What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-07-30 compared with 2026-04-30 · 256 added, 137 removed, 825 unchanged (32% of the section changed)

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

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

These financial measures should thus be considered as supplemental in nature and not considered in isolation or as a

substitute for the related financial information prepared in accordance with GAAP.

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

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

Food and Drug Administration

Food and Drug Administration (“FDA”).

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

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

Through the first quarter of 2026, U.S.

Through the second quarter of 2026, U.S.

adult nicotine consumers continued to face inflationary pressure on discretionary income, with impacts more pronounced among lower-income consumers.

Heightened geopolitical risk and uncertainty following the recent developments in the Middle East contributed to increased energy price volatility, with gas prices increasing to an average of $3.64 per gallon during March.

The increase in gas prices contributed to elevated inflation in March of 3.3%, above the Federal Reserve’s 2% target and the highest level since early 2024.

These macroeconomic pressures were partially offset by incremental near-term liquidity support, as Internal Revenue Service data indicates average tax refunds through the end of March increased versus the prior year.

Heightened geopolitical risk and uncertainty following the recent developments in the Middle East contributed to increased energy price volatility, with gas prices averaging $4.05 per gallon during June.

Gas prices contributed to elevated inflation in June of 3.5%, above the Federal Reserve’s 2% target.

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

For the first quarter of 2026, the discount retail share of the cigarette category reached 33.3%, an increase of 2.4 share points versus the first quarter of 2025 and 0.5 share points sequentially.

For the second quarter of 2026, the discount retail share of the cigarette category reached 33.8%, an increase of 2.6 share points versus the second quarter of 2025 and 0.5 share points sequentially.

When adjusted for trade inventory movements, our smokeable products segment domestic cigarette shipment volume declined by an estimated 4.5% in the second quarter of 2026 versus the second quarter of 2025.

When adjusted for trade inventory movements, total estimated domestic cigarette industry volume declined by 5% in the second quarter of 2026 versus the second quarter of 2025.

We believe moderating estimated domestic cigarette industry volume decline, which began in the third quarter of 2025, continues to primarily be driven by reduced cross-category movement between cigarettes and illicit flavored disposable e-vapor products.

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

nicotine pouch category continued to grow throughout the first quarter of 2026 to 58.1% of the U.S.

oral tobacco category, an increase of 9.1 share points versus the first quarter of 2025.

When adjusted for trade inventory movements, our smokeable products segment domestic cigarette shipment volume declined by an estimated 4% in the first quarter of 2026 versus the first quarter of 2025.

When adjusted for trade inventory movements, total estimated domestic cigarette industry volume declined by 5% in the first quarter of 2026 versus the first quarter of 2025.

In the fourth quarter of 2025, we estimated the industry decline rate to be 6.5% versus the fourth quarter of 2024.

We believe that the 1.5 percentage points change in the domestic cigarette industry volume decline rate in the first quarter of 2026 was due primarily to reduced cross-category movement between cigarettes and illicit flavored disposable e-vapor products.

nicotine pouch category continued to grow throughout the second quarter of 2026 to 59.9% of the U.S.

oral tobacco category, an increase of 8.1 share points versus the second quarter of 2025 and 1.8 share points sequentially.

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 reduced the sales volumes of our operating companies’ cigarette and MST products.

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

Various states and the federal government have taken regulatory and enforcement actions against manufacturers, distributors and retailers of illicit flavored disposable e-vapor products.

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.

Despite these enforcement measures, 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.

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

In 2026, traditional tobacco retailers continued 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.

Despite these enforcement measures, insufficient actions against manufacturers, distributors and retailers of nicotine products requiring FDA review for which no premarket tobacco product applications (“PMTA”) have been submitted have allowed such products

to continue to proliferate in the market.

We expect that effective enforcement against illicit products will occur more gradually than initially expected and continue to monitor the overall dynamics and competitive threats to our brands across multiple nicotine categories.

We are monitoring volatility in domestic and global economies and disruptions in the supply and distribution chains.

This volatility and disruption are the result of several factors, including macroeconomic conditions, raw materials availability and geopolitical events.

We continue to work to mitigate the potential negative impacts of these macroeconomic and geopolitical dynamics on our businesses through, among other actions, proactive engagement with current and potential suppliers and distributors and the development of alternative sourcing strategies.

We continue to assess the impact of volatility on price, availability or quality of tobacco, other raw materials or component parts, and work to mitigate the potential negative impacts of macroeconomic and geopolitical dynamics on our businesses through, among other actions, proactive engagement with current and potential suppliers and distributors and the development of alternative sourcing strategies.

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

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

Consolidated Results of Operations for the Three Months Ended March 31, 2026

The changes in net earnings and diluted EPS for the three months ended March 31, 2026, from the three months ended March 31, 2025, were due primarily to the following:

Consolidated Results of Operations for the Six Months Ended June 30, 2026

The changes in net earnings and diluted EPS for the six months ended June 30, 2026, from the six months ended June 30, 2025, were due primarily to the following:

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

For the three months ended March 31, 2025

For the six months ended June 30, 2025

$ 3,455 $ 2.04

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Operations 153 0.09

For the three months ended March 31, 2026

For the six months ended June 30, 2026

$ 4,481 $ 2.67

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% Change 3.9 % 4.9 %

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.

