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Item 7. Management’s Discussion and Analysis

2025-02-26 compared with 2024-02-27 · 494 added, 375 removed, 775 unchanged (53% of the section changed)

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

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

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

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

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

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

Our 2028 Goals are:

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

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

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

▪ Maintain our leadership position in the U.S.

tobacco space;

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

Smoke-Free Portfolio

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

▪ Approximately double our U.S.

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

Long-Term Growth

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

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

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

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

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cigar manufacturer.

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

In smoke-free products, we own USSTC, the leading global MST manufacturer, Helix, a leading manufacturer of oral nicotine pouches, and NJOY, an e-vapor manufacturer with a commercialized product portfolio fully covered by MGOs from the FDA.

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

marketing and commercialization of HTS products and, through a separate agreement, we have the exclusive U.S.

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

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

marketplace from the joint venture or exclusive rights agreement.

On June 1, 2023, we acquired NJOY Holdings.

For further details, see Note 3.

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

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

marketing and commercialization of HTS products.

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

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

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For a description of Altria, see Item 1.

Business of this Form 10-K (“Item 1”).

Vision and 2028 Goals

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

Our 2028 Goals are:

▪ Deliver a mid-single digits adjusted diluted EPS compounded annual growth rate in 2028 from a $4.84 base in 2022 (for our progress through 2024, see Consolidated Results of Operations );

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

▪ Target a debt-to-Consolidated EBITDA ratio of approximately 2.0x (see Liquidity and Capital Resources );

▪ Maintain our leadership position in the U.S.

tobacco space;

▪ Maintain a total adjusted OCI margin of at least 60% in each year through 2028 (see Operating Results by Business Segment ).

Smoke-Free Portfolio

smoke-free volumes by at least 35% from our 2022 base of 800 million units by 2028 (see Operating Results by Business Segment );

▪ Approximately double our U.S.

smoke-free net revenues to $5 billion by 2028 from our 2022 base, with $2 billion sourced from innovative smoke-free products (see Operating Results by Business Segment ).

We are reassessing our U.S.

smoke-free goals due to the continued proliferation of illicit flavored disposable e-vapor products resulting from insufficient enforcement action against manufacturers, distributors and retailers of these products.

We anticipate providing updated U.S.

smoke-free goals when we have more clarity on how the legitimate e-vapor market may evolve.

For additional information on the e-vapor category, see Operating Results by Business Segment - Business Environment.

▪ Long-Term Growth

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

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

Optimize & Accelerate Initiative

In October 2024, we announced a multi-phase Initiative designed to modernize our ways of working as we work towards achieving our Vision and 2028 Goals.

Through the Initiative, we plan to increase our organization’s speed, efficiency and effectiveness by centralizing work, outsourcing certain transactional tasks and streamlining, automating and standardizing processes.

We expect the design and detailed plans for all phases of the Initiative to be substantially complete in early 2026.

As part of the Initiative, we established an ABS organization within ALCS.

This organization will be responsible for driving efficiency and process improvement across our companies in partnership with external service providers.

We expect the initial phases of the Initiative will deliver at least $600 million in cumulative cost savings over the next five years, which we plan to reinvest in our businesses in support of our Vision and 2028 Goals.

The cumulative cost savings exclude our estimated total pre-tax charges for the Initiative’s initial phases of approximately $100 million to $125 million, which we will treat as special items and exclude from our adjusted diluted EPS.

For further discussion of the Initiative, see Note 7.

Asset Impairment, Exit and Implementation Costs to our consolidated financial statements in Item 8 (“Note 7”).

Trends and Developments

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

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

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

We continue to monitor the evolving macroeconomic and geopolitical landscapes.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We focus in this Trends and Developments section on the discretionary income pressures on adult tobacco consumers, illicit flavored disposable e-vapor products and recent regulatory and executive actions and their effects or potential effects on our businesses.

adult tobacco consumers remained under pressure throughout 2024 largely due to the compounding effects of high prices exceeding overall wage growth and historically high levels of consumer credit and credit card delinquency rates.

Although inflation rates stabilized in 2024, increased prices continued to pressure adult tobacco consumers.

These pressures influenced the discount segment retail share growth within the cigarette industry year-over-year.

We will continue to monitor conditions that impact adult tobacco consumer discretionary income and overall purchasing behaviors, including overall tobacco product expenditures, mix between premium and discount brand purchases and adoption of smoke-free products.

We expect discretionary income pressures will continue to influence adult tobacco consumers’ purchase behaviors in 2025.

Product assortment, regulation and enforcement continue to evolve in the e-vapor category.

For the 12 months ended December 31, 2024, we estimate the e-vapor category grew by approximately 30% versus the prior 12-month period, driven by the growth of illicit

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flavored disposable e-vapor products.

We estimate that illicit products now represent more than 60% of the e-vapor category.

In response to the proliferation of illicit disposable e-vapor products, states and the federal government took various regulatory and enforcement actions throughout the year in 2024, but these actions have failed to curb this trend.

Select states have established e-vapor product registries based on PMTA submissions or MGOs.

Additionally, we continue to see increased illicit activity across multiple tobacco categories, including nicotine pouch products and cigarettes.

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

For example, the FDA submitted proposed product standards banning menthol in cigarettes, which was delayed indefinitely in April 2024, and banning all characterizing flavors in cigars, both of which were withdrawn in January 2025.

In addition, in January 2025, the FDA proposed a tobacco product standard that would establish a maximum nicotine level in cigarettes and certain other combustible tobacco products significantly lower than the average concentration in these products on the market today with the aim of making such products minimally or non-addictive.

The proposed rule is subject to the Trump Administration’s January 2025 executive order pausing all federal agency rulemaking for 60 days.

Following the 60-day pause, the proposed product standard, if not withdrawn, may proceed through the rulemaking process, including the solicitation of public comment.

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

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

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

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

ABI’s business is exposed to foreign exchange rate fluctuations, inflation, commodity price movements and other macroeconomic factors that could impact financial performance from time to time.

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

See Note 8 for additional information on our investment in ABI.

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

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

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

While the growth of illicit flavored disposable e-vapor products has caused us to reassess certain of our 2028 Goals, we do not believe the trends and developments discussed above have materially impacted our ability to achieve our Vision.

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

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Consolidated Results of Operations

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2023 Tobacco and health and certain other litigation items

2022 JUUL changes in fair value

2023 Loss on disposition of JUUL equity securities

2023 ABI-related special items

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2024 Acquisition, disposition and integration-related items

2024 Asset impairment, exit and implementation costs

2024 Tobacco and health and certain other litigation items

2023 Loss on disposition of JUUL equity securities

2024 ABI-related special items

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% Change — % 3.4 %

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

▪ Fewer Shares Outstanding:

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

▪ Change in Tax Rate:

The change in the tax rate (which excludes the impact of special items shown in the table above) was driven primarily by lower state tax expense.

