ALTRIA GROUP, INC.
For the period ended Dec 31, 2025. Filed Feb 25, 2026.
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FY2025 · Filed Feb 25, 2026
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What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2024-12-31; filed 2025-02-26.
0000764180-25-000019
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-25.
0000764180-26-000017
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 431 previous paragraphs and 383 current paragraphs.
170 unchanged; 162 reworded; 43 added; 95 removed; 4 previous and 8 current paragraphs rearranged.
Tables are not compared: 16 previous and 17 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (43)
Current report
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.
Current report
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. The U.S. 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.
Current report
Product assortment, regulation and enforcement continue to evolve in the e-vapor category. 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. (“Note 4”).
Current report
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.
Current report
(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.
Current report
(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.
Current report
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.
Current report
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.
Current report
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.
Current report
E-vapor Reporting Unit Goodwill & Definite-Lived Intangible Assets Impairments
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
(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.
Current report
▪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:
Current report
(1) Included in our e-vapor products segment.
Current report
(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.
Current report
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. These 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 Paymentsin Note 7. Financial Instruments.
Current report
▪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.
Current report
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.
Current report
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.
Current report
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.
Current report
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.
Current report
▪limit adult nicotine consumer choices;
Current report
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).
Current report
Marlboro’s retail share of the premium segment was 59.4%, an increase of 0.1 share point.
Current report
▪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.
Current report
▪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.
Current report
▪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 also increased the list price of all its other premium cigarette brands by $0.25 per pack.
Current report
▪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.
Current report
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 ofon! shipment volume relative to MST (“volume/mix”) ($237 million).
Current report
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.
Current report
The following table summarizes our oral tobacco products segment’s retail restated share performance:
Current report
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.
Current report
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.
Current report
▪Effective November 18, 2025, USSTC increased the list price on its Copenhagen, Skoaland Red Seal brands by $0.10 per can. USSTC also increased the list price on its Husky brands by $0.08 per can.
Current report
▪Effective July 22, 2025, USSTC increased the list price on its Copenhagenand 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.
Current report
(2) On May 14, 2025, S&P changed its long-term debt credit rating to BBB+ from BBB and outlook to Stable from Positive.
Current report
(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.
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Removed paragraphs (95)
Previous report
▪Grow U.S. smoke-free volumes by at least 35% from our 2022 base of 800 million units by 2028 (see Operating Results by Business Segment); and
Previous report
▪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).
Previous report
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.
Previous report
U.S. 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.
Previous report
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 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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
For further discussion, see Note 4. Revenues from Contracts with Customersto our consolidated financial statements in Item 8.
Previous report
Second Quarter of 2024 Skoal Impairment:
Previous report
At December 31, 2023, the estimated fair value of the Skoal trademark exceeded its carrying value of $3.9 billion by approximately 6% ($0.2 billion). Sales volumes of MST products, including Skoal, have been negatively impacted due in part to evolving adult tobacco consumer preferences, which has resulted in consumers increasingly moving across tobacco categories. In connection with the preparation of our financial statements for the period ended June 30, 2024, we evaluated the accelerated growth of innovative tobacco products, including oral nicotine pouches, and the related increase in competitive activity among tobacco categories, which have contributed to reductions in sales volumes for MST products, including Skoal. We concluded that the expected impact from the sales volume declines on the Skoal trademark represented a triggering event and, as a result of this conclusion, we performed an interim impairment assessment as of June 30, 2024. 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.
Previous report
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:
Previous report
▪Altria and certain of our affiliates, including NJOY, are defendants in lawsuits alleging patent infringement based on the sale of NJOY ACEin 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”).
Previous report
▪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’svolume growth in 2024.
Previous report
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.
Previous report
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 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.
Previous report
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.
Previous report
▪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.
Previous report
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”).
Previous report
▪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.
Previous report
▪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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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).
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
The U.S. 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. on! 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.
Previous report
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.