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

▪ Fewer Shares Outstanding:

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▪ Operations:

The increase of $118 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI.

The increase of $153 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI and higher income from our equity investment in ABI, partially offset by lower net periodic benefit income, excluding service cost.

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

Consolidated Results of Operations for the Three Months Ended June 30, 2026

The changes in net earnings and diluted EPS for the three months ended June 30, 2026, from the three months ended June 30, 2025, were due primarily to the following:

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

For the three months ended June 30, 2025

$ 2,378 $ 1.41

2025 Acquisition-related items

2025 Asset impairment, exit and implementation costs

2025 Tobacco and health and certain other litigation items

2025 Amortization of intangibles

2025 ABI-related special items

2025 Cronos-related special items

2025 Income tax items

Subtotal 2025 special items

2026 Acquisition-related items

2026 Asset impairment, exit and implementation costs

2026 Tobacco and health and certain other litigation items

2026 Amortization of intangibles

2026 ABI-related special items

2026 Cronos-related special items

2026 Income tax items

Subtotal 2026 special items

Fewer shares outstanding — 0.01

Change in tax rate 12 0.01

Operations 35 0.02

For the three months ended June 30, 2026

$ 2,298 $ 1.37

2026 Reported Net Earnings and Reported Diluted EPS

$ 2,298 $ 1.37

2025 Reported Net Earnings and Reported Diluted EPS

$ 2,378 $ 1.41

% Change (3.4) % (2.8) %

2026 Adjusted Net Earnings and Adjusted Diluted EPS

$ 2,480 $ 1.48

2025 Adjusted Net Earnings and Adjusted Diluted EPS

$ 2,433 $ 1.44

% Change 1.9 % 2.8 %

▪ Fewer Shares Outstanding:

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

▪ Operations:

The increase of $35 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI and higher income from our equity investment in ABI, partially offset by higher general corporate expenses and lower net periodic benefit income, excluding service cost.

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

Non-GAAP Financial Measures

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

These items may include, for example, loss on early extinguishment of debt, restructuring charges, asset impairment charges, acquisition, disposition and integration-related items, equity investment-related special items, certain income tax items, charges associated with tobacco and health and certain other litigation items, 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”).

While amortization of intangibles is excluded from our adjusted financial measures, net revenues generated from these definite-lived intangible assets during the periods

presented, if applicable, are included in our adjusted financial measures.

These items may include, for example, loss on early extinguishment of debt,

charges related to restructuring and other exit activities, 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”).

While amortization of intangibles is excluded from our adjusted financial measures, net revenues generated from these definite-lived intangible assets during the periods presented, if applicable, are included in our adjusted financial measures.

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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We conduct a required annual review of goodwill and indefinite-lived intangible assets for potential impairment as of October 1 of each year, in accordance with our accounting policy, and more frequently if an event occurs or circumstances change that would require an interim quantitative impairment assessment.

There have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required as of March 31, 2026.

There have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required as of June 30, 2026.

E-Vapor Reporting Unit Goodwill

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

We believe that the estimated fair value of the e-vapor reporting unit at December 31, 2025 remains reasonable and there are no events or circumstances indicating an impairment for the three months ended March 31, 2026.

Fair value calculations are sensitive to changes in certain judgments and assumptions.

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For further discussion, see Trends and Developments above and Operating Results by Business Segment - Business Environment - Summary below.

We believe that the estimated fair value of the Skoal trademark at December 31, 2025 remains reasonable and there are no events or circumstances indicating an impairment for the three months ended March 31, 2026.

We believe that the estimated fair value of the Skoal trademark at December 31, 2025 remains reasonable and there are no events or circumstances indicating an impairment for the six and three months ended June 30, 2026.

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.

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Consolidated Operating Results

For the Three Months Ended March 31,

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2026 2025 2026 2025

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

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

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

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

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Tobacco and health and certain other litigation items

97 23 74 0.04

Amortization of intangibles 46 4 42 0.03

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Amortization of intangibles

74 12 62 0.04

ABI-related special items 2 1 1 —

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$ 5,904 $ 1,382 $ 4,522 $ 2.67

The following special items affected the comparability of statements of earnings amounts for the three months ended March 31, 2026 and 2025:

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

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

2026 Reported

$ 2,929 $ 631 $ 2,298 $ 1.37

Acquisition-related items 12 4 8 —

Asset impairment, exit and implementation costs 88 21 67 0.04

Tobacco and health and certain other litigation items

95 23 72 0.05

Amortization of intangibles 23 1 22 0.01

ABI-related special items 77 18 59 0.04

Cronos-related special items (4) — (4) —

Income tax items — 42 (42) (0.03)

2026 Adjusted for Special Items

$ 3,220 $ 740 $ 2,480 $ 1.48

2025 Reported

$ 3,118 $ 740 $ 2,378 $ 1.41

Acquisition-related items 16 4 12 0.01

Asset impairment, exit and implementation costs 15 3 12 0.01

Tobacco and health and certain other litigation items 5 1 4 —

Amortization of intangibles

ABI-related special items (19) (3) (16) (0.01)

Cronos-related special items 2 — 2 —

Income tax items — (10) 10 —

2025 Adjusted for Special Items

$ 3,174 $ 741 $ 2,433 $ 1.44

The following special items affected the comparability of statements of earnings amounts for the six and three months ended June 30, 2026 and 2025:

▪ Acquisition-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.

