What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-04-29 compared with 2024-10-31 · 375 added, 524 removed, 697 unchanged (56% of the section changed)

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We are Moving Beyond Smoking ™, 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.

For further discussion of our 2028 Goals, see our Annual Report on Form 10-K for the year ended December 31, 2024 (“2024 Form 10-K”).

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

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In smoke-free products, we own U.S.

Smokeless Tobacco Company LLC (“USSTC”), the leading global moist smokeless tobacco (“MST”) manufacturer, Helix Innovations LLC (“Helix”), a leading manufacturer of oral nicotine pouches, and NJOY, LLC (“NJOY”), an e-vapor manufacturer with a commercialized product portfolio fully covered by marketing granted orders (“MGO”) from the U.S.

Smokeless Tobacco Company LLC (“USSTC”), the leading global moist smokeless tobacco (“MST”) manufacturer, Helix Innovations LLC (“Helix”), a leading manufacturer of oral nicotine pouches, and NJOY, LLC (“NJOY”), a manufacturer of tobacco and menthol e-vapor products covered by marketing granted orders (“MGO”) from the U.S.

Food and Drug Administration (“FDA”).

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

In January 2025, the U.S.

International Trade Commission (“ITC”) issued an exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE (NJOY’s pod-based e-vapor product) in the United States, which became effective on March 31, 2025.

For further discussion, see Note 14.

Contingencies to our condensed consolidated financial statements in Item 1 (“Note 14”).

Additionally, we have a majority-owned joint venture, Horizon Innovations LLC (“Horizon”), for the U.S.

marketing and commercialization of heated tobacco stick products.

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

marketplace from the joint venture.

As of this Form 10-Q, Horizon had no products in the U.S.

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

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(“Cronos”), a leading Canadian cannabinoid company.

In March 2024, we sold a portion of our investment in ABI (“ABI Transaction”).

We used the proceeds from the sale to fund accelerated share repurchase (“ASR”) transactions for our common stock.

For further information on the ABI Transaction and the ASR transactions, see Note 6.

Investments in Equity Securities to our condensed consolidated financial statements in Item 1 (“Note 6”) and Note 1.

Background and Basis of Presentation to our condensed consolidated financial statements in Item 1 (“Note 1”), respectively.

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 our 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.

Optimize & Accelerate Initiative

On October 30, 2024, our Board of Directors (“Board of Directors” or “Board”) approved a multi-phase Optimize & Accelerate initiative (“Initiative”) designed to modernize our ways of working as we accelerate our progress toward our Vision and 2028 Goals.

Through the Initiative, we plan to increase our organization’s speed, efficiency and effectiveness by centralizing work, streamlining and standardizing processes, further using generative artificial intelligence and automation, and outsourcing certain transactional tasks.

We expect the design and detailed plans for all phases of the Initiative to be substantially complete in 12 to 18 months.

As part of the Initiative, we intend to establish an Accelerated Business Solutions organization within Altria Client Services LLC.

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 these initial phases of approximately $100 million to $125 million (excluding any non-cash impact that may result from pension settlement and curtailment accounting), which we intend to treat as special items and exclude from our adjusted diluted EPS.

Substantially all of these charges will result in cash expenditures and will consist of employee separations, new technology, business advisory services and other costs.

Although we are still evaluating certain aspects of the initial phases of the Initiative, for which the associated costs are not yet deemed probable and reasonably estimable, we expect to record the majority of the charges related to the initial phases of the Initiative by the end of the first half of 2025, with the initial charges being recorded beginning in the fourth quarter of 2024.

As we further develop and finalize detailed plans for the additional phases of the Initiative, we plan to update estimated related costs and cumulative cost savings as such amounts become probable and reasonably estimable.

Trends and Developments

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

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 business, 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 disposable e-vapor products and recent regulatory actions and their effects or potential effects on our business.

We continue to monitor the discretionary income pressure adult tobacco consumers have experienced during the first three quarters of 2024 as a result of the cumulative impact of inflation.

Wage increases have failed to keep up with rising prices, and we have observed increases in debt delinquencies.

In September 2024, the annual rate of inflation softened to 2.4%.

Although inflation rates remained lower in 2024 than prior years, increased prices continued to pressure adult tobacco consumer discretionary income.

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 the remainder of 2024.

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

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

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.

In this section, we focus on the discretionary income pressures on adult tobacco consumers, illicit flavored disposable e-vapor products, the ITC orders on NJOY ACE , recent regulatory actions and tariffs and their effects or potential effects on our businesses.

Other trends and developments are discussed elsewhere in MD&A.

adult tobacco consumers remained under pressure throughout the first quarter of 2025 largely due to the compounding effects of high prices exceeding overall wage growth and historically high levels of consumer credit and delinquency rates, which are beginning to moderate.

Although inflation rates moderated in the first quarter of 2025, increased prices and anticipation of higher prices from increased tariffs may further pressure adult tobacco consumers.

We have not yet seen a material impact on adult tobacco consumer purchasing behavior from the impact of tariffs and tariff speculation.

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

however, we expect discretionary income pressures will continue to influence adult tobacco consumers’ purchase behaviors through 2025.

In addition, we are monitoring the effects of tariffs on our businesses, including prices and the availability and quality of raw materials and ingredient and component parts for production.

While we expect higher tariffs to impact our costs in 2025, we do not expect the impact to be material based on presently available information on tariffs.

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

In June 2024, the FDA issued MGOs to NJOY for four of its menthol e-vapor products.

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

We estimate the disposable segment now represents 65% 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.

In response to the proliferation of illicit disposable e-vapor products, states and the federal government took various regulatory and enforcement actions in the first three quarters of 2024.

For the 12 months ended March 31, 2025, we estimate the e-vapor category grew by 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.

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 slow this trend.

Select states have established e-vapor product registries based on pre-market tobacco product application (“PMTA”) submissions or MGOs.

In June 2024, the federal government created a multi-agency task force in an effort to combat the illegal marketing and sale of e-vapor products in the United States.

We have also noted the emergence of products using nicotine analogues designed to imitate the effects of nicotine and evade the FDA regulatory framework for tobacco products.

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

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.

The FDA has announced that it would delay a decision on the menthol ban indefinitely, and the date for any final action on either proposal is to be determined.

In addition, 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 unintended negative consequences of the ban, such as adult tobacco consumer adoption of counterfeit and unregulated products.

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

Throughout 2024 and into the first quarter of 2025, various synthetic oral nicotine pouch products emerged in traditional tobacco retailers.

We continue to track the overall dynamics across multiple tobacco categories as well as competitive threats to our brands.

As discussed above in Our Business , the ITC orders related to NJOY ACE became effective March 31, 2025.

As a result, we performed an interim impairment assessment for the e-vapor reporting unit and recorded a non-cash impairment of our e-vapor reporting unit goodwill.

For further discussion, see Note 4.

Goodwill and Other Intangible Assets, net to our condensed consolidated financial statements in Item 1 (“Note 4”).

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 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, if not withdrawn, may proceed through the rulemaking process.

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

ABI’s business is exposed to foreign exchange rate fluctuations, inflation and commodity price movements which may impact financial performance from time to time.

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 6 for additional information on our investment in ABI.

The trends and developments discussed above have not had a material adverse impact on our condensed 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 businesses, investments and Vision.

Consolidated Results of Operations for the Nine Months Ended September 30, 2024

The changes in net earnings and diluted EPS for the nine months ended September 30, 2024, from the nine months ended September 30, 2023, were due primarily to the following:

For additional information on our investment in ABI, see Note 6.

Investments in Equity Securities to our condensed consolidated financial statements in Item 1 (“Note 6”).

With the exception of the impact of the ITC orders on NJOY, the trends and developments above have not had a material adverse impact on our businesses.

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.

Consolidated Results of Operations for the Three Months Ended March 31, 2025

The changes in net earnings and diluted EPS for the three months ended March 31, 2025, from the three months ended March 31, 2024, were due primarily to the following:

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

For the nine months ended September 30, 2023

For the three months ended March 31, 2024

$ 2,129 $ 1.21

2024 NPM Adjustment Items

2023 Acquisition, disposition and integration-related items

2024 Tobacco and health and certain other litigation items

2023 Loss on disposition of JUUL equity securities

2024 Amortization of intangibles

2024 ABI-related special items

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Subtotal 2024 special items (1)

2024 NPM Adjustment Items

2024 Acquisition, disposition and integration-related items

2024 Asset impairment

2025 Acquisition-related items

2025 Asset impairment, exit and implementation costs

2025 Tobacco and health and certain other litigation items

2025 Amortization of intangibles

2025 ABI-related special items

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Subtotal 2025 special items

Fewer shares outstanding — 0.12

Change in tax rate 35 0.02

Operations (137) (0.08)

For the nine months ended September 30, 2024

(1,012) (0.60)

2024 Reported Net Earnings

$ 8,225 $ 4.75

2023 Reported Net Earnings

$ 6,070 $ 3.40

% Change 35.5 % 39.7 %

2024 Adjusted Net Earnings and Adjusted Diluted EPS

$ 6,637 $ 3.84

2023 Adjusted Net Earnings and Adjusted Diluted EPS

$ 6,739 $ 3.78

% Change (1.5) % 1.6 %

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 — 0.05

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

▪ Operations:

The decrease of $137 million in operations (which excludes the impact of special items shown in the table above) was due primarily to lower OCI.

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

Consolidated Results of Operations for the three months ended September 30, 2024

The changes in net earnings and diluted EPS for the three months ended September 30, 2024, from the three months ended September 30, 2023, were due primarily to the following:

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

For the three months ended September 30, 2023

$ 2,166 $ 1.22

2023 NPM Adjustment Items

2023 Acquisition, disposition and integration-related items

2023 Tobacco and health and certain other litigation items

2023 ABI-related special items

2023 Income tax items

Subtotal 2023 special items

2024 NPM Adjustment Items

2024 Acquisition, disposition and integration-related items

2024 Tobacco and health and certain other litigation items

2024 ABI-related special items

2024 Cronos-related special items

2024 Income tax items

Subtotal 2024 special items

Fewer shares outstanding — 0.05

Change in tax rate 32 0.02

Operations 11 —

For the three months ended September 30, 2024

For the three months ended March 31, 2025

$ 1,077 $ 0.63

2024 Reported Net Earnings

2025 Reported Net Earnings and Reported Diluted EPS

$ 1,077 $ 0.63

2023 Reported Net Earnings

2024 Reported Net Earnings and Reported Diluted EPS

$ 2,129 $ 1.21

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% Change 2.1 % 6.0 %

(1) Prior period amounts have been recast to conform with current period presentation for amortization of intangibles, which we did not previously identify as a special item and we now exclude from our adjusted financial measures.

See Non-GAAP Financial Measures 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 $65 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI.

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

The increase of $11 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI, partially offset by lower income from our equity investment in ABI and lower net periodic benefit income, excluding service cost.

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

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, 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”).

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, resolutions of certain non-participating manufacturer (“NPM”) adjustment disputes under the Master Settlement Agreement (“NPM Adjustment Items”) and amortization expense associated with definite-lived intangible assets (“amortization of intangibles”).

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

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

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

underlying business trends and results.

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

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

Beginning in the first quarter of 2025, we changed our treatment of our amortization of intangibles that we previously included in our adjusted results, including adjusted net earnings and adjusted diluted EPS, and now treat this expense as a special item and exclude it from our adjusted results.

Amortization of definite-lived intangibles is significantly impacted by the timing, frequency and size of acquisitions, each with unique facts and circumstances, which could result in amortization charges that could be inconsistent in size and timing.

Net revenues generated from these definite-lived intangible assets during the periods presented, if applicable, are included in our adjusted financial measures.

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.

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Discussion and Analysis

Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 (“2023 Form 10-K”);

Our critical accounting policies and estimates are discussed in our 2024 Form 10-K;

there have been no updates to these critical accounting estimates, except as noted below.

Critical Accounting Estimates

Depreciation, Amortization, Impairment Testing and Asset Valuation

Goodwill and Other Intangible Assets Impairment Testing

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 an interim quantitative impairment assessment.

There have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required as of September 30, 2024.

Except for the factors leading us to perform a quantitative assessment for the e-vapor reporting unit as discussed below, there have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required as of March 31, 2025.

We will perform our annual impairment testing during the fourth quarter of 2025.

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).

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 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.

As a result of (i) lower projected revenue and income due to lower volume assumptions, (ii) a decrease in the perpetual growth rate to 0% (1% at October 1, 2023 valuation) and (iii) an increase in the discount rate to 11.5% (11.0% at October 1, 2023 valuation), we determined the estimated fair value of the Skoal trademark was below its carrying value and recorded a non-cash, pre-tax impairment of $354 million during the second quarter of 2024 in our condensed consolidated statements of earnings.

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.

At June 30, 2024, we used an income approach to estimate the fair value of the Skoal trademark.

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

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.

For example, a hypothetical 1% increase to the discount rate or a 1% decrease in the perpetual growth rate used in our quantitative assessment as of June 30, 2024, would have resulted in an additional pre-tax impairment to the Skoal trademark of approximately $300 million and $120 million, respectively, in the second quarter of 2024.

Our management believes that the estimated fair value of the Skoal trademark at June 30, 2024 was reasonable and no events or circumstances exist indicating an impairment at September 30, 2024.

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, we could have an additional non-cash impairment, which could be material, to the Skoal trademark in future periods.

E-vapor Reporting Unit:

On June 1, 2024, we finalized our purchase price allocation for the acquisition of NJOY Holdings (“NJOY Transaction”), resulting in a carrying value of $1.8 billion for our e-vapor reporting unit’s goodwill.

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 .

Remedies being sought by the plaintiffs vary and include an exclusion order that would prohibit the importation of NJOY ACE into the United States, an injunction on sales of NJOY ACE, and damages.

are vigorously defending this litigation and have developed other strategies we believe would allow NJOY ACE to remain on the market or limit sales disruption of NJOY ACE in the event of certain adverse litigation outcomes.

▪ 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 has negatively impacted NJOY’s volume growth in 2024.

If we 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 used to estimate the fair value at the time we finalized our purchase price allocation for the NJOY acquisition, it could result in a material non-cash impairment of our e-vapor reporting unit’s goodwill in future periods.

For further discussion of these factors, see Note 14.

Contingencies to our condensed consolidated financial statements in Item 1 (“Note 14”) and Operating Results by Business Segment - Business Environment below.

For information on the NJOY Transaction, see Note 2.

Acquisition of NJOY to our condensed consolidated financial statements in Item 1 (“Note 2”).

For further discussion of goodwill and other intangible assets, see Note 5.

G oodwill and Other Intangible Assets, net to our condensed consolidated financial statements in Item 1 (“Note 5”).

E-Vapor Reporting Unit Goodwill

At December 31, 2024, the estimated fair value of the e-vapor reporting unit exceeded its carrying value by approximately 28% ($0.3 billion).

As further discussed in Note 4, we determined the estimated fair value of the e-vapor reporting unit as of March 31, 2025 was below its carrying value and recorded a non-cash goodwill impairment of $873 million for the three months ended March 31, 2025 in our condensed consolidated statements of earnings.

As of March 31, 2025, after recording the goodwill impairment, the carrying value of goodwill within the e-vapor reporting unit was $895 million.

In addition, the carrying value of the e-vapor reporting unit’s net assets (including the effect of intercompany debt), which was negative, approximated its estimated fair value.

We used an income approach to estimate the fair value of the e-vapor reporting unit.

Due to the uncertainties discussed below, our discounted cash flows are based on a range of scenarios that consider certain potential regulatory and market outcomes.

The discount rates used in performing the valuation ranged from 12.0% to 15.0%.

Additionally, in determining these significant assumptions, we made judgments regarding our expectations for the future state of the e-vapor category and NJOY’s business, including the (i) timing and extent of effective enforcement against illicit flavored disposable e-vapor products;

(ii) timing and likelihood of regulatory authorizations of e-vapor products, including of NJOY’s products;

(iii) timing of the commercialization of NJOY e-vapor products in the United States;

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

and (v) conversion rates of illicit flavored disposable e-vapor consumers to lawful e-vapor products and, specifically, NJOY’s e-vapor products.

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

Although our discounted cash flow analyses are based on assumptions that we consider reasonable using the best available information as of March 31, 2025, 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, therefore, our impairment conclusions:

general macroeconomic conditions;

governmental actions, including FDA regulatory actions and inaction;

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

success of planned new product extensions;

competitive activity;

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

and income and excise taxes.

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

While our management believes that the estimated fair value of the e-vapor reporting unit at March 31, 2025 is reasonable, if the assumptions or judgments regarding the expectations for the future state of the e-vapor category and NJOY’s business discussed above fail to materialize as anticipated or if the discount rate used to estimate the fair value increases, we could have additional non-cash impairments of our e-vapor reporting unit goodwill in future periods, which could be material.

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 additional goodwill impairment charge of approximately $275 million in the first quarter of 2025.

Skoal Trademark Indefinite-Lived Intangible Asset

At December 31, 2024, the estimated fair value of the Skoal trademark exceeded its carrying value 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 .

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

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

We believe that the estimated fair value of the Skoal trademark at December 31, 2024 was reasonable and no events or circumstances existed indicating an impairment at March 31, 2025.

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, we could have material non-cash impairments of the 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 a pre-tax impairment charge to the Skoal intangible asset of approximately $85 million.

For further discussion of goodwill and other intangible assets, including the impairment of the e-vapor reporting unit goodwill in the first quarter of 2025, see Note 4.

Investment in Cronos

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

At March 31, 2025, the fair value of our investment in Cronos was less than its carrying value by approximately $25 million, or approximately 8%.

Based on our evaluation of the duration and magnitude of the fair value decline, our evaluation of Cronos’s financial condition (including its strong cash position) and near-

term prospects, and our intent and ability to hold our investment in Cronos until recovery, we concluded that the decline in fair value of our investment in Cronos below its carrying value is temporary and, therefore, no impairment was recorded.

At April 24, 2025, the fair value of our investment in Cronos was less than its carrying value by approximately $18 million or approximately 6%.

We will continue to monitor our investment in Cronos.

If we were to conclude that the decline in fair value is other than temporary, we would determine and recognize, in the period identified, the impairment of our investment.

Consolidated Operating Results

For the Nine Months Ended September 30, For the Three Months Ended September 30,

For the Three Months Ended March 31,

(in millions) 2025 2024

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

The following table provides a reconciliation of adjusted net earnings and adjusted diluted EPS for the nine months ended September 30:

The following table provides a reconciliation of adjusted net earnings and adjusted diluted EPS for the three months ended March 31:

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

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$ 1,683 $ 606 $ 1,077 $ 0.63

NPM Adjustment Items (27) (7) (20) (0.01)

Acquisition, disposition and integration-related items (2,513) (664) (1,849) (1.07)

Asset impairment 354 90 264 0.15

Acquisition-related items 79 14 65 0.04

Asset impairment, exit and implementation costs 888 4 884 0.52

Tobacco and health and certain other litigation items

40 10 30 0.02

ABI-related special items (39) (9) (30) (0.01)

Cronos-related special items 22 2 20 0.01

Income tax items — 41 (41) (0.02)

2024 Adjusted for Special Items

$ 8,768 $ 2,131 $ 6,637 $ 3.84

2023 Reported

$ 8,193 $ 2,123 $ 6,070 $ 3.40

NPM Adjustment Items (15) (4) (11) —

Acquisition, disposition and integration-related items 14 4 10 —

Tobacco and health and certain other litigation items 424 106 318 0.18

Loss on disposition of JUUL equity securities 250 — 250 0.14

Amortization of intangibles 37 6 31 0.02

ABI-related special items 21 4 17 0.01

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$ 2,730 $ 641 $ 2,089 $ 1.23

The following table provides a reconciliation of adjusted net earnings and adjusted diluted EPS for the three months ended September 30:

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

2024 Reported

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NPM Adjustment Items (6) (1) (5) —

Acquisition, disposition and integration-related items 44 11 33 0.02

Tobacco and health and certain other litigation items 24 5 19 0.01

Amortization of intangibles

ABI-related special items (86) (19) (67) (0.04)

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$ 2,715 $ 669 $ 2,046 $ 1.16

2023 Reported

$ 2,908 $ 742 $ 2,166 $ 1.22

NPM Adjustment Items (15) (4) (11) —

Acquisition, disposition and integration-related items 13 4 9 —

Tobacco and health and certain other litigation items 23 6 17 0.01

ABI-related special items 82 17 65 0.03

Income tax items — (29) 29 0.02

2023 Adjusted for Special Items

$ 3,011 $ 736 $ 2,275 $ 1.28

The following special items affected the comparability of statements of earnings amounts for the nine and three months ended September 30, 2024 and 2023:

▪ NPM Adjustment Items:

For a discussion of NPM Adjustment Items and a breakdown of these items by segment, see Health Care Cost Recovery Litigation in Note 14 and NPM Adjustment Items in Note 11, respectively.