Previous report
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.
Previous report
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.
Previous report
The FSPTCA also bans descriptors such as “light,” “low” or “mild” when used as descriptors of modified risk, unless expressly authorized by the FDA.
Previous report
The Final Tobacco Marketing Rule, as amended, among other things:
Previous report
▪restricts the use of non-tobacco trade and brand names on cigarettes and smokeless tobacco products;
Previous report
▪prohibits sampling of all tobacco products except that sampling of smokeless tobacco products is permitted in qualified adult-only facilities;
Showing the first 40 of 95 passages. Open the source sections for the rest.
Reworded paragraphs (162)
Previous wording
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. 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.
Current wording
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. 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.
Previous wording
We have a leading portfolio of tobacco products for U.S. 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.
Current wording
We have a leading portfolio of tobacco products for U.S. tobacco consumers age 21+. 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.
Previous wording
In smoke-free products, we own USSTC, the leading global MST manufacturer, Helix, a leading manufacturer of oral nicotine pouches, and NJOY, an e-vapor manufacturer with a commercialized product portfolio fully covered by MGOs from the FDA. Additionally, we have a majority-owned joint venture, Horizon, for the U.S. marketing and commercialization of HTS products.
Current wording
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. marketing and commercialization of HTS products.
Previous wording
▪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);
Current wording
▪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);
Previous wording
We are reassessing our U.S. smoke-free goals due to the continued proliferation of illicit flavored disposable e-vapor products resulting from insufficient enforcement action against manufacturers, distributors and retailers of these products. We anticipate providing updated U.S. smoke-free goals when we have more clarity on how the legitimate e-vapor market may evolve. For additional information on the e-vapor category, see Operating Results by Business Segment - Business Environment.
Current wording
▪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.
Previous wording
We expect the initial phases of the Initiative will deliver at least $600 million in cumulative cost savings over the next five years, which we plan to reinvest in our businesses in support of our Vision and 2028 Goals. The cumulative cost savings exclude our estimated total pre-tax charges for the Initiative’s initial phases of approximately $100 million to $125 million, which we will treat as special items and exclude from our adjusted diluted EPS. For further discussion of the Initiative, see Note 7. Asset Impairment, Exit and Implementation Coststo our consolidated financial statements in Item 8 (“Note 7”).
Current wording
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. 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. Exit and Implementation Costs(“Note 5”).
Previous wording
In this MD&A section, we discuss factors that have impacted our businesses as of the date of this Form 10-K. In addition, we are aware of and address certain trends and developments that could, individually or in the aggregate, have a material impact on our businesses, including the value of our investments in equity securities, in the future. We focus in this Trends and Developments section on the discretionary income pressures on adult tobacco consumers, illicit flavored disposable e-vapor products and recent regulatory and executive actions and their effects or potential effects on our businesses.
Current wording
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. 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.
Previous wording
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. As the trends and developments evolve and new ones emerge, we will continue to evaluate the potential impacts on our businesses, investments and Vision.
Current wording
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.
Previous wording
▪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.
Current wording
▪Operations: 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.
Previous wording
Our 2028 Goals include delivering a mid-single digits adjusted diluted EPS compounded annual growth rate (“CAGR”) in 2028 from a $4.84 base in 2022. Our calculation of progress towards this goal through 2024 is as follows:
Current wording
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:
Previous wording
We report our financial results in accordance with GAAP. 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”). In addition, our management reviews the ratio of debt-to-Consolidated EBITDA, which we use as a factor to determine our ability to access the capital markets and make investments in pursuit of our Vision. Consolidated EBITDA is calculated in accordance with our Credit Agreement (defined below in Liquidity and Capital Resources) and includes certain adjustments. Our management does not view any of these special items to be part of our underlying results as they may be highly variable, may be unusual or infrequent, are difficult to predict and can distort underlying business trends and results. Our management also reviews income tax rates on an adjusted basis, which may exclude certain income tax items from our reported effective tax rate.
Current wording
We report our financial results in accordance with GAAP. 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”). In addition, our management reviews the ratio of debt-to-Consolidated EBITDA, which we use as a factor to determine our ability to access the capital markets and make investments in pursuit of our Vision. Consolidated EBITDA is calculated in accordance with our Credit Agreement (defined below in Liquidity and Capital Resources) and includes certain adjustments. Our management does not view any of these special items to be part of our underlying results as they may be highly variable, may be unusual or infrequent, are difficult to predict and can distort underlying business trends and results. Our management also reviews income tax rates on an adjusted basis, which may exclude certain income tax items from our reported effective tax rate.
Previous wording
Note 2. Summary of Significant Accounting Policies to our consolidated financial statements in Item 8 (“Note 2”) includes a summary of the significant accounting policies and methods used in the preparation of our consolidated financial statements. In most instances, we must use an accounting policy or method because it is the only policy or method permitted under GAAP.
Current wording
Note 2. 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.
Previous wording
▪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.
Current wording
▪Revenue Recognition: 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.
Previous wording
▪Depreciation, Amortization, Impairment Testing and Asset 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.
Current wording
▪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.
Previous wording
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. We perform undiscounted operating cash flow analyses to determine if an impairment exists. 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. 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.
Current wording
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. We perform undiscounted operating cash flow analyses to determine if an impairment exists. 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 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.
Previous wording
We conduct a required annual review of goodwill and indefinite-lived intangible assets for potential impairment as of October 1 of each year, and more frequently if an event occurs or circumstances change that would require us to perform an interim review. We have the option of first performing a qualitative assessment to determine whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test. 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 measure the amount of impairment loss as the difference between the carrying value and the fair value of a reporting unit; however, the amount of the impairment loss is limited to the total amount of goodwill allocated to a reporting unit. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, which is determined using discounted cash flows, we consider the intangible asset to be impaired and reduce the carrying value to fair value in the period identified.
Current wording
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; however, the amount of the impairment loss is limited to the total amount of goodwill allocated to a reporting unit. If the carrying value of an indefinite-lived intangible asset exceeds its fair value, which is determined using discounted cash flows, we consider the intangible asset to be impaired and reduce the carrying value to fair value in the period identified.
Previous wording
We use an income approach to estimate the fair value of our reporting units and trademarks using information available as of the impairment testing date. The income approach reflects the discounting of expected future cash flows at a rate of return that incorporates the risk-free rate for the use of those funds, the expected rate of inflation and the risks associated with realizing expected future cash flows.
Current wording
We use an income approach to estimate the fair value of our reporting units and trademarks using information available as of the impairment testing date. The income approach reflects the discounting of expected future cash flows at a rate of return that incorporates the risk-free rate for the use of those funds, the expected rate of inflation and the risks associated with realizing expected future cash flows. The discounted cash flows may include multiple scenarios that consider a range of potential outcomes in projected cash flows.
Previous wording
We completed our annual impairment test of goodwill and indefinite-lived intangible assets performed as of October 1, 2024. We elected to perform a qualitative assessment for certain of our reporting units and indefinite-lived intangible assets. 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.
Current wording
We completed our annual impairment test of goodwill and indefinite-lived intangible assets performed as of October 1, 2025. 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 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.
Previous wording
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.
Current wording
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.
Previous wording
We made various judgments, estimates and assumptions in determining the estimated fair values of our reporting units and indefinite-lived assets, the most significant of which were volume, revenue, income, perpetual growth rates and discount rates in performing our annual impairment test of goodwill and indefinite-lived intangible assets. All significant inputs used in the valuation are classified in Level 3 of the fair value hierarchy. Our annual impairment test incorporated assumptions used in our long-term financial forecast, which is used by our management to evaluate business and financial performance, including allocating resources and evaluating results relative to setting employee compensation targets. The assumptions incorporated the highest and best use of our reporting units and indefinite-lived intangible assets and also included perpetual growth rates for periods beyond the long-term financial forecast. The perpetual growth rates and discount rates used in performing the valuations ranged from 0% to 2% and 10.0% to 13.5%, respectively. Additionally, in determining these significant assumptions, we made judgments regarding the: (i) timing of effective enforcement against illicit flavored disposable e-vapor products; (ii) timing and receipt of regulatory authorizations of innovative tobacco products, including oral nicotine pouches and e-vapor products; (iii) long-term growth of innovative tobacco products, including oral nicotine pouches, and the related impact on the MST category; (iv) long-term growth of the e-vapor category; (v) conversion rates of illicit flavored disposable e-vapor consumers to pod-based systems and specifically, NJOY ACE; and (vi) ability of NJOY ACE to remain on the market. Fair value calculations are sensitive to changes in these estimates and assumptions, some of which relate to broader macroeconomic conditions outside of our control.
Current wording
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 employee compensation targets. The assumptions incorporated the highest and best use of our reporting units and indefinite-lived intangible assets and also included perpetual growth rates for periods beyond the long-term financial forecast. The perpetual growth rates and discount rates used in performing the valuations ranged from 0% to 2% and 9.0% to 13.5%, respectively.
Previous wording
Although our discounted cash flow analyses are based on assumptions that are considered reasonable and based on the best available information as of October 1, 2024, our annual impairment testing date, we used significant judgment in determining future cash flows. In addition to the judgments discussed above, the following factors also have the potential to impact our assumptions and thus the expected future cash flows and, therefore, our impairment conclusions: general macroeconomic conditions; governmental actions, including FDA regulatory actions and inaction; changes in category growth (decline) rates as a result of changing adult tobacco consumer preferences; success of planned new product expansions; competitive activity; and income and excise taxes. For further discussion of these factors, see Operating Results by Business Segment - Business Environment below.
Current wording
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: general macroeconomic conditions; governmental actions, including FDA regulatory actions and inaction; 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.
Previous wording
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.
Current wording
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.
Previous wording
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.
Current wording
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.
Previous wording
During 2023, our quantitative annual impairment test of goodwill and indefinite-lived intangible assets resulted in no impairment charges.
Current wording
During 2024 and 2023, our annual impairment test of goodwill and indefinite-lived intangible assets resulted in no impairment charges.
Previous wording
For further discussion of our investments in equity securities, see Note 8.
Current wording
For further discussion of our investments in equity securities, see Note 6. Investments in Equity Securities (“Note 6”).
Previous wording
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.
Current wording
▪Contingencies: As discussed in Note 18 and Item 3, legal proceedings covering a wide range of matters are pending or threatened in various United States and foreign jurisdictions against Altria and certain of our subsidiaries, including PM USA and NJOY, as well as certain respective indemnitees. In 1998, PM USA and certain other tobacco product manufacturers entered into the MSA with 46 states, the District of Columbia and certain United States territories to settle asserted and unasserted health care cost recovery and other claims. PM USA and certain other U.S. tobacco product manufacturers had previously entered into agreements to settle similar claims brought by Mississippi, Florida, Texas and Minnesota (together with the MSA, “State Settlement Agreements”). PM USA’s portion of ongoing adjusted payments 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. 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.
Previous wording
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 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.
Current wording
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.
Previous wording
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. Assuming no change to the shape of the yield curve, a 50 basis point decrease (increase) in our discount rates would increase (decrease) our pension and postretirement expense by approximately $10 million. Similarly, a 50 basis point decrease (increase) in the expected return on plan assets would increase (decrease) our pension and postretirement expense by approximately $40 million.
Current wording
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. Similarly, a 50 basis point decrease (increase) in the expected return on plan assets would increase (decrease) our pension and postretirement expense by approximately $35 million.
Previous wording
For additional information see Note 18. Benefit Plans to our consolidated financial statements in Item 8 (“Note 18”).
Current wording
For additional information see Note 16. Benefit Plans (“Note 16”).
Previous wording
▪Income Taxes: Significant judgment is required in determining income tax provisions and in evaluating tax positions. 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.
Current wording
▪Income Taxes: Significant judgment is required in determining income tax provisions and in evaluating tax positions. 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 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.
Previous wording
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.
Current wording
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.
Previous wording
For additional information on income taxes, see Note 16. Income Taxesto our consolidated financial statements in Item 8 (“Note 16”).
Current wording
For additional information on income taxes, see Note 14. Income Taxes(“Note 14”).
Previous wording
▪NPM Adjustment Items: For a discussion of NPM Adjustment Items and a breakdown of these items by segment, see Health Care Cost Recovery Litigation in Note 20 and NPM Adjustment Items in Note 17, respectively.
Current wording
▪NPM Adjustment Items: For a discussion of NPM Adjustment Items and a breakdown of these items by segment, see Health Care Cost Recovery Litigation in Note 18 and NPM Adjustment Itemsin Note 15, respectively.
Previous wording
▪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. For a discussion of the sale of the IQOS System commercialization rights, see Note 6.
Current wording
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.
Previous wording
▪Asset Impairment, Exit and Implementation Costs: We recorded a non-cash, pre-tax impairment of the Skoal trademark of $354 million for the year ended December 31, 2024 in our oral tobacco products segment. For further discussion, see Note 6. In addition, we recorded exit and implementation costs of $68 million related to the Initiative for the year ended December 31, 2024. For a breakdown of these costs by segment, see Note 7.
Current wording
▪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.
Previous wording
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.
Current wording
▪ABI-Related Special Items: 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.
Previous wording
▪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. For further information on the gain related to the ABI Transaction, see Note 8.
Current wording
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.
Previous wording
▪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.
Current wording
▪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 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.
Previous wording
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.
Current wording
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.
Previous wording
Excise taxes on products decreased $407 million (10.2%), due primarily to lower shipment volume in our smokeable products segment.
Current wording
Excise taxes on products decreased $434 million (12.1%), due primarily to lower shipment volume in our smokeable products segment.
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Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
Additionally, in determining the significant assumptions, we made judgments regarding the: (i) timing of effective enforcement against illicit flavored disposable e-vapor products; (ii) timing and receipt of regulatory authorizations of innovative tobacco products, including oral nicotine pouches and e-vapor products; (iii) long-term growth of innovative tobacco products, including oral nicotine pouches, and the related impact on the MST category; (iv) long-term growth of the e-vapor category; 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.
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
▪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; and
Current report — wording carried from elsewhere
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.
Current report — wording carried from elsewhere
▪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.
Current report — wording carried from elsewhere
▪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.
Current report — wording carried from elsewhere
▪Effective January 21, 2025, USSTC increased the list price on its Copenhagenand Red Seal brands by $0.12 per can. USSTC also increased the list price on its Skoal brands by $0.17 per can.
Current report — wording carried from elsewhere
▪Effective February 17, 2026, USSTC increased the list price on its Copenhagen, Skoaland Red Seal brands by $0.12 per can.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
▪Contingencies: As discussed in Note 20 and Item 3, legal proceedings covering a wide range of matters are pending or threatened in various United States and foreign jurisdictions against Altria and certain of our subsidiaries, including PM USA and NJOY, as well as certain respective indemnitees. In 1998, PM USA and certain other tobacco product manufacturers entered into the MSA with 46 states, the District of Columbia and certain United States territories to settle asserted and unasserted health care cost recovery and other claims. PM USA and certain other U.S. 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”).
Previous report — wording carried elsewhere
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.
Previous report — wording carried elsewhere
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. If the proposed rule were to take effect, our operating companies could experience increased costs to comply with the rule.
Previous report — wording carried elsewhere
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.