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We recorded these items as follows:

For the Three Months Ended March 31,

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2026 2025 2026 2025

Net revenues (1)

$ — $ 42 $ — $ 8

Cost of sales (1)

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(2) Recorded as general corporate expense.

Amount is net of $22 million of insurance recoveries for the three months ended March 31, 2025.

Amounts are net of insurance recoveries of $7 million and $25 million for the six months ended June 30, 2026 and 2025, respectively, and $7 million and $3 million for the three months ended June 30, 2026 and 2025, respectively.

To date, we incurred total costs of $172 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 $71 million.

Additionally, we recorded a non-cash, pre-tax charge of $25 million for the three months ended March 31, 2025 for the change in the fair value of the contingent payments associated with the NJOY Transaction, which was recorded as general corporate expense and included in marketing, administration and research costs in our condensed consolidated statements of earnings.

Additionally, we recorded a non-cash, pre-tax charge of $25 million for the six months ended June 30, 2025 for the change in the fair value of the contingent payments associated with the NJOY Transaction, which was recorded as general corporate expense and included in marketing, administration and research costs in our condensed consolidated statements of earnings.

For further information, see Contingent Payments in Note 5.

Financial Instruments .

▪ Asset Impairment:

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

▪ Asset Impairment, Exit and Implementation Costs:

We recorded pre-tax exit and implementation costs of $78 million for the six and three months ended June 30, 2026 related our plan to transition USSTC’s manufacturing operations at our Nashville, Tennessee plant to a new facility to be constructed on our existing campus in Hopkinsville, Kentucky (“USSTC Facilities Consolidation”).

We recorded pre-tax exit and implementation costs of $16 million and $10 million for the six and three months ended June 30, 2026, respectively, and $30 million and $15 million for the six and three months ended June 30, 2025, respectively, related to our Optimize & Accelerate initiative (“Initiative”).

For further discussion and a breakdown of these costs by segment, see Note 3.

Exit and Implementation Costs .

We recorded a non-cash impairment charge of $873 million to reduce the carrying value of the e-vapor reporting unit goodwill to its estimated fair value for the six months ended June 30, 2025 in our all other category.

For further discussion, see Note 2.

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▪ Amortization of Intangibles:

We recorded pre-tax amortization expense of definite-lived intangible assets of $23 million and $37 million for the three months ended March 31, 2026 and 2025, respectively, in marketing, administration and research costs in our condensed consolidated statements of earnings.

Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025

We recorded pre-tax amortization expense associated with definite-lived intangible assets of $46 million and $74 million for the six months ended June 30, 2026 and 2025, respectively, and $23 million and $37 million for the three months ended June 30, 2026 and 2025, respectively, in marketing, administration and research costs in our condensed consolidated statements of earnings.

▪ ABI-Related Special Items:

We recorded net pre-tax losses of $78 million and $77 million for the six and three months ended June 30, 2026, respectively, due primarily to a dilution loss resulting from ABI’s share activity that reduced our ABI ownership interest, partially offset by mark-to-market gains on certain ABI financial instruments associated with its share commitments.

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

▪ Income Tax Items :

We recorded income tax items of $30 million and $42 million for the six and three months ended June 30, 2026, respectively, due to an income tax benefit related to the resolution of prior year tax audits, partially offset by income tax expense associated with a tax basis adjustment related to our investment in ABI.

For further discussion, see Note 11.

Income Taxes (“Note 11”).

Six Months Ended June 30, 2026 Compared with Six Months Ended June 30, 2025

Net revenues, which include excise taxes billed to customers, increased $178 million (1.6%), due primarily to higher net revenues in our smokeable products segment.

Cost of sales decreased $18 million (1.4%), due primarily to lower NJOY costs and lower shipment volume in our smokeable products segment, partially offset by higher manufacturing costs in our smokeable products segment.

Excise taxes on products decreased $70 million (9.5%), due primarily to 2026 refunds of taxes and duties paid on imported cigarettes and lower shipment volume in our smokeable products segment.

Marketing, administration and research costs decreased $38 million (6.5%), due primarily to lower tobacco and health and certain other litigation items, lower amortization of intangibles, lower general corporate expenses and lower costs related to our Optimize & Accelerate initiative (“Initiative”), partially offset by higher spending in our smokeable products and oral tobacco products segments.

Cost of sales increased $78 million (2.9%), due primarily to higher manufacturing costs and higher per unit settlement charges in our smokeable products segment and 2026 costs related to USSTC Facilities Consolidation, partially offset by lower shipment volume in our smokeable products segment and lower NJOY costs.

Excise taxes on products decreased $127 million (8.2%), due primarily to higher refunds of taxes and duties paid on imported cigarettes and lower shipment volume in our smokeable products segment.

Marketing, administration and research costs were essentially unchanged, as higher tobacco and health and certain other litigation items, higher general corporate expenses and higher spending in our oral tobacco products segment were mostly offset by lower amortization of intangibles, lower costs related to our Initiative and lower costs in our all other category.

Operating income increased $1,074 million (21.4%), due primarily to higher OCI (which includes the impact of a non-cash impairment of the e-vapor reporting unit goodwill in 2025).

