between tax positions we have taken or expect to take on income tax returns and the amounts recognized in our financial statements.

Resolution of the related tax positions with the relevant tax authorities may take many years to complete, and such timing is not entirely within our control.

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Effective tax rate $ 2,798 25.6 % $ 1,625 22.0 % $ 1,349 35.3 %

The tax provision (benefit) in 2023 included state tax expense, net of federal benefit, of $ 463 million and tax expense of $ 53 million for a valuation allowance recorded against a deferred tax asset related to the disposition of our former investment in JUUL.

The tax provision (benefit) in 2022 included tax benefits of $ 664 million due primarily to the release of valuation allowances related to the anticipated ability to utilize a portion of existing capital losses.

These tax benefits were partially offset by tax expense of $ 306 million for a valuation allowance recorded against a deferred tax asset related to the decreases in the estimated fair value of our investment in JUUL and by the state tax treatment of the impairment charge on our equity investment in ABI.

The tax provision (benefit) in 2021 was impacted by the state tax treatment of the impairment charge on our equity investment in ABI.

These tax benefits were partially offset by tax expense of $ 306 million for a valuation allowance recorded against a deferred tax asset related to the decreases in the estimated fair value of our former investment in JUUL and by the state tax treatment of the impairment charge on our investment in ABI.

The tax provision (benefit) in 2021 was impacted by the state tax treatment of the impairment charge on our investment in ABI.

The tax provision (benefit) in 2021 also included net tax expense of $ 128 million related to our investment in Cronos, including an addition to a valuation allowance on a deferred tax asset.

The tax provision (benefit) in 2020 included tax expense of $ 612 million for a valuation allowance on a deferred tax asset related to our impairment of our investment in JUUL in the third quarter of 2020, partially offset by a $ 24 million tax benefit reflecting the decrease of

a portion of the valuation allowance related to a reduction of a deferred tax asset associated with an increase in the estimated fair value of JUUL in the fourth quarter of 2020.

The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following at December 31:

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Settlement charges 644 729

Investment in JUUL 3,001 2,652

JUUL related losses 2,028 3,001

Investment in Cronos 397 407

IQOS deferred gain

Net operating losses and tax credit carryforwards 217 31

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Investment in ABI ( 1,391 ) ( 1,226 )

Finance assets, net — ( 29 )

Accrued pension costs ( 81 ) ( 70 )

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Net deferred income tax liabilities $ ( 2,771 ) $ ( 2,822 )

At December 31, 2022, we had estimated gross state tax net operating losses of $ 19 million that, if unused, will expire in 2035 through 2038.

At December 31, 2023, we had estimated gross federal, state and foreign tax net operating losses (“NOLs”) of $ 644 million, $ 700 million and $ 38 million, respectively.

The federal NOLs and a majority of the foreign NOLs have indefinite carryforward periods.

If not used, a majority of the state NOLs will expire in 2039 through 2043.

A reconciliation of the beginning and ending valuation allowances was as follows:

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Foreign currency translation ( 1 ) 4 ( 3 )

Additions to valuation allowance due to NJOY Transaction (no impact to earnings) 12 — —

Reductions to valuation allowance offset to deferred tax asset (no impact to earnings) ( 663 ) — —

Balance at end of year $ 2,256 $ 2,800 $ 3,097

We determine deferred tax assets and liabilities based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse.

We determine deferred tax assets and liabilities based on the differences between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse.

We record a valuation allowance when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

1 unchanged sentence

In reaching this determination, we consider the character of the assets and the possible sources of taxable income of the appropriate character within the available carryback and carryforward periods available under the tax law.

The additions to valuation allowances during 2022 were primarily due to deferred tax assets recorded in connection with decreases in the estimated fair value of our investment in JUUL.

The reductions to valuation allowances during 2022 were primarily due to the anticipated ability to utilize a portion of existing losses related to our investment in JUUL and the abandonment of our Cronos warrant.

The cumulative valuation allowance at December 31, 2022 was primarily attributable to deferred tax assets recorded in connection with our investment in JUUL ($ 2,394 million) and our Investment in Cronos ($ 379 million).

As has occurred in prior periods, there is a potential that sufficient positive evidence may be available in future periods to cause us to reduce or eliminate the valuation allowance on certain deferred tax assets.

That change to the valuation allowance would result in the recognition of previously unrecognized deferred tax assets and a decrease in income tax expense in the period the release is recorded.

The additions to valuation allowances during 2023 were primarily due to deferred tax assets recorded in connection with our former investment in JUUL.

The reductions to valuation allowances during 2023 were primarily due to the reduction of a deferred tax asset for the portion of our JUUL capital losses that is now part of our tax basis in the shares of a foreign subsidiary.

This outside basis difference of the foreign subsidiary is not recognized as a deferred tax asset since we do not expect the temporary difference to reverse in the foreseeable future.

The cumulative valuation allowance at December 31, 2023 was primarily attributable to deferred tax assets recorded in connection with our tax basis in the shares of a domestic subsidiary ($ 1,808 million) and our investment in Cronos ($ 397 million).

The additions to valuation allowances during 2022 were primarily due to deferred tax assets recorded in connection with decreases in the estimated fair value of our former investment in JUUL.

The reductions to valuation allowances during 2022 were primarily due to the anticipated ability to utilize a portion of existing losses related to our former investment in JUUL and the abandonment of our Cronos warrant.

The cumulative valuation allowance at December 31, 2022 was primarily attributable to deferred tax assets recorded in connection with our former investment in JUUL ($ 2,394 million) and our investment in Cronos ($ 379 million).

The changes in valuation allowances during 2021 were primarily due to deferred tax assets recorded in connection with our investment in Cronos.

The cumulative valuation allowance at December 31, 2021 was primarily attributable to deferred tax assets recorded in connection with our investment in JUUL ($ 2,652 million) and our Investment in Cronos ($ 407 million).

The 2020 valuation allowance was primarily attributable to deferred tax assets recorded in connection with the impairments of our investment in JUUL ($ 2,610 million), and our Investment in Cronos ($ 121 million).

For a discussion regarding the change in estimated fair value of our investment in JUUL, the impairment of our investment in ABI and the impairment of our Investment in Cronos, see Note 5.

The cumulative valuation allowance at December 31, 2021 was primarily attributable to deferred tax assets recorded in connection with our former investment in JUUL ($ 2,652 million) and our investment in Cronos ($ 407 million).

For a discussion regarding our former investment in JUUL, the impairment of our investment in ABI and our investment in Cronos, see Note 7.

Investments in Equity Securities .

Segment Reporting

Our operating companies’ products include (i) smokeable tobacco products, consisting of combustible cigarettes manufactured and sold by PM USA, and machine-made large cigars and pipe tobacco manufactured and sold by Middleton;

At December 31, 2023 our reportable segments were (i) smokeable products, consisting of combustible cigarettes manufactured and sold by PM USA, and machine-made large cigars and pipe tobacco manufactured and sold by Middleton;

and (ii) oral tobacco products, consisting of MST and snus products manufactured and sold by USSTC, and oral nicotine pouches manufactured and sold by Helix.

These products constituted our reportable segments of smokeable products and oral tobacco products at December 31, 2022.

The financial services business, the IQOS System heated tobacco business and Helix ROW were included in all other.

Our all other category included (i) the financial results of NJOY (beginning June 1, 2023);

(ii) Horizon;

(iii) Helix ROW;

(iv) our former financial services business, which completed the wind-down of its portfolio of finance assets in 2022;

and (v) the IQOS System heated tobacco business.

Prior to the sale of our wine business on October 1, 2021, wine produced and/or sold by Ste.

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OCI for our segments is defined as operating income before general corporate expenses and amortization of intangibles.

Interest and other debt expense, net, along with net periodic benefit cost (income), excluding service cost, and provision for income taxes are centrally managed at the corporate level and, accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by our CODM.

Interest and other debt expense, net, along with net periodic benefit income, excluding service cost, and provision for income taxes are centrally managed at the corporate level and, accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by our CODM.

We do not disclose information about total assets by segment because such information is not reported to or used by our CODM.

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Oral tobacco products 2,667 2,580 2,608

Wine — 494 614

All other 60 40 45

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Oral tobacco products 1,722 1,632 1,659

Wine — 21 ( 360 )

All other ( 74 ) ( 36 ) ( 97 )

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(Income) losses from investments in equity securities ( 243 ) 3,641 5,979

Impairment of JUUL equity securities — — 2,600

Loss on Cronos-related financial instruments — 15 148

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Substantially all of our net revenues for the years ended December 31, 2023, 2022 and 2021 were from sales generated in the United States.

PM USA, USSTC, Helix and Middleton’s customer, Performance Food Group Company, which acquired Core-Mark Holding Company, Inc.

in 2021, accounted for approximately 24 % and 23 % of our consolidated net revenues for the years ended December 31, 2022 and 2021, respectively.

Core-Mark Holding Company, Inc.

accounted for 17 % of our consolidated net revenues for the year ended December 31, 2020.

In addition, McLane Company, Inc., accounted for approximately 23 %, 23 % and 26 % of our consolidated net revenues for the years ended December 31, 2022, 2021 and 2020, respectively.

PM USA, USSTC, Helix, Middleton and NJOY’s customer, Performance Food Group Company, accounted for approximately 25 %, 24 % and 23 % of our consolidated net revenues for the years ended December 31, 2023, 2022 and 2021, respectively.

In addition, McLane Company, Inc., accounted for approximately 23 % of our consolidated net revenues for the years ended December 31, 2023, 2022 and 2021.

Substantially all of these net revenues were reported in the smokeable products and oral tobacco products segments.

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Total capital expenditures $ 196 $ 205 $ 169

The comparability of OCI for our reportable segments and the all other category was affected by the following:

The comparability of OCI for our reportable segments was affected by the following:

▪ Non-Participating Manufacturer (“NPM”) Adjustment Items:

We recorded pre-tax (income) expense for NPM adjustment items as follows:

We recorded pre-tax income for NPM adjustment items as follows:

For the Years Ended December 31,

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Total $ ( 50 ) $ ( 68 ) $ ( 76 )

We recorded the amounts in the table shown above for the smokeable products segment as (reductions) increases to cost of sales in our consolidated statements of earnings, which (increased) decreased OCI in our smokeable products segment.

NPM adjustment items result from the resolutions of certain disputes with states and territories related to the NPM adjustment provision under the Master Settlement Agreement (such dispute resolutions are referred to as “NPM Adjustment Items” and are more fully described in Health Care Cost Recovery Litigation in Note 17.

We recorded the amounts in the table shown above for the smokeable products segment as reductions to cost of sales in our consolidated statements of earnings, which resulted in increased OCI in our smokeable products segment.

For additional information, see Health Care Cost Recovery Litigation in Note 19.

Contingencies .

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We included these costs in marketing, administration and research costs in our consolidated statements of earnings.

▪ Wine Business Strategic Reset:

We recorded pre-tax implementation costs of $ 411 million for the year ended December 31, 2020, in our former wine segment, associated with a strategic reset initiated in the first quarter of 2020 intended to maximize Ste.

Michelle’s profitability and achieve improved long-term cash flow generation.

Substantially all of the charges consisted of the following:

(i) write-off of inventory ($ 292 million) as Ste.

Michelle no longer believed that the benefit of the blending and production plans for its inventory outweighed inventory carrying cost given the reduced product volume demand;

and (ii) estimated losses on future non-cancelable grape purchase commitments that Ste.

Michelle believed no longer had a future economic benefit ($ 100 million).

▪ PMCC Residual Value Adjustments:

For the year ended December 31, 2020, we recorded pre-tax charges of $ 125 million (as a reduction to net revenues in the all other category) related to the decrease in unguaranteed residual values of certain PMCC leased assets.

There were no such adjustments in 2022 or 2021.

▪ COVID-19 Special Items:

We recorded net pre-tax charges of $ 50 million ($ 41 million in the smokeable products segment and $ 9 million in the oral tobacco products segment) in our consolidated statement of earnings for the year ended December 31, 2020 related to the COVID-19 pandemic.

These net pre-tax charges, which were directly related to disruptions caused by or efforts to mitigate the impact of the COVID-19 pandemic, were all recorded in cost of sales and included premium pay, personal protective equipment and health screenings, which were partially offset by certain employment tax credits.

Benefit Plans

Our subsidiaries sponsor noncontributory defined benefit pension plans covering certain employees of Altria and our subsidiaries.