▪ Operations:

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

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

▪ higher OCI;

▪ lower interest and other debt expense, net;

partially offset by:

▪ lower net periodic benefit income;

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

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

The decrease of $48 million in operations (which excludes the impact of special items shown in the table above) was due primarily to lower OCI and lower net periodic benefit income, excluding service cost.

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

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Compounded EPS Growth Rate

Our 2028 Goals include delivering a mid-single digits adjusted diluted EPS compounded annual growth rate (“CAGR”) in 2028 from a $4.84 base in 2022.

Our calculation of progress towards this goal through 2024 is as follows:

For the Years Ended December 31, CAGR

Reported diluted EPS $ 6.54 $ 3.19 43.2 %

NPM Adjustment Items (0.01) (0.03)

Acquisition, disposition and integration-related items (1.08) —

Asset impairment, exit and implementation costs 0.18 —

Tobacco and health and certain other litigation items 0.04 0.05

JUUL changes in fair value — 0.81

ABI-related special items — 1.12

Cronos-related special items 0.01 0.10

Income tax items (0.56) (0.40)

Adjusted diluted EPS $ 5.12 $ 4.84 2.9 %

Non-GAAP Financial Measures

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

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

These items may include, for example, loss on early extinguishment of debt, restructuring charges, asset impairment charges, acquisition, disposition and integration-related items, equity investment-related special items, certain income tax items, charges associated with tobacco and health and certain other litigation items, and resolutions of certain non-participating manufacturer (“NPM”) adjustment disputes under the Master Settlement Agreement (“NPM Adjustment Items”).

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

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

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

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

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

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Critical Accounting Estimates

Note 2 includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements.

Summary of Significant Accounting Policies to our consolidated financial statements in Item 8 (“Note 2”) includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements.

In most instances, we must use an accounting policy or method because it is the only policy or method permitted under GAAP.

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Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a significant impact on our consolidated financial statements.

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The following is a review of the more significant assumptions and estimates, as well as the accounting policies and methods, used in the preparation of our consolidated financial statements:

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We perform undiscounted operating cash flow analyses to determine if an impairment exists.

These analyses are affected by general economic conditions and projected growth rates.

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

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

based on fair value.

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

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

We also review the estimated remaining useful lives of long-lived assets whenever events or changes in business circumstances indicate the lives may have changed.

We conduct a required annual review of goodwill and indefinite-lived intangible assets for potential impairment, and more frequently if an event occurs or circumstances change that would require us to perform an interim review.

We conduct a required annual review of goodwill and indefinite-lived intangible assets for potential impairment as of October 1 of each year, and more frequently if an event occurs or circumstances change that would require us to perform an interim review.

We have the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test.

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If the carrying value of an indefinite-lived intangible asset exceeds its fair value, which is determined using discounted cash flows, we consider the intangible asset to be impaired and reduce the carrying value to fair value in the period identified.

We use an income approach to estimate the fair value of our reporting units and trademarks using information available as of the impairment testing date.

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

Goodwill by reporting unit and indefinite-lived intangible assets at December 31, 2024 were as follows:

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Cigarettes $ 22 $ 2

MST and snus products 5,023 8,801

MST products 5,023 8,447

Cigars 77 2,640

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Total $ 6,945 $ 11,089

During 2023, we completed our annual impairment test of goodwill and indefinite-lived intangible assets performed as of October 1, 2023 and the results of this testing were as follows:

▪ no impairment charges were recorded;

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

Second Quarter of 2024 Skoal Impairment:

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

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

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

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

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

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

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

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

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

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

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

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

In connection with the preparation of our financial statements for the period ended June 30, 2024, we evaluated the accelerated growth of innovative tobacco products, including oral nicotine pouches, and the related increase in competitive activity among tobacco categories, which have

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contributed to reductions in sales volumes for MST products, including Skoal .

We concluded that the expected impact from the sales volume declines on the Skoal trademark represented a triggering event and, as a result of this conclusion, we performed an interim impairment assessment as of June 30, 2024.

We determined the estimated fair value of the Skoal trademark as of June 30, 2024, was below its carrying value and recorded a non-cash, pre-tax impairment of $354 million during the second quarter of 2024, which was recorded in our consolidated statement of earnings for the year ended December 31, 2024.

Our estimate of the fair value and carrying value of the Skoal trademark at June 30, 2024 was $3.6 billion after recording the impairment.

2024 Annual Review of Goodwill and Indefinite-lived Intangible Assets:

We completed our annual impairment test of goodwill and indefinite-lived intangible assets performed as of October 1, 2024.

We elected to perform a qualitative assessment for certain of our reporting units and indefinite-lived intangible assets.

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

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

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

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

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

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

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

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

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

Upon completion of this testing, we determined that the estimated fair values of our reporting units and our indefinite-lived intangible assets exceeded their carrying values in all circumstances and thus, no impairment charges were recorded.

The estimated fair values substantially exceeded the carrying values for all of our reporting units and indefinite-lived intangible assets with the exception of our Skoal trademark and e-vapor reporting unit discussed below.

Although the estimated fair value of the Skoal trademark exceeded its carrying value of $3.6 billion by approximately 7% ($0.3 billion), MST products, including Skoal , continued to be negatively impacted due in part to evolving adult tobacco consumer preferences, which have continued to contribute to reductions in sales volumes for MST products, including Skoal, as discussed above.

We believe if the decline in sales volume for Skoal is higher than currently estimated and results in material revenue declines, there may be a material adverse effect on the significant assumptions used in performing our valuation.

These adverse effects, including if Skoal ’s actual revenue and income or long-term outlook are significantly unfavorable compared to forecasted performance used to estimate the fair value or if the discount rate used to estimate the fair value increases, could result in a material non-cash impairment of our Skoal trademark in future periods.

Based on the 2024 annual impairment test, a hypothetical 1% increase to the discount rate used would have resulted in an impairment charge to the Skoal intangible asset of approximately $85 million.

While the estimated fair value of our e-vapor reporting unit exceeded its carrying value by approximately 28% ($0.3 billion), we continue to monitor several factors that could impact the carrying value of our e-vapor reporting unit’s goodwill, including the following:

▪ Altria and certain of our affiliates, including NJOY, are defendants in lawsuits alleging patent infringement based on the sale of NJOY ACE in the United States.

On January 29, 2025, the ITC issued its final determination regarding the complaint filed by JUUL against Altria and certain of our affiliates, including NJOY, finding that NJOY ACE infringes on JUUL’s patents and issued an exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE in the United States.