(Income) losses from investments in equity securities were favorable $15 million (10.5%), due primarily to favorable results from our investment in ABI.

(Income) losses from investments in equity securities, which decreased $46 million (15.8%), were negatively impacted by unfavorable special items from our investment in ABI as discussed above.

Reported net earnings of $4,481 million increased $1,026 million (29.7%), due primarily to higher operating income.

Reported basic and diluted EPS of $2.67, each increased by 30.9%, due primarily to higher reported net earnings.

Adjusted net earnings of $2,218 million increased $129 million (6.2%), due primarily to higher OCI.

Adjusted net earnings of $4,698 million increased $176 million (3.9%), due primarily to higher OCI and higher income from our equity investment in ABI, partially offset by lower net periodic benefit income, excluding service cost.

Adjusted diluted EPS of $2.80 increased by 4.9%, due primarily to higher adjusted net earnings and fewer shares outstanding.

Three Months Ended June 30, 2026 Compared with Three Months Ended June 30, 2025

Net revenues, which include excise taxes billed to customers, were essentially unchanged as higher net revenues in our smokeable products segment and all other category (which includes 2025 acquisition-related items) were offset by lower net revenues in our oral tobacco products segment.

Cost of sales increased $96 million (6.7%), due primarily to 2026 costs related to USSTC Facilities Consolidation, higher manufacturing costs and higher per unit settlement charges in our smokeable products segment, partially offset by lower shipment volume in our smokeable products segment.

Excise taxes on products decreased $57 million (7.0%), due primarily to lower shipment volume in our smokeable products segment and higher refunds of taxes and duties paid on imported cigarettes.

Marketing, administration and research costs increased $44 million (7.1%), due primarily to higher tobacco and health and certain other litigation items and higher general corporate expenses, partially offset by lower spending in our all other category and smokeable products segment and lower amortization of intangibles.

Operating income decreased $94 million (2.9%), due primarily to lower OCI and higher general corporate expenses.

(Income) losses from investments in equity securities, which decreased $61 million (41.2%), were negatively impacted by unfavorable special items from our investment in ABI as discussed above.

Provision for income taxes decreased $109 million (14.7%), due primarily to favorable tax items and lower earnings before income taxes.

For additional information, see Note 11.

Reported net earnings of $2,298 million decreased $80 million (3.4%), due primarily to lower operating income and unfavorable results from our investments in equity securities, partially offset by favorable income tax items.

Reported basic and diluted EPS of 1.37, each decreased by 2.8%, due primarily to lower reported net earnings, partially offset by fewer shares outstanding.

Adjusted net earnings of $2,480 million increased $47 million (1.9%), due primarily to higher OCI, favorable results from our investments in equity securities, partially offset by higher general corporate expenses and lower net periodic benefit income, excluding service cost.

Adjusted diluted EPS of $1.48 increased by 2.8%, due primarily to higher adjusted net earnings and fewer shares outstanding.

Operating Results by Business Segment

Business Environment

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 12, and in Part I, Item 1A Risk Factors in our 2025 Form 10-K, include:

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▪ 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 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 and geopolitical conditions (including inflation, tariffs and the economic impacts of international armed conflicts), 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 highly competitive nature of all nicotine categories, including competitive disadvantages related to (i) the impact on cigarette prices due to the settlement of certain healthcare cost recovery litigation, (ii) the growth of innovative nicotine products, such as e-vapor and oral nicotine pouch products, and (iii) the ability 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;

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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.

▪ Rulemaking and Guidance:

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

(1) “Smokeless tobacco,” as used in this section of this Form 10-Q, 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.

▪ 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 pre-market tobacco product application (“PMTA”), Substantial Equivalence (“SE”) or SE Exemption pathways.

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.

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

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.

The FSPTCA requires the FDA to issue a marketing order (either a marketing granted order (“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.

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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.

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 premarket review process.

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

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.

These circumstances could cause a manufacturer to

(1) “Smokeless tobacco,” as used in this section of this Form 10-Q, 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.

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 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.

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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.

In May 2026, the FDA issued guidance concerning how it intends to enforce premarket review requirements for certain e-vapor and oral nicotine pouch products with pending PMTAs.

The guidance indicates that the FDA generally will not prioritize enforcement against e-vapor and oral nicotine pouch products with (i) pending PMTAs that are undergoing scientific review, or (ii) pending Supplemental PMTAs for products, other than flavored e-vapor products, that have been accepted and pending for more than 180 days.

The guidance further states that the FDA may pursue enforcement on a case-by-case basis.

Products that generally will not be eligible for enforcement discretion include products appealing to youth and products that present public health or safety concerns greater than those typically presented by e-vapor or oral nicotine pouch products.

Helix submitted PMTAs for on!

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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.

PLUS oral nicotine pouches in additional flavors in November 2025 and June 2026.

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.

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PLUS oral nicotine pouches in tobacco, mint and wintergreen flavors in 6 mg and 9 mg nicotine levels.

As of April 27, 2026, the FDA has not issued a marketing order with respect to any other on!

As of July 27, 2026, the FDA has not issued a marketing order with respect to any other on!

PLUS product.

As of April 27, 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.

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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.

As of July 27, 2026, Middleton has received MGOs or exemptions that cover over 99% of its cigar product volume.