Employees hired on or after a date specific to their employee group, except for certain employees of UST’s subsidiaries and Middleton, are not eligible to participate in these noncontributory defined benefit pension plans but are instead eligible to participate in a defined contribution plan with enhanced benefits.

Employees hired on or after a date specific to their employee group are not eligible to participate in these noncontributory defined benefit pension plans but are instead eligible to participate in a defined contribution plan with enhanced benefits.

We also provide postretirement health care and other benefits to certain retired employees.

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Plan amendments — — ( 3 ) 2

Divestiture — ( 193 ) (1) — —

Benefit obligation at end of year 6,428 6,292 1,246 1,275

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( 460 ) ( 462 ) ( 33 ) ( 28 )

Divestiture — ( 145 ) (1) — —

Fair value of plan assets at end of year 6,775 6,603 102 122

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$ 347 $ 311 $ ( 1,144 ) $ ( 1,153 )

Amounts recognized on our consolidated balance sheets were as follows:

Amounts recognized on our consolidated balance sheets:

$ 506 $ 469 $ — $ —

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$ 347 $ 311 $ ( 1,144 ) $ ( 1,153 )

(1) Divestiture of benefit obligations and plan assets related to the Ste.

Michelle Transaction.

The table above presents the projected benefit obligation for our pension plans.

The accumulated benefit obligation, which represents benefits earned to date, for our pension plans was $ 6.3 billion and $ 6.1 billion at December 31, 2023 and 2022, respectively.

Actuarial (gains) losses for the years ended December 31, 2022 and 2021 for our pension and postretirement plans were due primarily to changes in the discount rate.

Actuarial (gains) losses for our pension plans for the year ended 2021 were further impacted by changes to mortality rate assumptions.

Plan amendments to our postretirement plans for the year ended December 31, 2021 included several plan changes announced in the second quarter of 2021 to our salaried retiree healthcare plans, primarily changing its post-age 65 coverage to a private medicare marketplace.

These amendments triggered a plan remeasurement in the second quarter of 2021, resulting in a reduction of $ 432 million (including discount rate impact and other changes) to our postretirement obligation in the second quarter of 2021 and a corresponding reduction to accumulated other comprehensive losses.

For pension plans with accumulated benefit obligations in excess of plan assets at December 31, 2022, our accumulated benefit obligation and fair value of plan assets were $ 134 million and $ 0 million , respectively.

For pension plans with accumulated benefit obligations in excess of plan assets at December 31, 2021, our accumulated benefit obligation and fair value of plan assets were $ 176 million and $ 0 million , respectively.

For pension plans with projected benefit obligations in excess of plan assets at December 31, 2022, our projected benefit obligation and fair value of plan assets were $ 158 million and $ 0 million , respectively.

For pension plans with projected benefit obligations in excess of plan assets at December 31, 2021, our projected benefit obligation and fair value of plan assets were $ 227 million and $ 0 million , respectively.

Actuarial losses for our pension plans for the year ended December 31, 2023 were due primarily to a lower discount rate.

Actuarial gains for our postretirement plans for the year ended December 31, 2023 were due primarily to a planned change in healthcare provider and other items, partially offset by actuarial losses attributable to a lower discount rate.

Actuarial gains for the year ended December 31, 2022 for our pension and postretirement plans were due primarily to a higher discount rate.

For pension plans with accumulated benefit obligations in excess of plan assets at December 31, 2023 and 2022, our accumulated benefit obligation was $ 142 million and $ 134 million, respectively.

Additionally, at December 31, 2023 and 2022, there were no plan assets for these plans.

For pension plans with projected benefit obligations in excess of plan assets at December 31, 2023 and 2022, our projected benefit obligation was $ 159 million and $ 158 million, respectively.

Additionally, at December 31, 2023 and 2022, there were no plan assets for these plans.

At December 31, 2023 and 2022, our accumulated postretirement benefit obligations were in excess of plan assets for all postretirement plans.

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Amortization:

Net loss 96 131 134 18 22 10

Net loss (gain) 4 96 131 ( 2 ) 18 22

Prior service cost (credit) 6 6 5 ( 40 ) ( 45 ) ( 46 )

Settlement — — 10 — — —

Net periodic benefit cost (income) $ ( 103 ) $ ( 121 ) $ ( 134 ) $ 30 $ 24 $ 20

For the year ended December 31, 2020, we recorded the settlement amount as a change to net losses in other comprehensive earnings/losses.

The following assumptions were used to determine our net periodic benefit cost for the years ended December 31:

The following assumptions were used to determine our net periodic benefit cost (income) for the years ended December 31:

Pension Postretirement

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In managing our pension assets, we implement a liability-driven investment framework that aligns plan assets with liabilities.

The current equity/fixed income allocation of 20 %/ 80 % is designed to balance pension liability hedging and asset growth in order to maintain our plan’s funded status and cover incremental service accruals and interest cost.

The current equity/fixed income target allocation of 20 %/ 80 % is designed to balance pension liability hedging and asset growth in order to maintain our plan’s funded status and cover incremental service accruals and interest cost.

Liability hedging is achieved through investing in rate-sensitive fixed income securities, primarily corporate bonds and U.S.

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Treasury and foreign government securities and all other investments 25 % (1)

(1) Amount includes U.S Treasury and foreign government securities ( 19 %) and asset based securities and all other investments ( 9 %).

(1) Amount includes U.S Treasury and foreign government securities ( 19 %) and asset backed securities and all other investments ( 6 %).

Our pension and postretirement plan asset performance is monitored on an ongoing basis to adjust the mix as necessary to achieve our target allocations.

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For pension plan assets, our allocation to below investment grade securities represented approximately 11 % of the fixed income holdings or approximately 9 % of our total plan assets at December 31, 2023.

Our allocation to emerging markets represented less than 1 % of total plan assets at December 31, 2022.

Our allocation to emerging markets represented approximately 2 % of total plan assets at December 31, 2023.

For postretirement plan assets, our allocation to below investment grade securities represented approximately 9 % of the fixed income holdings or approximately 4 % of our total plan assets at December 31, 2023.

There were no postretirement plan assets invested in emerging markets at December 31, 2022.

Also, less than 1 % of postretirement plan assets was invested in emerging markets at December 31, 2023.

Our risk management practices for our pension and postretirement plans include (i) ongoing monitoring of asset allocation, investment performance and investment managers’ compliance with their investment guidelines, (ii) periodic rebalancing between equity and debt asset classes and (iii) annual actuarial re-measurement of plan liabilities.

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Total investments measured at NAV $ 533 $ 436

Other ( 25 ) 130

Fair value of plan assets, net $ 6,775 $ 6,603

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Below investment grade and no rating

— 7 7 — 10 10

Other, net 1 3 4 — 3 3

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Asset backed securities are fixed income securities such as mortgage backed securities and auto loans that are collateralized by pools of underlying assets that are unable to be sold individually.

They are valued at a price which is based on a compilation of primarily observable market information or a broker quote in a non-active over-the-counter market.

They are valued at a price that is based on a compilation of primarily observable market information or a broker quote in a non-active over-the-counter market.

▪ Collective Investment Funds :

Collective investment funds consist of funds that are intended to mirror indices such as Standard & Poor’s 500 Index and MSCI EAFE Index.

They are valued on the basis of the relative interest of each participating investor in the fair value of the underlying assets of each of the respective collective investment funds.

The underlying assets are valued based on the net asset value (“NAV”), which is provided by the investment account manager as a practical expedient to estimate fair value.

They are valued on the basis of the relative interest of each participating investor in the fair value of the underlying assets of each of the respective collective investment funds, which are valued based on the net asset value (“NAV”), and are provided by the investment account manager as a practical expedient to estimate fair value.

These investments are not classified by level but are disclosed to permit reconciliation to the fair value of plan assets.

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employment Total

Net loss $ ( 2,180 ) $ 1 $ ( 34 ) $ ( 2,213 )

Net (loss) gain $ ( 2,236 ) $ 19 $ ( 39 ) $ ( 2,256 )

Prior service (cost) credit ( 18 ) 256 ( 5 ) 233

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Amounts recorded in accumulated other comprehensive losses $ ( 1,669 ) $ 208 $ ( 32 ) $ ( 1,493 )

$ ( 1,633 ) $ 226 $ ( 29 ) $ ( 1,436 )

We recorded the following amounts in accumulated other comprehensive losses at December 31, 2022:

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employment Total

Net loss $ ( 2,093 ) $ ( 362 ) $ ( 32 ) $ ( 2,487 )

Net (loss) gain $ ( 2,180 ) $ 1 $ ( 34 ) $ ( 2,213 )

Prior service (cost) credit

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Deferred income taxes

Amounts recorded in accumulated other comprehensive losses

571 ( 68 ) 10 513

Amounts recorded in accumulated other comprehensive losses $ ( 1,633 ) $ 226 $ ( 29 ) $ ( 1,436 )

The movements in other comprehensive earnings (losses) for the year ended December 31, 2023 were as follows:

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employment Total

Amounts reclassified to net earnings as components of net periodic benefit cost:

Amounts reclassified to net earnings as components of net periodic benefit cost (income):

Amortization:

Net loss $ 96 $ 18 $ 13 $ 127

Prior service cost/credit 6 ( 45 ) — ( 39 )

Other expense (income):

Net loss — — — —

Net loss (gain) $ 4 $ ( 2 ) $ 6 $ 8

Prior service cost (credit) 6 ( 40 ) — ( 34 )

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Other movements during the year:

Net loss $ ( 183 ) $ 345 $ ( 15 ) $ 147

Net (loss) gain $ ( 60 ) $ 20 $ ( 11 ) $ ( 51 )

Prior service (cost) credit — 3 — 3

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(in millions) Pension Post-retirement Post-employment Total

Amounts reclassified to net earnings as components of net periodic benefit cost:

Amounts reclassified to net earnings as components of net periodic benefit cost (income):

Amortization:

Net loss $ 131 $ 22 $ 10 $ 163

Prior service cost/credit 5 ( 46 ) — ( 41 )

Other expense (income):

Net loss — — — —

Net loss (gain) $ 96 $ 18 $ 13 $ 127

Prior service cost (credit) 6 ( 45 ) — ( 39 )

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Other movements during the year:

Net loss $ 465 $ 157 $ 2 $ 624

Net (loss) gain $ ( 183 ) $ 345 $ ( 15 ) $ 147

Prior service (cost) credit — ( 2 ) — ( 2 )

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employment Total

Amounts reclassified to net earnings as components of net periodic benefit cost:

Amounts reclassified to net earnings as components of net periodic benefit cost (income):

Amortization:

Net loss $ 134 $ 10 $ 19 $ 163

Prior service cost/credit 5 ( 30 ) — ( 25 )

Other expense (income):

Net loss 10 — — 10

Net loss (gain) $ 131 $ 22 $ 10 $ 163

Prior service cost (credit) 5 ( 46 ) — ( 41 )

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Other movements during the year:

Net loss $ ( 268 ) $ ( 162 ) $ ( 18 ) $ ( 448 )

Net (loss) gain $ 465 $ 157 $ 2 $ 624

Prior service (cost) credit ( 8 ) 345 — 337

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Contingencies

Legal proceedings covering a wide range of matters are pending or threatened in various United States and foreign jurisdictions against Altria and certain of our subsidiaries, including PM USA and USSTC, as well as our indemnitees and investees.

Various types of claims may be raised in these proceedings, including product liability, unfair trade practices, antitrust, income tax liability, contraband shipments, patent infringement, employment matters, claims alleging violation of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), claims for contribution and claims of competitors, shareholders or distributors.

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Furthermore, in those cases where plaintiffs are successful, we also may be required to pay interest and attorneys’ fees.

Although PM USA has historically been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from seeking to collect judgments while adverse verdicts have been appealed, there remains a risk that such relief may not be obtainable in all cases.

Although PM USA historically has been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from seeking to collect judgments while adverse verdicts have been appealed, there remains a risk that such relief may not be obtainable in all cases.

This risk has been substantially reduced given that 47 states and Puerto Rico limit the dollar amount of bonds or require no bond at all.

As discussed below, however, tobacco litigation plaintiffs have challenged the constitutionality of Florida’s bond cap statute in several cases and plaintiffs may challenge state bond cap statutes in other jurisdictions as well.

However, tobacco litigation plaintiffs have challenged the constitutionality of Florida’s bond cap statute in several cases, and plaintiffs may challenge state bond cap statutes in other jurisdictions as well.

Such challenges may include the applicability of state bond caps in federal court.

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

and (iii) accordingly, management has not

provided any amounts in our consolidated financial statements for unfavorable outcomes, if any.

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

Litigation defense costs are expensed as incurred.

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Shareholder class action and shareholder derivative lawsuits (2)

JUUL-related settlements (3)

Related interest costs

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(1) Includes judgments, settlements and fee disputes associated with tobacco and health and certain other litigation.

(2) See S hareholder Class Action and Shareholder Derivative Lawsuits below for discussions of the shareholder class action case and related settlement and the pending settlement of the federal and state shareholder derivative lawsuits.

The accrued liability for tobacco and health and certain other litigation items, including related interest costs, was included in accrued liabilities on our consolidated balance sheets.

Pre-tax charges for tobacco and health and certain other litigation were included in marketing, administration and research costs on our consolidated statements of earnings.

Pre-tax charges for related interest costs were included in interest and other debt expense, net on our consolidated statements of earnings.

After exhausting all appeals in those cases resulting in adverse verdicts associated with tobacco-related litigation, since October 2004, PM USA has paid judgments and settlements (including related costs and fees) totaling approximately $ 954 million and interest totaling approximately $ 230 million as of December 31, 2022.

(2) See Shareholder Class Action and Shareholder Derivative Lawsuits - Federal and State Shareholder Derivative Lawsuits below for a discussion of the settlement of the federal and state shareholder derivative lawsuits.

(3) Includes the settlement of certain e-vapor product litigation relating to JUUL e-vapor products and the e-vapor product litigation brought by the attorneys general of Minnesota and Alaska.

See E-vapor Product Litigation below for a discussion of these settlements.

The accrued liability for tobacco and health and certain other litigation items, including related interest costs, was included in accrued liabilities and other liabilities on our consolidated balance sheets.

Pre-tax charges for tobacco and health and certain other litigation were included in marketing, administration and research costs in our consolidated statements of earnings.

Pre-tax charges for related interest costs were included in interest and other debt expense, net in our consolidated statements of earnings.

After exhausting all appeals in those cases resulting in adverse verdicts associated with tobacco-related litigation, since October 2004, PM USA has paid judgments and settlements (including related costs and fees) totaling approximately $ 1 billion and interest totaling approximately $ 241 million as of December 31, 2023.

These amounts include payments for Engle progeny judgments (and related costs and fees) totaling approximately $ 440 million and related interest totaling approximately $ 60 million.

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(ii) health care cost recovery cases brought by governmental (both domestic and foreign) plaintiffs seeking reimbursement for health care expenditures allegedly caused by cigarette smoking and/or disgorgement of profits;

(iii) e-vapor cases alleging violation of RICO, fraud, failure to warn, design defect, negligence, antitrust and unfair trade practices;

(iii) e-vapor cases alleging violation of RICO, fraud, failure to warn, design defect, negligence, antitrust, patent infringement and unfair trade practices;

and (iv) other tobacco-related litigation described below.

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(1) Includes as of December 31, 2023, 16 cases filed in Illinois, 16 cases filed in New Mexico, 58 cases filed in Massachusetts and 48 non- Engle cases filed in Florida.

Does not include individual smoking and health cases brought by or on behalf of plaintiffs in Florida state and federal courts following the decertification of the Engle case (these Engle progeny cases are discussed below in Smoking and Health Litigation - Engle Class Action ).

Does not include individual smoking and health cases brought by or on behalf of plaintiffs in Florida state and federal courts following the decertification of the Engle class (these Engle progeny cases are discussed below in Smoking and Health Litigation - Engle Progeny Cases ).

Also does not include 1,385 cases brought by flight attendants seeking compensatory damages for personal injuries allegedly caused by exposure to environmental tobacco smoke (“ETS”).

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(2) See Health Care Cost Recovery Litigation - Federal Government’s Lawsuit below.

(3) Includes as of December 31, 2022, 57 class action lawsuits, 3,830 individual lawsuits and 1,396 “third party” lawsuits relating to JUUL e-vapor products, which include school districts, state and local government, tribal and healthcare organization lawsuits.

JUUL is an additional named defendant in each of these lawsuits.

The 57 class action lawsuits include 32 cases in the Northern District of California (“Multidistrict Litigation” or “MDL”) involving plaintiffs whose claims were previously included in other class action complaints but were refiled as separate stand-alone class actions for procedural and other reasons.

(3) Includes as of December 31, 2023, 57 class action lawsuits, 3,614 individual lawsuits and 1,506 “third party” lawsuits relating to the Multidistrict Litigation discussed under E-vapor Product Litigation below.

The 57 class action lawsuits include 32 cases in the Northern District of California involving plaintiffs whose claims were previously included in other class action complaints but were refiled as separate stand-alone class actions for procedural and other reasons.

In May 2023, we reached agreement on terms to resolve the majority of the Multidistrict Litigation lawsuits.

Also includes three patent infringement lawsuits filed against us and certain of our affiliates.

For further discussion of the pending Multidistrict Litigation settlement and patent infringement litigation, see E-vapor Product Litigation below.

(4) Includes as of December 31, 2023, one inactive smoking and health case alleging personal injury and purporting to be brought on behalf of a class of individual plaintiffs and two inactive class action lawsuits alleging that use of the terms “Lights” and “Ultra Lights” constitute deceptive and unfair trade practices, common law or statutory fraud, unjust enrichment, breach of warranty or violations of RICO.

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Tobacco-Related Cases Set for Trial:

As of January 27, 2023, two Engle progeny cases, two individual smoking and health case and one e-vapor case are set for trial through March 31, 2023.

As of January 29, 2024, no Engle progeny cases, three individual smoking and health case and no e-vapor cases are set for trial through March 31, 2024.

Trial dates are subject to change.

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Verdicts in favor of PM USA and other defendants were returned in 49 of the 80 cases.

These 46 cases were tried in Alaska ( 1 ), California ( 7 ), Connecticut ( 1 ), Florida ( 10 ), Louisiana ( 1 ), Massachusetts ( 6 ), Mississippi ( 1 ), Missouri ( 4 ), New Hampshire ( 1 ), New Jersey ( 1 ), New York ( 5 ), Ohio ( 2 ), Pennsylvania ( 1 ), Rhode Island ( 1 ), Tennessee ( 2 ) and West Virginia ( 2 ).

One case in Massachusetts, Main , where the verdict was initially returned in favor of PM USA, was reversed on appeal and remanded for a new trial.

Of the 31 non- Engle progeny cases in which verdicts were returned in favor of plaintiffs, 26 have reached final resolution.

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Charts listing certain verdicts for plaintiffs in the Engle progeny cases can be found in Smoking and Health Litigation - Engle Progeny Trial Results below.

In September 2022, a jury in a Florida state court returned a verdict in favor of plaintiff and against PM USA and R.J.

Reynolds Tobacco Company awarding approximately $ 4.5 million in compensatory damages and allocating 13 % of the fault to PM USA.

applying comparative fault, PM USA’s portion of the compensatory damages is less than $ 1 million.

In December 2023, a jury in a Hawaii state court returned a verdict in favor of plaintiff and against PM USA, awarding less than $ 1 million in compensatory damages and allocating 39 % of the fault to PM USA.

The jury found that plaintiff was not entitled to punitive damages.

Final judgment not yet been entered.

We intend to file post-trial motions challenging the verdict and will, if necessary, appeal.

Ricapor-Hall :

In August 2023, a jury in a Hawaii state court returned a verdict in favor of plaintiff and against PM USA, awarding $ 6 million in compensatory damages and $ 8 million in punitive damages.

In October 2023, the court entered judgment against PM USA for

$ 11 million, having reduced the compensatory damages award to $ 3 million based on the jury’s finding on comparative fault and a set-off against plaintiff’s settlements with other defendants, and we filed post-trial motions challenging the verdict.

If necessary, we will appeal any portion of the judgment that remains following resolution of the post-trial motions.

In May 2023, a jury in a Pennsylvania state court returned a verdict in favor of plaintiff and against PM USA, awarding less than $ 1 million in compensatory damages and allocating 50 % of the fault to PM USA.

Despite the comparative fault finding, the compensatory damages award would not have been reduced due to the jury’s finding for plaintiff on the strict liability claim.

Plaintiff’s claim for punitive damages was dismissed prior to the trial.

In lieu of appealing the trial court’s verdict, PM USA settled plaintiff’s claims in July 2023 and recorded a pre-tax charge of less than $ 1 million in the third quarter of 2023.

In February 2023, a jury in a Massachusetts state court returned a verdict in favor of plaintiff and against PM USA, awarding $ 5 million in compensatory damages.

There was no claim for punitive damages.

The trial court denied PM USA’s post-trial motions.

Both parties have appealed.

Following the denial of PM USA’s post-trial motions, PM USA appealed the judgment to the Appeals Court of Massachusetts, and the appeal remains pending.

In September 2022, a jury in a Massachusetts state court returned a verdict in favor of plaintiff and against PM USA, awarding approximately $ 8 million in compensatory damages and $ 1 billion in punitive damages.

We intend to file post-trial motions challenging the award and, if necessary, an appeal.

In February 2020, a jury in a Florida state court returned a verdict in favor of plaintiff and against PM USA, awarding approximately $ 11 million in compensatory damages.

There was no claim for punitive damages.

PM USA appealed the trial court verdict to the Third District Court of Appeal and, in September 2021, the appellate court reversed the trial court’s decision and found in favor of PM USA.

Plaintiff moved for a rehearing before the Third District Court of Appeal, which the court denied in March 2022.

In April 2022, plaintiff filed a notice to invoke the discretionary jurisdiction of the Florida Supreme Court.

In July 2022, the Florida Supreme Court denied plaintiff’s motion for discretionary review.

In September 2023, the court denied PM USA’s motion for a new trial and partially granted PM USA’s motion for remittitur, reducing the punitive damages award to $ 56 million.

In December 2023, the court entered a final judgment awarding plaintiff $ 8 million in compensatory damages, $ 56 million in punitive damages and prejudgment interest.

PM USA intends to appeal.

In September 2019, a jury in a Massachusetts state court returned a verdict in favor of plaintiffs and against PM USA, awarding approximately $ 10 million in compensatory damages.

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In February 2021, the trial court awarded plaintiffs attorneys’ fees and costs in the amount of approximately $ 2.3 million.

In July 2021, following denial of PM USA’s post-trial motions, PM USA appealed the judgment to the Appeals Court of Massachusetts.

In September 2022, the Massachusetts Supreme Judicial Court issued an order taking jurisdiction over the appeal, which remains pending.

PM USA appealed the judgment, and, in May 2023, the Massachusetts Supreme Judicial Court affirmed the trial court judgment and orders denying PM USA’s post-trial motions, concluding the case.

We recorded a pre-tax charge of approximately $ 48 million and paid the recorded amount in the second quarter of 2023.

Federal Government’s Lawsuit :

See Health Care Cost Recovery Litigation - Federal Government’s Lawsuit below for a discussion of the verdict and post-trial developments in the United States of America health care cost recovery case.

Engle Class Action:

In July 2000, in the second phase of the Engle smoking and health class action in Florida, a jury returned a verdict assessing punitive damages totaling approximately $ 145 billion against various defendants, including $ 74 billion against PM USA.

Following entry of judgment, PM USA appealed.

In May 2003, the Florida Third District Court of Appeal reversed the judgment entered by the trial court and instructed the trial court to order the decertification of the class.

Plaintiffs petitioned the Florida Supreme Court for further review.

In July 2006, the Florida Supreme Court ordered that the punitive damages award be vacated, that the class approved by the trial court be decertified and that members of the decertified class could file individual actions against defendants within one year of issuance of the mandate.

The court further declared the following Phase I findings are entitled to res judicata effect in such individual actions brought within one year of the issuance of the mandate:

Engle Progeny Cases:

Engle progeny cases are individual smoking and health lawsuits filed by Florida resident plaintiffs against one or more cigarette manufacturer defendants.

The lawsuits arose following the Florida Supreme Court’s decertification of the class in Engle, et.

Reynolds Tobacco Co., et.

, a smoking and health class action lawsuit filed in Florida state court against multiple defendants, including PM USA, in which the jury returned a verdict in favor of the plaintiff class and the trial court assessed punitive damages against the defendants.

In July 2006, the Florida Supreme Court mandated that the trial court’s punitive damages award be vacated, that the class approved by the trial court be decertified and that members of the decertified class could file individual actions against defendants within one year of issuance of the mandate.

Plaintiffs in Engle progeny lawsuits are entitled to rely on certain liability findings from the class action lawsuit, substantially reducing each plaintiff’s burden of proof.

These liability findings stipulate:

(i) that smoking causes various diseases;

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and (viii) that defendants were negligent.

In August 2006, PM USA and plaintiffs sought rehearing from the Florida Supreme Court on parts of its July 2006 opinion.

In December 2006, the Florida Supreme Court refused to revise its July 2006 ruling, except that it revised the set of Phase I findings entitled to res judicata effect by excluding finding (v) listed above (relating to agreement to misrepresent information), and added the finding that defendants sold or supplied cigarettes that, at the time of sale or supply, did not conform to the representations of fact made by defendants.

In February 2008, the trial court decertified the class.

Pending Engl e Progeny Cases:

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Because of a number of factors, including docketing delays, duplicated filings and overlapping dismissal orders, these numbers are estimates.

The 2015 federal Engle agreement resolved nearly all Engle progeny cases pending in federal court as of the date of the agreement, and each case excluded from that agreement subsequently has been resolved.

Each federal Engle progeny case has been resolved.

Engle Progeny Trial Results:

As of January 27, 2023, 143 federal and state Engle progeny cases involving PM USA have resulted in verdicts since the Florida Supreme Court Engle decision.

Seventy-nine verdicts were returned in favor of plaintiffs, and seven verdicts ( Skolnick , Calloway , Oshinsky-Blacker, McCoy, Mahfuz, Neff and Gloger ) that were initially returned in favor of plaintiffs were reversed post-trial or on appeal and remain pending.

In two cases, Kaplan ( McLaughlin ) and Sommers , the punitive damages awards were vacated on appeal and remanded for new trials.

In Sommers , the trial court entered final judgment dismissing the plaintiff’s punitive damages claim with prejudice, and plaintiff has appealed.

Fifty-six verdicts were returned in favor of PM USA, of which 46 were state cases.

As of January 29, 2024, 145 federal and state Engle progeny cases involving PM USA have resulted in verdicts.

Eighty-seven were returned in favor of plaintiffs, six of which have been reversed post-trial or on appeal and remain pending.

Fifty-eight verdicts were returned in favor of PM USA, two of which have been reversed post-trial or on appeal and remain pending.

In addition, there have been a number of mistrials, only some of which have resulted in new trials as of January 29, 2024.

The jury in one case, Garcia , awarded plaintiff compensatory

damages and found plaintiff was entitled to punitive damages;

however, the court declared a mistrial in the second phase of the trial regarding punitive damages because the jury was unable to determine the amount of the punitive damages.

Following appeals by the plaintiff and PM USA, the appellate court in Garcia affirmed the compensatory damages judgment against PM USA and granted a new trial with respect to punitive damages.

The plaintiff in Garcia subsequently filed a motion to voluntarily dismiss the punitive damages claim and to enter final judgment on the compensatory damages claim, which the court granted.

Three verdicts ( Cohen , Collar and Chacon ) that were returned in favor of PM USA were subsequently reversed for new trials.

Juries in two cases ( Reider and Banks ) returned zero damages verdicts in favor of PM USA.

Juries in two other cases ( Weingart and Hancock ) returned verdicts against PM USA awarding no damages, but the trial court in each case decided to award plaintiffs damages.

One case, Pollari , resulted in a verdict in favor of PM USA following a retrial of an initial verdict returned in favor of plaintiff.

Plaintiff and defendants appealed the verdict and the appellate court affirmed the judgment in favor of the defendants.

Three cases, Gloger , Rintoul ( Caprio ) and Duignan , resulted in verdicts in favor of plaintiffs following retrial of initial verdicts returned in favor of plaintiffs.

A post-trial appeal is pending in Duignan .

The verdicts in the retrials in Gloger and Rintoul ( Caprio ) were reversed upon appeal and remanded for new trials.

Two cases, Freeman and Harris , resulted in an appellate reversal of a jury verdict in favor of plaintiff, and a judgment in favor of PM USA.

Douglas , was dismissed with prejudice following a verdict in favor of plaintiff.

The charts below list the verdicts and post-trial developments in certain Engle progeny cases in which verdicts were returned in favor of plaintiffs.

Post-trial activity in a case can result in final resolution that differs from the initial verdict.

In many cases, parties have appealed either compensatory or punitive damages awards or both.

Courts also have increased and decreased the amounts of punitive damages juries have awarded, declared mistrials and vacated judgments, in whole or in part, with respect to compensatory and punitive damages awards.

Initial verdicts have been reversed in whole or in part on appeal or following retrial.

Juries have returned verdicts in favor of or against PM USA awarding no damages.

In cases where juries returned verdicts against PM USA awarding no damages, some trial

courts have decided to award plaintiff damages notwithstanding the verdict.

Cases also have been dismissed with or without prejudice before or after a verdict.

The charts below list the verdicts in and post-trial status of certain Engle progeny cases in which verdicts were returned in favor of plaintiffs.

The first chart lists cases that are pending as of January 29, 2024 where PM USA has determined an unfavorable outcome is not probable and the amount of loss cannot be reasonably estimated, and the second chart lists cases that have concluded in the past 12 months.

In this Note 19.

Contingencies , references to “R.J.

Reynolds” are to R.J.

Reynolds Tobacco Company.

Unless otherwise noted for a particular case, the jury’s award for compensatory damages will not be reduced by any finding of plaintiff’s comparative fault.

Further, the damages noted reflect adjustments based on post-trial or appellate rulings.

References below to “R.J.

Reynolds,” “Lorillard” and “Liggett Group” are to R.J.

Reynolds Tobacco Company, Lorillard Tobacco Company and Liggett Group, LLC, respectively.

Currently Pending Engle Cases with Verdicts Against PM USA

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(PM USA) Post-Trial Status

Ferraiuolo November 2023 PM USA and R.J.

Reynolds Duval $ 1 million (<$ 1 million PM USA)

Post-trial motions pending.

Chacon October 2023 PM USA Miami-Dade <$ 1 million

Appeals to the Third District Court of Appeal pending.

Hoffman January 2023 PM USA Miami-Dade $ 5 million ($ 3 million PM USA)

Awaiting entry of final judgment by the trial court.

Appeal to the Third District Court of Appeal pending.

Levine September 2022 PM USA and R.J.

Reynolds Miami-Dade $ 1 million

Appeals by defendants and plaintiff to Third District Court of Appeal pending.

Appeals to the Third District Court of Appeal pending.

Schertzer April 2022 PM USA and R.J.

Reynolds Miami-Dade $ 3 million

Appeal by defendants to the Third District Court of Appeal pending.

Appeal to the Third District Court of Appeal pending.

Lipp September 2021 PM USA Miami-Dade $ 15 million

Appeal by defendant to Third District Court of Appeal pending.

Garcia May 2021 PM USA Miami-Dade $ 6 million ($ 3 million PM USA)

Appeal by defendant to the Third District Court of Appeal pending.

Duignan February 2020 (2)

PM USA and R.J.

Reynolds Pinellas $ 3 million

Florida Supreme Court quashed the Second District Court of Appeal’s affirmation of judgment against the defendants and remanded the case for reconsideration in light of Prentice (3) .

Appeal to the Third District Court of Appeal pending.

Duignan February 2020 PM USA and R.J.

Reynolds Pinellas $ 3 million ($ 1 million PM USA)

Retrial of punitive damages claim pending.

McCall March 2019 PM USA Broward <$ 1 million (<$ 1 million PM USA)

New trial on punitive damages is set for April 2023.

Post-trial motions pending.

Chadwell September 2018 PM USA Miami-Dade $ 2 million

Third District Court of Appeal has ordered supplemental briefing in accordance with the decision in Prentice (3) .

Appeal to the Third District Court of Appeal pending.

Kaplan ( McLaughlin )

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Reynolds Broward $ 2 million

Florida Supreme Court vacated the punitive damages award in accordance with the decision in Sheffield (3) .

The Fourth District Court of Appeals affirmed the compensatory damages award and granted a new trial on punitive damages.

Appeal to the Fourth District Court of Appeal pending.

Cooper ( Blackwood )

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(<$ 1 million PM USA)

Fourth District Court of Appeal affirmed the compensatory damages award and granted a new trial on punitive damages.

Retrial of punitive damages claim pending.

(1) PM USA’s portion of the compensatory damages award is noted parenthetically where the court has ruled that comparative fault applies.

(2) Plaintiff’s verdict following a retrial of an initial verdict in favor of plaintiff.

(3) PM USA is not a defendant in Prentice or Sheffield , which are discussed below in Engle Progeny Appellate Issues .

Engle Cases Concluded Within Past 12 Months

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Tuttle August 2022 PM USA Duval Third quarter of 2022 <$ 1 million

Cuddihee January 2020 PM USA Duval Second quarter of 2022 $ 2 million June 2022

Garcia May 2021 PM USA Miami-Dade Fourth quarter of 2023 $ 3 million December 2023

Holliman February 2019 PM USA Miami-Dade Fourth quarter of 2022 $ 3 million January 2023

Brown January 2015 PM USA Federal Court - Middle District of Florida Third quarter of 2022 $ 5 million August 2022

Engle Progeny Appellate Issues:

Appellate decisions in the following Engle progeny cases may have wide application to other Engle progeny cases:

In Mary Sheffield v.

Reynolds Tobacco Company , an Engle progeny case against R.J.

Reynolds only, the Florida Supreme Court resolved a conflict among Florida’s District Courts of Appeal finding that the 1999 amendments to Florida’s punitive damages statute (including its caps and bar on multiple punitive damages awards for the same course of conduct) apply in wrongful death cases where the decedent was injured prior to the October 1, 1999 effective date of the amendments but died from his or her injuries after such effective date.

In Linda Prentice v.

Reynolds Tobacco Company , an Engle progeny case against R.J.

Reynolds only, the Florida Supreme Court resolved a conflict among Florida’s District Courts of Appeal finding that in order for an Engle plaintiff to prevail on fraudulent concealment and conspiracy claims, plaintiff must prove that the smoker relied to his or her detriment on a statement that concealed or omitted material information about the health risks or addictiveness of smoking.

The Florida Supreme Court declined to revisit its prior decisions giving preclusive effect to the Engle Phase I findings, described above in Engle Class Action .

Florida Bond Statute:

In June 2009, Florida amended its existing bond cap statute by adding a $ 200 million bond cap that applies to all state Engle progeny lawsuits in the aggregate and establishes individual bond caps for individual Engle progeny cases in amounts that vary depending on the number of judgments in effect at a given time.

Plaintiffs have been unsuccessful in various challenges to the bond cap statute in Florida state court.

No federal court has yet addressed the constitutionality of the bond cap statute or the applicability of the bond cap to Engle progeny cases tried in federal court.

From time to time, legislation has been presented to the Florida legislature that would repeal the bond cap statute;

however to date, no legislation repealing the statute has passed.

Other Smoking and Health Class Actions:

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In general, these cases have purported to be brought on behalf of residents of a particular state or states (although a few cases have purported to be nationwide in scope) and have raised addiction claims and, in many cases, claims of physical injury as well.

Class certification has been denied or reversed by courts in 61 smoking and health class actions involving PM USA in Arkansas ( 1 ), California ( 1 ), Delaware ( 1 ), the District of Columbia ( 2 ), Florida ( 2 ), Illinois ( 3 ), Iowa ( 1 ), Kansas ( 1 ), Louisiana ( 1 ), Maryland ( 1 ), Michigan ( 1 ), Minnesota ( 1 ), Nevada ( 29 ), New Jersey ( 6 ), New York ( 2 ), Ohio ( 1 ), Oklahoma ( 1 ), Oregon ( 1 ), Pennsylvania ( 1 ), Puerto Rico ( 1 ), South Carolina ( 1 ), Texas ( 1 ) and Wisconsin ( 1 ).

Michigan ( 1 ), Minnesota ( 1 ), Nevada ( 29 ), New Jersey ( 6 ), New York ( 2 ), Ohio ( 1 ), Oklahoma ( 1 ), Oregon ( 1 ), Pennsylvania ( 1 ), Puerto Rico ( 1 ), South Carolina ( 1 ), Texas ( 1 ) and Wisconsin ( 1 ).

See Certain Other Tobacco-Related Litigation below for a discussion of “Lights” and “Ultra Lights” class action cases and medical monitoring class action cases pending against PM USA.

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In the actions filed in Alberta, Manitoba and Nova Scotia, plaintiffs seek certification of classes of all individuals who smoked defendants’ cigarettes.

In March 2019, all of these class actions were stayed as a result of three Canadian tobacco manufacturers (none of which is related to us) seeking protection under Canada’s Companies’ Creditors Arrangement Act (which is similar to Chapter 11 bankruptcy in the United States).

In March 2019, all of these class actions were stayed as a result of three Canadian tobacco manufacturers ( no ne of which is related to us) seeking protection under Canada’s Companies’ Creditors Arrangement Act (which is similar to Chapter 11 bankruptcy in the United States).

The companies entered into these proceedings following a Canadian appellate court upholding two smoking and health class action verdicts against those companies totaling approximately CAD $ 13 billion.

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Supreme Court has refused to consider plaintiffs’ appeals from the cases decided by five federal circuit courts of appeal.

In addition to the cases brought in the United States, health care cost recovery actions have also been brought against tobacco industry participants, including PM USA and Altria, in Canada ( 10 cases), and other entities have stated that they are considering filing such actions.

In addition to the cases brought in the United States, health care cost recovery actions have been brought against tobacco industry participants, including PM USA and Altria, in Canada ( 10 cases), and other entities have stated that they are considering filing such actions.

Since the beginning of 2008, the Canadian Provinces of British Columbia, New Brunswick, Ontario, Newfoundland and Labrador, Quebec, Alberta, Manitoba, Saskatchewan, Prince Edward Island and Nova Scotia have brought health care reimbursement claims against cigarette manufacturers.

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Reynolds and, with respect to certain brands, ITG Brands, LLC (“ITG”)) make annual payments of approximately $ 10.4 billion, subject to adjustments for several factors, including inflation, market share and industry volume.

In addition, the OPMs are required to pay settling plaintiffs’ attorneys’ fees, subject to an annual cap of $ 500 million;

these quarterly payments are expected to end in 2024.

In addition, the OPMs are required to pay settling plaintiffs’ attorneys’ fees, subject to an annual cap of $ 500 million, on a pro rata basis based on market share.

These quarterly payments are expected to end in the fourth quarter of 2024.

For the years ended December 31, 2023, 2022 and 2021, the aggregate amount recorded in cost of sales with respect to the State Settlement Agreements was approximately $ 3.7 billion, $ 3.9 billion and $ 4.3 billion, respectively.

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The “NPM Adjustment” is a reduction in MSA payments made by the OPMs and those manufacturers that are subsequent signatories to the MSA (collectively, the “participating manufacturers” or “PMs”) that applies if the PMs collectively lose at least a specified level of market share to non-participating manufacturers since 1997, subject to certain conditions and defenses.

The independent auditor (“IA”) appointed under the MSA has calculated that PM USA’s share of the maximum potential NPM Adjustments for 2004-2021 is (exclusive of interest or earnings):

$ 388 million for 2004;

$ 181 million for 2005;

$ 154 million for 2006;

$ 185 million for 2007;

$ 250 million for 2008;

$ 211 million for 2009;

$ 218 million for 2010;

$ 166 million for 2011;

$ 214 million for 2012;

$ 224 million for 2013;

$ 258 million for 2014;

$ 313 million for 2015;

$ 292 million for 2016;

$ 285 million for 2017;

$ 318 million for 2018;

$ 415 million for 2019;

$ 573 million for 2020;

and $ 635 million for 2021.

These maximum amounts will be substantially reduced to reflect the NPM Adjustment settlements discussed below, and potentially for current and future calculation disputes and other developments.

PM USA’s recovery for 2004 is addressed below.

In addition, PM USA’s recovery of such reduced amounts for all subsequent years will be dependent upon subsequent determinations regarding state-specific defenses and disputes with other PMs.

The applicability of this reduction has been subject to certain disputes, some of which have been resolved via settlement, as discussed below.

Settlements of NPM Adjustment Disputes .

▪ Multi-State Settlement .

By the end of 2018, PM USA entered into a multi-state settlement of NPM Adjustment disputes with a total of 36 MSA states and territories in which PM USA settled the NPM Adjustment disputes through 2022 with 35 of the 36 states, and through 2024 with one state.

In March 2022, Illinois joined the multi-state settlement, settling the NPM Adjustment disputes through 2028 and bringing the total number of settling states and territories to 37 .

As a result, PM USA will receive approximately $ 80 million for 2004-2021 ($ 20 million of which relates to the 2019-2021 “transition years”).

In connection with this development for Illinois, PM USA recorded $ 80 million as a reduction in cost of sales in the first quarter of 2022.

Pursuant to the multi-state

settlement, PM USA has received $ 1.15 billion and expects to receive approximately $ 410 million in credits to offset PM USA’s MSA payments through 2036.

As of January 2022, a total of 36 states and territories had settled NPM Adjustment disputes relating to varying periods of time.

In March 2022 and August 2023, Illinois and Iowa, respectively, joined the multi-state settlement, bringing the total number of states and territories that have joined the multi-state settlement to 38 .

In the first quarter of 2022, PM USA recorded $ 80 million, $ 20 million of which related to the 2019 through 2021 “transition years,” as a reduction in cost of sales as a result of Illinois joining the multi-state settlement.

As a result of Iowa joining the multi-state settlement, PM USA will receive approximately $ 19 million for 2005 through 2022, $ 4 million of which relates to the 2020 through 2022 “transition years.” Accordingly, PM USA recorded $ 19 million as a reduction in cost of sales in the third quarter of 2023.

Pursuant to the multi-state settlement, PM USA has received $ 1.24 billion since the first group of states entered the NPM Adjustment dispute settlement in 2014 and expects to receive approximately $ 353 million in credits to offset PM USA’s MSA payments through 2039.

▪ New York Settlement.

In 2015, PM USA entered into a separate NPM Adjustment settlement with New York in which PM USA settled the NPM Adjustment disputes with New York in perpetuity.

In 2015, PM USA entered into a separate NPM Adjustment settlement in which PM USA settled the NPM Adjustment disputes with New York in perpetuity.

PM USA has received $ 503 million pursuant to the New York settlement and expects to receive annual credits applied against the MSA payments due to New York going forward.

▪ Montana Settlement .

In 2020, PM USA entered into a separate NPM Adjustment settlement with Montana in which PM USA settled the NPM Adjustment disputes with Montana through 2030.

This settlement resulted in a payment by PM USA of $ 4 million.

In 2020, PM USA entered into a separate NPM Adjustment settlement in which PM USA settled the NPM Adjustment disputes with Montana through 2030, resulting in a payment from PM USA to Montana for an immaterial amount.

Continuing NPM Adjustment Disputes with States That Have Not Settled .

▪ 2004 NPM Adjustment.

The PMs and the nine states that have not settled the NPM Adjustment disputes participated in a multi-state arbitration of NPM Adjustment disputes for 2004.

A tenth state, Illinois, also participated in the arbitration, but joined the multi-state settlement after the arbitration panel issued its decisions described below.

Hearings for nine of the 10 states concluded by the end of 2020.

The arbitration panels issued decisions finding that three states, Missouri, New Mexico and Washington, were not diligent in their enforcement of their escrow statutes in 2004 and, therefore, are subject to the NPM adjustment for 2004.

The arbitration panels further found that the remaining seven states were diligent in their enforcement and, therefore, are not subject to the NPM adjustment for 2004.

Washington and Missouri have challenged those determinations in their respective state courts and with the arbitration panels, and several issues remain to be resolved by the courts that may affect the final amount of the 2004 NPM adjustment PM USA and other PMs will receive.

PM USA recorded $ 21 million and $ 3 million as a reduction in cost of sales in the third quarter of 2021 and fourth quarter of 2022, respectively, for its estimate of the minimum amount of the 2004 NPM adjustment it will receive.

PM USA estimates it is entitled to interest of approximately $ 23 million and $ 5 million in connection with the 2004 NPM adjustment, which it recorded as interest income in the third quarter of 2021 and fourth quarter of 2022, respectively.

The PMs and the nine states that had not settled the NPM Adjustment disputes for 2004 participated in a multi-state arbitration.

Iowa subsequently joined the multistate settlement in August 2023.

The arbitration panel found three of the remaining eight states that have not settled the NPM Adjustment disputes, Washington, Missouri and New Mexico, were not diligent in the enforcement of their escrow statutes in 2004, and PM USA received approximately $ 52 million on account of the 2004 NPM Adjustment as a credit against its April 2023 MSA payment.

PM USA recorded $ 44 million and $ 8 million in third quarter of 2021 and fourth quarter of 2022, respectively.

Washington, Missouri and New Mexico have challenged those determinations in their respective state courts, and several issues remain to be resolved by the state trial and appellate courts that may affect the final amount of the 2004 NPM adjustment PM USA and other PMs will receive.

▪ 2005-2007 NPM Adjustments.

The PMs and the nine states that have not settled the NPM Adjustment disputes are currently arbitrating NPM Adjustment disputes before a single arbitration panel.

The arbitration encompasses three years , 2005-2007, for eight of the nine states, and one year , 2005, for one state.

As of January 27, 2023, no decisions have resulted from the arbitration.

The PMs and the eight states that have not settled the NPM Adjustment disputes are currently arbitrating NPM Adjustment disputes before a single arbitration panel.

The arbitration encompasses three years , 2005-2007, for seven of the eight states, and one year , 2005, for one state.

As of January 29, 2024, the arbitration panel had issued decisions for Maryland and Washington, finding Maryland diligent for all three years and Washington not diligent for all three years .

PM USA recorded $ 14 million as a reduction of costs of sales and $ 21 million as interest income in the fourth quarter of 2023 for its estimate of the minimum amount of the 2005 through 2007 NPM Adjustment it will receive.

▪ Subsequent Years.

No assurance can be given as to when proceedings for 2008 and subsequent years will be scheduled or the precise form those proceedings will take.

▪ In July 2022, the State of Iowa filed a motion in Iowa state court against the PMs, including PM USA, claiming that the PMs wrongfully disputed the applicability of NPM Adjustments to Iowa and that all adjustment amounts to date should have been paid to Iowa rather than deposited into the disputed payments account.

A similar enforcement motion was filed by the State of New Mexico against the PMs, including PM USA, in November 2022.

PM USA has placed certain disputed NPM Adjustment amounts attributed to Iowa and New Mexico in the disputed payments account established pursuant to the terms of the MSA.

Iowa and New Mexico seek a total of approximately $ 133 million and $ 84 million, respectively, in disputed payments from all defendants combined, as well as treble and punitive damages, and other relief.

The PMs filed a cross motion to compel arbitration in the Iowa matter, which was heard in December 2022.

A decision has not yet been issued.

Other Disputes under the State Settlement Agreements:

The payment obligations of the tobacco product manufacturers that are parties to the State Settlement Agreements, as well as the allocations of any NPM Adjustments and related settlements, have been and may continue to be affected by R.J.

Reynolds’s acquisition of Lorillard in 2015 and its related sale of certain cigarette brands to ITG (the “ITG transferred brands”).

PM USA filed motions to enforce the State Settlement Agreements in Florida, Minnesota, Texas and Mississippi in connection with various positions that R.J.

Reynolds and ITG took with regard to the ITG transferred brands.

After various court decisions in each of those states that were favorable to PM USA, those motions to enforce have now been resolved either through settlement or exhaustion of appeals, although further proceedings may occur based on the resolution of certain outstanding litigation between R.J.

Reynolds and ITG.

In May 2022, PM USA filed a motion to compel arbitration under the MSA regarding certain positions that R.J.

Reynolds and ITG took with regard to the ITG transferred brands.

In June 2022, the matter was resolved through mutual agreement of the parties.

PM USA continues to dispute how the ITG transferred brands are treated in allocating the NPM Adjustments under the MSA and related settlements and may pursue such claims.

Reynolds’s acquisition of Lorillard Tobacco Company in 2015 and its related sale of certain cigarette brands to ITG (the “ITG transferred brands”).

PM USA continues to dispute how the ITG transferred brands are treated in allocating the NPM Adjustments and profit adjustments under the State Settlement Agreements.

In December 2019, the State of Mississippi filed a motion in Mississippi state court seeking to enforce the Mississippi State Settlement Agreement against PM USA, R.J.

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Further proceedings remain outstanding, and a final judgment has not yet been issued.

In May 2023, PM USA and R.J.

Reynolds filed a motion in the United States District Court for the Eastern District of Texas seeking to enforce the Texas State Settlement Agreement against the State of Texas concerning the same tax rate issue raised by the State of Mississippi.

The State of Texas filed a cross-motion to enforce, and the matter remains pending in the trial court.

In January 2021, PM USA and other PMs reached an agreement with several MSA states to waive the PMs’ claim under the most favored nation provision of the MSA in connection with a settlement between those MSA states and a non-participating manufacturer, S&M Brands, Inc.

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The case ultimately proceeded only under the civil provisions of RICO.

In August 2006, the district court held that certain defendants, including Altria and PM USA, violated RICO and engaged in seven of the eight “sub-schemes” to defraud that the government had alleged.

Specifically, the court found that:

▪ defendants falsely denied, distorted and minimized the significant adverse health consequences of smoking;

▪ defendants hid from the public that cigarette smoking and nicotine are addictive;

▪ defendants falsely denied that they control the level of nicotine delivered to create and sustain addiction;

▪ defendants falsely marketed and promoted “low tar/light” cigarettes as less harmful than full-flavor cigarettes;

▪ defendants falsely denied that they intentionally marketed to youth;

▪ defendants publicly and falsely denied that ETS is hazardous to non-smokers;

▪ defendants suppressed scientific research.

The court did not impose monetary penalties on defendants, but ordered the following relief:

(i) an injunction against “committing any act of racketeering” relating to the manufacturing, marketing, promotion, health consequences or sale of cigarettes in the United States;

(ii) an injunction against participating directly or indirectly in the management or control of the Council for Tobacco Research, the Tobacco Institute, or the Center for Indoor Air Research, or any successor or affiliated entities of each;

(iii) an injunction against “making, or causing to be made in any way, any material false, misleading, or deceptive statement or representation or engaging in any public relations or marketing endeavor that is disseminated to the United States public and that misrepresents or suppresses information concerning cigarettes;” (iv) an injunction against conveying any express or implied health message or health descriptors on cigarette packaging or in cigarette advertising or promotional material, including “lights,” “ultra lights” and “low tar,” which the court found could cause consumers to believe one cigarette brand is less hazardous than another brand;

(v) the issuance of “corrective statements” in various media regarding the adverse health effects of smoking, the addictiveness of smoking and nicotine, the lack of any significant health benefit from smoking “low tar” or “light” cigarettes, defendants’ manipulation of cigarette design to ensure optimum nicotine delivery and the adverse health effects of exposure to ETS;

(vi) the disclosure on defendants’ public document websites and in the Minnesota document repository of all documents produced to the government in the lawsuit or produced in any future court or administrative action concerning smoking and health until the third quarter of 2021, with certain additional requirements as to documents withheld from production under a claim of privilege or confidentiality;

(vii) the disclosure of disaggregated marketing data to the government in the same form and on the same schedule as defendants now follow in disclosing such data to the FTC for a period of 10 years;

(viii) certain restrictions on the sale or transfer by defendants of any cigarette brands, brand names, formulas or cigarette businesses within the United States;

and (ix) payment of the government’s costs in bringing the action.

Following several years of appeals relating to the content of the corrective statements remedy described above, in October 2017, the district court approved the parties’ proposed consent order implementing corrective statements in newspapers and on television.

The corrective statements began appearing in newspapers and on television in the fourth quarter of 2017.

In April 2018, the parties reached agreement on the implementation details of the corrective statements on websites and onserts.

The corrective statements began appearing on websites in the second quarter of 2018 and the onserts began appearing in the fourth quarter of 2018.

In May 2014, the district court ordered further briefing on corrective statements on point-of-sale signage.

In May 2019, the district court ordered a hearing on the point-of-sale signage issue.

The hearing was subsequently vacated due to the parties reaching an agreement in principle regarding the placement of corrective statements at point-of-sale.

In December 2022, the district court entered a consent order approving the settlement.

In 2022, we recorded provisions totaling approximately $ 28 million for the estimated costs of implementing the corrective statements on point-of-sale signage remedy.

In August 2006, the district court held that certain defendants, including Altria and PM USA, violated RICO and engaged in certain “sub-schemes” to defraud that the government had alleged.

The court did not impose monetary penalties on defendants, but ordered various types of non-monetary relief, including an injunction against conveying any express or implied health message or health descriptors on cigarette packaging or in cigarette advertising or promotional material, including “lights,” “ultra lights” and “low tar,” which the court found could cause consumers to believe one cigarette brand is less hazardous than another brand, and the issuance of “corrective statements” in various media regarding the adverse health effects of smoking, the addictiveness of smoking and nicotine, the lack of any significant health benefit from smoking “low tar” or “light” cigarettes, defendants’ manipulation of cigarette design to ensure optimum nicotine delivery and the adverse health effects of exposure to ETS.

Corrective statements began appearing in newspapers and on television in the fourth quarter of 2017 and on websites in the second quarter of 2018, and the onserts began appearing in the fourth quarter of 2018.

In December 2022, the district court entered a consent order approving a settlement with respect to corrective statements on point-of-sale signage.

In June 2020, the U.S.

government filed a motion with the district court asking for clarification as to whether the court-ordered injunction that applies to cigarettes also applies to HeatSticks, a heated tobacco product used with the IQOS System.

government filed a motion with the district court asking for clarification as to whether the court-ordered injunction that applies to cigarettes discussed above also applies to HeatSticks, a heated tobacco product used with the IQOS System.

In August 2020, we filed an opposition to the government’s motion and, in the alternative, a motion to modify the injunction to make clear it does not apply to HeatSticks .

The district court heard arguments on the motions in July 2022 and has not yet issued any decisions.

Regardless of the district court’s decisions on the pending motions, the government has indicated it will not oppose a modification to the injunction that permits PM USA to use the Modified Risk Tobacco Product claim authorized by the FDA for HeatSticks .

In July 2023, the district court ruled that HeatSticks are cigarettes as defined in the court ordered injunction.

The district court also ruled that PM USA can make FDA authorized reduced exposure claims about HeatSticks .

In September 2023, PM USA appealed the district court’s ruling that HeatSticks are subject to the court’s injunction.

In connection with our assignment of exclusive U.S.

commercialization rights to the IQOS System to PMI, the U.S.

government has asserted that the assignment of those rights required district court approval and was subject to PMI becoming bound by the court-ordered injunction and, in January 2024, requested that we petition the district court for approval of that agreement.

E-vapor Product Litigation

As of January 27, 2023, we are defendants in 57 class action lawsuits relating to JUUL e-vapor products.

JUUL is an additional named defendant in each of these lawsuits.

The theories of recovery include violation of RICO, fraud, failure to warn, design defect, negligence and unfair trade practices.

Plaintiffs seek various remedies, including compensatory and punitive damages and an injunction prohibiting product sales.

The 57 class action lawsuits include 32 cases involving plaintiffs whose claims were previously included in other class

action complaints but were refiled as separate stand-alone class actions for procedural and other reasons.

As of January 29, 2024, we are defendants in 57 class action lawsuits, 3,614 individual lawsuits and 1,506 “third party” lawsuits relating to JUUL e-vapor products, which include school districts, state and local governments and tribal and healthcare organization lawsuits.

We refer to this litigation collectively as the “Multidistrict Litigation.” The 57 class action lawsuits include 32 cases involving plaintiffs whose claims were previously included in other class action complaints but were refiled as separate stand-alone class actions for procedural and other reasons.

Three of the class action lawsuits are pending in Canada.

We also have been named as defendants in other lawsuits involving JUUL e-vapor products, including 3,870 individual lawsuits and 1,406 “third party” lawsuits, which include school districts, state and local governments and tribal and healthcare organization lawsuits.

JUUL is an additional named defendant in each of these lawsuits.

In October 2019, the U.S.

Judicial Panel on Multidistrict Litigation ordered the coordination or consolidation of the federal individual and class action lawsuits mentioned above in the U.S.

District Court for the Northern District of California for pretrial purposes.

In December 2022, JUUL reportedly reached agreements to resolve the Multidistrict Litigation through settlement.

In January 2023, the court preliminarily approved the settlement.

We are not a party to any settlements concerning the Multidistrict Litigation.

The court has set trial dates for three cases pending in the Multidistrict Litigation.

The first trial is currently scheduled for April 2023.

We filed motions to dismiss certain claims in the class action and school district cases, including the federal RICO claim.

In October 2020, the U.S.

District Court for the Northern District of California granted the motion to dismiss the RICO class action claim without prejudice.

Although it otherwise denied the motion, the court found that plaintiffs had not sufficiently alleged standing or causation with respect to their claim under California law.

The court also granted the motion to dismiss the RICO claim in the cases filed by various school districts, but denied the motion in all other respects.

The court gave plaintiffs the opportunity to amend their complaints to attempt to cure the deficiencies the court identified and plaintiffs filed their amended complaints in November 2020.

In January 2021, we filed a renewed motion to dismiss the RICO claim, which the court denied in April 2021.

In June 2022, the court granted plaintiffs’ motion to certify a California state class based on state law claims against JUUL and a nationwide class based on RICO claims against Altria and other defendants.

Altria and the other defendants filed petitions with the U.S.

Court of Appeals for the Ninth Circuit seeking discretionary review of the class certification order, which the court granted in October 2022.

The theories of recovery in the Multidistrict Litigation include violation of RICO, fraud, failure to warn, design defect, negligence and unfair trade practices.

Plaintiffs seek various remedies, including compensatory and punitive damages, restitution or remediation (for plaintiffs that are government entities) and an injunction prohibiting product sales.

An additional group of cases is pending in California state courts.

In January 2020, the Judicial Council of California determined that this group of cases was appropriate for coordination and assigned the group to the Superior Court of California, Los Angeles County, for pretrial purposes.

JUUL also is named in a significant number of additional individual and class action lawsuits to which we are not currently named.

In May 2023, we reached agreement on terms to resolve the majority of the Multidistrict Litigation lawsuits as well as the group of cases pending in a consolidated California state court proceeding for $ 235 million, for which amount we recorded a pre-tax provision in the second quarter of 2023.

In September 2023, the court granted preliminary approval of the class action settlement.

The settlement is conditioned on certain participation rates among plaintiffs, and certain plaintiffs may opt out of the settlement and attempt to continue litigating their individual cases.

The settlement applies to all of the Multidistrict Litigation except 35 “third party” cases brought by Native American tribes and the three class action lawsuits pending in Canada.

The settlement also does not apply to the cases brought by state attorneys general, discussed below, or 17 putative class actions antitrust lawsuits.

For a description of the antitrust cases not subject to the settlement, see Antitrust Litigation below.

Four of the “third party” lawsuits noted above against us and JUUL were initiated, individually, by the attorneys general of Alaska, Hawaii, Minnesota and New Mexico alleging violations of state consumer protection and other similar laws.

We filed motions to dismiss the lawsuits.

In Alaska, Hawaii and Minnesota, the motions were denied in February 2022, May 2021 and June 2021, respectively.

Our motion to dismiss remains pending in New Mexico.

In the Alaska lawsuit, although the trial court declined to dismiss most of the plaintiff’s claims, the trial court did dismiss plaintiff’s public nuisance claim.

The trial courts in the Alaska, Hawaii and Minnesota lawsuits have set the trials for April 2024, February 2024 and March 2023, respectively.

In Alaska, Hawaii, Minnesota and New Mexico, the motions were denied in February 2022, May 2021, June 2021 and December 2023, respectively.

In April 2023 and January 2024, we agreed to settle the Minnesota and Alaska lawsuits, respectively, for immaterial amounts.

The trial court in the Hawaii lawsuit has set the trial for February 2024.

In January 2024, we agreed to the terms of a tentative settlement of the Hawaii lawsuit for an immaterial amount.

As of January 29, 2024, the trial court in New Mexico has not set a trial date.

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

In May 2023, Fuma International LLC (“Fuma”) filed a lawsuit against Altria and our affiliates Nu Mark LLC (“Nu Mark”), AGDC, ALCS and NJOY in the United States District Court for the Eastern District of Virginia asserting claims of patent infringement based on the sale of various Nu Mark and NJOY products, including NJOY ACE , in the United States.

In August 2023, we entered into an agreement with Fuma resulting in NJOY’s acquisition of the patents that Fuma asserted in its lawsuit.

The parties separately agreed that Fuma would dismiss its patent infringement claims in exchange for $ 10 million, and such claims were dismissed in August 2023.

We recorded a pre-tax provision for $ 10 million in the third quarter of 2023 related to the agreement and paid such amount to Fuma in August 2023.

In June 2023, JUUL and VMR Products LLC filed a lawsuit against Altria and our affiliates AGDC, ALCS, NJOY Holdings and NJOY in the United States District Court for the District of Arizona asserting claims of patent infringement based on the sale of NJOY ACE in the United States.

Plaintiffs seek various remedies, including damages and an injunction on sales of NJOY ACE .

The lawsuit is currently stayed.

Also in June 2023, the same plaintiffs filed a related action against the same defendants with the U.S.

International Trade Commission (“ITC”).

There, the plaintiffs also allege patent infringement, but the remedies sought include a prohibition on the importation of NJOY ACE into the United States.

No damages are recoverable in the proceedings before the ITC.

In August 2023, NJOY filed a complaint against JUUL in the United States District Court for the District of Delaware asserting claims of patent infringement based on the sale of certain JUUL e-vapor products, including the currently marketed JUUL device and JUULpods , in the United States.

The lawsuit is currently stayed.

Also in August 2023, NJOY filed a related action against JUUL with the ITC alleging patent infringement and seeking a ban on the importation and sale of the same JUUL products in the United States.

IQOS Litigation

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Reynolds to pay ALCS a 5.25 % royalty on future sales of its infringing product resulting in positive net income through the expiration of the relevant patents in 2035.

As gains related to this lawsuit have not yet been determined to be realized or realizable in accordance with GAAP, they have not been recognized in our financial statements for the fiscal year ended December 31, 2022.

Also in April 2020, a related patent infringement action was filed against the same defendants by the same plaintiffs, as well as R.J.

Reynolds, with the U.S.

International Trade Commission (“ITC”), but the remedies sought included a prohibition on the importation of the IQOS System electronic device, Marlboro HeatSticks and component parts into the United States and on the sale of any such products previously imported into the United States.

Reynolds has filed a notice of appeal of the judgment.

As gains related to this lawsuit have not yet been determined to be realized or realizable in accordance with GAAP, they have not been recognized in our consolidated financial statements for the fiscal year ended December 31, 2023.

In April 2020, a related patent infringement action was filed against the same defendants by the same plaintiffs, as well as R.J.

Reynolds, with the ITC, but the remedies sought included a prohibition on the importation of the IQOS System electronic device, Marlboro HeatSticks and component parts into the United States and on the sale of any such products previously imported into the United States.

No damages are recoverable in the proceedings before the ITC.

In September 2021, the ITC issued a limited exclusion order barring the importation of the IQOS System electronic device, Marlboro HeatSticks and the infringing components into the United States and a cease and desist order barring domestic sales, marketing and distribution of these imported products.

The orders became effective on November 29, 2021.

Consequently, PM USA removed the IQOS System electronic

device and Marlboro HeatSticks from the marketplace.

The orders became effective in November 2021.

Consequently, PM USA removed the IQOS System electronic device and Marlboro HeatSticks from the marketplace.

In December 2021, defendants appealed the orders to the U.S.

Court of Appeals for the Federal Circuit and, in January 2022, the court denied defendants’ motion to stay the orders pending the conclusion of the appeal.

An additional unrelated patent infringement case regarding the IQOS System electronic device was filed in November 2020 in the U.S.

Court of Appeals for the Federal Circuit and, in March 2023, the U.S.

Court of Appeals for the Federal Circuit issued its decision affirming the ITC exclusion order in full.

In November 2020, Healthier Choices Management Corp.

filed an additional unrelated patent infringement case in the U.S.

District Court for the Northern District of Georgia against PM USA and Philip Morris Products S.A.

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District Court denied plaintiff’s motion to amend the complaint and plaintiff appealed this ruling to the U.S.

Court of Appeals for the Federal Circuit, which appeal remains pending.

Court of Appeals for the Federal Circuit, which reversed the district court’s decision and remanded for further proceedings.

On remand, the U.S.

District Court stayed the case pending the outcome of plaintiff’s appeal from a ruling by the U.S.

Patent and Trademark Office, which issued a decision that the claims of the asserted patent are not valid.

That appeal remains pending.

Antitrust Litigation

In March 2023, we entered into a stock transfer agreement with JUUL pursuant to which, among other things, we transferred to JUUL all of our beneficially owned JUUL equity securities.

Investments in Equity Securities for a discussion of our disposition of our investment in JUUL.

In April 2020, the FTC issued an administrative complaint against Altria and JUUL alleging that our 35 % investment in JUUL and the associated agreements constitute an unreasonable restraint of trade in violation of Section 1 of the Sherman Antitrust Act of 1890 (“Sherman Act”) and Section 5 of the Federal Trade Commission Act of 1914, and substantially lessened competition in violation of Section 7 of the Clayton Antitrust Act (“Clayton Act”).

If the FTC’s challenge is successful, the FTC may order a broad range of remedies, including divestiture of our minority investment in JUUL, rescission of the transaction and all associated agreements, a requirement of FTC approval of future agreements related to the development, manufacture, distribution or sale of e-vapor products and prohibition against any officer or director of either Altria or JUUL serving on the other party’s board of directors or attending meetings of the other party’s board of directors and notice to the FTC in advance of certain corporate actions, including acquisitions, mergers or certain corporate restructurings.

In February 2022, the administrative law judge dismissed the FTC’s complaint and, also in February 2022, FTC complaint counsel appealed the administrative law judge’s decision to the FTC.

Oral argument with respect to the appeal occurred in September 2022.

After oral argument, the FTC asked for additional briefing, which was completed in December 2022.

Altria can appeal any adverse ruling the FTC issues following its review to any U.S.

Court of Appeals.

In March 2023, following our disposition of our investment in JUUL, we filed a motion to dismiss the complaint.

In June 2023, the FTC dismissed the action as no longer in the public interest.

Also as of January 29, 2024, 17 putative class action lawsuits have been filed against Altria and JUUL in the U.S.

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closed-system electronic cigarette market.

Plaintiffs seek various remedies, including treble damages, attorneys’ fees, a declaration that the agreements between Altria and JUUL are invalid, divestiture of our minority investment in JUUL and rescission of the transaction.

Plaintiffs seek various remedies, including treble damages, attorneys’ fees, a declaration that the agreements between Altria and JUUL are invalid and rescission of the transaction.

We filed a motion to dismiss these lawsuits in January 2021.

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In January 2022, the trial court ordered that the direct-purchaser plaintiffs’ claims against JUUL be sent to arbitration pursuant to an arbitration provision in JUUL’s online purchase agreement.

The court granted plaintiffs’ leave to replead the complaint with new direct-purchaser plaintiffs, which plaintiffs did in February 2022, substituting in four new plaintiffs.

In August 2022, the court stayed all of the cases pending any appeal to the court of appeals from the FTC’s lawsuit against Altria and JUUL.

In November 2020, we exercised our rights to convert our non-voting JUUL shares to voting shares.

In September 2022, we exercised our option to be released from our JUUL non-competition obligations, resulting in (i) the permanent termination of our non-competition obligations to JUUL, (ii) the loss of our JUUL board designation rights (other than the right to appoint one independent director so long as our ownership continues to be at least 10 %), our preemptive rights, our consent rights and certain other rights with respect to our investment in JUUL and (iii) the conversion of our JUUL shares to single vote common stock, significantly reducing our voting power.

We do not currently intend to exercise our remaining governance rights or to vote our JUUL shares other than as a passive investor.

The court granted plaintiffs’ leave to replead the complaint with new direct-purchaser plaintiffs, which plaintiffs did in February 2022, substituting four new plaintiffs.

In September 2023, the direct-purchaser plaintiffs filed a third amended consolidated class action complaint, substituting three of the four named plaintiffs.

In October 2023, JUUL filed a motion to compel arbitration as to certain new direct-purchaser plaintiffs and a motion to dismiss the direct-purchaser plaintiffs’ claims for injunctive relief.

Altria joined the motion to dismiss the injunctive relief claims.

The trial is set to commence in May 2026.

Shareholder Class Action and Shareholder Derivative Lawsuits

Shareholder Class Action :

In October and December 2019, two purported Altria shareholders filed putative class action lawsuits against Altria, Howard A.

Willard III, our former Chairman and Chief Executive Officer, and William F.

Gifford, Jr., our former Vice Chairman and Chief Financial Officer and current Chief Executive Officer, in the U.S.

District Court for the Eastern District of New York.

In December 2019, the court consolidated the two lawsuits into a single proceeding.

The consolidated lawsuit was subsequently transferred to the U.S.

District Court for the Eastern District of Virginia.

The lawsuit asserts claims under Sections 10(b) and 20(a) and under Rule 10b-5 of the Exchange Act.

In April 2020, JUUL, its founders and some of its current and former executives were added to the lawsuit.

The claims allege false and misleading statements and omissions relating to our investment in JUUL.

Plaintiffs seek various remedies, including damages and attorneys’ fees.

In July 2020, the defendants filed motions to dismiss plaintiffs’ claims, which the district court denied in March 2021.

In the fourth quarter of 2021, plaintiffs and defendants agreed upon a class action settlement under which, among other things, (i) all claims asserted against Altria and the other named defendants are resolved without any liability or wrongdoing attributed to them personally or to Altria and (ii) Altria will pay the class an aggregate amount of $ 90 million, which amount includes attorneys’ fees.

The class is defined to include persons and entities who purchased or otherwise acquired shares of Altria between

October 25, 2018 through April 2, 2020, subject to certain exclusions.

The trial court granted final approval of the settlement in March 2022.

In the fourth quarter of 2021, we agreed to settle a class action lawsuit brought by purported Altria shareholders against Altria and certain of our current and former executives and JUUL, its founders and certain of its current and former executives alleging false and misleading statements and omissions relating to our former investment in JUUL.

Pursuant to the settlement, which was granted final approval by the trial court in March 2022, among other things, (i) all claims asserted against Altria and the other named defendants were resolved without any liability or wrongdoing attributed to them personally or to Altria and (ii) Altria agreed to pay the class an aggregate amount of $ 90 million, which amount included attorneys’ fees.

We recorded pre-tax provisions totaling $ 90 million in 2021 and, in January 2022, paid $ 90 million to plaintiffs’ escrow account.

Federal and State Shareholder Derivative Lawsuits :

In August 2020, two purported Altria shareholders filed separate derivative lawsuits in the U.S.

District Court for the Northern District of California on behalf of themselves and Altria, against Mr.

Gifford, JUUL and certain of our executives and officers.

These derivative lawsuits relate to our investment in JUUL, and assert claims of breach of fiduciary duty by the Altria defendants and aiding and abetting in that alleged breach of fiduciary duty by the remaining defendants.

In March 2021, the U.S.

District Court for the Northern District of California granted defendants’ motion to transfer both lawsuits to the U.S.

District Court for the Eastern District of Virginia.

Three additional federal derivative lawsuits were filed in October 2020, January 2021 and March 2021, respectively, in the U.S.

District Court for the Eastern District of Virginia against Mr.

Crosthwaite, certain members of our Board of Directors, JUUL, its founders and some of its current and former executives.

These suits assert various claims, including breach of fiduciary duty, unjust enrichment, waste of corporate assets and violations of certain federal securities laws.

The remedies sought in these lawsuits include damages, disgorgement of profits, reformation of our corporate governance and internal procedures, and attorneys’ fees.

In April 2021, the court consolidated the five cases pending in the Eastern District of Virginia into a single case.

Six derivative lawsuits have been filed in Virginia state courts against Mr.

Crosthwaite (our former Chief Growth Officer and JUUL’s current Chief Executive Officer), certain members of our Board of Directors, JUUL, its founders and some of its current and former executives.

The lawsuits were filed in September 2020, May 2021, June 2021, July 2021, August 2021 and August 2021, respectively.

The lawsuits assert various claims, including breach of fiduciary duty, and seek remedies similar to those sought by plaintiffs in the cases pending in federal court in the Eastern District of Virginia.

In successive orders from July 2021, September 2021 and January 2022, five of the six state derivative cases were consolidated into a single case.

In October 2022, plaintiffs and defendants in all the federal and state derivative cases agreed upon a settlement of these cases.

Under the terms of the settlement, among other things, we agreed to fund underage tobacco prevention and cessation programs, which may include positive youth development programs, led by independent third-party organizations.

In the second and third quarters of 2022, we recorded pre-tax provisions of $ 7 million and $ 20 million, respectively, for costs associated with the independent monitoring of our funding commitments and attorneys’ fees.

In January 2023, the federal trial court conducted a final approval hearing, at which the court sustained an objection to a provision of the settlement, but granted the parties additional time to resolve the issue, and scheduled a second final approval hearing for February 2023.

In October 2022, we agreed to settle a series of federal and state derivative cases brought by Altria shareholders on behalf of themselves and Altria against Altria and certain of our current and former executives and directors and JUUL, its founders and certain of its current and former executives.

The cases related to our former investment in JUUL and asserted claims of breach of fiduciary duty by the Altria defendants and aiding and abetting in that alleged breach of fiduciary duty by the remaining defendants.

Under the terms of the settlement, which became effective in May 2023, among other things, we agreed to provide $ 100 million in funding over a five-year period to underage tobacco prevention and cessation programs, which may include positive youth development programs, led by independent third-party organizations.

We expect to begin funding in 2024.

In 2022, we recorded pre-tax provisions totaling $ 27 million for costs associated with the independent monitoring of our funding commitments and attorneys’ fees.

In the first quarter of 2023, we recorded pre-tax provisions totaling approximately $ 100 million related to the settlement, and in April 2023, paid $ 15 million to plaintiffs’ escrow account for attorneys’ fees.

Certain Other Tobacco-Related Litigation

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Neither case is active.

As of January 27, 2023, one smoking and health case alleging personal injury or seeking court-supervised programs or an ongoing medical monitoring program on behalf of individuals exposed to environmental tobacco smoke and purporting to be brought on behalf of a class of individual plaintiffs, is pending in a U.S.

As of January 29, 2024, one smoking and health case alleging personal injury or seeking court-supervised programs or an ongoing medical monitoring program on behalf of individuals exposed to ETS and purporting to be brought on behalf of a class of individual plaintiffs, is pending in a U.S.

The case is currently inactive.

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Plaintiffs’ allegations of liability in these cases have been based on various theories of recovery, such as negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, breach of implied warranty, addiction and breach of consumer protection statutes.

Plaintiffs have typically sought various forms of relief, including compensatory and punitive damages, and certain equitable relief, including but not limited to disgorgement.

Plaintiffs have typically sought various forms of relief, including compensatory and punitive damages, and certain equitable relief,

including disgorgement.

Defenses raised in these cases have included lack of causation, assumption of the risk, comparative fault and/or contributory negligence, and statutes of limitations.

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the Clean Air Act, the Clean Water Act, the Resource Conservation and Recovery Act and the Comprehensive Environmental Response, Compensation and Liability Act (commonly known as “Superfund”), which can impose joint and several liability on each responsible party.

Altria and our former subsidiaries are involved in several cost recovery/contribution cases subjecting them to potential costs of remediation and natural

resource damages under Superfund or other laws and regulations.

Altria and our former subsidiaries are involved in several cost recovery/contribution cases subjecting them to potential costs of remediation and natural resource damages under Superfund or other laws and regulations.

We expect to continue to make capital and other expenditures in connection with environmental laws and regulations.

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Other than those amounts, it is not possible to reasonably estimate the cost of any environmental remediation and compliance efforts that we may undertake in the future.

In the opinion of our management, however, compliance with environmental laws and regulations, including the payment of any remediation costs or damages and the making of related expenditures, has not had, and is not expected to have, a material adverse effect on our consolidated results of operations, capital expenditures, financial position or cash flows.

In the opinion of our management, however, compliance with environmental laws and regulations, including the payment of any remediation costs or damages and the making of related expenditures, has not had a material adverse effect on our consolidated results of operations, capital expenditures, financial position or cash flows.

Guarantees and Other Similar Matters

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These items have not had, and are not expected to have, a significant impact on our liquidity.

Under the terms of a distribution agreement between Altria and PMI (the “Distribution Agreement”), entered into as a result of our 2008 spin-off of our former subsidiary PMI, liabilities concerning tobacco products will be allocated based in substantial part on the manufacturer.

Under the terms of a distribution agreement between Altria and PMI (“Distribution Agreement”), entered into as a result of our 2008 spin-off of our former subsidiary PMI, liabilities concerning tobacco products will be allocated based in substantial part on the manufacturer.

PMI will indemnify Altria and PM USA for liabilities related to tobacco products manufactured by PMI or contract manufactured for PMI by PM USA, and PM USA will indemnify PMI for liabilities related to tobacco products manufactured by PM USA, excluding tobacco products contract manufactured for PMI.

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District Court for the Northern District of Georgia.

PM USA has issued guarantees relating to our obligations under our outstanding debt securities, borrowings under our $ 3.0 billion Credit Agreement and amounts outstanding under our commercial paper program.

As part of the supplier financing program, Altria guarantees the financial obligations of ALCS under the financing program agreement.

For further discussion of the supplier financing program, see Note 5.

Supplier Financing .

PM USA guarantees our obligations under our outstanding debt securities, any borrowings under our $ 3.0 billion Credit Agreement and any amounts outstanding under our commercial paper program.

For further discussion, see Note 10.

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We believe that our audits provide a reasonable basis for our opinions.

As described in the Report of Management On Internal Control Over Financial Reporting, management has excluded NJOY Holdings, Inc.

from its assessment of internal control over financial reporting as of December 31, 2023 because it was acquired by the Company in a business combination during 2023.

We have also excluded NJOY Holdings, Inc.

from our audit of internal control over financial reporting.

NJOY Holdings, Inc.

is a wholly-owned subsidiary whose total assets and total revenues excluded from management’s assessment and our audit of internal control over financial reporting each represent less than 1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

Definition and Limitations of Internal Control over Financial Reporting

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The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,

and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Tobacco and Health Litigation Provisions and Disclosures

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Tobacco and Health Litigation

As described in Note 19 to the consolidated financial statements, legal proceedings covering a wide range of matters are pending or threatened in various U.S.

and foreign jurisdictions against the Company as well as its respective indemnitees and investees.

and foreign jurisdictions against the Company as well as its respective indemnitees.

The Company records provisions in the consolidated financial statements for pending litigation when management determines that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.

The Company’s most significant category of legal proceedings is tobacco and health litigation.

The Company’s accrued liability for tobacco and health litigation was $44 million as of December 31, 2022.

The Company’s accrued liability for tobacco and health litigation makes up a significant portion of the tobacco and health and certain other litigation items liability of $346 million as of December 31, 2023.

While it is reasonably possible that an unfavorable outcome in a case may occur, except for those cases which have been accrued for:

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

The principal considerations for our determination that performing procedures relating to tobacco and health litigation provisions and disclosures is a critical audit matter are (i) the significant judgment by management when determining if a loss for tobacco and health litigation should be recorded in the consolidated financial statements, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s determination of whether a loss should be recorded;

and (ii) the significant judgment by management when disclosing facts and circumstances related to the litigation, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures related to the disclosures, including evaluating the audit evidence obtained related to management’s disclosures.

The principal considerations for our determination that performing procedures relating to tobacco and health litigation is a critical audit matter are (i) the significant judgment by management when determining if a loss for tobacco and health litigation should be recorded in the consolidated financial statements and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s determination of whether a loss should be recorded.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

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and (iv) evaluating the sufficiency of the Company’s tobacco and health litigation disclosures.

JUUL Labs, Inc.

(“JUUL”) - Determination of the Fair Value of the Investment

As described in Notes 2 and 5 to the consolidated financial statements, as of December 31, 2022, the Company accounts for its investment in JUUL as an investment in an equity security measured at fair value.

The Company’s investment in JUUL was $250 million as of December 31, 2022.

Fair value is estimated by management using an income approach, which reflects the discounting of future cash flows for the U.S.

In determining the estimated fair value of the Company’s investment in JUUL, management has made various 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 the significant assumptions, management has made judgments regarding the:

(i) likelihood of certain potential regulatory actions impacting the e-vapor category and specifically whether the U.S.

Food and Drug Administration (“FDA”) will ultimately authorize JUUL’s products, which have received marketing denial orders and are now under additional administrative review;

(ii) 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) 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) timing of international expansion plans.

The principal considerations for our determination that performing procedures relating to the determination of the fair value of the investment in JUUL is a critical audit matter are the (i) significant judgment by management when determining the fair value of the investment in JUUL;

(ii) a high degree of auditor judgment, subjectivity and effort in performing procedures to evaluate management’s significant judgments and assumptions related to discount rates, the likelihood of certain potential regulatory actions impacting the e-vapor category and specifically whether the FDA will ultimately authorize JUUL’s products, the likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, and the risk created by the number and types of legal cases pending against JUUL;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the determination of the fair value of the investment in JUUL, including controls over the Company’s methods, significant assumptions and data.

These procedures also included, among others, (i) testing management’s process for determining the fair value of the investment in JUUL;

(ii) evaluating the appropriateness of the income approach;

(iii) testing the completeness and accuracy of underlying data used in the income

and (iv) evaluating management’s significant judgments and assumptions related to discount rates, the likelihood of certain potential regulatory actions impacting the e-vapor category and specifically whether the FDA will ultimately authorize JUUL’s products, the likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, and the risk created by the number and types of legal cases pending against JUUL.

Evaluating management’s significant judgments and assumptions related to the risk created by the number and types of legal cases pending against JUUL;

the reasonableness of the range of scenarios that consider potential regulatory actions impacting the e-vapor category and specifically whether the FDA will ultimately authorize JUUL’s products;

and the likelihood of JUUL maintaining adequate liquidity to fund projected cash needs involved evaluating whether management’s assumptions and judgments were reasonable based on current market information regarding regulatory and litigation matters affecting JUUL and the e-vapor category.

Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the Company’s income approach and the reasonableness of the discount rate assumptions.

Skoal Trademark Impairment Assessment

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

In performing the discounted cash flow analysis, management included significant judgments and assumptions related to volume, operating margins, income, discount rate, and growth rates.

In performing the 2023 valuation, management’s cash flow analysis for the Skoal trademark included significant judgments and assumptions related to volume, revenue, income, perpetual growth rate and discount rate.

The principal considerations for our determination that performing procedures relating to the Skoal trademark impairment assessment is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Skoal trademark;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to income and the discount rate;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to revenue, perpetual growth rate, and the discount rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

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These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Skoal trademark;

(ii) evaluating the appropriateness of the income approach;

(ii) evaluating the appropriateness of the income approach used by management;

(iii) testing the completeness and accuracy of underlying data used in the income approach;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to income and the discount rate.

Evaluating management’s assumption related to income involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Skoal brand;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to revenue, perpetual growth rate, and the discount rate.

Evaluating management’s assumptions related to revenue and perpetual growth rate involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Skoal brand;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating the appropriateness of the Company’s income approach and the reasonableness of the discount rate assumption.

and (iii) whether these assumptions

were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the Company’s income approach;

and (ii) the reasonableness of the discount rate assumption.

Acquisition of NJOY Holdings, Inc.

– Valuation of Developed Technology

As described in Notes 1 and 3 to the consolidated financial statements, the Company completed the acquisition of NJOY Holdings, Inc.

(“NJOY”) on June 1, 2023 for total consideration of $2.9 billion.

Of the acquired intangible assets, $1 billion of developed technology was recorded.

Management determined the preliminary fair value of the developed technology intangible asset using an income approach.

The significant assumptions used by management in determining the preliminary fair value of the developed technology intangible asset included volume growth rates, operating margins, the assessment of acquired technology life cycles, the discount rate, as well as other factors.

The principal considerations for our determination that performing procedures relating to the valuation of developed technology acquired in the acquisition of NJOY is a critical audit matter are (i) the significant judgment by management when developing the preliminary fair value estimate of the developed technology acquired;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to volume growth rates, operating margins, the assessment of acquired technology life cycles, and the discount rate;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with performing our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the acquired developed technology.

These procedures also included, among others (i) reading the purchase agreement and vouching the cash paid for the acquisition;

(ii) testing management’s process for developing the preliminary fair value estimate of developed technology acquired;

(iii) evaluating the appropriateness of the income approach used by management;

(iv) testing the completeness and accuracy of the underlying data used in the income approach;

and (v) evaluating the reasonableness of the significant assumptions used by management related to the volume growth rates, operating margins, the assessment of the acquired technology life cycles, and the discount rate.

Evaluating management’s assumptions related to the volume growth rates and operating margins involved considering (i) the current and past performance of the NJOY business;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skills and knowledge were used to assist in evaluating (i) the appropriateness of the income approach utilized by management;

and (ii) the reasonableness of the acquired technology life cycles and the discount rate assumptions.

/s/ PricewaterhouseCoopers LLP

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maintained effective internal control over financial reporting.

Management of Altria Group, Inc.

excluded NJOY Holdings, Inc., a wholly owned subsidiary, from its assessment of internal control over financial reporting as of December 31, 2023, because it was acquired by Altria Group, Inc.

in a business combination during 2023.

NJOY Holdings, Inc.’s total assets and total revenues each represent less than 1% of the related consolidated financial statement amounts as of and for the year ended December 31, 2023.

PricewaterhouseCoopers LLP, an independent registered public accounting firm, who audited and reported on the consolidated financial statements of Altria Group, Inc.

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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 8. Financial Statements and Supplementary Data