The ITC’s determination is currently under a 60-day review period by the Office of the United States Trade Representative which could reject the ITC’s determination.

If the Trade Representative does not affirmatively reject the ITC’s determination, the determination will automatically become final and the ITC’s orders will take effect on March 31, 2025, or earlier if the Trade Representative notifies the ITC of approval before the 60 days elapse.

The final exclusion order and cease-and-desist orders can be appealed to the U.S.

Court of Appeals for the Federal Circuit, but the final exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE would likely not be stayed during the pendency of such an appeal.

We continue to vigorously defend this litigation, including our motion filed in February 2025 seeking reconsideration of the ITC’s determination on one of the four patents as discussed in Item 3.

Legal Proceedings of this Form 10-K (“Item 3”).

▪ Additionally, sales of illicit flavored disposable e-vapor products continue to increase with limited effective enforcement against these products, contributing to declines in pod-based e-vapor product volume, which negatively impacted NJOY ACE’s volume growth in 2024.

We are pursuing pathways to minimize the disruption the ITC’s decision could cause.

NJOY is working on a product solution that addresses all of the patents at issue in the event the Trade Representative does not affirmatively reject the ITC’s determination.

Additionally, NJOY is pursuing potential solutions with a pipeline of other alternative e-vapor products.

However, in the event the Trade Representative does not affirmatively reject the ITC’s determination, it is likely that NJOY will not be able to sell NJOY ACE in the United States until a product solution addressing all of the patents at issue in the ITC action has received the necessary regulatory approvals.

If we continue to experience unfavorable outcomes with respect to the patent infringement lawsuits and our related strategies, or if continued illicit e-vapor product sales or other factors result in a significantly different long-term outlook for NJOY’s volume growth rates versus projections, there may be a material adverse effect on the significant assumptions used in performing our valuation.

These adverse effects, including if NJOY’s actual revenue and income or long-term outlook are significantly unfavorable compared to forecasted performance used to estimate the fair value or if the discount rate used to estimate the fair value increases, could result in a

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material non-cash impairment of our e-vapor reporting unit’s goodwill or related definite-lived intangible assets (carrying value of $1.8 billion and $1.1 billion, respectively, at December 31, 2024), or both, in future periods.

Based on our 2024 annual impairment test, a hypothetical 1% increase to the discount rate used to estimate the fair value of the e-vapor reporting unit would have resulted in an impairment charge of approximately $125 million.

We made various judgments, estimates and assumptions in determining the estimated fair values of our reporting units and indefinite-lived assets, the most significant of which were volume, revenue, income, perpetual growth rates and discount rates in performing our annual impairment test of goodwill and indefinite-lived intangible assets.

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

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

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

The perpetual growth rates and discount rates used in performing the valuations ranged from 0% to 2% and 10.0% to 13.5%, respectively.

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

(i) timing of effective enforcement against illicit flavored disposable e-vapor products;

(ii) timing and receipt of regulatory authorizations of innovative tobacco products, including oral nicotine pouches and e-vapor products;

(iii) long-term growth of innovative tobacco products, including oral nicotine pouches, and the related impact on the MST category;

(iv) long-term growth of the e-vapor category;

(v) conversion rates of illicit flavored disposable e-vapor consumers to pod-based systems and specifically, NJOY ACE ;

and (vi) ability of NJOY ACE to remain on the market.

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

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

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

Although our discounted cash flow analyses are based on assumptions that are considered reasonable and based on the best available information as of October 1, 2024, our annual impairment testing date, we used significant judgment in determining future cash flows.

In addition to the judgments discussed above, the following factors also have the potential to impact our assumptions and thus the expected future cash flows and, therefore, our impairment conclusions:

general macroeconomic conditions;

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competitive activity;

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

and income and excise taxes.

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While our management believes that the estimated fair values of each reporting unit and indefinite-lived intangible asset at December 31, 2024 are reasonable, actual performance in the short term or long term could be significantly different from forecasted performance, which could result in impairment charges in future periods.

For further discussion of goodwill and other intangible assets, see Note 6.

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

For further discussion of goodwill and other intangible assets, including the impairment charge of the Skoal trademark in the second quarter of 2024, see Note 6.

▪ Investments in Equity Securities:

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▪ Contingencies:

As discussed in Note 19 and Item 3.

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

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

As discussed in Note 20 and Item 3, 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 NJOY, as well as certain respective indemnitees.

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

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

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

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

PM USA’s obligations under the State Settlement Agreements to make quarterly payments with respect to settling plaintiffs’ attorneys’ fees ended in the fourth quarter of 2024.

In addition, PM USA, Middleton and USSTC are subject to quarterly user fees imposed by the FDA as a result of the FSPTCA.

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

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

result from an unfavorable outcome in any pending case;

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

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

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

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

Due to changes in market factors, our discount rates used to determine our pension plan and postretirement plan obligations increased to 5.7% at December 31, 2024 from 5.3% and 5.2%, respectively, for these plans at December 31, 2023.

We presently anticipate net pre-tax pension and postretirement income of approximately $15 million in 2025 versus net pre-tax income of $46 million in 2024.

This decrease is due primarily to:

(i) lower expected income on plan assets;

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

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

This decrease is due primarily to lower expected income on plan assets and higher amortization of net unrecognized losses in 2025, partially offset by lower service and interest costs.

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

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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.

We recognize the financial statement benefit for uncertain income tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by taxing authorities.

We recognize the financial statement benefit for uncertain income tax positions in our consolidated financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by taxing authorities.

The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement.

For those income tax positions where it is more likely than not that a tax benefit will not be sustained, no tax benefit is recognized in the financial statements.

We recognize accrued interest and penalties associated with uncertain tax positions as part of the provision for income taxes in our consolidated statements of earnings.

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Income Taxes to our consolidated financial statements in Item 8 (“Note 16”).

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Consolidated Operating Results

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Acquisition, disposition and integration-related items (2,527) (665) (1,862) (1.08)

Asset impairment, exit and implementation costs 422 107 315 0.18

Tobacco and health and certain other litigation items

101 25 76 0.04

Loss on disposition of JUUL equity securities 250 — 250 0.14

ABI-related special items 2 — 2 —

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Tobacco and health and certain other litigation items 430 107 323 0.18

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

Loss on disposition of JUUL equity securities 250 — 250 0.14

ABI-related special items 89 19 70 0.03

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2023 Adjusted for Special Items $ 11,711 $ 2,889 $ 8,822 $ 4.95

The following special items affected the comparability of statements of earnings amounts.

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The following special items affected the comparability of statements of earnings amounts for the years ended December 31, 2024 and 2023.

▪ NPM Adjustment Items:

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▪ Acquisition, Disposition and Integration-Related Items:

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

We recorded a pre-tax gain of $2.7 billion upon the assignment of the IQOS System commercialization rights to PMI in April 2024, for the year ended December 31, 2024.

For a discussion of the sale of the IQOS System commercialization rights, see Note 6.

We recorded net pre-tax expenses of $176 million for the year ended December 31, 2024 related to the NJOY Transaction.

For further information on the costs incurred for the NJOY Transaction, see Note 3.

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

▪ Asset Impairment, Exit and Implementation Costs:

We recorded a non-cash, pre-tax impairment of the Skoal trademark of $354 million for the year ended December 31, 2024 in our oral tobacco products segment.

For further discussion, see Note 6.

In addition, we recorded exit and implementation costs of $68 million related to the Initiative for the year ended December 31, 2024.

For a breakdown of these costs by segment, see Note 7.

▪ Tobacco and Health and Certain Other Litigation Items:

For a discussion of tobacco and health and certain other litigation items and a breakdown of these costs by segment, see Note 20 and Tobacco and Health and Certain Other Litigation Items in Note 17, respectively.

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

▪ Loss on Disposition of JUUL Equity Securities:

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

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

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

We recorded a corresponding adjustment to the JUUL tax valuation allowance in 2023.

For further discussion, see Note 8 and Note 16.

▪ ABI-Related Special Items:

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

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

For further discussion, see Note 7.

We recorded net pre-tax expense of $2 million from our investment in ABI for the year ended December 31, 2024, which consists primarily of mark-to-market losses on certain ABI financial instruments associated with its share commitments, mostly offset by a gain related to the ABI Transaction.

For further information on the gain related to the ABI Transaction, see Note 8.

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

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

▪ Cronos-Related Special Items:

We recorded net pre-tax expense for the years ended December 31, 2023 and 2022, consisting of the following:

(in millions) 2023 2022

Loss on Cronos-related financial instruments $ — $ 15

(Income) losses from investments in equity securities (1)

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

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

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

For further discussion, see Note 7 and Note 15.

We recorded pre-tax losses of $29 million for Cronos-related special items for the year ended December 31, 2023, substantially all of which related to our share of special items recorded by Cronos.

We recorded a corresponding adjustment to the Cronos tax valuation allowance.

▪ Income Tax Items:

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

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

We recorded income tax items of $969 million for the year ended December 31, 2024, due primarily to an income tax benefit from partial releases of valuation allowances on JUUL-related losses in connection with an agreement reached in October 2024 with the Internal Revenue Service (“IRS”) and in connection with the ABI Transaction.

For further discussion, see Note 16.

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

2024 Compared with 2023

Net revenues, which include excise taxes billed to customers, decreased $465 million (1.9%), due primarily to lower net revenues in the smokeable products segment, partially offset by higher net revenues in the oral tobacco products segment.

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

Cost of sales decreased $141 million (2.3%), due primarily to lower shipment volume in our smokeable products segment, partially offset by higher per unit settlement charges and higher manufacturing costs in our smokeable products segment and higher NJOY costs.

Excise taxes on products decreased $407 million (10.2%), due primarily to lower shipment volume in our smokeable products segment.

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

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

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

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

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

Marketing, administration and research costs were unchanged compared to 2023 as higher costs, including NJOY and other costs in support of our Vision and 2024 costs related to the Initiative, were offset by lower general corporate expenses.

The lower general corporate expenses were due primarily to lower charges to resolve certain JUUL-related litigation and the 2023 settlement of the shareholder derivative lawsuits, partially offset by higher net acquisition-related costs primarily associated with the NJOY Transaction and 2024 transaction costs from the ABI Transaction.

See Note 3, Note 8 and Note 20 for a discussion of litigation items.

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Operating income decreased $306 million (2.7%), due primarily to lower OCI (which includes a non-cash impairment of the Skoal trademark in our oral tobacco product segment and costs related to the Initiative), partially offset by lower general corporate expenses.

Interest and other debt expense, net increased $48 million (4.9%), due primarily to 2023 interest income associated with the sale of the IQOS System commercialization rights and unfavorable NPM Adjustment Items, partially offset by 2023 interest expense and fees for the term loan facility associated with the NJOY Transaction.

For additional information regarding the sale of the IQOS System commercialization rights, see Note 6.

Net periodic benefit income, excluding service cost, decreased by $25 million (19.7%), due primarily to lower income on plan assets and higher amortization of net unrecognized losses in 2024.

For additional information, see Note 18.

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

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

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

(Income) losses from investments in equity securities, which were favorable $409 million (100+%), were positively impacted by the 2023 loss on the disposition of our JUUL equity securities and favorable results in 2024 from our investment in ABI (due primarily to our gain on the ABI Transaction).

Provision for income taxes decreased $404 million (14.4%), due primarily to favorable tax items, partially offset by higher earnings before income taxes.

For additional information, see Note 16.

Reported net earnings of $11,264 million increased $3,134 million (38.5%), due primarily to the gain on the sale of the IQOS System commercialization rights, favorable income tax items and favorable results from our investments in equity securities, partially offset by lower operating income.

Reported basic and diluted EPS of $6.54, each increased by 43.1% due to higher reported net earnings and fewer shares outstanding.

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

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

Adjusted net earnings of $8,821 million were essentially unchanged compared to 2023, as lower OCI and lower net periodic benefit income, excluding service costs, was offset by a lower adjusted tax rate.

Adjusted diluted EPS of $5.12 increased by 3.4%, due to fewer shares outstanding.

Operating Results by Business Segment

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

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

▪ the FDA’s failure to effectively address illicit tobacco products on the market, including illicit e-vapor and oral nicotine pouch products;

▪ illicit trade in tobacco products, including cigarettes, e-vapor products and oral nicotine pouch products;

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

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▪ governmental investigations;

▪ reductions in consumption levels of cigarettes and MST products;

▪ reductions in consumption levels of cigarettes and MST products resulting in lower shipment volumes;

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

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

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

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

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

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

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▪ the proliferation of products using nicotine analogues that are designed to imitate the effects of nicotine but are not subject to the FDA regulatory framework for tobacco products;

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

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

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

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

As innovative smoke-free products evolve to better address the preferences of adult tobacco consumers, these consumers continue to transition from cigarettes and MST products to exclusive use of innovative smoke-free tobacco product alternatives, which aligns with our Vision.

As a result, long-term trends in the overall nicotine space are improving.

Industry equivalized nicotine volumes increased for the second consecutive year in 2024 and grew by a compounded annual growth rate of approximately 2% over the past five years.

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

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

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

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

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

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

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

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

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

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

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

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

We estimate that, when adjusted for calendar differences and trade inventory movements, total estimated domestic cigarette industry volume declined by 8% in the fourth quarter of 2024 and 9% for the full year.

PM USA reported domestic cigarette volumes declined by 8.8% in the fourth quarter of 2024 and 10.2% for the full year.

When adjusted for calendar differences and trade inventory movements, PM USA volumes for the fourth quarter of 2024 and the full year each declined by an estimated 11%.

In the fourth quarter, Marlboro share of the total cigarette category was 41.3%, a decrease of 1.0 share point versus the prior year and 0.3 share points in the fourth quarter.

Marlboro share performance is discussed further in the Operating Results - Smokeable Products Segment below.

We have been monitoring shifts in adult tobacco consumer preferences and their effects on cigarette industry decline rates.

As a result, we believe that the decline in adult smokers, excluding any cross category movement, resulted in an estimated 2.5% decline in cigarette industry volume over the 12 months ended December 31, 2024.

We estimate that cross-category movement contributed to cigarette industry volume declines in a range of approximately 3% to 4% over the 12 months ended December 31, 2024.

For the 12 months ended December 31, 2024, we estimate the e-vapor category grew approximately 30% versus the prior 12-month period, driven by the growth of illicit flavored disposable e-vapor products.

We estimate that illicit products now represent more than 60% of the e-vapor category.

These illicit disposable e-vapor products are largely distributed through non-traditional retail channels (including e-commerce and vape retail channels), making them more difficult to track.

In addition, we believe illicit cigarettes are becoming more prevalent in the United States, based on the results of discarded pack studies we conducted in select geographies.

We believe the FDA’s inadequate enforcement and slow pace of smoke-free product authorizations enables bad actors to disregard regulation and illicit products to proliferate.

Through our competitive intelligence tracking, we continue to monitor these growing trends and evaluate the impacts on the overall nicotine and tobacco categories.

For the fourth quarter of 2024, reported shipment volume of NJOY consumables (including NJOY ACE and NJOY DAILY ) was approximately 12.8 million units, and NJOY device shipment volume was approximately 1.1 million units.

The NJOY share of the pod-based e-vapor category reached 6.4% in the fourth quarter of 2024, an increase of 0.2 share points sequentially and 2.8 share points versus the fourth quarter of 2023.

nicotine pouch category continued to grow significantly throughout the fourth quarter of 2024 to 45.7% of the U.S.

oral tobacco category, an increase of 9.6 share points versus the fourth quarter of 2023.

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

For the fourth quarter of 2023, on!

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

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

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

maintained year-over-year share momentum through the fourth quarter of 2024 to achieve 8.9% of the total oral tobacco category, an increase of 2.0 share points versus the fourth quarter of 2023 and unchanged sequentially.

For the fourth quarter 2024, the traditional smokeless category (including MST) share of the total oral tobacco category declined to 54.3%, down 9.6 share points versus the fourth quarter of 2023.

Copenhagen had an oral tobacco category share of 18.1% for the fourth quarter of 2024, a decrease of 3.6 share points when compared to the fourth quarter of 2023.

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

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

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

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

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

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

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

Reserve’s target of 2%.

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

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

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

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

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

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

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

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

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

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

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

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

We continue to track the growth of nicotine pouch volumes and the related impact on the size of the MST category.

Decreases in the size of the MST category could impact the carrying value of our assets, such as our smokeless tobacco product goodwill and trademarks.

For example, in the second quarter of 2024, we recorded a non-cash, pre-tax impairment on the value of the Skoal trademark.

Throughout the full year 2024, U.S.

adult tobacco consumers remained under pressure largely due to the compounding effects of high prices exceeding overall wage growth.

In addition, consumer credit and credit card delinquency rates rose to the highest levels since 2011 in the first half of 2024.

While recent reports indicate that consumer credit and delinquency rates are beginning to moderate, these rates remain at historically high levels.

Although the monthly rate of inflation stabilized during the year, headwinds continued for U.S.

adult tobacco consumers.

Gas prices throughout the fourth quarter of 2024 experienced seasonal declines, averaging $3.02 per gallon for the month of December 2024.

While gas prices were lower than in the prior year, they remained consistently above $3.00 per gallon throughout 2024.

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Discretionary income pressures on adult tobacco consumers have influenced discount brand share performance.

For the fourth quarter of 2024, the discount share of the cigarette category reached 30.4%, an increase of 0.6 share points sequentially and an increase of 1.7 share points versus the fourth quarter of 2023.

We continue to monitor the evolving regulatory, macroeconomic and consumer dynamics within our business environment for impacts on our businesses.

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

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The FSPTCA also bans descriptors such as “light,” “low” or “mild” when used as descriptors of modified risk, unless expressly authorized by the FDA.

In connection with a 2016 lawsuit initiated by Middleton, the U.S.

Department of Justice, on behalf of the FDA, informed Middleton that the FDA does not intend to bring an enforcement action against Middleton for the use of the term “mild” in the trademark “Black & Mild.” Consequently, Middleton dismissed its lawsuit without prejudice.

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

Effective April 2022, the U.S.

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

Currently, however, the statutory definition of tobacco products does not cover products containing nicotine analogues, which are designed to imitate the effects of nicotine.

As a result, products containing nicotine analogues are not subject to the FDA regulatory framework for tobacco products, including the requirements that manufacturers submit a PMTA to, and receive an MGO from, the FDA before marketing such products in the United States.

▪ Final Tobacco Marketing Rule:

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

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

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

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

The Final Tobacco Marketing Rule currently does not apply to products containing nicotine analogues.

▪ Rulemaking and Guidance:

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

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

The FDA also may request comments on

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

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

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broad topics through an Advanced Notice of Proposed Rulemaking (“ANPRM”).

We actively engage with the FDA to develop and implement the FSPTCA’s regulatory framework, including submission of comments to various FDA policies and proposals and participation in public hearings and engagement sessions.

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

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

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

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

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▪ advance operational excellence.

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

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

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

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

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

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

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

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

Any such actions affecting our operating companies’ products could have a material adverse impact on our business, results of operations, cash flows or financial position.

Any such actions affecting our

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operating companies’ products could have a material adverse impact on our business, results of operations, cash flows or financial position.

Products Regulated in 2009 :

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Cigarette and smokeless tobacco products introduced into the market or modified after March 22, 2011 are “Non-Provisional Products” and must receive a marketing order from the FDA prior to being offered for sale.

Marketing orders for Non-Provisional Products may be obtained by filing an SE report, PMTA or using another pre-market pathway established by the FDA.

Marketing orders for Non-Provisional Products may be obtained by filing an SE report, a PMTA or using another pre-market pathway established by the FDA.

PM USA and USSTC may not be able to obtain a marketing order for non-provisional products because the FDA may determine that any such product does not meet the statutory requirements for approval.