Effect of Adverse FDA Determinations :

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In January 2025, the U.S.

District Court for the Eastern District of Texas found in favor of cigarette manufacturers that had challenged the final rule on the basis that the FDA exceeded its statutory authority by requiring cigarette packaging and

advertising to contain 11 specific warnings when it only had the authority to require nine.

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

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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 April 27, 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.

This perspective is reflected in the FDA’s March 2026 draft guidance on flavored electronic nicotine delivery systems.

As of July 27, 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 e-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.

This perspective is reflected in the FDA’s May 2026 guidance regarding how it intends to enforce premarket review requirements for certain e-vapor and oral nicotine pouch products with pending PMTAs.

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

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

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

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

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

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

Between the end of 1998 and April 27, 2026, the weighted-average state cigarette excise tax increased from $0.36 to $2.02 per pack.

As of April 27, 2026, one state (Utah) has enacted legislation increasing cigarette excise taxes in 2026, and various increases are under consideration or have been proposed.

Between the end of 1998 and July 27, 2026, the weighted-average state cigarette excise tax increased from $0.36 to $2.02 per pack.

As of July 27, 2026, one state (Utah) has enacted legislation increasing cigarette excise taxes in 2026, and various 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.

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

As of April 27, 2026, the federal government, 24 states, Puerto Rico, Philadelphia, Pennsylvania and Cook County, Illinois have adopted a weight-based tax methodology for MST.

As of July 27, 2026, the federal government, 24 states, Puerto Rico, Philadelphia, Pennsylvania and Cook County, Illinois have adopted a weight-based tax methodology for MST.

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

As of April 27, 2026, 34 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-vapor products.

As of July 27, 2026, 37 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-vapor products.

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

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

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.

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.

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

As of April 27, 2026, 182 countries, as well as the European Union, have become parties to the FCTC.

As of July 27, 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 a party to the agreement, as the agreement has not been submitted to, or ratified by, the U.S.

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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.

As of April 27, 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.

As of July 27, 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 and Illinois, exempt certain products that have received FDA market authorization through the PMTA pathway.

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

As of April 27, 2026, legislation relating to this issue is pending in one other state.

As of July 27, 2026, legislation relating to this issue is pending in one other state.

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

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

As of April 27, 2026, 44 states, the District of Columbia and Puerto Rico have enacted laws increasing the legal age to purchase tobacco products to 21.

As of July 27, 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 and advocate for raising the minimum legal age to purchase all tobacco products to 21 at the federal and state levels.

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

When appropriate, we also take legal action to protect our 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.

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.

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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 nicotine 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, 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).

Current geopolitical and macroeconomic conditions (including tariffs, inflation, high interest rates, labor shortages, supply and demand imbalances and international armed conflicts) 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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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 their products.

certain of their products.

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

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Operating Results

For the Three Months Ended March 31,

(in millions) 2026 2025 Change

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2026 2025 Change 2026 2025 Change

Net revenues $ 10,150 $ 9,979 1.7 % $ 5,392 $ 5,357 0.7 %

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Reported OCI margins (1)

65.0 % 63.2 % 1.8 pp

64.0 % 63.7 % 0.3 pp 63.1 % 64.1 % (1.0) pp

Adjusted OCI margins (1)

65.1 % 64.4 % 0.7 pp

64.9 % 64.5 % 0.4 pp 64.8 % 64.5 % 0.3 pp

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

Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025

Six Months Ended June 30, 2026 Compared with Six Months Ended June 30, 2025

Net revenues, which include excise taxes billed to customers, increased $171 million (1.7%), due primarily to higher pricing ($639 million), which includes higher promotional investments, lower shipment volume and a higher percentage of discount shipment volume relative to premium (“volume/cigarette mix”) ($475 million).

Reported OCI increased $204 million (8.3%), due primarily to higher pricing, which includes higher promotional investments, 2026 refunds of taxes and duties paid on imported cigarettes ($51 million) and lower tobacco and health and certain other litigation items ($34 million), p artially offset by volume/cigarette mix ($160 million) and higher manufacturing costs ($47 million).

Adjusted OCI increased $158 million (6.3%), due primarily to higher pricing, which includes higher promotional investments, and 2026 refunds of taxes and duties paid on imported cigarettes, p artially offset by volume/cigarette mix and higher manufacturing costs.

Reported and adjusted OCI increased $216 million (4.0%) and $229 million (4.2%), respectively, due primarily to higher pricing, which includes higher promotional investments, higher refunds of taxes and duties paid on imported cigarettes ($78 million), p artially offset by volume/cigarette mix ($381 million) and higher costs ($110 million).

Three Months Ended June 30, 2026 Compared with Three Months Ended June 30, 2025

Net revenues, which include excise taxes billed to customers, increased $35 million (0.7%), due primarily to higher pricing ($309 million), which includes higher promotional investments, partially offset by volume/cigarette mix ($279 million).

Reported OCI increased $12 million (0.4%), due primarily to higher pricing, which includes higher promotional investments, and higher refunds of taxes and duties paid on imported cigarettes ($27 million), p artially offset by volume/cigarette mix ($221 million), higher tobacco and health and certain other litigation items ($63 million) and higher costs ($44 million).

Adjusted OCI increased $71 million (2.4%), due to higher pricing, which includes higher promotional investments, and higher refunds of taxes and duties paid on imported cigarettes, p artially offset by volume/cigarette mix and higher costs.

Shipment Volume and Retail Share Results

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Shipment Volume

For the Three Months Ended March 31,

(sticks in millions) 2026 2025 Change

For the Six Months Ended June 30, For the Three Months Ended June 30,

(sticks in millions) 2026 2025 Change 2026 2025 Change

Marlboro 25,349 27,436 (7.6) % 13,389 14,458 (7.4) %

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Contract manufactured export cigarettes (2)

1,346 475 100%+ 736 475 54.9 %

(1) Domestic cigarettes shipment volume includes Marlboro ;

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The following table summarizes our domestic cigarettes retail share performance:

For the Three Months Ended March 31,

2026 2025 Percentage Point Change

For the Six Months Ended June 30, For the Three Months Ended June 30,

2026 2025 Percentage Point Change 2026 2025 Percentage Point Change

Marlboro 39.6 % 41.0 % (1.4) 39.5 % 41.0 % (1.5)

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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.

Three Months Ended March 31, 2026 Compared with the Three Months Ended March 31, 2025

Six Months Ended June 30, 2026 Compared with the Six Months Ended June 30, 2025

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 2.8%, driven primarily by the industry’s decline rate (impacted by the continued discretionary income pressures on adult nicotine consumers), partially offset by trade inventory movements and retail share gains.

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When adjusted for trade inventory movements, total domestic cigarette industry volume decreased by an estimated 5%.

Marlboro ’s retail share of the premium segment was 59.5%, an increase of 0.1 share point versus the prior year and 0.2 share points sequentially.

Marlboro ’s retail share of the premium segment was 59.6%, an increase of 0.1 share point.

Total cigarettes industry discount category retail share was 33.6%, an increase of 2.6 share points, due primarily to continued discretionary income pressures on adult nicotine consumers.

Three Months Ended June 30, 2026 Compared with the Three Months Ended June 30, 2025

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 3.2%, driven primarily by the industry’s decline rate (impacted by the continued discretionary income pressures on adult nicotine consumers), partially offset by trade inventory movements and retail share gains.

When adjusted for trade inventory movements, our smokeable products segment domestic cigarette shipment volume decreased by an estimated 4.5%.

When adjusted for trade inventory movements, total domestic cigarette industry volume decreased by an estimated 5%.

Marlboro ’s retail share of the premium segment was 59.6%, unchanged versus the prior year and an increase of 0.1 share point sequentially.

Total cigarettes industry discount category retail share was 33.8%, an increase of 2.6 share points versus the prior year and 0.5 share points sequentially, due primarily to continued discretionary income pressures on adult nicotine consumers.

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PM USA and Middleton executed the following pricing actions during 2026 and 2025:

▪ Effective April 12, 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 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.

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

▪ Effective April 12, 2026, PM USA increased the list price of Marlboro (excluding Mainline Menthol and 72s Menthol) and L&M by $0.20 per pack.

▪ Effective July 19, 2026, 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.

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Operating Results

For the Three Months Ended March 31,

(in millions) 2026 2025 Change

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2026 2025 Change 2026 2025 Change

Net revenues $ 1,382 $ 1,407 (1.8) % $ 713 $ 753 (5.3) %

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Reported OCI margins (1)

67.2 % 68.8 % (1.6) pp

61.0 % 68.6 % (7.6) pp 55.2 % 68.4 % (13.2) pp

Adjusted OCI margins (1)

67.4 % 69.2 % (1.8) pp

67.0 % 68.9 % (1.9) pp 66.7 % 68.7 % (2.0) pp

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

Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025

Net revenues, which include excise taxes billed to customers, increased $15 million (2.3%), as higher pricing ($47 million), which includes higher promotional investments, was partially offset by lower shipment volume and a higher percentage of on!

shipment volume relative to MST (“volume/product mix”) ($32 million).

Reported and adjusted OCI were essentially unchanged as higher pricing, which includes higher promotional investments, was mostly offset by lower volume/product mix ($29 million) and higher costs ($17 million).

Six Months Ended June 30, 2026 Compared with Six Months Ended June 30, 2025

Net revenues, which include excise taxes billed to customers, decreased $25 million (1.8%), due primarily to lower shipment volume ($99 million), partially offset by higher pricing ($78 million), which includes higher promotional investments.

Reported OCI decreased $115 million (12.4%), due primarily to lower shipment volume ($87 million), 2026 costs related to USSTC Facilities Consolidation ($78 million) and higher costs ($25 million), partially offset by higher pricing, which includes higher promotional investments.

Adjusted OCI decreased $39 million (4.2%), due primarily to lower shipment volume and higher costs, partially offset by higher pricing, which includes higher promotional investments.

Three Months Ended June 30, 2026 Compared with Three Months Ended June 30, 2025

Net revenues, which include excise taxes billed to customers, decreased $40 million (5.3%), due primarily to lower shipment volume ($74 million), partially offset by higher pricing ($31 million), which includes higher promotional investments.

Reported OCI decreased $117 million (23.5%), due primarily to 2026 costs related to USSTC Facilities Consolidation ($78 million) and lower shipment volume ($67 million), partially offset by higher pricing, which includes higher promotional investments.

Adjusted OCI decreased $40 million (8.0%), due primarily to lower shipment volume, partially offset by higher pricing, which includes higher promotional investments.

Shipment Volume and Retail Share Results

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Shipment Volume

For the Three Months Ended March 31,

(cans in millions) 2026 2025 Change

For the Six Months Ended June 30, For the Three Months Ended June 30,

(cans in millions) 2026 2025 Change 2026 2025 Change

Copenhagen 165.8 185.6 (10.7) % 85.4 95.9 (10.9) %

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

For the Three Months Ended March 31,

2026 2025 Percentage Point Change

For the Six Months Ended June 30, For the Three Months Ended June 30,

2026 2025 Percentage Point Change 2026 2025 Percentage Point Change

Copenhagen 13.4 % 16.4 % (3.0) 13.1 % 15.9 % (2.8)

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Three Months Ended March 31, 2026 Compared with Three Months Ended March 31, 2025

Our oral tobacco products segment’s reported domestic shipment volume decreased 3.1%, driven primarily by retail share losses, partially offset by the industry’s growth rate and trade inventory movements.

Six Months Ended June 30, 2026 Compared with Six Months Ended June 30, 2025

Our oral tobacco products segment’s reported domestic shipment volume decreased 6.0%, driven primarily by retail share losses, partially offset by the industry’s growth rate and other factors.

When adjusted for trade inventory movements, our oral tobacco products segment’s reported domestic shipment volume decreased by an estimated 5.5%.

Total oral tobacco products category industry volume increased by an estimated 9.5% over the six months ended March 31, 2026, driven primarily by growth in oral nicotine pouches, partially offset by declines in MST volumes.

Our oral tobacco products segment’s retail share was 29.0%, a decrease of 5.5 share points versus the prior year due primarily to share declines for MST products, and a decrease of 0.4 share points sequentially, as share declines for MST products were partially offset by oral nicotine pouch segment share growth.

oral tobacco category share for on!

nicotine pouches was 7.8%, a decrease of 0.8 share points versus the prior year and an increase of 0.2 share points sequentially.

Total oral tobacco products category industry volume increased by an estimated 6% over the six months ended June 30, 2026, driven primarily by growth in oral nicotine pouches, partially offset by declines in MST volumes.

Our oral tobacco products segment’s retail share was 29.0%, a decrease of 4.5 share points due primarily to share declines for MST products.

nicotine pouch category grew to 59.0% of the U.S.

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’s share of the nicotine pouch category was 13.9%, a decrease of 2.9 share points.

Three Months Ended June 30, 2026 Compared with Three Months Ended June 30, 2025

Our oral tobacco products segment’s reported domestic shipment volume decreased 8.5%, driven primarily by retail share losses and trade inventory movements, partially offset by the industry’s growth rate and other factors.

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

Our oral tobacco products segment’s retail share was 29.0%, a decrease of 3.7 share points versus the prior year due primarily to share declines for MST products, and unchanged sequentially.

oral tobacco category share for on!

nicotine pouches was 8.6%, an increase of 0.3 share points versus the prior year and 0.8 share points sequentially.

nicotine pouch category grew to 59.9% of the U.S.

oral tobacco category, an increase of 8.1 share points versus the prior year and 1.8 share points sequentially.

’s share of the nicotine pouch category was 14.4%, a decrease of 1.7 share points versus the prior year and an increase of 1.0 share point sequentially.

Pricing Actions

USSTC and Helix executed the following pricing actions during 2026 and 2025:

▪ Effective May 12, 2026, USSTC increased the list price on its Copenhagen , Skoal and Red Seal brands by $0.10 per can.

▪ Effective March 29, 2026, Helix increased the list price on its on!

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

At March 31, 2026, our significant subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests.

At June 30, 2026, our significant subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests.

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

At March 31, 2026, we had $3.5 billion of cash and cash equivalents.

At June 30, 2026, we had $2.4 billion of cash and cash equivalents.

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

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Debt (“Note 10”).

At March 31, 2026, the credit ratings and outlook for our indebtedness by major credit rating agencies were:

At June 30, 2026, the credit ratings and outlook for our indebtedness by major credit rating agencies were:

Short-term Debt Long-term Debt Outlook

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

At March 31, 2026, we had availability under our Credit Agreement for borrowings of up to an aggregate principal amount of $3.0 billion, and we were in compliance with the covenants in our Credit Agreement.

At June 30, 2026, we had availability under our Credit Agreement for borrowings of up to an aggregate principal amount of $3.0 billion, and we were in compliance with the covenants in our Credit Agreement.

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

For further discussion on borrowing arrangements, see Note 10.

Long-Term Debt - At March 31, 2026 and December 31, 2025, our total long-term debt was $24.6 billion and $25.7 billion, respectively.

Long-Term Debt - At June 30, 2026 and December 31, 2025, our total long-term debt was $24.6 billion and $25.7 billion, respectively.

In February 2026, we repaid in full at maturity our 4.400% senior unsecured notes in the aggregate principal amount of approximately $1.1 billion.

For further discussion of long-term debt, see Note 10.

At March 31, 2026, our debt-to-Consolidated net earnings and debt-to-Consolidated EBITDA ratios were calculated as follows:

For the Twelve Months Ended March 31, 2026 (1)

At June 30, 2026, our debt-to-Consolidated net earnings and debt-to-Consolidated EBITDA ratios were calculated as follows:

For the Twelve Months Ended June 30, 2026 (1)

(in millions)

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

(2) Balance at March 31, 2026.

(2) Balance at June 30, 2026.

Guarantees and Other Similar Matters - As discussed in Note 12, we had unused letters of credit obtained in the ordinary course of business and certain guarantees to a limited number of third parties related to contractual obligations.

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

We paid approximately $2.4 billion in April 2026 for amounts accrued in 2025 under the State Settlement Agreements.

We recorded $0.7 billion of charges to cost of sales for each of the three months ended March 31, 2026 and 2025, in connection with the State Settlement Agreements and FDA user fees.

We paid approximately $2.6 billion and $2.9 billion for the six months ended June 30, 2026 and 2025, respectively, in connection with the State Settlement Agreements and FDA user fees, primarily all of which was paid in the second quarter of each period.

We recorded $1.6 billion of charges to cost of sales for each of the six months ended June 30, 2026 and 2025, and $0.9 billion of charges to cost of sales for each of the three months ended June 30, 2026 and 2025, in connection with the State Settlement Agreements and FDA user fees.

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

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Equity and Dividends

During the first three months of 2026 and 2025, we paid dividends of $1,780 million and $1,730 million, respectively, an increase of 2.9%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share

repurchase program.

During the first six months of 2026 and 2025, we paid dividends of $3,556 million and $3,454 million, respectively, an increase of 3.0%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase program.

Our current annualized dividend rate is $4.24 per share.

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Cash Provided by/Used in Operating Activities

During the first three months of 2026, net cash provided by operating activities was $2,324 million compared with $2,720 million during the first three months of 2025.

This decrease was due primarily to payments for certain transferable income tax credits in 2026 and higher payments for interest on long-term debt, partially offset by higher net revenues in our smokeable products segment.

We had a working capital deficit at March 31, 2026 and December 31, 2025, and believe we have the ability to fund working capital deficits with cash provided by operating activities, borrowings under our Credit Agreement and access to the credit and capital markets.

During the first six months of 2026, net cash provided by operating activities was $3,043 million compared with $2,925 million during the first six months of 2025.

This increase was due primarily to lower payments for State Settlement Agreements and higher net revenues in our smokeable products segment, partially offset by higher payments for income taxes.

We had a working capital deficit at June 30, 2026 and December 31, 2025, and believe we have the ability to fund working capital deficits with cash provided by operating activities, borrowings under our Credit Agreement and access to the credit and capital markets.

Cash Provided by/Used in Investing Activities

During the first three months of 2026, net cash used in investing activities was $109 million compared with $43 million during the first three months of 2025.

During the first six months of 2026, net cash used in investing activities was $166 million compared with $79 million during the first six months of 2025.

This increase was due primarily to investments in our manufacturing capabilities and innovative products.

Capital expenditures for 2026 are expected to be in the range of $375 million to $450 million, an increase from the previous range of $300 million to $375 million, primarily driven by investments to support the USSTC Facilities Consolidation, and are expected to be funded from operating cash flows.

Cash Provided by/Used in Financing Activities

During the first three months of 2026, net cash used in financing activities was $3,157 million compared with $1,085 million during the first three months of 2025.

This increase was due to repayments of long-term debt in 2026 and issuances of long-term debt in 2025.

During the first six months of 2026, net cash used in financing activities was $4,988 million compared with $4,693 million during the first six months of 2025.

This increase was due to issuances of long-term debt in 2025 and higher dividends paid on our common stock, partially offset by lower repayments of long-term debt and lower share repurchases.

New Accounting Guidance Not Yet Adopted

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Parent Guarantor

March 31, 2026 December 31, 2025 March 31, 2026 December 31, 2025

June 30, 2026 December 31, 2025 June 30, 2026 December 31, 2025

Due from Non-Guarantor Subsidiaries

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(in millions of dollars)

For the Three Months Ended March 31, 2026

For the Six Months Ended June 30, 2026

Guarantor (2)

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Net earnings (losses) (277) 3,976

(1) For the three months ended March 31, 2026, net earnings (losses) include $92 million of intercompany interest income from non-guarantor subsidiaries and $103 million of interest expense from non-guarantor subsidiaries.

(2) For the three months ended March 31, 2026, net earnings (losses) include $65 million of intercompany interest income from non-guarantor subsidiaries.

(1) For the six months ended June 30, 2026, net earnings (losses) include $184 million of intercompany interest income from non-guarantor subsidiaries and $197 million of interest expense from non-guarantor subsidiaries.

(2) For the six months ended June 30, 2026, net earnings (losses) include $123 million of intercompany interest income from non-guarantor subsidiaries.

Cautionary Factors That May Affect Future Results

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

We elaborate on these important factors and the risks we face throughout this Form 10-Q, particularly in the Executive Summary and Business Environment sections preceding our discussion of the operating results of our segments above, and in our other publicly filed reports, including our 2025 Form 10-K.

We elaborate on these important factors and the risks we face throughout this Form 10-Q, particularly

in the Executive Summary and Business Environment sections preceding our discussion of the operating results of our segments above, and in our other publicly filed reports, including our 2025 Form 10-K.

These factors and risks include the following:

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

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

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis