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Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-02-26 · 431 added, 538 removed, 731 unchanged (57% of the section changed)

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

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with the other sections of this Form 10-K, including our consolidated financial statements and related notes contained in Item 8, and the discussion of risk factors that may affect future results in Item 1A.

All references to “Notes” in this MD&A are to Notes to our consolidated financial statements in Item 8.

Additionally, refer to Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) in our 2023 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, which we filed with the SEC on February 27, 2024 and is incorporated by reference into this Form 10-K.

MD&A in our 2024 Annual Report on Form 10-K for management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2024 compared to the year ended December 31, 2023, which we filed with the SEC on February 26, 2025 and is incorporated by reference into this Form 10-K.

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

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tobacco consumers age 21+.

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

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

We are Moving Beyond Smoking TM , by responsibly transitioning adult smokers to a smoke-free future, competing vigorously for existing smoke-free adult nicotine consumers and exploring new growth opportunities - beyond the United States and beyond nicotine.

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

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cigar manufacturer.

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

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

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

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

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For a description of Altria, see Item 1.

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Our 2028 Goals are:

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

▪ Deliver a mid-single digits adjusted diluted EPS compounded annual growth rate (“CAGR”) in 2028 from a $4.87 base in 2022, which has been recast as described in Non-GAAP Financial Measures below (for our progress through 2025, see Consolidated Results of Operations );

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

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Smoke-Free Portfolio

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

▪ Approximately double our U.S.

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

We are reassessing our U.S.

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

We anticipate providing updated U.S.

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

▪ Due to ongoing market disruption caused by illicit e-vapor products that have evaded the regulatory process, we continue to reassess our smoke-free goals and expect to provide updated goals when we have more clarity on how the legitimate e-vapor market may evolve.

We remain steadfast in our commitment to our Vision and to building a portfolio of FDA-authorized smoke-free products for adult smokers and adult nicotine consumers currently using smoke-free products.

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

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

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

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

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

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

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

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

In 2025, we began modernizing our ways of working, which enabled increased speed, efficiency and effectiveness across the organization.

We are now adding the final phases of the Initiative and continue to expect to deliver cumulative savings of at least $600 million by the end of 2029.

We continue to plan to reinvest these savings in our businesses in support of our Vision and 2028 Goals.

These cumulative cost savings exclude our estimated pre-tax charges for the Initiative of approximately $175 million, updated from our prior estimate of approximately $125 million, as a result of finalizing the plans for all phases of the Initiative, which we treat as special items and exclude from our adjusted diluted EPS.

For further discussion of the Initiative, see Note 5.

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

Exit and Implementation Costs (“Note 5”).

Trends and Developments

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

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

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

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

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

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

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

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

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

In this section, we focus on the discretionary income pressures on adult nicotine consumers, tariffs, evolving consumer preferences and illicit flavored disposable e-vapor products.

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

Throughout 2025, U.S.

adult nicotine consumers faced persistent inflationary pressures on discretionary income, with lower-income consumers particularly affected.

Inflation remained above the Federal Reserve’s 2% target, and elevated prices for essentials such as groceries and housing continued to constrain spending, prompting many low-income earners to cut back and rely more heavily on credit.

Gas prices trended downward as expected, with the most notable improvement seen in December when the average price fell to $2.89 per gallon, bringing the average in the fourth quarter of 2025 to approximately $3.00 per gallon.

Meanwhile, tariffs introduced earlier in the year steadily increased over recent months, weighing on consumer confidence and adding headwinds to discretionary spending.

While we have not observed a material impact on adult nicotine consumer purchasing behavior as a result of tariffs, we continue to closely monitor the additional pressure that tariff-related price increases may exert.

In addition, we are monitoring other effects of tariffs on our businesses, including the price, availability and quality of tobacco, raw materials, ingredients and component parts used to manufacture our operating companies’ products.

We do not expect tariffs to have a material impact on our costs in 2026 based on presently available information.

Overall discretionary income pressures on adult nicotine consumers have resulted in increased discount brand share performance and continued to contribute to evolving adult nicotine consumer preferences, each of which has negatively impacted the sales volumes of our operating companies’ premium brands.

For the fourth quarter of 2025, the discount retail share of the cigarette category reached 32.9%, an increase of 2.6 share points versus the fourth quarter of 2024 and 0.7 share points sequentially.

Additionally, we believe that a significant number of adult nicotine consumers switch among tobacco categories, use multiple forms of tobacco products and try

innovative nicotine products, such as e-vapor products and oral nicotine pouches.

nicotine pouch category continued to grow throughout the fourth quarter of 2025 to 56.9% of the U.S.

oral tobacco category, an increase of 10.4 share points versus the fourth quarter of 2024.

When adjusted for trade inventory movements, smokeable products segment’s domestic cigarette shipment volume declined by an estimated 7% in the fourth quarter of 2025 versus the fourth quarter of 2024.

We estimate that, when adjusted for trade inventory movements and other factors, total estimated domestic cigarette industry volume declined by 6.5% in the fourth quarter of 2025 versus the fourth quarter of 2024.

In the third quarter of 2025, we estimated the industry decline rate to be 8% versus the third quarter of 2024.

We believe that the 1.5 percentage points reduction in the domestic cigarette industry volume decline rate in the current quarter was primarily due to illicit flavored disposable e-vapor product growth moderating slightly in 2025 as compared to the prior year.

We have closely monitored this trend and its impact on cigarette industry decline rates.

Based on our latest data, we are updating our cigarette category volume decomposition.

We now estimate that cross-category movement, primarily driven by illicit flavored disposable e-vapor products, contributed approximately 2% to 3% to the cigarette industry volume decline during 2025 versus our prior estimate of approximately 3% to 4%.

As innovative smoke-free products evolve to better address the preferences of adult nicotine consumers, these consumers continue to transition from cigarettes and MST products to innovative smoke-free products, which has negatively impacted the sales volumes of our operating companies’ cigarette and MST products.

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

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

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flavored disposable e-vapor products.

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

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

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

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

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

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

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

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

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

Flavored disposable e-vapor products have continued driving growth in the e-vapor category.

We estimate that flavored disposable e-vapor products, the majority of which we believe have evaded the regulatory process, represent approximately 70% of the e-vapor category.

In response to the proliferation of illicit flavored disposable e-vapor products, states and the federal government have taken various regulatory and enforcement actions.

For example, the FDA and U.S.

Customs and Border Protection have made it more difficult to import properly declared illicit e-vapor products, seized unauthorized e-vapor products and issued warning letters to importers.

However, although the FDA, in conjunction with other federal entities, has increased enforcement activity, insufficient actions against manufacturers, distributors and retailers of nicotine products requiring FDA review for which no PMTAs have been submitted have allowed such products to continue to proliferate in the market.

We expect that effective enforcement against illicit flavored disposable e-vapor products will occur more gradually than initially anticipated.

As a result, in connection with the preparation of our financial statements for the year ended December 31, 2025, we recorded non-cash impairments of our e-vapor reporting unit goodwill and definite-lived intangible assets.

For further discussion, see Note 4.

Goodwill and Other Intangible Assets, net.

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

Throughout 2024 and 2025, traditional tobacco retailers began to carry various synthetic oral nicotine pouch products.

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

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, commodity price movements and other macroeconomic factors that could impact financial performance from time to time.

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

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

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

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

With the exception of the impact of illicit flavored disposable e-vapor products on NJOY, the trends and developments above have not had a material adverse impact on our results of operations, cash flows or financial position.

We do not believe the trends and developments discussed above have materially impacted our ability to achieve our Vision.

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

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Consolidated Results of Operations

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2024 NPM Adjustment Items

2023 Acquisition, disposition and integration-related items

2024 Acquisition and disposition-related items

(1,862) (1.08)

2024 Asset impairment, exit and implementation costs

2024 Tobacco and health and certain other litigation items

2023 Loss on disposition of JUUL equity securities

2024 Amortization of intangibles

2024 ABI-related special items

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Subtotal 2024 special items (1)

(2,328) (1.35)

2025 NPM Adjustment Items

2024 Acquisition, disposition and integration-related items

2025 Acquisition and disposition-related items

2025 Asset impairment, exit and implementation costs

(1,921) (1.14)

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

(2,201) (1.30)

Fewer shares outstanding — 0.11

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% Change 2.4 % 4.4 %

(1) Prior period amounts have been recast to conform with current period presentation for amortization of intangibles that were not previously identified as special items and that are now excluded from our adjusted financial measures.

See Non-GAAP Financial Measures below.

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

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▪ Operations:

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

The increase of $93 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 net periodic benefit income, excluding service cost and higher interest and other debt expense, net.

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

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Compounded EPS Growth Rate

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

Our 2028 Goals include delivering a mid-single digits adjusted diluted EPS CAGR in 2028 from a $4.87 (1) base in 2022.

Our calculation of progress towards this goal through 2025 is as follows:

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NPM Adjustment Items (0.01) (0.03)

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

Acquisition and disposition-related items 0.04 —

Asset impairment, exit and implementation costs 1.14 —

Tobacco and health and certain other litigation items 0.03 0.05

Amortization of intangibles 0.06 0.03

JUUL changes in fair value — 0.81

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Adjusted diluted EPS (1)

$ 5.42 $ 4.87 3.6 %

See Non-GAAP Financial Measures 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.

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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 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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Critical Accounting Estimates

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

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

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

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

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

▪ Revenue Recognition:

Our businesses generate substantially all of their revenue from sales contracts with customers.

Our businesses define net revenues as revenues, which include excise taxes and shipping and handling charges billed to customers, net of cash discounts for prompt payment, sales returns (also referred to as returned goods) and sales incentives.

Our businesses exclude from the transaction price sales taxes and value-added taxes imposed at the time of sale.

Our businesses record sales incentives, which consist of consumer incentives and trade promotion activities, as a reduction to revenues (a portion of which is based on amounts estimated as being due to wholesalers, retailers and consumers at the end of a period) based principally on historical volume, utilization and redemption rates.

We include expected payments for sales incentives in accrued marketing liabilities on our consolidated balance sheets.

For further discussion, see Note 4.

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

▪ Depreciation, Amortization, Impairment Testing and Asset Valuation:

We define net revenues as revenues, which include excise taxes and shipping and handling charges billed to customers, net of cash discounts for prompt payment, sales returns (also referred to as returned goods) and sales incentives.

These consumer incentives consist primarily of price promotions, substantially all of which are made to retailers to incent the promotion of certain product offerings in select geographic areas.

These price promotions include estimates of variable consideration and require estimates and judgments based principally on shipment volume, retail acceptance and compliance, redemption and utilization.

Actual payments will differ from estimated payments to the extent actual results differ from estimated assumptions.

We reflect differences between actual and estimated payments in the period in which actual payments become known, which have not been material to our financial position, results of operations or operating cash flows.

We record these expected payments for price promotions as a reduction to revenues upon shipment of goods to customers in our consolidated statements of earnings and in accrued marketing liabilities on our consolidated balance sheets.

▪ Depreciation, Amortization, Impairment Testing and Assets Valuation:

We depreciate property, plant and equipment and amortize our definite-lived intangible assets using the straight-line method over the estimated useful lives of the assets.

We depreciate machinery and equipment over periods up to 20 years, and buildings and building improvements over periods up to 50 years.

We amortize definite-lived intangible assets over their estimated useful lives up to 25 years.

We amortize definite-lived intangible assets over their estimated useful lives.

We review long-lived assets, including definite-lived intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying value of the assets may not be fully recoverable.

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

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

If the carrying value of the long-lived asset exceeds its fair value, we measure the amount of impairment loss as the difference between the carrying value and the fair value of the long-lived asset, which is determined using discounted cash flows.

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

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

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

If necessary, we will perform a single step quantitative impairment test.

Additionally, we have the option to unconditionally bypass the qualitative assessment and perform a single step quantitative assessment.

If the carrying value of a reporting unit that includes goodwill exceeds its fair value, which is determined using discounted cash flows, goodwill is considered impaired.

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

When a qualitative assessment is performed, we determine whether it is more likely than not that an impairment exists based on qualitative factors such as macroeconomic conditions, industry and competitive conditions, legal and regulatory environment, historical financial performance and significant changes impacting the reporting unit and the indefinite-lived intangible assets.

In performing a quantitative assessment, if the carrying value of a reporting unit that includes goodwill exceeds its fair value, which is determined using discounted cash flows, goodwill is considered impaired.

We measure the amount of impairment loss as the difference between the carrying value and the fair value of a reporting unit;

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

The discounted cash flows may include multiple scenarios that consider a range of potential outcomes in projected cash flows.

In determining the estimated fair values of our reporting units and indefinite-lived intangible assets in 2025, 2024 and 2023, we made various judgments, estimates and assumptions, the most significant of which were volume, price, revenue, income, operating margins, perpetual growth rates, discount rates and scenario weightings, as applicable.

Goodwill by reporting unit and indefinite-lived intangible assets at December 31, 2025 were as follows:

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Total $ 5,787 $ 11,089

Second Quarter of 2024 Skoal Impairment:

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

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

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

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

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

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

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

2025 Annual Review of Goodwill and Indefinite-lived Intangible Assets

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Upon completion of this testing, we determined that the estimated fair values substantially exceeded the carrying values for all of our reporting units and indefinite-lived intangible assets with the exception of our e-vapor reporting unit and Skoal trademark.

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

The perpetual growth rates and discount rates used in performing the valuations ranged from 0% to 2% and 9.0% to 13.5%, respectively.

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

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

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

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

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

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

and (v) conversion rates of illicit flavored disposable e-vapor consumers to FDA-authorized 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 outside of our control.

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

Although our discounted cash flow analyses are based on assumptions that we considered reasonable and are based on the best available information as of December 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 thus the expected future cash flows and, therefore, our impairment conclusions:

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governmental actions, including FDA regulatory actions and inaction;

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

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

success of planned new product expansions;

competitive activity;

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

and income and excise taxes.

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

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

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

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

While our management believes that the estimated fair values of each reporting unit and indefinite-lived intangible assets at December 31, 2025 are reasonable, actual performance in the short term or long term could be significantly different from forecasted performance, which could result in impairment charges in future periods.

After recording the impairment charge in the fourth quarter of 2025 (discussed below), the carrying value of the e-vapor reporting unit’s net assets (including the effect of intercompany debt), approximated its estimated fair value.

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, if we experience unfavorable outcomes with respect to litigation proceedings (including actions alleging patent infringement), 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 in 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 $150 million during 2025.

Although 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 nicotine consumer preferences, which have continued to contribute to reductions in sales volumes for MST products, including Skoal .

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.

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.

A hypothetical 1% increase in the discount rate used to estimate the fair value of the Skoal trademark would have resulted in an impairment charge of approximately $90 million in 2025.

During 2024 and 2023, our annual impairment test of goodwill and indefinite-lived intangible assets resulted in no impairment charges.

E-vapor Reporting Unit Goodwill & Definite-Lived Intangible Assets Impairments

During the fourth quarter of 2025, we determined that the long-lived assets in the e-vapor reporting unit may not be fully recoverable.

As a result, we first performed a recoverability test of the e-vapor definite-lived intangible assets.

We determined that the asset group was not recoverable because the estimated undiscounted cash flows, including an assumed terminal‑year EBITDA multiple, were less than its carrying value.