Products Regulated in 2016 :

Manufacturers of products first regulated by the FDA in 2016, including cigars, oral nicotine pouches and e-vapor products, that were on the market as of August 8, 2016 and not subsequently modified must have filed an SE report or PMTA by the filing deadline of September 9, 2020 in order for their products to remain on the market.

Manufacturers of products first regulated by the FDA in 2016, including cigars, oral nicotine pouches and e-vapor products, that were on the market as of August 8, 2016 and not subsequently modified must have filed an SE report or a PMTA by the filing deadline of September 9, 2020 in order for their products to remain on the market.

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

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

For products (new or modified) not on the market as of August 8, 2016, manufacturers must file an SE report or PMTA and receive FDA authorization prior to marketing and selling the product.

For products (new or modified) not on the market as of August 8, 2016, manufacturers must file an SE report or a PMTA and receive FDA authorization prior to marketing and selling the product.

Helix submitted PMTAs for on!

oral nicotine pouches in May 2020.

oral nicotine pouches in May 2020 and PMTAs for on!

PLUS oral nicotine pouches in tobacco, mint and wintergreen flavors in June 2024.

As of February 24, 2025, the FDA has not issued marketing order decisions for any on!

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

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

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

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

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

As a result, PM USA removed the products from the marketplace.

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

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

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

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

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

PLUS products.

As of February 24, 2025, Middleton has received marketing orders or exemptions that cover over 99% of its cigar product volume.

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

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

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

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

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

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

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

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

Switching completely to this product from cigarettes reduces risk of lung cancer.” In February 2025, USSTC filed a notice with the FDA withdrawing its modified risk application.

As a result of our June 2023 acquisition of NJOY Holdings, we gained full global ownership of NJOY’s e-vapor product portfolio, including NJOY ACE , a pod-based e-vapor product with an MGO from the FDA, and NJOY DAILY , which also has an MGO.

In June 2024, NJOY received MGOs with respect to two NJOY ACE menthol products and two NJOY DAILY menthol products.

In May 2024, NJOY submitted a supplemental PMTA to the FDA to commercialize and market the NJOY ACE 2.0 device, which leverages Bluetooth ® connectivity to incorporate access restriction technology designed to prevent underage use by authenticating the user before unlocking the device.

Also in May 2024, NJOY re-submitted PMTAs for blueberry and watermelon flavored pod-based e-vapor products that work exclusively with the Bluetooth ® -enabled NJOY ACE 2.0 device.

These products previously received marketing denial orders (“MDOs”) on the basis of FDA concerns regarding underage use.

Post-Market Surveillance :

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

Manufacturers that receive MGOs must adhere to the FDA post-market record keeping and reporting requirements, as detailed in market orders and in the final PMTA rule.

The requirements include prior notification of marketing activities.

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

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

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Effect of Adverse FDA Determinations :

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It is therefore difficult to predict the duration of FDA reviews of SE reports or PMTAs.

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

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

Also, adverse FDA determinations on innovative tobacco products could have a material adverse effect on our ability to achieve our Vision.

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

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

Also, adverse FDA determinations on innovative tobacco products could have a material adverse effect on our innovative tobacco businesses and our ability to achieve our Vision.

▪ FDA Regulatory Actions

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District Court for the Eastern District of Texas found in favor of cigarette manufacturers in one such suit and blocked the rule, finding it unconstitutional on the basis that it compelled speech in violation of the First Amendment.

The FDA has appealed the decision.

The FDA appealed the decision, and, in March 2024, the U.S.

Court of Appeals for the Fifth Circuit reversed the trial court and remanded the case for further proceedings.

In August 2024, the cigarette manufacturers in the suit petitioned the U.S.

Supreme Court to review the case, which the U.S.

Supreme Court declined to do in November 2024.

In January 2025, the U.S.

District Court for the Eastern District of Texas found in favor of cigarette manufacturers that had challenged the final rule on the basis that the FDA exceeded its statutory authority by requiring cigarette packaging and advertising to contain 11 specific warnings when it only had the authority to require nine.

In its ruling, the court granted a preliminary injunction staying the FDA’s enforcement of the rule against all cigarette manufacturers pending further litigation.

In December 2024, PM USA and several Georgia co-plaintiffs filed suit against the FDA in the U.S.

District Court for the Southern District of Georgia, challenging the final rule on substantive and procedural grounds.

Briefing is ongoing, and a hearing on PM USA’s request to enjoin the rule is set for April 2025.

▪ Underage Access and Use of Certain Tobacco Products :

The FDA announced regulatory actions in September 2018 to address underage access and use of e-vapor products.

The FDA announced regulatory actions in September 2018 to address underage access to and use of e-vapor products.

We have engaged with the FDA on this topic and have reaffirmed to the FDA our ongoing and long-standing commitment to preventing underage use.

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

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

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

▪ Electronic Nicotine Delivery System Products :

More recently, the FDA has taken limited action aimed at manufacturers and retailers of certain disposable flavored e-vapor products.

However, despite some enforcement activity, insufficient actions against manufacturers, distributors and retailers of certain product categories that violate the law, including certain disposable and flavored e-vapor products, certain oral nicotine pouch products and products targeted to minors, have allowed such products to proliferate on the market.

▪ E-Vapor Products :

As of February 24, 2025, many manufacturers of menthol and other flavored e-vapor products have received MDOs for failure to provide sufficiently strong product-specific scientific evidence to demonstrate that the benefit of their products to adult smokers overcomes the risk that their products pose to youth.

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In January 2024, the U.S.

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

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

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

Court of Appeals for the Fifth Circuit ruled that the FDA process and procedure for addressing an e-vapor PMTA violated federal law and that, among other things, the FDA failed to give the manufacturer plaintiff fair notice of, and repeatedly changed positions with respect to, the information required to obtain a PMTA.

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

In July 2024, the U.S.

Supreme Court agreed to review the U.S.

Court of Appeals for the Fifth Circuit’s decision, and the case was argued before the U.S.

Supreme Court in December 2024.

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

Supreme Court review these decisions.

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

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

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

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

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

In January 2025, the FDA proposed a tobacco product standard that would establish a maximum nicotine level in cigarettes and certain other combustible tobacco products (including little cigars, cigarillos and most large cigars) significantly lower than the average concentration in these products currently on the market with the aim of making such products minimally or non-addictive.

The proposed rule does not apply to e-vapor products,

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nicotine pouches, heated tobacco products, MST products or premium cigars.

The proposed rule is subject to the Trump Administration’s January 2025 executive order pausing all federal agency rulemaking for 60 days.

Following the 60-day pause, the proposed product standard, if not withdrawn, may proceed through the rulemaking process, including the solicitation of public comment, which we believe would take multiple years to complete.