▪ Acquisition, disposition and integration-related items:

We recorded a pre-tax gain of $2.7 billion upon the assignment of the IQOS Tobacco Heating System (“ IQOS System”) commercialization rights to Philip Morris International Inc.

(“PMI”) in April 2024, for the nine months ended September 30, 2024.

For a discussion of the sale of the IQOS System commercialization rights, see Note 5.

We recorded pre-tax expenses of $187 million and $44 million for the nine and three months ended September 30, 2024, respectively, related to the NJOY Transaction.

For further information on the costs incurred for the NJOY Transaction, see Note 2.

▪ Asset Impairment:

We recorded a non-cash, pre-tax impairment of the Skoal trademark of $354 million for the nine months ended September 30, 2024 in our oral tobacco products segment.

See Non-GAAP Financial Measures above.

The following special items affected the comparability of statements of earnings amounts for the three months ended March 31, 2025 and 2024:

▪ Acquisition-related items:

We recorded net pre-tax charges of $54 million for the three months ended March 31, 2025, primarily due to expenses related to the ITC exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE in the United States.

These charges include insurance recoveries from insurance contracts associated with the acquisition of NJOY Holdings (“NJOY Transaction”).

For further information on the ITC’s determination, see E-vapor Product Litigation in Note 14 .

We recorded these items for the three months ended March 31, 2025 as follows:

(in millions)

Net revenues (1)

Cost of sales (1)

Marketing, administration and research costs (2)

(1) Included in our all other category.

(2) Recorded as general corporate expense, net of $22 million in insurance recoveries.

Total costs incurred to date associated with the ITC determination and patent infringement lawsuits related to the NJOY Transaction were $137 million, which were offset by insurance recoveries of $47 million.

These total amounts include $61 million of costs offset by $25 million of insurance recoveries recorded in 2024.

Additionally, we recorded a non-cash, pre-tax charge of $25 million for the three months ended March 31, 2025 for the increase in the fair value of the contingent payments associated with the NJOY Transaction.

This charge was recorded as general corporate expense and included in marketing, administration and research costs in our condensed consolidated statements of earnings.

For further information, see Contingent Payments in Note 7.

Financial Instruments .

▪ Amortization of Intangibles:

We recorded pre-tax amortization expense of definite-lived intangible assets of $37 million and $27 million for the three months ended March 31, 2025 and 2024, respectively, in marketing, administration and research costs in our condensed consolidated statements of earnings.

▪ Asset Impairment, Exit and Implementation Costs:

We recorded a non-cash impairment charge of $873 million to reduce the carrying value of the e-vapor reporting unit goodwill to its estimated fair value for the three months ended March 31, 2025 in our all other category.

There is no income tax benefit associated with the impairment of the e-vapor reporting unit goodwill as the impairment is non-deductible for tax purposes.

For further discussion, see Note 4.

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For a discussion of tobacco and health and certain other litigation items and a breakdown of these costs by segment, see Note 14 and Tobacco and Health and Certain Other Litigation Items in Note 11, respectively.

▪ Loss on Disposition of JUUL Equity Securities:

We recorded a non-cash, pre-tax loss of $250 million related to the disposition of our JUUL equity securities for the nine months ended September 30, 2023 as (income) losses from investments in equity securities in our condensed consolidated statement of earnings.

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

▪ ABI-Related Special Items:

We recorded net pre-tax income of $39 million from our investment in ABI for the nine months ended September 30, 2024, which consists primarily of a gain related to the ABI Transaction, partially offset by mark-to-market losses on certain ABI financial instruments associated with its share commitments.

We recorded net pre-tax income of $86 million from our investment in ABI for the three months ended March 31, 2024, which consists primarily of a gain related to our sale of a portion of our investment in ABI (“ABI Transaction”), net of transaction costs.

For further information on the gain related to the ABI Transaction, see Note 6.

We recorded net pre-tax losses of $54 million and $82 million from our investment in ABI for the nine and three months ended September 30, 2023, respectively, consisting primarily of mark-to-market losses on certain ABI financial instruments associated with its share commitments.

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 pre-tax losses of $30 million, substantially all of which related to our share of special items recorded by Cronos for the nine months ended September 30, 2023.

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

▪ Income Tax Items:

We recorded income tax items of $41 million for the nine months ended September 30, 2024, due primarily to an income tax benefit from the partial release of a valuation allowance on JUUL-related losses, partially offset by interest expense on tax reserves recorded in prior years.

We recorded income tax items of $71 million, for the three months ended March 31, 2024, due primarily to an income tax benefit from the partial release of a valuation allowance on our losses related to our former investment in JUUL Labs, Inc.

The valuation allowance release was due to our capital gain on the ABI Transaction.

For further discussion, see Note 13.

Income Taxes to our condensed consolidated financial statements in Item 1.

We recorded income tax items of $29 million, for the nine and three months ended September 30, 2023, due primarily to tax expense associated with a tax basis adjustment related to our investment in ABI.

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, decreased $464 million (2.5%), due primarily to lower net revenues in our smokeable products segment, partially offset by higher net revenues in our oral tobacco products segment.

Cost of sales decreased $118 million (2.5%), 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 shipment volume.

Excise taxes on products decreased $324 million (10.7%), due to lower shipment volume in our smokeable products segment.

Marketing, administration and research costs increased $16 million (0.8%), due primarily to higher investment spending in support of our Vision (including 2024 NJOY costs), partially 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 acquisition-related costs primarily associated with the NJOY Transaction and transaction costs from the ABI Transaction.

See Note 14 for a discussion of litigation items.

Operating income decreased $392 million (4.5%), due primarily to lower OCI (which includes a non-cash impairment of the Skoal trademark in our oral tobacco product segment), partially offset by lower general corporate expenses.

Interest and other debt expense, net increased $24 million (3.2%), due primarily to 2023 interest income associated with the sale of the IQOS System commercialization rights, partially offset by 2023 interest expense and fees for the term loan facility associated with the NJOY Transaction.

For further discussion regarding the sale of the IQOS System commercialization rights, see Note 5.

(Income) losses from investments in equity securities, which were favorable $425 million (100+%), were positively impacted by the 2023 loss on the disposition of our JUUL equity securities and favorable results from our investment in ABI (due primarily to our gain on the ABI Transaction.)

Provision for income taxes increased $533 million (25.1%), due primarily to higher earnings before income taxes, partially offset by favorable tax items as discussed above.

Reported net earnings of $8,225 million increased $2,155 million (35.5%), due primarily to the gain on the sale of the IQOS System commercialization rights, favorable results from our investments in equity securities and favorable income tax items, partially offset by lower operating income.

Reported basic and diluted EPS of $4.75, each increased by 39.7% due to higher reported net earnings and fewer shares outstanding.

Adjusted net earnings of $6,637 million decreased $102 million (1.5%), due primarily to lower adjusted OCI.

Adjusted diluted EPS of $3.84 increased by 1.6%, due to fewer shares outstanding, partially offset by lower adjusted net earnings.

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, decreased $22 million (0.4%), due to lower net revenues in our smokeable products segment and in our all other category, partially offset by higher net revenues in our oral tobacco products segment.

Cost of sales decreased $42 million (2.7%), due primarily to lower shipment volume in our smokeable products segment, partially offset by higher per unit settlement charges in our smokeable products segment and higher NJOY shipment volume.

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Net revenues, which include excise taxes billed to customers, decreased $317 million (5.7%), due primarily to lower net revenues in our smokeable products segment.

Cost of sales decreased $167 million (11.6%), due primarily to lower shipment volume and lower per unit settlement charges in our smokeable products segment, partially offset by higher NJOY costs.

Excise taxes on products decreased $119 million (13.9%), due to lower shipment volume in our smokeable products segment.

Marketing, administration and research costs increased $46 million (7.5%), due primarily to higher general corporate expenses and higher investment spending in support of our Vision.

The higher general corporate expenses were due primarily to higher acquisition-related costs associated with the NJOY Transaction.

Operating income increased $63 million (2.0%), due primarily to higher OCI, partially offset by higher general corporate expenses.

(Income) losses from investments in equity securities, which were favorable $58 million (100%), were positively impacted by lower special items from our investment in ABI.

Reported net earnings of $2,293 million increased $127 million (5.9%), due primarily to higher operating income and favorable results from our investments in equity securities.

Reported basic and diluted EPS of $1.34, each increased by 9.8% due to higher reported net earnings and fewer shares outstanding.

Adjusted net earnings of $2,357 million increased $82 million (3.6%), due primarily to higher adjusted OCI.

Marketing, administration and research costs decreased $18 million (3.0%), due primarily to lower general corporate expenses, partially offset by higher tobacco and health and certain other litigation items.

The lower general corporate expenses were due primarily to transaction costs associated with the ABI Transaction in 2024, partially offset by acquisition-related items in 2025 discussed above.

Operating income decreased $886 million (33.1%), due primarily to lower OCI (which includes a non-cash impairment of the e-vapor reporting unit goodwill and acquisition-related items in 2025 in our all other category), partially offset by lower general corporate expenses.

(Income) losses from investments in equity securities were unfavorable $152 million (51.5%), due primarily to lower income from our equity investment in ABI (due primarily to our gain on the ABI Transaction in 2024 and lower ownership interest), partially offset by favorable Cronos-related special items.

Reported net earnings of $1,077 million decreased $1,052 million (49.4%), due primarily to lower operating income, unfavorable results from our investments in equity securities and unfavorable income tax items, partially offset by lower state income tax expense.

Reported basic and diluted EPS of $0.63, each decreased by 47.9% due to lower reported net earnings, partially offset by fewer shares outstanding.

Adjusted net earnings of $2,089 million increased $43 million (2.1%), due primarily to higher OCI and a lower adjusted tax rate, partially offset by lower income from our equity investment in ABI and lower net periodic benefit income, excluding service cost.

Adjusted diluted EPS of $1.23 increased by 6.0%, due to fewer shares outstanding and higher adjusted net earnings.

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These challenges, some of which are discussed in more detail in Note 14, and in Part I, Item 1A.

Risk Factors of our 2023 Form 10-K, include:

Risk Factors in our 2024 Form 10-K, include:

▪ pending and threatened litigation and bonding requirements;

▪ restrictions and requirements imposed by the Family Smoking Prevention and Tobacco Control Act (“FSPTCA”) and restrictions and requirements (and related enforcement actions) that have been, and in the future will be, imposed by the FDA;

▪ 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 illicit tobacco products on the market, including illicit e-vapor and oral nicotine pouch products;

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

▪ changes in adult tobacco consumer purchase behavior, which is influenced by various factors such as macroeconomic conditions (including inflation), excise taxes and price gap relationships, 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 and tariffs), the proliferation of illicit disposable e-vapor products, excise taxes and product price gap relationships, each of which has resulted and may in the future 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;

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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 tobacco consumers continue to transition from cigarettes and MST to exclusive use of innovative 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.

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 third quarter of 2024, we estimate that, when adjusted for trade inventory movements and calendar differences, total estimated domestic cigarette industry volume declined by 9% versus the third quarter of 2023.

The cigarette industry volume decline for the third quarter of 2024 was primarily driven by the growth of illicit e-vapor products and continued discretionary income pressures on adult tobacco consumers.

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

We estimate the disposable segment now represents 65% of the e-vapor category.

We estimate that cross-category movement to illicit disposable e-vapor products, which we discuss in more detail below, contributed to cigarette industry volume declines in a range of 2% to 3% over the last 12 months.

We estimate that, when adjusted for calendar differences and trade inventory movements, total estimated domestic cigarette industry volume declined by 9% in the first quarter of 2025.

PM USA reported domestic cigarette volumes declined by 13.7% in the first quarter of 2025 versus the first quarter of 2024.

When adjusted for calendar differences and trade inventory movements, PM USA volumes for the first quarter of 2025 declined by an estimated 12% versus the first quarter of 2024.

In the first quarter, Marlboro share of the total cigarette category was 41.0%, a decrease of 1.0 share point versus the first quarter

of 2024 and 0.3 share points sequentially.

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

For the 12 months ended March 31, 2025, 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 have conducted in select geographies.

We believe the FDA’s inaction, lack of enforcement and slow pace of smoke-free product authorizations enables bad actors to disregard regulation.

For example, we have observed that the lack of effective enforcement against illicit disposable e-vapor products has allowed for the introduction of illicit products in other categories, such as oral nicotine, where we have seen a rise in illicit nicotine pouch products.

These products are distributed primarily through e-commerce channels and vape stores that are more difficult to track than traditional retail.

We have also noted the emergence of products using nicotine analogues, which are designed to imitate the effects of nicotine and are not subject to the regulatory framework for tobacco products.

While illicit oral nicotine products and nicotine analogues have not had a material impact on our business to date, a lack of a regulatory framework and effective enforcement could lead to an increase in the introduction and volume activity of these products, which could have a material impact on our innovative tobacco products businesses.

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.

Through the third quarter of 2024, U.S.

adult tobacco consumers have remained under pressure as a result of the cumulative impact of inflation.

Wage increases have failed to keep up with the rising prices of everyday expenses in recent years, and we

have observed increases in consumer debt and credit card delinquencies.

We also have observed softening in the Consumer Price Index, which was 2.4% for the month of September 2024.

Although inflation rates remained lower than prior years, increased prices on certain expenditures, such as groceries and gas, continued to pressure adult tobacco consumer discretionary income.

Gas prices throughout the third quarter of 2024 experienced seasonal increases, reaching an average price of $3.21 per gallon for the month of September 2024.

While gas prices were lower than in the third quarter of 2023, they remained consistently above $3.00 per gallon in the third quarter of 2024.

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

For the third quarter of 2024, the discount share of the cigarette category reached 29.8%, an increase of 0.5 share points sequentially and an increase of 1.5 share points versus the third quarter of 2023.

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

For the third quarter of 2024, reported shipment volume of NJOY consumables (including NJOY ACE and NJOY DAILY ) was approximately 10.4 million units, and NJOY device shipment volume was approximately 1.1 million units.

The NJOY share of the e-vapor category reached 6.2% in the third quarter of 2024, an increase of 0.8 share points sequentially.

nicotine pouch category continued to grow significantly throughout the third quarter of 2024 to 43.9% of the U.S.

oral tobacco category, an increase of 11.4 share points versus the third quarter of 2023.

maintained year-over-year share momentum through the third quarter of 2024 to achieve 8.9% of the total oral tobacco category, an increase of 2.0 share points versus the third quarter of 2023 and an increase of 0.8 share points sequentially.

For the third quarter 2024, the traditional smokeless category (including MST and Snus) share of the total oral tobacco category declined to 56.1%, down 11.4 share points versus the third quarter of 2023.

Copenhagen had an oral tobacco category share of 18.7% for the third quarter of 2024, a decrease of 4.3 share points when compared to the third quarter of 2023.

nicotine pouch category continued to grow significantly throughout the first quarter of 2025 to 49.1% of the U.S.

oral tobacco category, an increase of 8.7 share points versus the first quarter of 2024.

maintained year-over-year share momentum through the first quarter of 2025 to achieve 8.8% of the total oral tobacco category, an increase of 1.8 share points versus the first quarter of 2024 and an increase of 0.1 share point sequentially.

For the first quarter 2025, the traditional smokeless category (including MST) share of the total oral tobacco category declined to 50.9%, down 8.7 share points versus the first quarter of 2024.

Copenhagen had an oral tobacco category share of 16.9% for the first quarter of 2025, a decrease of 3.2 share points when compared to the first quarter of 2024.

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 trademarks.

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.

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

Throughout the first quarter of 2025, U.S.

adult tobacco consumers remained under pressure largely due to the continued compounding effects of high prices exceeding overall wage growth, especially among low income consumers.

Although the year-over-year increases in the rate of inflation moderated in the first quarter of 2025, high prices on every day expenses, such as groceries and housing, continued to constrain consumers’ disposable income.

While gas prices in the first quarter of 2025 were lower than in the prior year, the average price remained above $3.00 per gallon.

In addition, consumer credit and delinquency rates remain at historically high levels, and potential tariff activity induced consumer fear of price hikes and rising inflation.

Throughout the first quarter of 2025, this speculation drove a decline of nearly 13% in consumer sentiment versus the fourth quarter of 2024 to the lowest levels since 2022.

We will continue to monitor the additional pressure that tariff-related price increases may have on adult tobacco consumer purchase behavior.

Overall discretionary income pressures on adult tobacco consumers have increased discount brand share performance and negatively impacted the sales volumes of our companies’ premium brands.

For the first quarter of 2025, the discount share of the cigarette category reached 30.9%, an increase of 0.6 share points sequentially and an increase of 1.8 share points versus the first quarter of 2024.

We continue to monitor the evolving regulatory, macroeconomic (including inflation and tariffs) and consumer dynamics within our business environment to assess potential 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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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.

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:

As required by the FSPTCA, in March 2010, the FDA promulgated a wide range of advertising and promotion restrictions for cigarettes and smokeless tobacco (1) products (the “Final Tobacco Marketing Rule”).

The May 2016 deeming regulations amended the Final Tobacco Marketing Rule to expand specific provisions to all tobacco products, including cigars, pipe tobacco and e-vapor and oral nicotine products containing tobacco-derived nicotine or other tobacco derivatives.

As required by the FSPTCA, the FDA has promulgated a wide range of advertising and promotion restrictions for cigarettes and smokeless tobacco (1) products (the “Final Tobacco Marketing Rule”), which the FDA has subsequently amended to expand specific provisions to all tobacco products, including cigars, pipe tobacco and e-vapor and oral nicotine products containing tobacco-derived nicotine or other tobacco derivatives such as synthetic nicotine.

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

The Final Tobacco Marketing Rule, as amended, among other things:

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

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

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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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Should PM USA or USSTC receive unfavorable determinations on any SE reports currently pending with the FDA, we believe PM USA and USSTC can replace the vast majority of these product volumes with other FDA authorized products or with Pre-existing Tobacco Products.

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.

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.

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

MGOs 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 an MGO 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

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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!

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

As of October 28, 2024, the FDA has not issued marketing order decisions for any on!

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

PLUS products.

As of October 28, 2024, Middleton has received marketing orders or exemptions that cover over 99% of its cigar product volume.

As of April 24, 2025, Middleton has received MGOs 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.

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.

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

Supreme Court to review the case.

In September 2024, the FDA announced in guidance that it generally would not enforce the final rule until December 2025.

However, the FDA has separately stated that parties involved in pending litigation would not be required to comply during the pendency of the case before the U.S.

Supreme Court and for an additional 15 months after the U.S.

Supreme Court’s disposition of the case.

We submitted comments in response to the September 2024 guidance asking the FDA to set the same compliance deadline for all manufacturers and, assuming the rule remains in place following the U.S.

Supreme Court’s disposition of the case, to begin enforcing the rule no sooner than 15 months following the disposition.

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

Supreme Court declined to do.

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 March 2025, the FDA appealed that decision to the U.S.

Court of Appeals for the Fifth Circuit.

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 was held in April 2025.

▪ Underage Access and Use of Certain Tobacco Products :

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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 e-vapor 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 October 28, 2024, many manufacturers of menthol and other flavored e-vapor products have received MDOs for failure to provide sufficiently strong product-specific scientific evidence to demonstrate that the benefit of their products to adult smokers overcomes the risk that their products pose to youth.

As of April 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.

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

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In January 2024, 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.

Court of Appeals for the Fifth Circuit ruled that the FDA had unlawfully changed its position 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.

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Court of Appeals for the Fifth Circuit’s decision.

In April 2025, the U.S.