Second, we measured the impairment loss by comparing the carrying value of the definite-lived intangible assets, consisting of developed technology and trademarks, to their estimated fair values.

These fair values were determined using an income approach, specifically the relief from royalty method, which estimates the value of an intangible asset by calculating the present value of the hypothetical royalty payments a company avoids by owning the asset rather than licensing it from a third party.

In performing this analysis, we made various judgments, estimates and assumptions, the most significant of which were volume, price, revenue, income, operating margins, scenario weightings, discount rates, royalty rates, obsolescence rates and economic lives.

As a result, we recorded a non-cash, pre-tax impairment of these assets of $970 million, which we recorded in our consolidated statement of earnings for the year ended December 31, 2025.

Following the impairment of these e-vapor definite-lived intangible assets, we performed our annual impairment test of goodwill, utilizing the revised carrying amount of the e-vapor reporting unit after reflecting the e-vapor definite-lived intangible assets impairment charges.

Our test indicated that the estimated fair value of the e-vapor reporting unit was below its carrying value, resulting in a non-cash goodwill impairment of $285 million, which we recorded in our consolidated statement of earnings for the year ended December 31, 2025.

The impairments of the e-vapor definite-lived intangible assets and the e-vapor reporting unit goodwill were due primarily to lower projected volume and revenue as a result of the impact of estimates regarding protracted ineffective enforcement against illicit flavored disposable e-vapor products.

After this e-vapor goodwill impairment charge, the carrying value of e-vapor goodwill as of December 31, 2025 was $610 million.

In addition to our annual impairment testing, during the first quarter of 2025 we identified a triggering event related to our e‑vapor reporting unit that required an interim impairment assessment.

As a result, we performed a quantitative impairment assessment of goodwill and related intangible assets for the e‑vapor reporting unit as of March 31, 2025.

As discussed in Note 4, the interim impairment assessment resulted in a non-cash goodwill impairment of $873 million during the first quarter of 2025, which is recognized in our consolidated statement of earnings for the year ended December 31, 2025.

We concluded that the carrying value of our e-vapor definite-lived intangible assets was recoverable and no impairment existed as of March 31, 2025.

As a result of the goodwill impairments recognized in the first and the fourth quarters of 2025, the total non-cash goodwill impairment recognized in our consolidated statement of earnings for the year ended December 31, 2025 was $1,158 million.

▪ Investments in Equity Securities:

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For further discussion of our investments in equity securities, see Note 6.

▪ Marketing Costs:

Our businesses promote their products with consumer incentives, trade promotions and consumer engagement programs.

These consumer incentive and trade promotion activities, which include discounts, coupons, rebates, in-store display incentives and volume-based incentives, do not create a distinct deliverable and are, therefore, recorded as a reduction of revenues.

We make consumer engagement program payments to third parties.

Our businesses expense these consumer engagement programs, which include event marketing, as incurred and such expenses are included in marketing, administration and research costs in our consolidated statements of earnings.

For interim reporting purposes, our businesses charge consumer engagement programs and certain consumer incentive expenses to operations as a percentage of sales, based on estimated sales and related expenses for the full year.

Investments in Equity Securities (“Note 6”).

▪ Contingencies:

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

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

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

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

Payments under the State Settlement Agreements and the FDA user fees are based on variable factors, such as volume, operating income, market share and inflation, depending on the subject payment.

Our subsidiaries account for the cost of the State Settlement Agreements and FDA user fees as a component of cost of sales.

Our subsidiaries recorded approximately $3.7 billion and $4.0 billion of charges to cost of sales for the years ended December 31, 2024 and 2023, respectively, in connection with the State Settlement Agreements and FDA user fees.

Payments under the State Settlement Agreements are based on variable factors, such as inflation, operating income, market share and industry volume.

Our subsidiaries account for the cost of the State Settlement Agreements as a component of cost of sales.

Our subsidiaries recorded approximately $3.0 billion and $3.5 billion of charges to cost of sales for the years ended December 31, 2025 and 2024, respectively, in connection with the State Settlement Agreements.

We record provisions in our consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.

At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, except to the extent discussed in Note 20 and Item 3:

At the present time, while it is reasonably possible that an unfavorable

outcome in a case may occur, except to the extent discussed in Note 18 and Item 3:

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

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Any effect of the modifications is generally amortized over future periods.

We recognize the funded status of our defined benefit pension and other postretirement plans on the consolidated balance sheets and record as a component of other comprehensive earnings (losses), net of deferred income taxes, the gains or losses and prior service costs or credits that have not been recognized as components of net periodic benefit cost (income).

We recognize the funded status of our defined benefit pension and other postretirement plans on the consolidated balance sheets and record as a component of other comprehensive earnings (losses), net of deferred income taxes, the gains and losses and prior service costs and credits that have not been recognized as components of net periodic benefit cost (income).

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

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

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

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

Due to changes in market factors, our discount rates used to determine our pension plan and postretirement plan obligations decreased to 5.4% at December 31, 2025 from 5.7% at December 31, 2024.

We presently anticipate net pre-tax pension and postretirement expense of approximately $48 million in 2026 versus net pre-tax income of $11 million in 2025.

This change is due primarily to higher amortization of net unrecognized losses, lower expected income on plan assets and an expected settlement charge in 2026, partially offset by lower interest costs.

Assuming no change to the shape of the yield curve, a 50 basis point decrease (increase) in our discount rates would increase (decrease) our pension and postretirement expense by approximately $5 million.

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For additional information see Note 16.

Benefit Plans to our consolidated financial statements in Item 8 (“Note 18”).

Benefit Plans (“Note 16”).

▪ Income Taxes:

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

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

We determine the realizability of deferred tax assets based on the weight of all available positive and negative evidence.

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

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

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

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

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

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

In assessing realizability, we consider the weight of all available positive and negative evidence, including the character of the assets and the possible sources of taxable income of the appropriate character within the applicable carryback and carryforward periods available under the tax law.

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

The recognized amount is the largest benefit that is more than 50% likely to be realized upon ultimate settlement.

We do not recognize positions that do not meet this threshold in the financial statements.

We recognized income tax benefits and charges in the consolidated statements of earnings during 2025 and 2024 as a result of various tax events.

For additional information on income taxes, see Note 14.

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

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Income Taxes (“Note 14”).

Consolidated Operating Results

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Oral tobacco products 2,802 2,776

E-vapor products (13) 40

All other 5 (2)

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Oral tobacco products 1,828 1,449

E-vapor products (2,297) (171)

All other (229) (243)

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NPM Adjustment Items (20) (5) (15) (0.01)

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

Acquisition and disposition-related items 76 10 66 0.04

Asset impairment, exit and implementation costs 2,184 263 1,921 1.14

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58 14 44 0.03

Amortization of intangibles 132 22 110 0.06

ABI-related special items 95 20 75 0.04

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

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

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

Asset impairment, exit and implementation costs 422 107 315 0.18

Tobacco and health and certain other litigation items 101 25 76 0.04

Loss on disposition of JUUL equity securities 250 — 250 0.14

Amortization of intangibles 139 24 115 0.07

ABI-related special items 2 — 2 —

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2024 Adjusted for Special Items (1)

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$ 11,786 $ 2,850 $ 8,936 $ 5.19

See Non-GAAP Financial Measures below.

The following special items affected the comparability of statements of earnings amounts for the years ended December 31, 2025 and 2024.

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For a discussion of NPM Adjustment Items and a breakdown of these items by segment, see Health Care Cost Recovery Litigation in Note 18 and NPM Adjustment Items in Note 15, respectively.

▪ Acquisition, Disposition and Integration-Related Items:

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

▪ Acquisition and Disposition-Related Items:

We recorded net pre-tax charges reflecting expenses primarily 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 are net of insurance recoveries from insurance contracts associated with the NJOY Transaction.

For further information on the ITC’s determination, see E-vapor Product Litigation - JUUL Patent Litigation in Note 18 .

We recorded these items as follows for the years ended December 31:

(in millions) 2025 2024

Net revenues (1)

Cost of sales (1)

Marketing, administration and research costs (2)

Total $ 51 $ 36

(1) Included in our e-vapor products segment.

(2) Recorded as general corporate expense, net of $39 million and $25 million of insurance recoveries for the year ended December 31, 2025 and 2024, respectively.

In 2024 and 2025, we incurred total costs of $151 million primarily associated with the ITC exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE in the United States and patent infringement lawsuits related to the NJOY Transaction, which were offset by insurance recoveries of $64 million.

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

In connection with the June 2024 issuance by the FDA of MGOs for four NJOY ACE menthol pod products, we recorded a pre-tax charge of approximately $140 million for the year ended December 31, 2024 for the change in the fair value of the contingent payments associated with the NJOY Transaction.

charges were recorded as general corporate expense and included in marketing, administration and research costs in our consolidated statements of earnings.

For further information, see Contingent Payments in Note 7.

Financial Instruments .

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.

in April 2024, for the year ended December 31, 2024.

For a discussion of the sale of the IQOS System commercialization rights, see Note 4.

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

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

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

▪ Asset Impairment, Exit and Implementation Costs:

We recorded non-cash, pre-tax impairment charges of $2,128 million to reduce the carrying values of the e-vapor reporting unit goodwill and definite-lived intangible assets to their estimated fair values for the year ended December 31, 2025 in our e-vapor products segment.

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

For further discussion, see Note 4.

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

We recorded pre-tax exit and implementation costs of $56 million and $68 million related to the Initiative for the years ended December 31, 2025 and 2024, respectively.

For a breakdown of these costs by segment, see Note 5.

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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 18 and Tobacco and Health and Certain Other Litigation Items in Note 15, 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 former investment in JUUL for the year ended December 31, 2023 as (income) losses from investments in equity securities in our consolidated statement of earnings.

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

For further discussion, see Note 8 and Note 16.

▪ Amortization of Intangibles:

We recorded pre-tax amortization expense of definite-lived intangible assets of $132 million and $139 million for the years ended December 31, 2025 and 2024, respectively, in marketing, administration and research costs in our consolidated statements of earnings.

▪ ABI-Related Special Items:

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

We recorded net pre-tax losses of $95 million from our investment in ABI for the year ended December 31, 2025, consisting primarily of mark-to-market losses on certain ABI financial instruments associated with its share commitments.

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

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

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

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

▪ Cronos-Related Special Items:

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

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

▪ Income Tax Items:

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

For further discussion, see Note 16.

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

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

For further discussion of income tax items, see Note 14.

2025 Compared with 2024

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

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

Net revenues, which include excise taxes billed to customers, decreased $739 million (3.1%), due primarily to lower net revenues in our smokeable products segment.

Cost of sales decreased $480 million (7.9%), due primarily to lower shipment volume and lower per unit settlement charges in our smokeable products segment.

Excise taxes on products decreased $434 million (12.1%), due primarily to lower shipment volume in our smokeable products segment.

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

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

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

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

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

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

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

Marketing, administration and research costs decreased $230 million (8.4%), due primarily to lower acquisition-related items discussed above and transaction costs associated with the ABI Transaction in 2024, both of which are included in general corporate expenses.

Operating income decreased $1,342 million (11.9%), due primarily to lower OCI (which includes the net impact of non-cash impairments of the e-vapor reporting unit goodwill and definite-lived intangible assets in our e-vapor products segment in 2025 and a non-cash impairment of the Skoal trademark in our oral tobacco product segment in 2024), partially offset by lower general corporate expenses.

Net periodic benefit income, excluding service cost, decreased by $43 million (42.2%), due primarily to lower income on plan assets and higher amortization of net unrecognized losses in 2025, partially offset by lower interest costs.

For additional information, see Note 16.

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

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

(Income) losses from investments in equity securities was unfavorable $142 million (21.8%), due primarily to lower income from our equity investment in ABI (which includes our gain on the ABI Transaction in 2024).

Provision for income taxes increased $48 million (2%), due primarily to unfavorable income tax items discussed above, partially offset by lower earnings before income taxes.

For additional information, see Note 14.

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

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

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

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

Reported net earnings of $6,947 million decreased $4,317 million (38.3%), due primarily to the gain on the sale of the IQOS System commercialization rights in 2024 and lower operating income.

Reported basic and diluted EPS of $4.12, each decreased by 37% due to lower reported net earnings, partially offset by fewer shares outstanding.

Adjusted net earnings of $9,148 million increased $212 million (2.4%), due primarily to higher OCI and a lower adjusted tax rate, partially offset by lower net periodic benefit income, excluding service cost and higher interest and other debt expense, net.

Adjusted diluted EPS of $5.42 increased by 4.4%, due to higher adjusted net earnings and fewer shares outstanding.

Operating Results by Business Segment

Business Environment

tobacco industry faces a number of business and legal challenges that have materially adversely affected and may continue to materially adversely affect our business, results of operations, cash flows or financial position or our ability to achieve our Vision.

nicotine industry faces a number of business, legal and regulatory challenges that have materially adversely affected and may continue to materially adversely affect our business, results of operations, cash flows or financial position or our ability to achieve our Vision.

These challenges, some of which are discussed in more detail in Note 18, Item 1A and Item 3, include:

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

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

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

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

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

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

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▪ other federal, state and local government actions, including:

▪ restrictions on the sale of certain tobacco products, the sale of tobacco products by certain retail establishments, the sale of tobacco products with characterizing flavors and the sale of tobacco products in certain package sizes;

▪ additional restrictions on the advertising and promotion of tobacco products;

▪ other actual and proposed tobacco-related legislation and regulation;

▪ restrictions on the sale of certain nicotine products, the sale of nicotine products by certain retail establishments, the sale of nicotine products with characterizing flavors and the sale of nicotine products in certain package sizes;

▪ additional restrictions on the advertising and promotion of nicotine products;

▪ other actual and proposed tobacco- or nicotine-related legislation and regulation;

▪ prohibitions on the sale of tobacco products based on environmental concerns and the imposition of responsibility on manufacturers for the disposal, recycling or other treatment of post-consumer goods such as plastic packaging;

▪ governmental investigations;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Throughout the full year 2024, U.S.

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

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

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

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

adult tobacco consumers.

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

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

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

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

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

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

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

▪ changes in adult nicotine 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 nicotine consumers switching to lower-priced nicotine products and lower shipment volumes;

▪ the highly competitive nature of all nicotine categories, including competitive disadvantages related to the impact on cigarette prices due to the settlement of certain healthcare cost recovery litigation, the growth of innovative nicotine products, such as e-vapor and oral nicotine pouch products, and the ability of competitors to receive refunds of certain duties, taxes and fees paid on imported tobacco products when offsetting volumes of those products or substantially similar products are subsequently exported;

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

We continue to monitor the evolving business, legal and regulatory challenges within our business environment to assess potential impacts on us.

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

FSPTCA and FDA Regulation

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

▪ establish pre-market review pathways for new and modified tobacco products (see Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement below);

▪ establish premarket review pathways for new and modified tobacco products (see Premarket Review Pathways for Tobacco Products and Market Authorization Enforcement below);

▪ prohibit any express or implied claims that a tobacco product is or may be less harmful than other tobacco products without FDA authorization;

▪ authorize the FDA to impose tobacco product standards that are appropriate for the protection of the public health (see Potential Product Standards below);

▪ authorize the FDA to impose tobacco product standards that are appropriate for the protection of public health (see Potential Product Standards below);

▪ equip the FDA with a variety of investigatory and enforcement tools, including the authority to inspect product manufacturing and other facilities (see Investigation and Enforcement below).

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

Effective April 2022, the U.S.

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

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

See Premarket Review Pathways for Tobacco Products and Market Authorization Enforcement below for additional information.

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.

As a result, products containing nicotine analogues are not subject to the FDA regulatory framework for tobacco products.

▪ 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.

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

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

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

▪ prohibits the sale or distribution of items such as hats and tee shirts with cigarette or smokeless tobacco brands or logos;

▪ prohibits cigarettes and smokeless tobacco brand name sponsorship of any athletic, musical, artistic or other social or cultural event, or any entry or team in any event;

▪ 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.

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.

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

The FDA also may request comments on

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

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

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

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

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

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

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

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

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

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

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

▪ ensure timely, clear and consistent product application review;

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

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

▪ advance operational excellence.

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

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

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

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

▪ Premarket Review Pathways for Tobacco Products and Market Authorization Enforcement:

The FSPTCA permits the sale of tobacco products on the market as of February 15, 2007 and not subsequently modified (“Pre-existing Tobacco Products”) and new or modified products authorized through the PMTA, Substantial Equivalence (“SE”) or SE Exemption pathways.

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

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

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

For products currently on the market, the FDA premarket authorization enforcement policy varies based on product type and date of availability on the market, specifically:

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

▪ cigarette and smokeless tobacco products that were modified or first introduced into the market between February 15, 2007 and March 22, 2011 are generally considered “Provisional Products” for which SE reports were required to be filed by March 22, 2011.

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

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

A manufacturer was permitted to keep such a product on the

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

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

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 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.

The FSPTCA requires the FDA to issue a marketing order (either an MGO or a marketing denial order (“MDO”)) with respect to a PMTA no later than 180 days after receipt of the PMTA.

Following the 180-day FDA review period, the FSPTCA allows any party that receives an MDO to seek expedited judicial review of the ruling in a federal appellate court within 30 days.

Together, these statutory deadlines for FDA action and judicial review create a structure and timeline for manufacturers seeking to market new products.

While it is possible that the FDA may bring an enforcement action relating to commercialized products for which a PMTA has been pending longer than the 180-day review period, we believe that any such enforcement action would conflict with the FSPTCA.

Our operating companies may decide to commercialize products that have not received MGOs from the FDA if the operating company submitted a PMTA with respect to any such product in compliance with the FSPTCA and the FDA failed to issue a marketing order within the statutory review period.

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

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

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

Any such actions affecting our

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

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

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

Products Regulated in 2009 :

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therefore, those determinations did not impact business results.

PM USA and USSTC have other Provisional Products that continue to be subject to the FDA’s pre-market review process.

PM USA and USSTC have other Provisional Products that continue to be subject to the FDA’s premarket review process.

In the meantime, they can continue marketing these products unless the FDA determines that a specific Provisional Product is not substantially equivalent.

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PM USA and USSTC have Provisional Products included in this subset of products.

While we believe PM USA’s and USSTC’s current Provisional Products meet the statutory requirements of the FSPTCA, we cannot predict how the FDA will ultimately apply law, regulation and guidance to their various SE reports.

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, a PMTA or using another pre-market pathway established by the FDA.

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

Should PM USA or USSTC receive unfavorable determinations on any SE report 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 apply to 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 premarket 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 a PMTA by the filing deadline of September 9, 2020 in order for their products to remain on the market.

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

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

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

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

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.

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

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 discretion.

For products (new or modified) not on the market as of August 8, 2016, manufacturers must file an SE report or a PMTA.

As described above, the FSPTCA requires the FDA to issue a marketing order with respect to a PMTA no later than 180 days after receipt of the PMTA.

Helix submitted PMTAs for on!

oral nicotine pouches in May 2020 and PMTAs for on!

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

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

PLUS products.

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

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

These products are not currently marketed or sold.

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

This product is not currently marketed or sold.

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

Switching completely to this product from cigarettes reduces risk of lung cancer.” 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.

oral nicotine pouches on the market as of August 2016 in May 2020, PMTAs for additional on!

oral nicotine pouches in September 2024, PMTAs for on!

PLUS oral nicotine pouches in tobacco, mint and wintergreen flavors in June 2024 and PMTAs for on!

PLUS oral nicotine pouches in six additional flavors in November 2025.

In September 2025, the FDA launched a pilot program intended to increase efficiency and streamline the review process for PMTAs for select oral nicotine pouch products.

Also in September 2025, the FDA communicated to Helix that PMTAs for certain of its products, including on!

PLUS, were being reviewed through the pilot program.

In December 2025, the FDA issued MGOs with respect to on!

PLUS oral nicotine pouches in tobacco, mint

and wintergreen flavors in 6 mg and 9 mg nicotine levels.

As of February 23, 2026, the FDA has not issued a marketing order with respect to any other on!

PLUS product.

As of February 23, 2026, Middleton has received MGOs or exemptions that cover over 99% of its cigar product volume.

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

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

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

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

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

NJOY ACE is subject to ITC exclusion and cease-and-desist orders prohibiting importation and sale in the United States.

Although NJOY Daily is not subject to these orders, JUUL has asserted claims of patent infringement based on the sale of NJOY Daily in the United States.

Effect of Adverse FDA Determinations :

FDA review timeframes have varied.

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

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

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

Also, adverse FDA determinations or enforcement actions concerning innovative nicotine products could have a material adverse effect on our innovative nicotine businesses and our ability to achieve our Vision.

Post-Market Surveillance :

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

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Effect of Adverse FDA Determinations :

FDA review time frames have varied.

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

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

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

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

If the FDA fails to issue a marketing order within the statutory review period with respect to a PMTA submitted by one of our operating companies and that operating company elects to commercialize the applicable product, we expect that operating company will execute its plans consistent with the post-market record keeping and reporting requirements of the FDA’s most recently issued MGOs for similar products.

▪ FDA Regulatory Actions

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

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

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

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

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

Supreme Court declined to do in November 2024.

Supreme Court declined to do.

In January 2025, the U.S.

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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 is set for April 2025.

In August 2025, the federal court vacated the final rule on the basis that the FDA violated federal law by not disclosing timely data it relied on in creating the rule.

In October 2025, the FDA appealed that decision to the U.S.

Court of Appeals for the Eleventh Circuit.

▪ Underage Access and Use of Certain Tobacco Products :

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

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

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 action aimed at manufacturers and retailers of certain disposable flavored e-vapor products.

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

▪ E-Vapor Products :

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

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

As of February 23, 2026, 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 benefits of their products to adult smokers overcome the risks that their products pose to youth.

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

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

A number of these manufacturers are challenging the MDOs for their

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.

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

In July 2024, the U.S.

Supreme Court agreed to review the U.S.

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

Supreme Court in December 2024.

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

Supreme Court review these decisions.

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.

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.

▪ Potential Product Standards

▪ Nicotine in Cigarettes and Other Combustible Tobacco Products :

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.

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

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

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

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

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

The public comment period on the proposed product standard closed in September 2025, and we have engaged with the FDA through the rulemaking process, including by submitting comments.

We believe the rulemaking process for this proposed product standard will take multiple years to complete.

▪ Flavors in Tobacco Products :

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

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

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

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

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

▪ establishing tobacco product design and development controls;

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

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

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

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

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

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

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

This proposed rule establishes a framework of tobacco product manufacturing practices.

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

▪ impact the consumer acceptability of tobacco products;

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

▪ limit adult tobacco consumer choices;

▪ impose restrictions on communications with adult tobacco consumers;

▪ create a competitive advantage or disadvantage for certain tobacco companies;

▪ impact the consumer acceptability of nicotine products;

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

▪ limit adult nicotine consumer choices;

▪ impose restrictions on communications with adult nicotine consumers;

▪ create a competitive advantage or disadvantage for certain nicotine companies;

▪ impose additional manufacturing, labeling or packaging requirements;

▪ impose additional restrictions at retail;

▪ result in increased illicit trade in tobacco products;

▪ result in increased illicit trade in nicotine products;

▪ otherwise significantly increase the cost of doing business.

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

The failure to comply with FDA

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

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

▪ Investigation and Enforcement:

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Investigations or enforcement actions could result in significant costs or otherwise have a material adverse effect on our business, results of operations, cash flows or financial position.

Although the FDA, in conjunction with other federal entities, has increased enforcement activity, insufficient actions against manufacturers, distributors and retailers of tobacco products requiring FDA review for which no PMTA has been submitted have allowed such products to proliferate on the market.

In addition, the FDA’s failure to clearly define product pathways and issue marketing orders within the statutory review period has resulted in a market with few authorized smoke-free products available to adult nicotine consumers.

Tobacco products are subject to substantial excise taxes in the United States.

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Between the end of 1998 and February 23, 2026, the weighted-average state cigarette excise tax increased from $0.36 to $2.02 per pack.

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

Four states (Hawaii, Indiana, Maine and New Jersey) increased excise taxes in 2025.

As of February 23, 2026, no states have increased excise taxes in 2026.

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.

Various other increases are under consideration or have been proposed.

Many 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.

This ad valorem method results in more tax being paid on premium products than is paid on lower-priced products of equal weight.

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As of February 23, 2026, 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.

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

As of February 23, 2026, 34 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-vapor products.

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Similarly, 19 states and the District of Columbia have enacted legislation to tax oral nicotine pouches.

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.

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 nicotine consumer purchases from premium to non-premium or discount cigarettes, to lower-taxed tobacco products or to counterfeit and contraband products.

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

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

Changes to federal or state tax laws or challenges to one or more of our positions with respect to those laws, including with respect to the availability of duty drawback, which allows manufacturers to receive refunds of certain duties, taxes and fees paid on imported tobacco products when offsetting volumes of those products or substantially similar products are subsequently exported, could increase the taxes and other fees payable with respect to our operating companies’ products or reduce the amount of taxes and other fees paid by our operating companies for which refunds are available.

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

International Treaty on Tobacco Control

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As of February 23, 2026, 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.

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

The FCTC is the first international public health treaty and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation.

The treaty recommends (and in certain instances, requires) signatory nations to enact legislation that would address various tobacco-related issues.

There are a number of proposals currently under consideration by the governing body of the FCTC, some of which call for substantial restrictions on the manufacture, marketing, distribution and sale of tobacco products.

There are a number of proposals under consideration by the governing body of the FCTC, some of which call for substantial restrictions on the manufacture, marketing, distribution and sale of tobacco products.

It is not possible to predict the outcome of these proposals or the impact of any FCTC actions on legislation or regulation in the United States, either indirectly or as a result of the United States becoming a party to the FCTC, or whether or how these actions might indirectly influence FDA regulation and enforcement.

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As discussed in Note 18, during 1997 and 1998, PM USA and other major domestic cigarette manufacturers entered into the State Settlement Agreements.

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.

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.

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

As of December 2025, the applicable percentage rate was approximately 2.7% based on the latest CPI-U data.

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

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For a discussion of the impact of the State Settlement Agreements on us, see Liquidity and Capital Resources - Payments Under State Settlement Agreements and FDA Regulation below and Note 18.

The State Settlement Agreements also place numerous requirements and restrictions on participating manufacturers’ business operations, including prohibitions and restrictions on the advertising and marketing of cigarettes and smokeless tobacco products.

Among these are prohibitions of outdoor and transit brand advertising, payments for product placement and free sampling (except in adult-only facilities).

The State Settlement Agreements also place restrictions on the use of brand name sponsorships and brand name non-tobacco products and prohibitions on targeting youth and the use of cartoon characters.

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

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

As of February 23, 2026, 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.

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.

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

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

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

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

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

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

As of February 23, 2026, legislation relating to this issue is pending in one other state.

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

states and localities on e-vapor and oral nicotine pouch products have been enacted or proposed internationally.

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

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

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

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

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

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

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

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As of February 23, 2026, 44 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.

Although an increase in the minimum age to purchase tobacco products may have a negative impact on our operating companies’ sales volumes, we support and advocate for raising the minimum legal age to purchase all tobacco products to 21 at the federal and state levels.

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

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

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

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

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research on legislation and regulation.

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

Along with the scientific and public health communities, we continue to study and gather

scientific evidence concerning the health effects of e-vapor and other innovative nicotine products.

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

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

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

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In addition to the actions discussed above, other regulatory initiatives affecting the tobacco industry have been adopted or are being considered at the federal level and in a number of state and local jurisdictions.

For example, in recent years, legislation has been introduced or enacted at the state or local level to subject tobacco products to various reporting requirements and performance standards;

For example, legislation has been introduced or enacted at the state or local level to subject tobacco products to various reporting requirements and performance standards;

establish educational campaigns relating to tobacco consumption or tobacco control programs or provide additional funding for governmental tobacco control activities;

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

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

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

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

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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 investment in JUUL, see Note 8.

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

Private Sector Activity on Tobacco Products

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Reasons for the discontinuation include change in corporate policy and, with respect to e-vapor products, reported illnesses and the uncertain regulatory environment.

Furthermore, third-party digital platforms, such as app stores, have restricted, and in some cases prohibited, communications with adult tobacco consumers concerning tobacco products.

Furthermore, third-party digital platforms, such as app stores, have restricted, and in some cases prohibit, communications with adult nicotine consumers concerning tobacco products.

It is possible that if this private sector activity becomes more widespread it could have an adverse effect on our business, results of operations, cash flows or financial position.

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

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

the sale of tobacco products requiring FDA review for which no PMTA has been submitted;

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

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Counterfeit tobacco products, for example, are manufactured by unknown third parties in unregulated environments.

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

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

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

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

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

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

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

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

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

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

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.

Prohibitionist 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 FDA-authorized e-vapor product business, such as the lawsuit we filed in federal court in California against manufacturers, distributors and retailers of illicit e-vapor products, which we settled in October 2025.

Pursuant to the terms of the settlement, a foreign manufacturer and certain domestic distributors of illicit disposable e-vapor devices are prohibited from selling or shipping flavored e-vapor products to consumers, retailers, wholesalers or distributors located in the State of California and from selling or shipping such products to anyone if they have actual knowledge that the products will ultimately be resold or reshipped to consumers in the State of California.

In June 2024, the U.S.

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

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

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

Customs and Border Protection, the U.S.

Marshals Service, the U.S.

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

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

laws, including the FSPTCA.

While these federal entities have increased enforcement activity against manufacturers, distributors and retailers of tobacco products requiring FDA review for which no PMTA has been submitted, we do not believe these efforts have had a significant impact on the volume of such products on the market.

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, 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.

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 nicotine consumer product acceptability and have a material adverse effect on our business and profitability.

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

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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.

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 nicotine consumer product acceptability, which could have a material adverse effect on our business and profitability.

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

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

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

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, and have limited access to, and increased 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.

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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.

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

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

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

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 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.

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

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

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

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

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For the Year Ended December 31, 2025

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

(in millions) Smokeable Products Oral Tobacco Products E-Vapor Products All Other Total

Net revenues $ 20,485 $ 2,802 $ (13) $ 5 $ 23,279

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NPM Adjustment Items (24) — — — (24)

Acquisition and disposition-related items — — 67 — 67

Asset impairment, exit and implementation costs 49 7 2,128 — 2,184

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

Progress towards our current U.S.

smoke-free portfolio goals are as follows through 2024:

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

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

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

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

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

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Smokeable Products Segment

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Net revenues, which include excise taxes billed to customers, decreased $719 million (3.4%), due primarily to lower shipment volume ($2,426 million), partially offset by higher pricing ($1,680 million), which includes higher promotional investments.

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

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

Reported OCI increased $163 million (1.5%), due primarily to higher pricing, which includes higher promotional investments, lower per unit settlement charges and lower tobacco and health and certain other litigation items ($15 million), partially offset by lower shipment volume ($1,651 million).

Adjusted OCI increased $142 million (1.3%), due primarily to higher pricing, which includes higher promotional investments, and lower per unit settlement charges, partially offset by lower shipment volume.

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

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We do not expect future product liability defense costs for our smokeable products segment to be significantly different from product liability defense costs incurred in 2025.

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Shipment Volume and Retail Share Results

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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:

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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.

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

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

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

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

2025 Compared with 2024

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

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

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

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 10.0%, driven primarily by the industry’s decline rate (impacted by the continued growth of flavored disposable e-vapor products, the majority of which we believe have evaded the regulatory process, and discretionary income pressures on adult nicotine consumers), retail share losses and calendar differences.

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

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

Shipments of premium cigarettes accounted for 93.6% and 95.9% of our smokeable products segment’s reported domestic cigarettes shipment volume for 2025 and 2024, respectively.

Our cigar reported shipment volume decreased by 1.5%.

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

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

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

Our cigar reported shipment volume increased 1.8%.

Marlboro ’s retail share of the premium segment was 59.4%, an increase of 0.1 share point.

Total cigarettes industry discount category retail share was 31.8%, an increase of 2.2 share points, primarily due to continued discretionary income pressures on adult nicotine consumers.

For a discussion regarding discount category dynamics in 2025, the growth of flavored disposable e-vapor products and the economic conditions that impact adult nicotine consumer purchasing behavior, see Trends and Developments and Operating Results by Business Segment - Business Environment - Summary above.

Pricing Actions

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

PM USA and Middleton executed the following pricing actions during 2025 and 2024:

▪ Effective October 12, 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 also increased the list price of all its other premium cigarette brands by $0.22 per pack.

▪ Effective July 20, 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 also increased the list price of all its other premium cigarette brands by $0.22 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.

▪ 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 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.

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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 January 18, 2026, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) and L&M by $0.20 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 $0.25 per pack.

▪ Effective February 8, 2026, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.12 per five-pack.

Oral Tobacco Products Segment

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

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2025 Compared with 2024

Net revenues, which include excise taxes billed to customers, increased $109 million (4.1%), due to higher pricing ($221 million), which includes higher promotional investments, partially offset by lower shipment volume and a higher percentage of on!

shipment volume relative to MST ($112 million).

Reported OCI decreased $273 million (15.9%), 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 ($125 million), partially offset by higher pricing, which includes higher promotional investments.

Adjusted OCI increased $89 million (5.2%), due primarily to higher pricing, which includes higher promotional investments, partially offset by lower shipment volume and a higher percentage of on!

shipment volume relative to MST.

Net revenues, which include excise taxes billed to customers, increased $26 million (0.9%), as higher pricing ($263 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”) ($237 million).

Reported OCI increased $379 million (26.2%), due primarily to a non-cash impairment of the Skoal trademark ($354 million) in 2024, higher pricing, which includes higher promotional investments, partially offset by lower volume/mix ($222 million) and higher costs ($17 million).

Adjusted OCI increased $24 million (1.3%), as higher pricing, which includes higher promotional investments, was mostly offset by lower volume/mix and higher costs.

Shipment Volume and Retail Share Results

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

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

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.

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

For the Years Ended December 31,

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Total oral tobacco products 31.9 % 37.3 %

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

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

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

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 tracked 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.

2025 Compared with 2024

Our oral tobacco products segment’s reported domestic shipment volume decreased 1.0%, driven primarily by retail share losses and trade inventory movements, partially offset by the industry’s growth rate, calendar differences and other factors.

Our oral tobacco products segment’s reported domestic shipment volume decreased 5.5%, driven primarily by retail share losses, calendar differences and other factors, partially offset by the industry’s growth rate and trade inventory movements.

When adjusted for calendar differences and trade inventory movements, our oral tobacco products segment’s domestic shipment volume decreased by an estimated 4.5%.

Total oral tobacco products category industry volume increased by an estimated 14% over the six months ended December 31, 2025, driven primarily by growth in oral nicotine pouches, partially offset by declines in MST volumes.

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Our oral tobacco products segment’s retail share was 37.5%, as share declines for MST products were partially offset by oral nicotine pouch segment share growth.

Our oral tobacco products segment’s retail share was 31.9%, a decrease of 5.4 share points primarily due to share declines for MST products.

nicotine pouch category grew to 53.3% of the U.S.

oral tobacco category, an increase of 11.7 share points versus the prior year.

oral tobacco category, an increase of 10.0 share points.

In addition, on!

’s share of the nicotine pouch category was 19.2%, a decrease of 2.6 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.

’s share of the nicotine pouch category was 15.4%, a decrease of 3.4 share points.

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 nicotine consumer purchasing behavior, see Trends and Developments and Operating Results by Business Segment - Business Environment - Summary above.

Pricing Actions

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

▪ Effective November 18, 2025, USSTC increased the list price on its Copenhagen , Skoal and Red Seal brands by $0.10 per can.

USSTC also increased the list price on its Husky brands by $0.08 per can.

▪ Effective July 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 and Husky brands by $0.25 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.

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

brand by $0.20 per can.

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

For the year ended December 31, 2024, reported domestic shipment volumes for NJOY consumables (1) and devices were 46.6 million units and 5.0 million units, respectively.

For the year ended December 31, 2024, NJOY retail share of consumables in the U.S.

multi-outlet and convenience channel was 5.5%.

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

For a discussion regarding the growth of illicit e-vapor products and the ITC’s determination on the patent infringement complaint related to NJOY, see Critical Accounting Estimates above.

▪ Effective February 17, 2026, USSTC increased the list price on its Copenhagen , Skoal and Red Seal brands by $0.12 per can.

Liquidity and Capital Resources

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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.

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Capital Markets and Other Matters

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The impact of credit ratings on the cost of borrowings under our Credit Agreement is discussed in Note 8.

Short-Term Borrowings to our consolidated financial statements in Item 8 (“Note 10”).

Short-Term Borrowings and Borrowing Arrangements (“Note 8”).

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

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Moody’s Investors Service, Inc.

(“Moody’s”) P-2 A3 Negative (1)

Standard & Poor’s Financial Services LLC (“S&P”) A-2 BBB Positive

(“Moody’s”) P-2 A3 Stable (1)

Standard & Poor’s Financial Services LLC (“S&P”) A-2 BBB+ (2)

Fitch Ratings Inc.

F2 BBB Stable

(1) On May 6, 2024, Moody’s changed its outlook for our indebtedness to Negative from Stable.

(“Fitch”) F2 (3)

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

(2) On May 14, 2025, S&P changed its long-term debt credit rating to BBB+ from BBB and outlook to Stable from Positive.

(3) On February 13, 2026, Fitch changed its short-term debt credit rating to F1 from F2 and long-term debt credit rating to BBB+ from BBB.

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 the State Settlement Agreements, quarterly income tax payments and quarterly dividend payments, and generally use our commercial paper program to meet those needs.

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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 10.

For further discussion on short-term borrowings and borrowing arrangements, see Note 8.

Long-Term Debt - At December 31, 2025 and 2024, our total long-term debt was $25.7 billion and $24.9 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.

On February 6, 2025, we issued USD denominated senior unsecured notes in the aggregate principal amount of $1.0 billion.

The net proceeds from the notes are being used for general corporate purposes, which may include the repayment of our 2.350% senior unsecured notes due May 2025 and our 1.700% senior unsecured notes due June 2025.

The notes contain the following terms:

▪ $0.5 billion at 4.875%, due 2028, interest payable semiannually beginning August 4, 2025;

▪ $0.5 billion at 5.625%, due 2035, interest payable semiannually beginning August 6, 2025.

During 2025, our long-term debt activity included the following:

▪ Debt Issuance - In the first and third quarters of 2025, we issued U.S.

dollar denominated senior unsecured notes each in the aggregate principal amount of $1.0 billion ($2.0 billion total).

▪ Debt Repayment - In the second quarter of 2025, we repaid in full at maturity (i) senior unsecured notes in the aggregate principal amount of $750 million and (ii) senior unsecured Euro notes in the aggregate principal amount of €750 million ($857 million).

In February 2026, we repaid in full at maturity senior unsecured notes in the aggregate principal amount of approximately $1.1 billion.

All of our long-term debt outstanding at December 31, 2025 and 2024 was fixed-rate debt.

At December 31, 2024 and 2023, the weighted-average coupon interest rate on total long-term debt was approximately 4.3%.

At December 31, 2025 and 2024, the weighted-average coupon interest rate on our total long-term debt was approximately 4.5% and 4.3%, respectively.

For further details on long-term debt, see Note 9.

Long-Term Debt to our consolidated financial statements in Item 8 (“Note 11”).

Long-Term Debt (“Note 9”).

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

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EBITDA 10,734

(Income) loss from investments in equity securities and noncontrolling interests, net (652)

(Income) losses from investments in equity securities and noncontrolling interests, net (510)

Dividends from less than 50% owned affiliates 208

Gain on the sale of IQOS System commercialization rights

Asset impairment and exit costs 978

Impairment of goodwill 1,158

Fair value adjustment for NJOY Transaction contingent payments 25

Consolidated EBITDA $ 12,593

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Long-term debt 24,140

Total Debt $ 24,926

Total Debt / Consolidated net earnings 2.2

Total Debt / Consolidated EBITDA 2.1

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ABI Transaction - As discussed in Note 8, 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 3 .

Debt $ 25,709

Debt / Consolidated net earnings 3.7

Debt / Consolidated EBITDA 2.0

In October 2023, we filed a registration statement on Form S-3 with the SEC, under which we may offer debt securities or warrants to purchase debt securities from time to time over a three-year period from the date of filing.

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

As further discussed in Note 5.

Supplier Financing to our consolidated financial statements in Item 8, as part of the supplier financing program, Altria guarantees the financial obligations of ALCS under the financing program agreement.

As part of the supplier financing program further discussed in Note 2, 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 9, 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 20.

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.

This estimate no longer includes PM USA’s obligations under the State Settlement Agreements to make quarterly payments with respect to settling plaintiffs’ attorneys’ fees due to the termination of these obligations 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 18.

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

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We paid approximately $3.5 billion and $3.9 billion for the years ended December 31, 2025 and 2024, respectively, in connection with the State Settlement Agreements and FDA user fees, which are primarily paid in the second quarter of each period.

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

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 December 31, 2024, PM USA had posted appeal bonds totaling $31 million, which have been collateralized with restricted cash that is included in assets on our 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 20, Item 3 and Item 1A.

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Litigation-Related Payments - 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 18, Item 3 and Item 1A.

Other Long-Term Liabilities - We had $0.9 billion of accrued postretirement health care costs on our consolidated balance sheet at December 31, 2025 and estimate approximately $82 million of annual payments.

In addition, we had accrued pension obligations, substantially all of which are funded from plan assets.

In addition, we had pension obligations, substantially all of which are funded from pension plan assets.

For further information on our postretirement health care and pension obligations, see Note 16.

In October 2024, we entered into an agreement with the IRS regarding the tax treatment of a $6.4 billion ordinary loss we recognized in 2023 for cash tax purposes with respect to a portion of our tax basis associated with our former investment in JUUL.

As a result, other liabilities decreased approximately $1.1 billion, which included the reversal of an unrecognized tax benefit associated with the $6.4 billion ordinary loss position recognized in 2023, as further discussed in Note 16.

We are unable to estimate the timing of payments of other long-term liabilities included on our consolidated balance sheet at December 31, 2024.

We are unable to estimate the timing of payments of other long-term liabilities included on our consolidated balance sheets at December 31, 2025.

Equity and Dividends

During 2024, we paid dividends of $6.8 billion, essentially unchanged from 2023, reflecting a higher dividend rate, mostly offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase programs.

Dividends paid in 2025 and 2024 were approximately $6,960 million and $6,845 million, respectively, an increase of 1.7%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase programs.

In the third quarter of 2025, our Board approved a 3.9% increase in the quarterly dividend rate to $1.06 per share of our common stock versus the previous rate of $1.02 per share.

Our current annualized dividend rate is $4.24 per share.

Our 2028 Goals include a progressive dividend goal targeting mid-single digits dividend per share growth annually through 2028.

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

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

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

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 12 and Part II, Item 5.

In October 2025, the Board authorized a $1.0 billion expansion of our existing share repurchase program from $1.0 billion to $2.0 billion, which now expires on December 31, 2026.

For further discussion of our share repurchase programs, see Note 10.

Capital Stock and Part II, Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities of this Form 10-K.

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During 2025, net cash provided by operating activities was $9.3 billion compared with $8.8 billion during 2024.

This decrease was due primarily to lower net revenues, payments for certain transferable income tax credits, higher litigation payments and a portion of the NJOY contingent payments ($140 million), partially offset by lower payments for (i) federal excise taxes and (ii) Statement Settlement Agreements, due primarily to lower smokeable products shipment volume.

This increase was due primarily to lower payments for State Settlement Agreements, litigation and excise taxes, and a portion of the NJOY contingent payments in 2024 ($140 million), partially offset by lower net revenues and higher payments for certain transferable income tax credits.

We had a working capital deficit at December 31, 2025 and 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 2024, net cash provided by investing activities was $2.2 billion compared with net cash used in investing activities of $1.3 billion during 2023.

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

Capital expenditures for 2024 decreased 27.6% to $142 million.

During 2025, net cash used in investing activities was $0.3 billion compared with net cash provided by investing activities of $2.2 billion during 2024.

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

Capital expenditures for 2025 increased 52.1% to $216 million, primarily due to investments in our manufacturing capabilities and innovative products.

We expect capital expenditures for 2026 to be in the range of $300 million to $375 million, which are expected to be funded from operating cash flows.

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During 2025, net cash used in financing activities was $7.6 billion compared with $11.5 billion during 2024.

This increase was due primarily to higher share repurchases in 2024, issuance of long-term debt in 2023 and a portion of the NJOY contingent payments ($110 million), partially offset by lower repayments of long-term debt in 2024.

This decrease was due to lower share repurchases, issuances of long-term debt in 2025 and a portion of the NJOY contingent payments in 2024 ($110 million), partially offset by higher repayments of long-term debt and higher dividends paid on our common stock.

New Accounting Guidance Not Yet Adopted

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(“Parent”), has guaranteed the Parent’s obligations under its outstanding debt securities, borrowings under its Credit Agreement and amounts outstanding under its commercial paper program (“Guarantees”).

Pursuant to the Guarantees, the Guarantor fully and unconditionally guarantees, as primary obligor, the

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payment and performance of the Parent’s obligations under the guaranteed debt instruments (“Obligations”), subject to release under certain customary circumstances as noted below.

Pursuant to the Guarantees, the Guarantor fully and unconditionally guarantees, as primary obligor, the payment and performance of the Parent’s obligations under the guaranteed debt instruments (“Obligations”), subject to release under certain customary circumstances as noted below.

The Guarantees provide that the Guarantor guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of the Obligations.

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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.

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

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

What changed 10-K

Item 7. Management’s Discussion and Analysis