▪ Flavors in Tobacco Products :

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

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

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

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

The FDA could propose an additional product standard for flavors in innovative tobacco products, including e-vapor products and oral nicotine products.

We submitted comments during the notice-and-comment period.

In October 2023, the FDA submitted the two proposed product standards to the White House Office of Management and Budget for review.

In April 2024, the FDA announced the indefinite delay of a decision on the menthol ban, citing the high volume of feedback received during the notice-and-comment period.

In January 2025, the Trump Administration withdrew the two proposed product standards from the Office of Management and Budget (“OMB”) and sent them back to the FDA.

▪ N-nitrosonornicotine (“NNN”) in Smokeless Tobacco :

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

▪ Good Manufacturing Practices:

▪ Tobacco Product Manufacturing Practices:

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

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

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

▪ establishing tobacco product design and development controls;

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

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

OMB currently lists the rule as a long-term action.

If the proposed rule were to take effect, our operating companies could experience increased costs to comply with the rule.

▪ Impact on Our Business;

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

For example, actions by the FDA could:

For example, actions (or inaction) by the FDA could:

▪ impact the consumer acceptability of tobacco products;

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The FSPTCA imposes user fees on cigarette, cigarette tobacco, smokeless tobacco, cigar and pipe tobacco manufacturers and importers to pay for the cost of regulation and other matters.

The FSPTCA does not impose user fees on e-vapor or oral nicotine pouch manufacturers.

The FSPTCA does not impose user fees on e-vapor products or oral nicotine pouch manufacturers.

The cost of the FDA user fee is allocated first among tobacco product categories subject to FDA user fees and then among manufacturers and importers within each respective category based on their relative market shares, all as prescribed by the FSPTCA and FDA regulations.

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See Liquidity and Capital Resources - Payments Under State Settlement Agreements and FDA Regulation below for a discussion of our FDA user fee payments.

In addition, compliance with the FSPTCA’s regulatory requirements has resulted, and will continue to result, in additional costs.

In addition, our operating companies’ compliance with the FSPTCA’s regulatory requirements has resulted, and will continue to result, in additional costs.

The amount of additional compliance and related costs has not been material in any given quarter or year-to-date period but could become material, either individually or in the aggregate.

The failure to comply with FDA regulatory requirements, even inadvertently, and FDA enforcement actions also could have a material adverse effect on our business, results of operations, cash flows or financial position.

The failure to comply with FDA

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regulatory requirements, even inadvertently, and FDA enforcement actions also could have a material adverse effect on our business, results of operations, cash flows or financial position.

▪ Investigation and Enforcement:

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Between the end of 1998 and February 24, 2025, the weighted-average state cigarette excise tax increased from $0.36 to $1.93 per pack.

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

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

Three states (Maryland, Colorado and Rhode Island) increased excise taxes in 2024.

As of February 24, 2025, no states have increased excise taxes in 2025.

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

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Lower sales volume and reported share performance of our operating companies’ products could have a material adverse effect on our business, results of operations, cash flows or financial position.

In addition, substantial excise tax increases on e-vapor and oral nicotine products may negatively impact adult smokers’ transition to these products, which could materially adversely affect our ability to achieve our Vision.

International Treaty on Tobacco Control

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As of December 2024, the inflation calculation was approximately 2.9% based on the latest CPI-U data.

however, the increase in the annual payments did not have a material impact on our financial position.

We believe that inflation will continue at increased levels in 2024, but do not expect the corresponding increase in annual payments to result in a material financial impact.

However, we will continue to monitor the impact of increased inflation on the macroeconomic environment and our businesses.

We will continue to monitor the impact of increased inflation on the macroeconomic environment and our businesses.

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For a discussion of the impact of the State Settlement Agreements on us, see Liquidity and Capital Resources - Payments Under State Settlement Agreements and FDA Regulation below and Note 20.

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As of February 24, 2025, multiple states and localities are considering legislation to ban flavors in one or more tobacco products, and six states (California, Massachusetts, New Jersey, New York, Rhode Island and Utah) and the District of Columbia have passed such legislation.

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

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

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

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

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

Indiana, Massachusetts and Utah passed legislation capping the amount of nicotine in e-vapor products.

As of February 24, 2025, legislation relating to this issue is pending in three other states.

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

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

Such action also could negatively impact adult smokers’ transition to smoke-free products, which could materially adversely affect our ability to achieve our Vision.

Such action also could negatively impact adult smokers’ transition to smoke-free products, which could materially adversely affect our innovative tobacco businesses and our ability to achieve our Vision.

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

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

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

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

As of February 24, 2025, 43 states, the District of Columbia and Puerto Rico have enacted laws increasing the legal age to purchase tobacco products to 21.

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

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

Along with the scientific and public health communities, we continue to study and gather scientific evidence concerning the health effects of e-vapor and other innovative tobacco products.

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

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research on legislation and regulation.

Scientific determinations as to any health risks or negative health consequences associated with the use of e-vapor and other innovative tobacco products could materially adversely affect our innovative tobacco products businesses and our ability to achieve our Vision.

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

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

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

Federal Trade Commission (“FTC”) issued a Civil Investigative Demand to us while conducting its antitrust review of our former investment in JUUL;

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

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

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

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

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

For a discussion of our disposition of our former investment in JUUL, see Note 8.

In April 2023, January 2024, February 2024 and April 2024, we agreed to settle the lawsuits relating to our former investment in JUUL initiated by the attorneys general of Minnesota, Alaska, Hawaii and New Mexico, respectively.

Private Sector Activity on Tobacco Products

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Illicit Trade in Tobacco Products

Illicit trade in tobacco products can have an adverse impact on our business.

Illicit trade in tobacco products has had, and could continue to have, an adverse impact on our businesses, including the sales volumes and market shares of our operating companies’ innovative and smoke-free products and traditional tobacco products.

Illicit trade can take many forms, including the sale of counterfeit tobacco products;

the sale of tobacco products that do not comply with the FSPTCA and FDA regulations;

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

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

the sale of unregulated products;

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

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

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

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

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

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

Moreover, illicit trade in tobacco products results in federal, state and local governments losing tax revenues.

Losses in tax revenues can cause such governments to take various actions, including increasing excise taxes, imposing legislative or regulatory requirements, or asserting claims against manufacturers of tobacco products or members of the trade channels through which such tobacco products are distributed and sold, each of which may have an adverse effect on our business, results of operations, cash flows or financial position.

Losses in tax revenues can cause such governments to take various actions, including increasing excise taxes, imposing

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legislative or regulatory requirements, or asserting claims against manufacturers of tobacco products or members of the trade channels through which such tobacco products are distributed and sold, each of which could have an adverse effect on our business, results of operations, cash flows or financial position.

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

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

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

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

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

In June 2024, the U.S.

Department of Justice (“DOJ”) and the FDA announced the creation of a federal multi-agency task force to combat the illegal marketing and sale of e-vapor products in the United States.

The announcement noted that, in addition to the DOJ and the FDA, the task force will leverage the criminal and civil law enforcement capabilities of the U.S.

Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S.

Customs and Border Protection, the U.S.

Marshals Service, the U.S.

Postal Inspection Service and the FTC and that additional agencies may join the task force in the future.

The DOJ and the FDA stated that the task force will focus on many topics, such as investigating and prosecuting new criminal, civil, seizure and forfeiture actions under various U.S.

laws, including the FSPTCA.

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

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

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

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

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

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

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

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

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

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

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

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

Macroeconomic factors, such as tariffs, may exacerbate reductions in demand for tobacco leaf by increasing the cost of purchasing tobacco leaf from a supplier in another country.

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

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

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

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

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

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

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

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

As consumer demand increases for innovative smoke-free products and decreases for combustible and MST products, the volume of raw materials, ingredients and component parts required for the production of combustible and MST products has decreased.

Reduced demand for raw materials, ingredients and component parts may reduce supply and availability of raw materials, ingredients and component parts as suppliers divert resources to other products or cease producing these products.

Furthermore, challenging economic conditions can create the risk that our suppliers, distributors, logistics providers or other third-party partners suffer financial or operational difficulties, which may impact their ability to provide us with or distribute finished product, raw materials and component parts and services in a timely manner or at all.

If we are unable to identify alternate sources of raw materials, ingredients and component parts for our operating companies’ products, we could be exposed to supply risk.

We have implemented and continue to implement various strategies to help secure sufficient supplies of raw materials, ingredients and component parts for production, including maintaining inventory levels of certain tobacco varieties that cover several years, purchasing

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raw materials, ingredients and component parts from disperse geographic regions throughout the world and entering into long-term contracts with some of our tobacco growers and direct material suppliers.

To date, the impact on us of changes in the price, availability and quality of tobacco, other raw materials, ingredients and component parts has not been material.

However, the effects of the current macroeconomic and geopolitical conditions on prices, availability and quality of such items may continue, which could have a material adverse effect on our business, results of operations, cash flows or financial position.

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

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

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Congress and various state and local governments.

These existing and potential

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

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

To date, the impact on us of changes in the price, availability and quality of tobacco, other raw materials, ingredients and component parts has not been material.

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

Timing of Sales

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NPM Adjustment Items (29) — — (29)

Asset impairment, exit and implementation costs 60 362 — 422

Tobacco and health and certain other litigation items 70 — — 70

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

smoke-free portfolio reported the following results for 2023:

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

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

Progress towards our current U.S.

smoke-free portfolio goals are as follows through 2024:

smoke-free volumes of approximately 821 million units, an increase of 2.6% when compared to the 2022 base;

smoke-free net revenues were $2.8 billion and net revenues from innovative smoke-free products were $0.3 billion.

As discussed previously, we are reassessing our U.S.

smoke-free goals, and we anticipate providing updated U.S.

smoke-free goals when we have more clarity on how the legitimate e-vapor market may evolve.

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Smokeable Products Segment

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NPM Adjustment Items (29) (29)

Asset impairment, exit and implementation costs 60 —

Tobacco and health and certain other litigation items 70 69

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Net revenues, which include excise taxes billed to customers, decreased $552 million (2.5%), due primarily to lower shipment volume ($2,528 million), partially offset by higher pricing ($1,968 million), which includes higher promotional investments.

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

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

Reported OCI increased $151 million (1.4%), due primarily to higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($56 million), partially offset by lower shipment volume ($1,648 million), higher per unit settlement charges and manufacturing costs ($198 million) and 2024 exit costs related to the Initiative.

Adjusted OCI increased $212 million (2.0%), due primarily to higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($86 million), partially offset by lower shipment volume, higher per unit settlement charges and manufacturing costs.

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

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For further discussion on these matters, see Note 20 and Item 3.

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

For the years ended December 31, 2024 and 2023, product liability defense costs for PM USA were $125 million and $133 million, respectively.

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

We do not expect future product liability defense costs for our smokeable products segment to be significantly different from product liability defense costs incurred in 2024.

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Shipment Volume and Retail Share Results

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Cigarettes shipment volume includes Marlboro ;

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

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

Other premium brands, such as Virginia Slims and Parliament ;

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

Cigarettes volume includes units sold as well as promotional units but excludes units sold for distribution to Puerto Rico, U.S.

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Total cigarettes 45.9 % 46.9 %

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

and Circana Group, L.P.

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

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

Retail share results for cigarettes are based on data from Circana, LLC (“Circana”), as well as Management Science Associates, Inc.

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

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

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

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

For other trade classes selling cigarettes, retail share is based on shipments from wholesalers to retailers through the Store Tracking Analytical Reporting System, as provided by MSAi.

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

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2024 Compared with 2023

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

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

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

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 10.2%, driven primarily by the industry’s decline rate (impacted by the growth of illicit e-vapor products and continued discretionary income pressures on adult tobacco consumers), retail share losses and trade inventory movements, partially offset by calendar differences.

When adjusted for calendar differences and trade inventory movements, our smokeable products segment’s domestic cigarettes shipment volume decreased by an estimated 11%.

When adjusted for calendar differences and trade inventory movements, total estimated domestic cigarette industry volume decreased by an estimated 9%.

Shipments of premium cigarettes accounted for 95.9% and 94.8% of our smokeable products segment’s reported domestic cigarettes shipment volume for 2024 and 2023, respectively.

Our cigar reported shipment volume increased by 2.8%.

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

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

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

Our cigar reported shipment volume decreased by 1.5%.

Marlboro ’s retail share of the total cigarette category was 41.7%, a decrease of 0.5 share points.

Total cigarettes industry discount category retail share increased 1.3 share points to 29.7%, due primarily to continued discretionary income pressures on adult tobacco consumers.

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For a discussion regarding discount category dynamics in 2024, the growth of illicit e-vapor products and the economic conditions that impact adult tobacco consumer purchasing behavior, see Operating Results by Business Segment - Business Environment - Summary above.

Pricing Actions

PM USA and Middleton executed the following pricing and promotional allowance actions during 2024 and 2023:

▪ Effective October 20, 2024, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) , L&M and Basic by $0.17 per pack.

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

▪ Effective October 6, 2024, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.13 per five-pack.

▪ Effective July 14, 2024, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) , L&M and Basic by $0.17 per pack.

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

▪ Effective April 21, 2024, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.16 per five-pack.

▪ Effective April 14, 2024, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) , L&M and Basic by $0.20 per pack.

PM USA also increased the list price of all its other cigarette brands by $0.25 per pack.

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