Supreme Court vacated the U.S.

Court of Appeals for the Fifth Circuit’s determination, concluding that manufacturers had been given fair notice of the PMTA requirements, and remanded the case for further review.

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

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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 July 2024, the Biden Administration published its Spring 2024 Unified Regulatory Agenda, which indicates that the date for any final action on this proposed product standard is to be determined.

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.

If not withdrawn, the proposed product standard 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.

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

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.

As of October 28, 2024, the FDA has not completed rulemaking with respect to either proposed product standard.

In April 2024, the FDA announced that it would delay a decision on the menthol ban indefinitely, citing the high volume of feedback received during the notice-and-comment period, and the Biden Administration’s Spring 2024 Unified Regulatory Agenda indicates that the date for any final action on these proposed product standards is to be determined.

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

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

The Biden Administration’s Spring 2024 Unified Regulatory Agenda includes the FDA’s plans to complete rulemaking with respect to this proposed rule by April 2025.

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.

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Federal, state and local cigarette excise taxes have increased substantially over the past two decades, far outpacing the rate of inflation.

Between the end of 1998 and October 28, 2024, the weighted-average state cigarette excise tax increased from $0.36 to $1.93 per pack.

As of October 28, 2024, three states (Maryland (effective in July 2024), Colorado (effective in July 2024)

and Rhode Island (effective in September 2024)) have increased excise taxes in 2024.

In addition, various increases are under consideration or have been proposed.

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

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

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

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

A majority of states currently tax MST using an ad valorem method, which is calculated as a percentage of the price of the product, typically the wholesale price.

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We support legislation to convert ad valorem taxes on MST to a weight-based methodology because, unlike the ad valorem tax, a weight-based tax subjects cans of equal weight to the same tax.

As of October 28, 2024, the federal government, 23 states, Puerto Rico, Philadelphia, Pennsylvania and Cook County, Illinois have adopted a weight-based tax methodology for MST.

As of April 24, 2025, the federal government, 24 states, Puerto Rico, Philadelphia, Pennsylvania and Cook County, Illinois have adopted a weight-based tax methodology for MST.

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

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

As of October 28, 2024, 33 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-vapor products.

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

As of April 24, 2025, 32 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-vapor products.

These taxes are calculated in varying ways and may differ based on the e-vapor product form.

Similarly, 13 states and the District of Columbia have enacted legislation to tax oral nicotine pouches.

Various excise tax increases are under consideration or have been proposed.

For example, in April 2025, the Indiana state legislature passed a budget proposal that, if signed by the governor of Indiana, would increase the state’s cigarette excise tax to $2 per pack and increase the state’s excise taxes on both e-vapor and oral nicotine products, in each case effective July 1, 2025.

Additionally, in April 2025, the Washington state legislature passed a bill that, if signed by the governor of Washington, would subject oral nicotine pouches to the same state taxes currently applicable to other tobacco products, effective January 1, 2026.

Tax increases are expected to continue to have an adverse impact on sales of our operating companies’ products through lower consumption levels and the potential shift in adult tobacco consumer purchases from premium to non-premium or discount cigarettes, to lower taxed tobacco products or to counterfeit and contraband products.

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The World Health Organization’s Framework Convention on Tobacco Control (the “FCTC”) entered into force in February 2005.

As of October 28, 2024, 182 countries, as well as the European Union, have become parties to the FCTC.

As of April 24, 2025, 182 countries, as well as the European Union, have become parties to the FCTC.

While the United States is a signatory of the FCTC, it is not currently a party to the agreement, as the agreement has not been submitted to, or ratified by, the U.S.

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These settlements require participating manufacturers to make substantial annual payments, which are adjusted for several factors, including inflation, operating income, market share and industry volume.

Increases in inflation can increase our financial liability under the State Settlement Agreements.

The State Settlement Agreements’ inflation calculations require us to apply the higher of 3% or the U.S.

Higher rates of inflation can increase our financial liability under the State Settlement Agreements as the State Settlement Agreements’ inflation calculations require us to apply the higher of 3% or the U.S.

Bureau of Labor Statistics’ Consumer Price Index for All Urban Consumers (“CPI-U”) percentage rate as published in January of each year.

As of December 2023, the inflation calculation was approximately 3.4% based on the latest CPI-U data.

While this calculation resulted in an increase in our annual payments under the State Settlement Agreements, the increase 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.

As of December 2024, the applicable percentage rate was approximately 2.9% based on the latest CPI-U data.

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

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 14.

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

As of October 28, 2024, multiple states and localities are considering legislation to ban flavors in one or more tobacco products, and six states (California, Massachusetts, New Jersey, New York, Rhode Island and Utah) and the District of Columbia have passed such legislation.

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

As of April 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 states, such as New York 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.

Maryland banned e-vapor product flavors other than tobacco and menthol through Department of Taxation rulemaking.

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

As of October 28, 2024, legislation relating to this issue is pending in one other state.

As of April 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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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 October 28, 2024, 43 states, the District of Columbia and Puerto Rico have enacted laws increasing the legal age to purchase tobacco products to 21.

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

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

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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 former interest in JUUL, see Note 6.

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 businesses, including the sales volumes and market shares of our operating companies’ innovative and smoke-free products and traditional tobacco products.

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;

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

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.

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

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

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 could have an adverse effect on our business, results of operations, cash flows or financial position.

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

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

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

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 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.

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

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, inflation, geopolitical instability, labor disruptions, 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.

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.

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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.

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

Current macroeconomic conditions, geopolitical instability (including inflation, high interest rates, labor shortages, supply and demand imbalances and geopolitical instability 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, tobacco leaf and resins and aluminum used in our packaging).

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 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.

However, the effects of current macroeconomic and geopolitical conditions, including tariffs, 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.

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Operating Results

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

For the Nine Months Ended September 30, 2024

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

Net revenues $ 15,941 $ 2,084 $ 19 $ 18,044

Excise taxes (2,630) (76) — (2,706)

Revenues net of excise taxes $ 13,311 $ 2,008 $ 19 $ 15,338

Reported OCI $ 8,183 $ 996 $ (291) $ 8,888

NPM Adjustment Items (29) — — (29)

Asset impairment — 354 — 354

Tobacco and health and certain other litigation items 59 — — 59

Adjusted OCI $ 8,213 $ 1,350 $ (291) $ 9,272

Reported OCI margin (1)

61.5 % 49.6 % (100.0+)% 57.9 %

Adjusted OCI margin (1)

61.7 % 67.2 % (100.0+)% 60.5 %

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

For further information on our reportable segments, see Note 11.

Smokeable Products Segment

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Operating Results

For the Nine Months Ended September 30, For the Three Months Ended September 30,

(in millions) 2024 2023 Change 2024 2023 Change

For the Three Months Ended March 31,

(in millions) 2025 2024 Change

Net revenues $ 4,622 $ 4,906 (5.8) %

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NPM Adjustment Items — (6)

Asset impairment, exit and implementation costs 13 —

Tobacco and health and certain other litigation items 36 18

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Reported OCI margins (1)

61.5 % 59.8 % 1.7 pp 63.1 % 59.7 % 3.4 pp

63.2 % 59.9 % 3.3 pp

Adjusted OCI margins (1)

61.7 % 60.1 % 1.6 pp 63.1 % 59.6 % 3.5 pp

64.4 % 60.2 % 4.2 pp

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

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, decreased $541 million (3.3%), due primarily to lower shipment volume ($1,991 million), partially offset by higher pricing ($1,444 million), which includes higher promotional investments.

Reported OCI increased $91 million (1.1%), due primarily to higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($131 million), partially offset by lower shipment volume ($1,293 million) and higher per unit settlement charges and manufacturing costs ($206 million).

Adjusted OCI increased $71 million (0.9%), due primarily to higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($125 million), partially offset by lower shipment volume and higher per unit settlement charges and manufacturing costs.

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, decreased $32 million (0.6%), due primarily to lower shipment volume ($556 million), partially offset by higher pricing ($517 million), which includes higher promotional investments.

Reported OCI increased $194 million (7.1%), due primarily to higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($84 million), partially offset by lower shipment volume ($363 million) and higher per unit settlement charges.

Adjusted OCI increased $194 million (7.1%), due primarily to higher pricing, which includes higher promotional investments, and lower marketing, administration and research costs ($92 million), partially offset by lower shipment volume and higher per unit settlement charges.

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Net revenues, which include excise taxes billed to customers, decreased $284 million (5.8%), due primarily to lower shipment volume ($775 million), partially offset by higher pricing ($491 million), which includes lower promotional investments.

Reported OCI increased $30 million (1.2%), due primarily to higher pricing, which includes lower promotional investments, lower per unit settlement charges and manufacturing costs ($73 million), partially offset by lower shipment volume ($510 million) and higher marketing, administration and research costs ($13 million), which include higher tobacco and health and certain other litigation items and costs associated with our Optimize & Accelerate initiative in 2025.

Adjusted OCI increased $67 million (2.7%), due primarily to higher pricing, which includes lower promotional investments, lower per unit settlement charges and manufacturing costs ($73 million) and lower marketing, administration and research costs ($18 million), partially offset by lower shipment volume.

Shipment Volume and Retail Share Results

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Shipment Volume

For the Nine Months Ended September 30, For the Three Months Ended September 30,

(sticks in millions) 2024 2023 Change 2024 2023 Change

For the Three Months Ended March 31,

(sticks in millions) 2025 2024 Change

Marlboro 12,978 14,973 (13.3) %

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Cigarettes shipment volume includes Marlboro ;

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

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.

Territories to overseas military and by Philip Morris Duty Free Inc., none of which, individually or in the aggregate, is material to our smokeable products segment.

Cigarettes volume includes units sold as well as promotional units but excludes units not considered domestic, which are not material to our smokeable products segment.

The following table summarizes our cigarettes retail share performance:

For the Nine Months Ended September 30, For the Three Months Ended September 30,

2024 2023 Percentage Point Change 2024 2023 Percentage Point Change

For the Three Months Ended March 31,

2025 2024 Percentage Point Change

Marlboro 41.0 % 42.0 % (1.0)

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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.

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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For a discussion of volume trends and factors that impact volume and retail share performance, see Operating Results by Business Segment - Business Environment - Summary above.

Nine Months Ended September 30, 2024 Compared with the Nine Months Ended September 30, 2023

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 10.6%, 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.

Three Months Ended March 31, 2025 Compared with the Three Months Ended March 31, 2024

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 13.7%, 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 calendar differences.

When adjusted for calendar differences and trade inventory movements, our smokeable products segment domestic cigarette shipment volume decreased by an estimated 12%.

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

Shipments of premium cigarettes accounted for 95.8% and 94.6% of our smokeable products segment’s reported domestic cigarettes shipment volume for the nine months ended September 30, 2024 and 2023, respectively.

Marlboro share of the premium segment was 59.3%, an increase of 0.5 share points.

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

Shipments of premium cigarettes accounted for 96.1% and 95.6% of our smokeable products segment’s reported domestic cigarettes shipment volume for the three months ended March 31, 2025 and 2024, respectively.

Marlboro share of the premium segment was 59.3%, an increase of 0.1 share point.

Total cigarettes industry discount category retail share was 30.9%, an increase of 1.8 share points, primarily due to continued discretionary income pressures on adult tobacco consumers.

Three Months Ended September 30, 2024 Compared with the Three Months Ended September 30, 2023

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 8.6%, 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) and retail share losses, partially offset by trade inventory movements and calendar differences.

When adjusted for trade inventory movements and calendar differences, our smokeable products segment domestic cigarette shipment volume decreased by an estimated 11.5%.

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

Shipments of premium cigarettes accounted for 96.1% and 95.0% of our smokeable products segment’s reported domestic cigarettes shipment volume for the three months ended September 30, 2024 and 2023, respectively.

Marlboro retail share of the total cigarette category was 41.7%, a decrease of 0.6 share points versus the prior year and 0.3 share points sequentially.

Additionally, Marlboro share of the premium segment was 59.3%, an increase of 0.3 share points versus the prior year and a decrease of 0.1 share point sequentially.

Total cigarettes industry discount category retail share was 29.8%, an increase of 1.5 share points versus the prior year and 0.5 share points sequentially, primarily due to continued discretionary income pressures on adult tobacco consumers.

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

For a discussion regarding discount category dynamics in 2025, 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 actions during 2025 and 2024:

▪ Effective January 19, 2025, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) and L&M by $0.17 per pack.

PM USA decreased the list price of Marlboro Black by $0.28 per pack.

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

▪ 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.

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

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

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

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

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

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

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

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

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

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

▪ Effective October 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 April 13, 2025, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) and L&M by $0.20 per pack.

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

▪ Effective April 20, 2025, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.14 per five-pack.

Oral Tobacco Products Segment

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Operating Results

For the Nine Months Ended September 30, For the Three Months Ended September 30,

(in millions) 2024 2023 Change 2024 2023 Change

For the Three Months Ended March 31,

(in millions) 2025 2024 Change

Net revenues $ 654 $ 651 0.5 %

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Reported OCI $ 433 $ 435 (0.5) %

Asset impairment 354 — — —

Asset impairment, exit and implementation costs 2 —

Adjusted OCI $ 435 $ 435 — %

Reported OCI margins (1)

49.6 % 68.9 % (19.3) pp 66.8 % 69.3 % (2.5) pp

68.8 % 69.5 % (0.7) pp

Adjusted OCI margins (1)

67.2 % 68.9 % (1.7) pp 66.8 % 69.3 % (2.5) pp

69.2 % 69.5 % (0.3) pp

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

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, increased $91 million (4.6%), due to higher pricing ($170 million), partially offset by lower shipment volume and a higher percentage of on!

shipment volume relative to MST ($79 million).

Reported OCI decreased $318 million (24.2%), due primarily to a non-cash impairment of the Skoal trademark ($354 million), lower shipment volume and a higher percentage of on!

shipment volume relative to MST ($82 million) and higher marketing, administration and research costs ($44 million), partially offset by higher pricing.

Adjusted OCI increased $36 million (2.7%), due primarily to higher pricing, partially offset by lower shipment volume and a higher percentage of on!

shipment volume relative to MST and higher marketing, administration and research costs.

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Net revenues, which include excise taxes billed to customers, increased $37 million (5.4%), due primarily to higher pricing ($51 million), which includes higher promotional investments, partially offset by a higher percentage of on!

shipment volume relative to MST (net of higher shipment volume) ($15 million).

Reported and adjusted OCI increased $9 million (2.0%), due primarily to higher pricing, which includes higher promotional investments, partially offset by higher marketing, administration and research costs ($27 million) and a higher percentage of on!

shipment volume relative to MST (net of higher shipment volume) ($13 million).

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Net revenues, which include excise taxes billed to customers, was essentially unchanged, as higher pricing ($58 million), which includes higher promotional investments, was mostly offset by lower shipment volume and a higher percentage of on!

shipment volume relative to MST (“volume/mix”) ($55 million).

Reported OCI was essentially unchanged, as lower volume/mix ($57 million), was mostly offset by higher pricing, which includes higher promotional investments.

Adjusted OCI was unchanged, as higher pricing, which includes higher promotional investments, was mostly offset by lower volume/mix.

Shipment Volume and Retail Share Results

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Shipment Volume

For the Nine Months Ended September 30, For the Three Months Ended September 30,

(cans and packs in millions) 2024 2023 Change 2024 2023 Change

For the Three Months Ended March 31,

(cans in millions) 2025 2024 Change

Copenhagen 89.7 99.1 (9.5) %

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Other primarily includes Red Seal and Husky .

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

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

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

To calculate volumes of cans and packs shipped, one pack of snus or one can of oral nicotine pouches, irrespective of the number of pouches in the pack or can, is assumed to be equivalent to one can of MST.

The following table summarizes our oral tobacco products segment’s retail share performance (excluding international volume):

For the Nine Months Ended September 30, For the Three Months Ended September 30,

2024 2023 Percentage Point Change 2024 2023 Percentage Point Change

To calculate volumes of cans shipped, one can of oral nicotine pouches, irrespective of the number of pouches in the can, is assumed to be equivalent to one can of MST.

We have restated prior period retail share performance data and estimated industry volume to reflect the inclusion of synthetic oral nicotine pouch products.

Prior to 2025, our reported oral tobacco segment retail share performance data excluded synthetic oral nicotine pouch products.

Throughout 2024 and into the first quarter of 2025, we have been tracking the quarterly sequential growth of synthetic oral nicotine pouch products in various traditional tobacco retailers.

Based on the consistency of this trend, beginning in the first quarter of 2025 our reported oral tobacco products segment retail share performance data and category industry volume estimates have been updated to include synthetic oral nicotine pouch products.

The following table summarizes our oral tobacco products segment’s retail restated share performance:

For the Three Months Ended March 31,

2025 2024 Percentage Point Change

Copenhagen 16.9 % 20.1 % (3.2)

Skoal 6.6 8.0 (1.4)

8.0 6.8 1.2 8.9 6.9 2.0

Other 2.4 2.7 (0.3)

Total oral tobacco products 34.7 % 37.8 % (3.1)

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

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

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

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

Oral tobacco products are defined by Circana as domestic tobacco derived oral products, in the form of MST, snus and oral nicotine pouches.

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

Oral tobacco products are defined by Circana as domestic oral products, in the form of MST and all oral nicotine pouch products (inclusive of tobacco-derived and synthetic oral nicotine products).

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

For example, one pack of snus or one can of oral nicotine pouches, irrespective of the number of pouches in the pack or can, is assumed to be equivalent to one can of MST.

For example, one can of oral nicotine pouches, irrespective of the number of pouches in the can, is assumed to be equivalent to one can of MST.

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

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For a discussion of volume trends and factors that impact volume and retail share performance, see Operating Results by Business Segment - Business Environment - Summary above.

Nine Months Ended September 30, 2024 Compared with Nine Months Ended September 30, 2023

Our oral tobacco products segment’s reported domestic shipment volume decreased 1.3%, primarily driven by retail share losses and trade inventory movements, partially offset by the industry’s growth rate, calendar differences and other factors.

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

Total oral tobacco products category industry volume increased by an estimated 7.5% over the six months ended September 30, 2024, primarily driven by growth in oral nicotine pouches, partially offset by declines in MST volumes.

Our oral tobacco products segment’s retail share was 37.8%, as share declines for MST products were partially offset by oral nicotine pouch segment share growth.

nicotine pouch category grew to 41.9% of the U.S.

oral tobacco category, an increase of 12.4 share points versus the prior year.

In addition, on!

’s share of the nicotine pouch category was 19.1%, a decrease of 3.8 share points versus the prior year.

Three Months Ended September 30, 2024 Compared with Three Months Ended September 30, 2023

Our oral tobacco products segment’s reported domestic shipment volume increased 1.2%, driven primarily by industry’s growth rate, calendar differences and other factors, partially offset by retail share losses and trade inventory movements.

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Our oral tobacco products segment’s reported domestic shipment volume decreased 5.0%, primarily driven by retail share losses, calendar differences, trade inventory movements and other factors, partially offset by the industry’s growth rate.

When adjusted for calendar differences and trade inventory movements, our oral tobacco products segment’s reported domestic shipment volume decreased by an estimated 1%.

Total oral tobacco products category industry volume increased by an estimated 10% over the six months ended March 31, 2025, primarily driven by growth in oral nicotine pouches, partially offset by declines in MST volumes.

Our oral tobacco products segment’s retail share was 34.7%, as share declines for MST products were partially offset by oral nicotine pouch segment share growth.

oral tobacco category share for on!

nicotine pouches was 8.9%, an increase of 2.0 share points versus the prior year and 0.8 share points sequentially.

nicotine pouch category grew to 49.1% of the U.S.

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In addition, on!

’s share of the nicotine pouch category was 20.3%, a decrease of 0.9 share points versus the prior year and an increase of 0.9 share points sequentially.

’s share of the nicotine pouch category was 17.9%, an increase of 0.5 share points versus the prior year.

For a discussion regarding the growth of oral nicotine pouch products and the related impact on the MST category and economic conditions that impact adult tobacco consumer purchasing behavior, see Operating Results by Business Segment - Business Environment - Summary above.

Pricing Actions

USSTC and Helix executed the following pricing actions during 2025 and 2024:

▪ Effective February 23, 2025, Helix increased the list price on its on!

brand by $0.20 per can.

▪ Effective January 21, 2025, USSTC increased the list price on its Copenhagen and Red Seal brands by $0.12 per can.

USSTC also increased the list price on its Skoal brands by $0.17 per can.

▪ Effective August 25, 2024, Helix increased the list price on its on!

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

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

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

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

brand by $0.09 per can.

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

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

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

▪ Effective April 22, 2025, USSTC increased the list price on its Copenhagen and Red Seal brands by $0.12 per can.

USSTC also increased the list price on its Skoal brands by $0.17 per can.

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

Nine Months Ended September 30, 2024

Reported domestic shipment volumes for the nine months ended September 30, 2024 for NJOY consumables (1) and devices were 33.8 million units and 3.9 million units, respectively.

For the nine months ended September 30, 2024 NJOY retail share of consumables in the U.S.

multi-outlet and convenience channel was 5.3%.

Three Months Ended September 30, 2024

Reported domestic shipment volumes for the three months ended September 30, 2024 for NJOY consumables (1) increased 15.6% versus the prior year to 10.4 million units.

Reported domestic shipment volume for the three months ended September 30, 2024 for NJOY devices increased 100+% versus the prior year to 1.1 million units.

In the third quarter of 2024, NJOY retail share of consumables in the U.S.

multi-outlet and convenience channel increased 2.8 share points versus the prior year to 6.2%.

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Reported domestic shipment volumes for NJOY consumables (1) increased 23.9% to 13.5 million units.

Reported domestic shipment volume for NJOY devices decreased 70% to 0.3 million units.

NJOY retail share of consumables in the U.S.

multi-outlet and convenience channel increased 2.4 share points to 6.6%.

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

For a discussion regarding the growth of illicit e-vapor products and the ITC’s exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE in the United States, see Note 14.

For more information on the impairment of the e-vapor reporting unit goodwill, see Note 4.

Liquidity and Capital Resources

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

At September 30, 2024, our significant subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with

respect to their equity interests.

At March 31, 2025, our significant subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests.

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

At September 30, 2024, we had $1.9 billion of cash and cash equivalents.

At March 31, 2025, we had $4.7 billion of cash and cash equivalents.

In addition to having access to the operating cash flows of our subsidiaries, our capital resources include access to credit markets in the form of commercial paper, availability under our $3.0 billion senior unsecured 5-year revolving credit agreement (“Credit Agreement”), which we use for general corporate purposes, and access to credit markets through the issuance of long-term senior unsecured notes.

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

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

Capital Markets and Other Matters

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Debt to our condensed consolidated financial statements in Item 1 (“Note 12”).

At September 30, 2024, the credit ratings and outlook for our indebtedness by major credit rating agencies were:

At March 31, 2025, the credit ratings and outlook for our indebtedness by major credit rating agencies were:

Short-term Debt Long-term Debt Outlook

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F2 BBB Stable

(1) On April 28 2025, Moody’s changed its outlook to Stable from Negative.

Credit Lines - From time to time, we have short-term borrowing needs to meet our working capital requirements arising from the timing of payments under State Settlement Agreements, quarterly income tax payments and quarterly dividend payments, and generally use our commercial paper program to meet those needs.

At September 30, 2024, we had availability under our Credit Agreement for borrowings of up to an aggregate principal amount of $3.0 billion, and we were in compliance with the covenants in our Credit Agreement.

At March 31, 2025, we had availability under our Credit Agreement for borrowings of up to an aggregate principal amount of $3.0 billion, and we were in compliance with the covenants in our Credit Agreement.

We monitor the credit quality of our bank group and do not know of any potential non-performing credit provider in that group.

For further discussion on short-term borrowings, see Note 12.

Long-Term Debt - At September 30, 2024 and December 31, 2023, our total long-term debt was $25.2 billion and $26.2 billion, respectively.

During the first quarter of 2024, we repaid in full at maturity our 4.000% and 3.800% senior unsecured notes in the aggregate principal amounts of $776 million and $345 million, respectively.

For further details on long-term debt, see Note 12.

At September 30, 2024, our debt-to-Consolidated net earnings and debt-to-Consolidated EBITDA ratios were calculated as follows:

For the Twelve Months Ended September 30, 2024 (1)

Long-Term Debt - At March 31, 2025 and December 31, 2024, our total long-term debt was $26.1 billion and $24.9 billion, respectively.

In February 2025, we issued U.S.

dollar denominated senior unsecured notes in the aggregate principal amount of $1.0 billion.

For further discussion of long-term debt, see Note 12.

At March 31, 2025, our debt-to-Consolidated net earnings and debt-to-Consolidated EBITDA ratios were calculated as follows:

For the Twelve Months Ended March 31, 2025 (1)

(in millions)

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EBITDA 13,939

(Income) loss from investments in equity securities and noncontrolling interests, net (668)

(Income) loss from investments in equity securities and noncontrolling interest, net (500)

Dividends from less than 50% owned affiliates 139

Gain on the sale of IQOS System commercialization rights

Asset impairment 354

Impairment of goodwill and other intangible assets 1,227

Exit costs 35

Fair value adjustment for NJOY Transaction contingent payments 165

Consolidated EBITDA $ 12,305

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Total Debt / Consolidated EBITDA 2.1

(1) Calculated as of the end of the applicable quarter on a rolling four quarters basis.

(2) Balance at September 30, 2024.

ABI Transaction - As discussed in Note 6, in March 2024, we received pre-tax cash proceeds from the ABI Transaction of approximately $2.4 billion and paid transaction costs of approximately $62 million.

We used the proceeds from the ABI Transaction to fund the ASR transactions discussed below.

NJOY Contingent Payments - In the second quarter of 2024, the FDA issued MGOs for four NJOY e-vapor menthol products.

As a result, we became obligated to make cash payments totaling $250 million under the acquisition agreement, which we made in July 2024.

For further discussion on the NJOY contingent payments, see Note 2 .

Guarantees and Other Similar Matters - As discussed in Note 14, we had unused letters of credit obtained in the ordinary course of business and guarantees (including third-party guarantees) outstanding at September 30, 2024.

(1) Calculated for the four most recent fiscal quarters.

(2) Balance at March 31, 2025.

From time to time, we also issue lines of credit to affiliated entities.

As further discussed in Note 4.

Supplier Financing to our condensed consolidated financial statements in Item 1 and Note 14, as part of the supplier financing program, Altria guarantees the financial obligations of Altria Client Services LLC under the financing program agreement.

As part of the supplier financing program, Altria guarantees the financial obligations of ALCS under the financing program agreement.

In addition, as discussed below in Supplemental Guarantor Financial Information and in Note 12, PM USA guarantees our obligations under our outstanding debt securities, any borrowings under our Credit Agreement and any amounts outstanding under our commercial paper program.

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

For further discussion of State Settlement Agreements, see Health Care Cost Recovery Litigation in Note 14.

Based on current agreements, estimated market share, estimated annual industry volume decline rates and inflation rates, the estimated amounts that we may charge to cost of sales for payments related to State Settlement Agreements and FDA user fees are $3.5 billion on average for the next three years.

The estimated amount for 2024 includes PM USA’s obligations under the State Settlement Agreements to pay settling plaintiffs’ attorneys’ fees.

We expect PM USA’s obligation to pay these fees will terminate in the fourth quarter of 2024.

In addition, the amount excludes the potential impact of any NPM Adjustment Items.

For further discussion of the State Settlement Agreements, see Health Care Cost Recovery Litigation in Note 14.

Based on current agreements, estimated annual industry volume decline rates, estimated operating income, estimated market share and inflation, the estimated amounts that we may charge to cost of sales for payments related to State Settlement Agreements and FDA user fees are $3.0 billion on average for the next three years.

The estimated amount excludes the potential impact of any NPM Adjustment Items.

The estimated amounts due under the State Settlement Agreements charged to cost of sales in each year are generally paid in April of the following year.

The amounts charged to cost of sales for FDA user fees are generally paid in the quarter in which the fees are incurred.

We paid approximately $3.3 billion and $3.5 billion for the nine months ended September 30, 2024 and 2023, respectively, in connection with the State Settlement Agreements and FDA user fees, primarily all of which was paid in

the second quarter of each period.

We recorded $2.9 billion and $3.0 billion of charges to cost of sales for the nine months ended September 30, 2024 and 2023, respectively, and $0.9 billion and $1.0 billion of charges to cost of sales for the three months ended September 30, 2024 and 2023, respectively, in connection with the State Settlement Agreements and FDA user fees.

The payments due under the terms of the State Settlement Agreements and FDA user fees are subject to adjustment for several factors, including volume, operating income, inflation and certain contingent events and, in general, are allocated based on each manufacturer’s market share.

We paid approximately $2.7 billion in April 2025 for amounts accrued in 2024 under the State Settlement Agreements.

We recorded $0.7 billion and $0.9 billion of charges to cost of sales for the three months ended March 31, 2025 and 2024, respectively, in connection with the State Settlement Agreements and FDA user fees.

The payments due under the terms of the State Settlement Agreements and FDA user fees are subject to adjustment for several factors, including volume, operating income, market share and inflation.

The future payment amounts discussed above are estimates, and actual payment amounts will differ to the extent underlying assumptions differ from actual future results.

For further discussion on the potential impact of inflation on future payments, see Operating Results by Business Segment - Business Environment - State Settlement Agreements above.

Litigation-Related Deposits and Payments - With respect to certain adverse verdicts currently on appeal, to obtain stays of judgments pending appeals, as of September 30, 2024, PM USA had posted appeal bonds totaling $31 million, which have been collateralized with restricted cash that is included in assets on our condensed consolidated balance sheet.

Litigation-Related Deposits and Payments - With respect to certain adverse verdicts currently on appeal, to obtain stays of judgments pending appeals, as of March 31, 2025, PM USA had posted appeal bonds totaling $24 million, which have been collateralized with restricted cash that is included in assets on our condensed consolidated balance sheet.

Litigation is subject to uncertainty, and an adverse outcome or settlement of litigation could have a material adverse effect on our results of operations, cash flows or financial position in a particular fiscal quarter or fiscal year, as more fully disclosed in Note 14.

Equity and Dividends

During the first nine months of 2024 and 2023, we paid dividends of $5,108 million and $5,040 million, respectively, an increase of 1.3%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase programs.

In August 2024, our Board of Directors approved a 4.1% increase in the quarterly dividend rate to $1.02 per share of our common stock versus the previous rate of $0.98 per share.

During the first three months of 2025, we paid dividends of $1,730 million, essentially unchanged from the first three months of 2024, reflecting fewer shares outstanding as a result of shares we repurchased under our share repurchase programs, mostly offset by a higher dividend rate.

Our current annualized dividend rate is $4.08 per share.

We have a progressive dividend goal targeting mid-single digits dividend growth annually through 2028.

Future dividend payments remain subject to the discretion of our Board.

ASR - In March 2024, we increased our $1.0 billion share repurchase program to $3.4 billion and entered into the ASR transactions.

In the first half of 2024, we paid $2.4 billion for the repurchase of our common stock in the ASR transactions.

We funded the ASR transactions with proceeds from the ABI Transaction.

For further discussion of our share repurchase programs, see Note 1 and Part II, Item 2.

Future dividend payments remain subject to the discretion of our Board of Directors (“Board of Directors” or “Board”).

For further discussion of our share repurchase programs, see Note 1.

Background and Basis of Presentation to our condensed consolidated financial statements in Item 1 and Part II, Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds of this Form 10-Q.

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Cash Provided by/Used in Operating Activities

During the first nine months of 2024, net cash provided by operating activities was $5,413 million compared with $6,060 million during the first nine months of 2023.

This decrease was due primarily to payments for certain transferable income tax credits, higher litigation payments and a portion of the NJOY contingent payments ($140 million).

We had a working capital deficit at September 30, 2024 and December 31, 2023, and believe we have the ability to fund working capital deficits with cash provided by operating activities, borrowings under our Credit Agreement and access to the credit and capital markets.

During the first three months of 2025, net cash provided by operating activities was $2,720 million compared with $2,877 million during the first three months of 2024.

This decrease was due primarily to lower net revenues, partially offset by lower excise tax payments.

We had a working capital deficit at March 31, 2025 and December 31, 2024, and believe we have the ability to fund working capital deficits with cash provided by operating activities, borrowings under our Credit Agreement and access to the credit and capital markets.

Cash Provided by/Used in Investing Activities

During the first nine months of 2024, net cash provided by investing activities was $2,238 million compared with net cash used in investing activities of $1,217 million during the first nine months of 2023.

This change was due primarily to proceeds from the ABI Transaction in 2024 and the NJOY Transaction in 2023, partially offset by proceeds from the sale of IQOS System commercialization rights in 2023.

Capital expenditures for 2024 are expected to be in the range of $125 million to $175 million, a reduction from the previous range of $175 million to $225 million, and are expected to be funded from operating cash flows.

During the first three months of 2025, net cash used in investing activities was $43 million compared with net cash provided by investing activities of $2,316 million during the first three months of 2024.

This change was due primarily to proceeds from the ABI Transaction in 2024.

Cash Provided by/Used in Financing Activities

During the first nine months of 2024, net cash used in financing activities was $9,444 million compared with $7,353 million during the first nine months of 2023.

This increase was due to higher share repurchases in 2024 and a portion of the NJOY contingent payments ($110 million), partially offset by lower repayments of long-term debt in 2024.

During the first three months of 2025, net cash used in financing activities was $1,085 million compared with $5,268 million during the first three months of 2024.

This decrease was due to higher share repurchases in 2024, repayments of long-term debt in 2024 and issuances of long-term debt in 2025.

New Accounting Guidance Not Yet Adopted

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

Neither the Guarantor nor other 100% owned subsidiaries of the Parent that are not guarantors of the debt (“Non-

Guarantor Subsidiaries”) are limited by contractual obligations on their ability to pay cash dividends or make other distributions with respect to their equity interests.

Neither the Guarantor nor other 100% owned subsidiaries of the Parent that are not guarantors of the debt (“Non-Guarantor Subsidiaries”) are limited by contractual obligations on their ability to pay cash dividends or make other distributions with respect to their equity interests.

The following tables include summarized financial information for the Parent and the Guarantor.

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Parent Guarantor

September 30, 2024 December 31, 2023 September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024 March 31, 2025 December 31, 2024

Due from Non-Guarantor Subsidiaries

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(in millions of dollars)

For the Nine Months Ended September 30, 2024

For the Three Months Ended March 31, 2025

Guarantor (2)

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Net earnings (losses) (149) 1,758

(1) For the nine months ended September 30, 2024, net earnings (losses) include $276 million of intercompany interest income from non-guarantor subsidiaries and $333 million of interest expense from non-guarantor subsidiaries.

(2) For the nine months ended September 30, 2024, net earnings (losses) include $218 million of intercompany interest income from non-guarantor subsidiaries.

(1) For the three months ended March 31, 2025, net earnings (losses) include $92 million of intercompany interest income from non-guarantor subsidiaries and $113 million of interest expense from non-guarantor subsidiaries.

(2) For the three months ended March 31, 2025, net earnings (losses) include $72 million of intercompany interest income from non-guarantor subsidiaries.

Cautionary Factors That May Affect Future Results

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This Form 10-Q contains statements concerning our expectations, plans, objectives, future financial performance and other statements that are not historical facts.

You can identify these forward-looking statements by use of words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “will,” “estimates,” “forecasts,” “intends,” “projects,” “goals,” “objectives,” “guidance,” “targets” and other words of similar meaning.

You can identify these forward-looking statements by our use of words such as “strategy,” “expects,” “continues,” “plans,” “anticipates,” “believes,” “will,” “estimates,” “forecasts,” “intends,” “projects,” “goals,” “objectives,” “guidance,” “targets” and other words of similar meaning.

You can also identify them by the fact that they do not relate strictly to historical or current facts.

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Any such statement is qualified by reference to the following cautionary statements.

We elaborate on these important factors and the risks we face throughout this Form 10-Q, particularly in the “Executive Summary” and “Business Environment” sections preceding our discussion of the operating results of our segments above, and in our other publicly filed reports, including our 2023 Form 10-K.

We elaborate on these important

factors and the risks we face throughout this Form 10-Q, particularly in the “Executive Summary” and “Business Environment” sections preceding our discussion of the operating results of our segments above, and in our other publicly filed reports, including our 2024 Form 10-K.

These factors and risks include the following:

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▪ the growth of the e-vapor category, including illicit disposable e-vapor products, which contributes to reductions in domestic cigarette consumption levels and shipment volume;

▪ the risks associated with illicit trade in tobacco products (including counterfeit products, illegally imported products, illicit disposable e-vapor products and oral nicotine pouch products) and the sale of products designed to avoid the regulatory framework for tobacco products, such as products using nicotine analogues, each of which contribute to reductions in the consumption levels and shipment volumes of our businesses’ products;

▪ the impact of illicit trade in tobacco products and the sale of products designed to avoid the regulatory framework for tobacco products, each of which contribute to reductions in the consumption levels and shipment volumes of our businesses’ products;

▪ our failure to develop and commercialize innovative products, including tobacco products that may reduce health risks relative to other tobacco products and appeal to adult tobacco consumers;

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▪ increases in tobacco product-related taxes;

▪ our failure to complete or manage successfully strategic transactions, including the NJOY Transaction and other acquisitions, dispositions, joint ventures and investments in third parties, or realize the anticipated benefits of such transactions;

▪ our failure to complete or manage successfully strategic transactions, including acquisitions, dispositions, joint ventures and investments in third parties, or realize the anticipated benefits of such transactions;

▪ significant changes in price, availability or quality of tobacco, other raw materials or component parts, including as a result of changes in macroeconomic, climate and geopolitical conditions;

▪ our reliance on a few significant facilities and a small number of key suppliers, distributors and distribution chain service providers and the risks associated with an extended disruption at a facility or in service by a supplier, distributor or distribution chain service provider;

▪ the risk that we may be required to write down intangible assets, including trademarks and goodwill, due to impairment;

▪ the risk that we may be required to write down goodwill and intangible assets, including trademarks and other intellectual property, due to impairment;

▪ the risks associated with our Optimize & Accelerate initiative, including risks relating to business continuity, our internal control over financial reporting and audit procedures and our ability to recognize the expected savings;

▪ the risk that we could decide, or be required, to recall products;

▪ the various risks related to health epidemics and pandemics and the measures that international, federal, state and local governments, agencies, law enforcement and health authorities implement to address them;

▪ our inability to attract and retain a highly skilled and diverse workforce due to the decreasing social acceptance of tobacco usage, tobacco control actions and other factors;

▪ our inability to attract and retain a highly skilled workforce due to the decreasing social acceptance of tobacco usage, tobacco control actions and other factors;

▪ the risks associated with the various U.S.

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▪ a downgrade or potential downgrade of our credit ratings;

▪ our inability to attract investors due to increasing investor expectations of our performance relating to corporate responsibility factors, including environmental, social and governance matters;

▪ the impact of heightened focus by investors and other stakeholders on our performance relating to corporate responsibility matters;

▪ the failure of our, or our key service providers’ or key suppliers’, information systems to function as intended, or cyber-attacks or security breaches affecting us or our key service providers or key suppliers;

▪ our failure, or the failure of our key service providers or key suppliers, to comply with laws related to personal data protection, privacy, artificial intelligence and information security;

▪ our ability to recognize the expected cost savings in connection with the Initiative or successfully reinvest those savings in our businesses in support of our Vision and 2028 Enterprise Goals, in each case, in the expected manner or time frame or at all;

▪ the risk that the expected benefits of our investment in ABI may not materialize in the expected manner or timeframe or at all, including due to macroeconomic and geopolitical conditions;

foreign currency exchange rates;

ABI’s business results;

ABI’s share price;

impairment losses on the value of our investment;

our incurrence of additional tax liabilities related to our investment in ABI;

and reductions in the number of directors that we can have appointed to the ABI board of directors;

▪ the risk that the expected benefits of our investment in ABI may not materialize in the expected manner or timeframe or at all;

▪ the risks associated with our investment in Cronos, including legal, regulatory and reputational risks and the risk that the expected benefits of the transaction may not materialize in the expected manner or timeframe or at all.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis