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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion should be read in conjunction with the other sections of this Form 10-K, including the 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 2021 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, 2021 compared to the year ended December 31, 2020, which we filed with the SEC on February 25, 2022 and is incorporated by reference into this Form 10-K for the year ended December 31, 2022.

In this MD&A section, we refer to the following “adjusted” financial measures: adjusted operating companies income (loss) (“OCI”); adjusted OCI margins; adjusted net earnings attributable to Altria; adjusted diluted earnings per share attributable to Altria; and adjusted effective tax rates. These adjusted financial measures are not required by, or calculated in accordance with, United States generally accepted accounting principles (“GAAP”) and may not be calculated the same as similarly titled measures used by other companies. These adjusted financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. For a further description of these non-GAAP financial measures, see the Non-GAAP Financial Measures section below.

Executive Summary

Our Business

We have a leading portfolio of tobacco products for U.S. tobacco consumers age 21+. Our Vision by 2030 is to responsibly lead the transition of adult smokers to a smoke-free future. We are Moving Beyond SmokingTM, 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.

Our wholly owned subsidiaries include leading manufacturers of both combustible and smoke-free products. In combustibles, we own PM USA, the most profitable U.S. cigarette manufacturer, and Middleton, a leading U.S. cigar manufacturer.

Our smoke-free portfolio includes ownership of USSTC, the leading global MST manufacturer, and Helix, a leading manufacturer of oral nicotine pouches. Additionally, we have a majority-owned joint venture, Horizon, for the U.S. marketing and commercialization of HTS products and, through a separate agreement, we have the exclusive U.S. commercialization rights to the IQOS System and Marlboro HeatSticks through April 2024.

Our investments in equity securities include ABI, the world’s largest brewer, Cronos, a leading Canadian cannabinoid company, and JUUL, a U.S. based e-vapor company.

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The brand portfolios of our tobacco operating companies include Marlboro, Black & Mild, Copenhagen, Skoal and on!. Trademarks and service marks related to Altria referenced in this Form 10-K are the property of Altria or our subsidiaries or are used with permission.

For a description of Altria, see Item 1. Business of this Form 10-K (“Item 1”).

Trends and Developments

In this MD&A section, we discuss factors that have impacted our business as of the date of this Form 10-K. In addition, we are aware of certain trends and developments that could, individually or in the aggregate, have a material impact on our business, including the value of our investments in equity securities, in the future. In this Trends and Developments section, we focus on the potential effects on our business resulting from the continued elevated rate of inflation, supply chain disruptions, ongoing geopolitical events and recent regulatory actions.

We continue to monitor the evolving macroeconomic and geopolitical landscapes. High rates of inflation occurred in 2022, driven by increasing global energy, commodity and food prices, which were further exacerbated by other factors, including supply and demand imbalances, labor shortages and the Russian invasion of Ukraine. High inflation, high gas prices and rising interest rates could continue to impact our business by negatively impacting adult tobacco consumers’ disposable income and future purchase behaviors. During 2022, cigarette retail share for the industry discount segment increased. We continue to expect potential fluctuations in discount product share for cigarettes and MST products as price sensitive adult tobacco consumers react to their economic conditions and will monitor the effect of these dynamics on adult tobacco consumers and their purchase behaviors, including overall tobacco product expenditures, mix between premium and discount brand purchases and adoption of smoke-free products. Increases in inflation also have a direct and adverse impact on our MSA expense and other direct and indirect costs. We expect inflation to continue at increased levels in 2023, and the extent of any effects on adult tobacco consumers’ purchase behaviors depends in part on the magnitude and duration of such increased inflation levels. See Operating Results by Business Segment - Tobacco Space - Business Environment for additional information on evolving trends in the tobacco industry and the impacts to our business from increased inflation.

Volatility in domestic and global economies and disruptions in the supply and distribution chains are expected to continue in 2023, resulting from several factors, including the on-going impacts of inflation, supply and demand imbalances across many sectors such as energy and commodities, raw materials availability and geopolitical events. We continue to work to mitigate the potential negative impacts of these macroeconomic and geopolitical dynamics on our businesses through, among other actions, proactive engagement with current and potential suppliers and distributors, the development of alternative sourcing strategies, entry into long-term supply contracts, evolution of our safety, health and environmental protocols at our facilities and prudent oversight of our liquidity. See Operating Results by Business Segment - Tobacco Space - Business Environment for additional information on the supply chain and other impacts of the macroeconomic and geopolitical environment on our business.

Tobacco companies are subject to broad and evolving regulatory and legislative frameworks that could have a material impact on our business. For example, the FDA has issued proposed product standards regarding menthol in cigarettes and characterizing flavors in cigars, and, in June 2022, the Biden Administration published plans for future potential regulatory actions that include the FDA’s plans to develop a proposed product standard that would establish a maximum nicotine level for cigarettes and certain other combustible tobacco products. In addition, certain states and localities are considering or have passed legislation to ban flavors in one or more tobacco products, including California where a ban on the sale of most tobacco products with characterizing flavors became effective in December 2022. See Operating Results by Business Segment - Tobacco Space - Business Environment for additional information on the nature, scope and potential impacts of regulatory and legislative developments.

In June 2022, the FDA issued marketing denial orders (“MDOs”) to JUUL ordering all of JUUL’s products currently marketed in the United States off the market. In July 2022, the FDA administratively stayed the MDOs on a temporary basis, citing its determination that there are scientific issues unique to the JUUL PMTA that warrant additional agency review. This administrative stay temporarily suspends the MDOs, and JUUL’s products currently remain on the market. See Operating Results by Business Segment - Tobacco Space - Business Environment - FSPTCA and FDA Regulation - FDA Regulatory Actions - Electronic Nicotine Delivery System Products for additional information regarding the MDOs. We considered, among other factors, the impact of the FDA’s actions in conducting our quarterly quantitative valuations of our investment in JUUL during 2022, which resulted in us recording non-cash, pre-tax unrealized losses of approximately $1.5 billion for the year ended December 31, 2022. We will continue to monitor and consider developments in the FDA’s additional review, among other factors, in our quarterly quantitative valuations of JUUL.

The adverse macroeconomic and geopolitical landscapes have impacted global businesses, including ABI, and the global markets in 2022, and we expect this dynamic to continue in 2023. ABI’s business has continued to be impacted by supply chain constraints across certain markets, foreign exchange rate fluctuations, inflation, commodity cost headwinds and the Russian invasion of Ukraine (as evidenced by ABI fully impairing its joint venture with exposure to Russia and Ukraine in the first quarter of 2022). Additionally, the macroeconomic and geopolitical factors have contributed to significant changes in certain foreign exchange rates, including the Euro to USD exchange rate, and in the global equity markets. We evaluated these and other factors related to the decline in the fair value of our equity investment in ABI below its carrying value, and concluded that the decline was other than temporary, which resulted in us recording a non-cash, pre-tax charge of $2.5 billion in the third quarter of 2022. The fair value of our equity investment in ABI had share price and market valuation recovery during the fourth quarter of 2022.

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See Note 5 and Critical Accounting Policies for additional information on our investments in equity securities.

In October 2022, we modified our heated tobacco portfolio of smoke-free products by (i) entering into an agreement with PMI to, among other things, transition and ultimately conclude our relationship with respect to the IQOS System in the United States and (ii) entering into a joint venture with Japan Tobacco for the U.S. marketing and commercialization of heated tobacco stick products. For further discussion of (i) the agreement with PMI, see Note 4, and (ii) the joint venture, see Item 1 and Note 1. Background and Basis of Presentation to the consolidated financial statements in Item 8 (“Note 1”).

While the impairment of our equity investment in ABI and reduction in the estimated fair value of our equity investment in JUUL had a material adverse effect on our financial results in 2022, to date, our operating companies have not experienced any material adverse effects from the trends and developments discussed above. Additionally, we do not believe that these trends and developments have impacted our ability to achieve our Vision. As the trends and developments discussed above evolve and new ones emerge, we will continue to evaluate the potential impacts on our business, investments and Vision.

Consolidated Results of Operations

The changes in net earnings attributable to Altria and diluted earnings per share (“EPS”) attributable to Altria for the year ended December 31, 2022, from the year ended December 31, 2021, were due primarily to the following:

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

2021 Tobacco and health and certain other litigation items 138 0.07

2021 Income tax items (3) —

2022 Tobacco and health and certain other litigation items (98) (0.05)

Fewer shares outstanding — 0.11

Change in tax rate 14 —

2022 Adjusted Net Earnings and Adjusted Diluted EPS $ 8,742 $ 4.84

2021 Adjusted Net Earnings and Adjusted Diluted EPS $ 8,519 $ 4.61

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

▪Fewer Shares Outstanding: Fewer shares outstanding were due to shares we repurchased under our share repurchase program.

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▪Operations: The increase of $209 million in operations (which excludes the impact of special items shown in the table above) was due primarily to higher OCI and lower interest and other debt expense, net.

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

2023 Forecasted Results

We expect our 2023 full-year adjusted diluted EPS to be in a range of $4.98 to $5.13, representing a growth rate of 3% to 6% over our 2022 full-year adjusted diluted EPS base of $4.84, as shown in the table below. While the 2023 full-year adjusted diluted EPS guidance accounts for a range of scenarios, the external environment remains dynamic. We will continue to monitor conditions related to (i) the economy, including the impact of high inflation, rising interest rates and global supply chain disruptions, (ii) adult tobacco consumer dynamics, including disposable income, purchasing patterns and adoption of smoke-free products and (iii) regulatory and legislative developments.

Our 2023 full-year adjusted diluted EPS guidance range includes planned investments in support of our Vision, such as (i) continued smoke-free product research, development and regulatory preparation expenses, (ii) enhancement of our digital consumer engagement system and (iii) marketplace activities in support of our smoke-free products. The guidance range also includes lower expected net periodic benefit income due to market factors, including higher interest rates, and the impact of the 2022 completion of the PMCC wind-down.

We expect our 2023 full-year adjusted effective tax rate will be in a range of 24.5% to 25.5%.

Reconciliation of 2022 Reported Diluted EPS to 2022 Adjusted Diluted EPS

NPM Adjustment Items (0.03)

Tobacco and health and certain other litigation items 0.05

JUUL changes in fair value 0.81

ABI-related special items 1.12

Cronos-related special items 0.10

Income tax items (0.40)

For a discussion of certain income and expense items in the table above, see the Consolidated Operating Results section below.

Our full-year adjusted diluted EPS forecast and full-year forecast for our adjusted effective tax rate exclude the impact of certain income and expense items, including those items noted in the Non-GAAP Financial Measures section below, that our management believes are not part of underlying operations. Our management cannot estimate on a forward-looking basis the impact of these items on our reported diluted EPS or our reported effective tax rate because these items, which could be significant, may be unusual or infrequent, are difficult to predict and may be highly variable. As a result, we do not provide a corresponding GAAP measure for, or reconciliation to, our adjusted diluted EPS forecast or our adjusted effective tax rate forecast.

Non-GAAP Financial Measures

While we report our financial results in accordance with GAAP, our management reviews OCI, which is defined as operating income before general corporate expenses and amortization of intangibles, to evaluate the performance of, and allocate resources to, our segments. Our management also reviews certain financial results, including OCI, OCI margins, net earnings attributable to Altria 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-related and disposition-related costs, equity investment-related special items (including any changes in fair value of our equity investment recorded at fair value and any changes in the fair value of related warrants and preemptive rights), certain income tax items, charges associated with tobacco and health and certain other litigation items, and resolutions of certain non-participating manufacturer (“NPM”) adjustment disputes under the MSA (such dispute resolutions are referred to as “NPM Adjustment Items”). 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. Our adjusted effective tax rate may exclude certain income tax items from our reported effective tax rate.

Our management believes that adjusted financial measures provide useful additional insight into underlying business trends and results, and provide a more meaningful comparison of year-over-year results. Our management uses adjusted financial measures and regularly provides these to our chief operating decision maker (“CODM”) for planning, forecasting and evaluating business and financial performance, including allocating resources and evaluating results relative to employee compensation targets. These adjusted financial measures are not required by, or calculated in accordance with GAAP and may not be calculated the same as similarly titled measures

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used by other companies. These adjusted financial measures should thus be considered as supplemental in nature and not considered in isolation or as a substitute for the related financial information prepared in accordance with GAAP. Except as noted in the 2023 Forecasted Results section above, when we provide a non-GAAP measure in this Form 10-K, we also provide a reconciliation of that non-GAAP financial measure to the most directly comparable GAAP financial measure.

Discussion and Analysis

Critical Accounting Estimates

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.

The preparation of financial statements includes the use of estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the dates of the financial statements and the reported amounts of net revenues and expenses during the reporting periods. If actual amounts are ultimately different from previous estimates, the revisions are included in our consolidated results of operations for the period in which the actual amounts become known. Historically, the aggregate differences, if any, between our estimates and actual amounts in any year have not had a significant impact on our consolidated financial statements.

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

▪Revenue Recognition: Our businesses generate substantially all of their revenue from sales contracts with customers. Our businesses define net revenues as revenues, which include excise taxes and shipping and handling charges billed to customers, net of cash discounts for prompt payment, sales returns (also referred to as returned goods) and sales incentives. Our businesses exclude from the transaction price sales taxes and value-added taxes imposed at the time of sale.

Our businesses record sales incentives, which consist of consumer incentives and trade promotion activities, as a reduction to revenues (a portion of which is based on amounts estimated as being due to wholesalers, retailers and consumers at the end of a period) based principally on historical volume, utilization and redemption rates. We include expected payments for sales incentives in accrued marketing liabilities on our consolidated balance sheets.

For further discussion, see Note 3. Revenues from Contracts with Customers to the consolidated financial statements in Item 8.

▪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.

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. These analyses are affected by general economic conditions and projected growth rates. For purposes of recognition and measurement of an impairment for assets held for use, we group assets and liabilities at the lowest level for which cash flows are separately identifiable. If we determine that an impairment exists, any related impairment loss is calculated based on fair value. We base impairment losses on assets to be disposed of, if any, on the estimated proceeds to be received, less costs of disposal. We also review the estimated remaining useful lives of long-lived assets whenever events or changes in business circumstances indicate the lives may have changed.

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

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Goodwill by reporting unit and indefinite-lived intangible assets at December 31, 2022 were as follows:

(in millions) Goodwill Indefinite-LivedIntangible Assets

Cigarettes $ 22 $ 2

Oral nicotine pouches 55 —

During 2022, we completed our annual impairment test of goodwill and indefinite-lived intangible assets performed as of October 1, 2022 and the results of this testing were as follows:

▪no impairment charges were recorded; and

▪the estimated fair values of all reporting units and the indefinite-lived intangible assets within all reporting units substantially exceeded their carrying values, with the exception of the Skoal trademark within the MST and snus products reporting unit. At December 31, 2022, the estimated fair value of the Skoal trademark exceeded its carrying value of $3.9 billion by approximately 12%. Skoal’s performance has been negatively impacted due in part to changes in adult tobacco consumers’ purchase behaviors resulting from adverse macroeconomic and geopolitical conditions. These conditions contributed to a decrease in Skoal’s revenue and operating company income for the year ended December 31, 2022 versus the prior year. The growth of innovative tobacco products, including oral nicotine pouches, has also continued to impact Skoal’s performance, and as adult tobacco consumers’ preferences continue to evolve, we expect consumers to increasingly move across tobacco categories. In addition to the factors impacting Skoal’s performance, rising U.S. interest rates have resulted in an increase in the discount rate used in our estimate of fair value. An additional 1% increase in the discount rate would have resulted in the estimated fair value exceeding its carrying value by approximately 2% at December 31, 2022. If Skoal’s revenue and operating company income continue to decrease, or if the discount rate used to estimate the fair value continues to increase, it could result in a material non-cash impairment of the Skoal trademark in future periods.

During 2021, our quantitative annual impairment test of goodwill and indefinite-lived intangible assets resulted in no impairment charges.

In 2022, we elected to unconditionally bypass the qualitative assessment and perform a single step quantitative assessment for all reporting units and indefinite-lived intangible assets. We used an income approach to estimate the fair values of our reporting units and indefinite-lived intangible assets. The income approach reflects the discounting of expected future cash flows to their present value at a rate of return that incorporates the risk-free rate for the use of those funds, the expected rate of inflation and the risks associated with realizing expected future cash flows. The weighted-average discount rate used in performing the valuations was approximately 12%.

In performing the 2022 discounted cash flow analysis, we made various judgments, estimates and assumptions, the most significant of which were volume, income, operating margins, growth rates and discount rates. The analysis incorporated assumptions used in our long-term financial forecast, which is used by our management to evaluate business and financial performance, including allocating resources and evaluating results relative to setting employee compensation targets. The assumptions incorporated the highest and best use of our indefinite-lived intangible assets and also included perpetual growth rates for periods beyond the long-term financial forecast. The perpetual growth rate used in performing all of the valuations was 2%. Fair value calculations are sensitive to changes in these estimates and assumptions, some of which relate to broader macroeconomic conditions outside of our control.

Although our discounted cash flow analysis is based on assumptions that are considered reasonable and based on the best available information at the time that the discounted cash flow analysis is developed, there is significant judgment used in determining future cash flows. The following factors have the most potential to impact our assumptions and thus the expected future cash flows and, therefore, our impairment conclusions: general macroeconomic and geopolitical conditions; regulatory developments; changes in category growth 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 - Tobacco Space - Business Environment below.

While our management believes that the estimated fair values of each reporting unit and indefinite-lived intangible asset at December 31, 2022 are reasonable, actual performance in the short-term or long-term could be significantly different from forecasted performance, which could result in impairment charges in future periods.

For further discussion of goodwill and other intangible assets, see Note 4.

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▪Investments in Equity Securities: At the end of each reporting period, wereview our equity investments accounted for under the equity method of accounting (ABI and Cronos) for impairment by comparing the fair value of each of our investments to their carrying value. If the carrying value of an investment exceeds its fair value and the loss in value is other than temporary, we consider the investment impaired, reduce its carrying value to its fair value, and record the impairment in the period identified. We use certain factors to make this determination including (i) the duration and magnitude of the fair value decline, (ii) the financial condition and near-term prospects of the investee and (iii) our intent and ability to hold our investment until recovery to its carrying value.

We account for our investment in JUUL as an investment in an equity security and measure our investment in JUUL at fair value on our consolidated balance sheet at December 31, 2022. Our consolidated statements of earnings include any cash dividends received from our investment in JUUL (none received to date) and any changes in the estimated fair value of our investment, which is calculated quarterly.

Investment in ABI

At December 31, 2022, our equity investment in ABI consisted of 185 million restricted shares of ABI (the “Restricted Shares”) and 12 million ordinary shares of ABI. The fair value of our equity investment in ABI is based on: (i) unadjusted quoted prices in active markets for ABI’s ordinary shares and was classified in Level 1 of the fair value hierarchy and (ii) observable inputs other than Level 1 prices, such as quoted prices for similar assets for the Restricted Shares, and was classified in Level 2 of the fair value hierarchy. We can convert the Restricted Shares to ordinary shares at our discretion. Therefore, the fair value of each Restricted Share is based on the value of an ordinary share.

The fair value of our equity investment in ABI at December 31, 2022 and 2021 was $11.9 billion (carrying value of $9.0 billion) and $11.9 billion (carrying value of $11.1 billion), respectively, which was above its carrying value by approximately 33% and 7% at December 31, 2022 and 2021, respectively.

At February 23, 2023, the fair value of our equity investment in ABI was $12.0 billion, which exceeded its carrying value by approximately 33%. We will continue to monitor our investment in ABI, including the impact of macroeconomic and geopolitical factors on ABI’s business and market valuation.

Investment in JUUL

At December 31, 2022, the estimated fair value of our investment in JUUL was $250 million, as compared with $1.7 billion at December 31, 2021.

In June 2022, the FDA issued MDOs to JUUL ordering all of JUUL’s products currently marketed in the United States off the market. In July 2022, the FDA administratively stayed the MDOs on a temporary basis, citing its determination that there are scientific issues unique to the JUUL PMTAs that warrant additional review. This administrative stay temporarily suspended the MDOs, and JUUL’s products remain on the market.

The decrease in the estimated fair value of our investment in JUUL for the year ended December 31, 2022 was primarily driven by (i) a decrease in the likelihood of a favorable outcome from the FDA for JUUL’s products that are currently marketed in the United States, which have received MDOs and are under additional administrative review, (ii) a decrease in the likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, which could result in JUUL seeking protection under bankruptcy or other insolvency laws, (iii) projections of higher operating expenses resulting in lower long-term operating margins, (iv) projections of lower JUUL revenues in the United States over time due to lower JUUL volume assumptions and (v) an increase in the discount rate due to changes in market factors, partially offset by the effect of passage of time on the projected cash flows.

We use an income approach to estimate the fair value of our investment in JUUL. The income approach reflects the discounting of future cash flows for the United States and international markets 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 future cash flows.

In determining the fair value of our investment in JUUL, we made certain judgments, estimates and assumptions, the most significant of which were likelihood of certain potential regulatory and liquidity outcomes, sales volume, operating margins, discount rates and perpetual growth rates. All significant inputs used in the valuation are classified in Level 3 of the fair value hierarchy. Additionally, in determining these significant assumptions, we made judgments regarding: (i) the likelihood of certain potential regulatory actions impacting the e-vapor category and specifically whether the FDA will ultimately authorize JUUL’s products, which have received MDOs and are under additional administrative review; (ii) the likelihood of JUUL maintaining adequate liquidity to fund projected cash needs, the absence of which could result in JUUL seeking protection under bankruptcy or other insolvency laws; (iii) the risk created by the number and types of legal cases pending against JUUL; (iv) expectations for the future state of the e-vapor category, including competitive dynamics; and (v) the timing of international expansion plans. Due to these uncertainties, our future cash flow projections of JUUL are based on a range of scenarios that consider certain potential regulatory, liquidity and market outcomes.

Although our discounted cash flow analyses were based on assumptions that our management considered reasonable and were based on the best available information at the time that the analyses were developed, there is significant judgment used in determining future cash flows. If the following factors, in isolation, significantly deviate from current expectations, we believe that they have the potential to

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materially impact our significant assumptions of the likelihood of certain potential regulatory and liquidity outcomes, sales volume, operating margins, discount rates and perpetual growth rates, and thus potentially materially increase our valuation of our investment in JUUL:

▪favorable regulatory and legislative developments at the international, federal, state and local levels such as FDA authorization of (i) existing JUUL products that have received MDOs from the FDA and that are now under additional administrative review or (ii) future tobacco product applications for JUUL’s flavored e-vapor products, which are currently not permitted in the market without FDA authorization;

▪JUUL’s ability to maintain adequate financing to fund projected cash needs;

▪favorable developments related to litigation; and

▪favorable financial and market performance, including substantial changes in competitive dynamics.

While our management believes that the recorded value of our investment in JUUL at December 31, 2022 represents our best estimate of the fair value of the investment, JUUL’s actual performance in the short term or long term could be significantly different from forecasted performance due to changes in the factors noted above. Additionally, the value of our investment in JUUL could be significantly impacted by changes in the discount rate, which could be caused by numerous factors, including changes in market inputs, as well as risks specific to JUUL, including the outcome of the FDA’s additional review of the JUUL PMTAs that have received MDOs and favorable or unfavorable developments related to JUUL’s liquidity and litigation environment.

For additional information on our investments in equity securities, including impairments of our investments in ABI and Cronos and estimated changes in fair value of our JUUL investment, see Note 5.

▪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.

▪Contingencies: As discussed in Note 17 and Item 3. Legal Proceedings of this Form 10-K (“Item 3”), legal proceedings covering a wide range of matters are pending or threatened in various U.S. and foreign jurisdictions against Altria and our subsidiaries, including PM USA, as well as their respective indemnitees and our investees. 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, the “State Settlement Agreements”). PM USA’s portion of ongoing adjusted payments and legal fees is based on its relative share of the settling manufacturers’ domestic cigarette shipments, including roll-your-own cigarettes, in the year preceding that in which the payment is due. 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 $4.2 billion and $4.6 billion of charges to cost of sales for the years ended December 31, 2022 and 2021, respectively, in connection with the State Settlement Agreements and FDA user fees.

We record provisions in our consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated. At the present time, while it is reasonably possible that an unfavorable outcome in a case may occur, except to the extent discussed in Note 17 and Item 3: (i) management has concluded that it is not probable that a loss has been incurred in any pending litigation; (ii) management is unable to estimate the possible loss or range of loss that could result from an unfavorable outcome in any pending case; and (iii) accordingly, management has not provided any amounts in the consolidated financial statements for unfavorable outcomes, if any. We expense litigation defense costs as incurred and include such costs in marketing, administration and research costs in our consolidated statements of earnings.

▪Employee Benefit Plans: Weprovide a range of benefits to certain employees and retired employees, including pension, postretirement health care and postemployment benefits. We record annual amounts relating to these plans based on calculations specified by GAAP, which include various actuarial assumptions as to discount rates, assumed rates of return on plan assets, mortality, compensation increases, turnover rates and health care cost trend rates. We review our actuarial assumptions on an annual basis and make modifications to the assumptions based on current rates and trends when it is deemed appropriate to do so. Any effect of the modifications is generally amortized over future periods.

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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.

Due to changes in market factors, our discount rate assumptions for our pension and postretirement plans obligations increased to 5.6% for these plans at December 31, 2022 from 3.0% and 2.9%, respectively, at December 31, 2021. We presently anticipate net pre-tax pension and postretirement income of approximately $70 million in 2023 versus net pre-tax income of $97 million in 2022. This decrease is due primarily to: (i) higher discount rates resulting in net higher interest and service costs; (ii) lower estimated return on assets due to lower fair value of plan assets at December 31, 2022; partially offset by (iii) lower amortization of net unrecognized losses in 2023. 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.

For additional information see Note 15. Benefit Plans to the consolidated financial statements in Item 8 (“Note 15”).

▪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.

We recognize the financial statement benefit for uncertain income tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination by taxing authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. We recognize accrued interest and penalties associated with uncertain tax positions as part of the provision for income taxes in our consolidated statements of earnings.

We recognized income tax benefits and charges in the consolidated statements of earnings during 2022 and 2021 as a result of various tax events.

For additional information on income taxes, see Note 13. Income Taxes to the consolidated financial statements in Item 8 (“Note 13”).

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Consolidated Operating Results

For the Years Ended December 31,

Net Revenues:

Excise Taxes on Products:

All other — 2

Operating Income:

OCI:

Amortization of intangibles (73) (72)

General corporate expenses (292) (345)

As discussed further in Note 14, our CODM reviews OCI to evaluate the performance of, and allocate resources to, our segments. Our management believes it is appropriate to disclose this measure to help investors analyze the business performance and trends of our business segments.

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The following table provides a reconciliation of adjusted net earnings attributable to Altria and adjusted diluted EPS attributable to Altria for the years ended December 31:

Tobacco and health and certain other litigation items 131 33 98 98 0.05

Tobacco and health and certain other litigation items 182 44 138 138 0.07

Income tax items — 3 (3) (3) —

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

▪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 17 and NPM Adjustment Items in Note 14, respectively.

▪Asset Impairment, Exit, Implementation, Acquisition and Disposition-Related Costs: For a discussion of acquisition and disposition-related costs in our oral tobacco products segment and former wine segment for the year ended December 31, 2021, see Acquisition-Related Costs and Ste. Michelle Transaction in Note 14.

▪Tobacco and Health and Certain Other Litigation Items: For a discussion of tobacco and health and certain other litigation items and a breakdown of these costs by segment, see Note 17 and Tobacco and Health and Certain Other Litigation Items in Note 14, respectively.

▪JUUL Changes in Fair Value: We recorded non-cash, pre-tax unrealized losses from investments in equity securities in our consolidated statements of earnings as a result of changes in the estimated fair value of our investment in JUUL of $1,455 million for the year ended December 31, 2022. We did not record a change in the estimated fair value of our investment in JUUL for the year ended December 31, 2021.

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

For further discussion, see Note 5 and Note 13.

▪ABI-Related Special Items: We recorded net pre-tax losses of $2,544 million and $6,203 million from our equity investment in ABI for the years ended December 31, 2022 and 2021, respectively, substantially all of which related to non-cash impairments of our equity investment in ABI of $2,541 million and $6,157 million, for the years ended December 31, 2022 and 2021, respectively. For further discussion, see Note 5.

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

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▪Cronos-Related Special Items: We recorded net pre-tax expense for the years ended December 31, 2022 and 2021, consisting of the following:

Loss on Cronos-related financial instruments (1) $ 15 $ 148

(Income) losses from investments in equity securities (2) 171 318

Total Cronos-related special items - (income) expense $ 186 $ 466

(1) Amounts are related to the non-cash change in the fair value of the warrant (which we irrevocably abandoned in the fourth quarter of 2022) and certain anti-dilution protections (the “Fixed-price Preemptive Rights”) acquired in the Cronos transaction.

(2) Amounts include our share of special items recorded by Cronos and additional adjustments, if required under the equity method of accounting, related to our investment in Cronos including the $107 million and $205 million non-cash, pre-tax impairments of our investment in Cronos in 2022 and 2021, respectively.

We recorded corresponding adjustments to the Cronos tax valuation allowance in 2022 and 2021 relating to the special items.

For further discussion, see Note 5 and Note 13.

▪Loss on Early Extinguishment of Debt: We recorded pre-tax losses of $649 million for the year ended December 31, 2021, as a result of the completion of debt tender offers for and redemption of certain of our long-term senior unsecured notes. For further discussion, see Note 8. Long-TermDebt to the consolidated financial statements in Item 8 (“Note 8”).

▪Income Tax Items: We recorded income tax items of $729 million for the year ended December 31, 2022, due primarily to the release of valuation allowances on deferred tax assets related to a portion of our investment in JUUL and our Cronos warrant (which we irrevocably abandoned in the fourth quarter of 2022) due to the anticipated ability to utilize these losses. For further discussion, see Note 13.

2022 Compared with 2021

Net revenues, which include excise taxes billed to customers, decreased $917 million (3.5%), due primarily to the sale of our wine business in October 2021 and lower net revenues in the smokeable products segment.

Cost of sales decreased $677 million (9.5%), due primarily to lower shipment volume in our smokeable products segment and the sale of our wine business, partially offset by higher manufacturing costs and higher per unit settlement charges.

Excise taxes on products decreased $494 million (10.1%), due primarily to lower shipment volume in our smokeable products segment.

Marketing, administration and research costs decreased $105 million (4.3%), due primarily to the sale of our wine business (including lower disposition-related costs), lower spending associated with the IQOS System heated tobacco business, lower general corporate expensesand acquisition-related costs in 2021 in our oral tobacco products segment, partially offset by higher costs in our smokeable products segment.

Operating income increased $359 million (3.1%), due primarily to higher operating results in our smokeable products segment and lower general corporate expenses.

Interest and other debt expense, net decreased $104 million (9.0%), due primarily to lower interest costs as a result of debt maturities and refinancing activities and higher interest income due to higher rates and interest associated with the sale of the IQOS System commercialization rights.

(Income) losses from investments in equity securities, which were favorable $2,338 million (39.1%), were positively impacted by favorable special items from our investment in ABI (primarily due to a lower non-cash impairment of ABI) and lower losses from Cronos-related special items, partially offset by non-cash, unrealized losses resulting from the changes in the estimated fair value of our investment in JUUL in 2022.

Provision for income taxes increased $276 million (20.5%), due primarily to higher pre-tax earnings, partially offset by favorable income tax items and the state tax treatment of the impairment charges on our equity investment in ABI. For further discussion, see Note 13.

Reported net earnings attributable to Altria of $5,764 million increased $3,289 million (100.0%+), due primarily to lower losses from investments in equity securities, favorable income tax items, the loss on early extinguishment of debt in 2021, higher operating income, lower losses on Cronos-related financial instruments and lower interest and other debt expense, net. Reported basic and diluted EPS attributable to Altria of $3.19 each increased by 100.0%+ due to higher reported net earnings attributable to Altria and fewer shares outstanding.

Adjusted net earnings attributable to Altria of $8,742 million increased $223 million (2.6%), due primarily to higher OCI and lower interest and other debt expense, net. Adjusted diluted EPS attributable to Altria of $4.84 increased by 5.0%, due to higher adjusted net earnings attributable to Altria and fewer shares outstanding.

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Operating Results by Business Segment

Tobacco Space

Business Environment

Summary

The U.S. tobacco industry faces a number of business and legal challenges that have materially adversely affected and may continue to materially adversely affect our business, results of operations, cash flows or financial position or our ability to achieve our Vision. These challenges, some of which are discussed in more detail in Note 17, Item 1A and Item 3, include:

▪pending and threatened litigation and bonding requirements;

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

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

▪bans and restrictions on tobacco use imposed by governmental entities and private establishments and employers;

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

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

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

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

▪governmental investigations;

▪reductions in consumption levels of cigarettes and MST products;

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

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

▪the highly competitive nature of all tobacco categories, including competitive disadvantages related to cigarette price increases attributable to the settlement of certain litigation and the proliferation of innovative tobacco products, such as e-vapor and oral nicotine pouch products;

▪illicit trade in tobacco products; and

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

In addition to and in connection with the foregoing, evolving adult tobacco consumer preferences continue to impact the tobacco industry. We believe that a significant number of adult tobacco consumers switch among tobacco categories, use multiple forms of tobacco products and try innovative tobacco products, such as e-vapor products and oral nicotine pouches. Adult smokers continue to transition from cigarettes to exclusive use of smoke-free tobacco product alternatives, which aligns with our Vision.

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).

Over the past two years, the legislative and regulatory activities discussed below negatively impacted growth in the e-vapor category. Due to the uncertainty these challenges have created and continue to create in the marketplace, the e-vapor category experienced an estimated volume decline of 1.2% for the year ended December 31, 2022 compared to 2021. In the fourth quarter of 2022, e-vapor industry volumes declined by 4% sequentially and declined by 7% versus the same period in 2021 as a result of FDA regulatory actions with respect to JUUL, which are discussed below.

Oral nicotine pouch retail share of the total oral tobacco category grew significantly from 15.3% for the year ended December 31, 2021 to 21.8% for the year ended December 31, 2022. The oral nicotine pouch category continues to be increasingly competitive. In addition, oral nicotine pouch growth has sourced in significant part from smokeless tobacco and cigarette consumers.

We are monitoring the sale and distribution of synthetic nicotine products, including in the form of e-vapor products and oral nicotine pouches. As a result of recent amendments to the U.S. Food, Drug and Cosmetic Act, synthetic nicotine products are now subject to FDA regulatory oversight, as discussed further below. We believe FDA regulatory actions, which may be subject to legal challenges, will further impact the competitive environment.

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We believe the innovative tobacco product categories will continue to be dynamic due to competition, adult tobacco consumer exploration of a variety of tobacco product options, adult tobacco consumer perceptions of the relative risks of smoke-free products compared to cigarettes, FDA determinations on product applications, FDA enforcement activity and legislative actions.

For the year ended December 31, 2022, we estimate that, when adjusted for trade inventory movements and other factors, domestic cigarette industry volume declined by 8.0%. We expect 2023 cigarette industry volume trends to be most influenced by (i) disposable income, purchasing patterns and adoption of smoke-free products, (ii) macroeconomic conditions (including inflation, gasoline prices and unemployment levels), (iii) cross-category movement and (iv) regulatory and legislative (including excise tax) developments.

Macroeconomic conditions (including a high inflationary environment) can impact adult tobacco consumer purchasing behavior. For example, economic downturns have coincided with adult tobacco consumers modifying purchase behavior at retail, potentially reducing the amount of their regular brand purchases or selecting discount products and other lower priced tobacco brands. Beginning in January 2022, the Omicron variant of COVID-19 impacted consumer purchasing behavior, resulting in a short-term decrease in retail trips and tobacco sales volume. In addition, gas prices increased during the second and third quarters of 2022 due in part to the Russian invasion of Ukraine before decreasing during the fourth quarter. Increases in inflation as a result of macroeconomic and geopolitical conditions put pressure on discretionary income as the Consumer Price Index reached a 40 year high in June 2022 and rose 6.5% for all items during the year ended December 31, 2022. Throughout 2022, these economic headwinds were partially offset by positive wage inflation, increases in federal tax refund payments and low unemployment in comparison to the year ended December 31, 2021. We believe that adult tobacco consumers adapted their purchasing patterns across a variety of goods and services to compensate for the pressures on disposable income. As price sensitive adult tobacco consumers react to their economic conditions, we expect potential fluctuations in discount product share for cigarettes and MST products. However, if macroeconomic conditions or other factors cause greater than expected discount share growth or a reduction in purchases at retail, such factors could have a material adverse effect on our business, results of operations, cash flows or financial position, including an adverse effect on the carrying value of our assets such as our tobacco product trademarks.

FSPTCA and FDA Regulation

▪The Regulatory Framework:The FSPTCA, its implementing regulations and its 2016 deeming regulations establish broad FDA regulatory authority over all tobacco products and, among other provisions:

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

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

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

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

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

The FSPTCA also bans descriptors such as “light,” “low” or “mild” when used as descriptors of modified risk, unless expressly authorized by the FDA. In connection with a 2016 lawsuit initiated by Middleton, the U.S. Department of Justice, on behalf of the FDA, informed Middleton that the FDA does not intend to bring an enforcement action against Middleton for the use of the term “mild” in the trademark “Black & Mild.” Consequently, Middleton dismissed its lawsuit without prejudice. If the FDA were to change its position at some later date, Middleton would have the opportunity to bring another lawsuit.

In March 2022, the U.S. Congress expanded the statutory definition of tobacco products to include products containing nicotine derived from any source, including synthetic nicotine. The amendment became effective in April 2022. See Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement below for additional information on the effects of the statutory change.

▪Final Tobacco Marketing Rule: As required by the FSPTCA, in March 2010, the FDA promulgated a wide range of advertising and promotion restrictions for cigarettes and smokeless tobacco(1) products (the “Final Tobacco Marketing Rule”). The May 2016 deeming regulations amended the Final Tobacco Marketing Rule to expand specific provisions to all tobacco products, including cigars, pipe tobacco and e-vapor and oral nicotine products containing tobacco-derived nicotine or other tobacco derivatives.

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

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

(1)“Smokeless tobacco,” as used in this section of this Form 10-K, refers to smokeless tobacco products first regulated by the FDA in 2009, including MST.It excludes oral nicotine pouches, which were first regulated by the FDA in 2016.

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

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

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

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

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

▪Rulemaking and Guidance: From time to time, the FDA issues proposed regulations and guidance, which may be issued in draft or final form, generally involve public comment and may include scientific review. The FDA also may request comments on broad topics through an Advanced Notice of Proposed Rulemaking (“ANPRM”). We actively engage with the FDA to develop and implement the FSPTCA’s regulatory framework, including submission of comments to various FDA policies and proposals and participation in public hearings and engagement sessions.

The FDA’s implementation of the FSPTCA and related regulations and guidance also may have an impact on enforcement efforts by states, territories and localities of their laws and regulations as well as of the State Settlement Agreements (see State Settlement Agreements below). Such enforcement efforts may adversely affect our operating companies’ ability to market and sell regulated tobacco products in those states, territories and localities.

▪FDA’s Comprehensive Plan for Tobacco and Nicotine Regulation: In July 2017, the FDA announced a “Comprehensive Plan for Tobacco and Nicotine Regulation” (“Comprehensive Plan”) designed to strike a balance between regulation and encouraging the development of innovative tobacco products that may be less risky than cigarettes. Since then, the FDA has issued additional information about its Comprehensive Plan in response to concerns associated with the rise in the use of e-vapor products by youth and the potential youth appeal of flavored tobacco products (see FDA Regulatory Actions - Underage Access and Use of Certain Tobacco Products below). As part of the Comprehensive Plan, the FDA:

▪issued ANPRMs relating to potential product standards for nicotine in cigarettes, flavors in all tobacco products (including menthol in cigarettes and characterizing flavors in all cigars) and, for e-vapor products, to protect against known public health risks such as concerns about youth exposure to liquid nicotine;

▪took actions to restrict youth access to e-vapor products; and

▪reconsidered the processes used by the FDA to review certain reports and new product applications.

In December 2022, the Reagan-Udall Foundation published a report on its operational evaluation of the FDA’s Center for Tobacco Products. Among other recommendations, the report urges the FDA to clearly define product pathways, accelerate PMTA decision-making, take enforcement actions against manufacturers and products that violate the law and address the need for risk communications to tobacco consumers.

▪Pre-Market Review Pathways for Tobacco Products and Market Authorization Enforcement: The FSPTCA permits the sale of tobacco products on the market as of February 15, 2007 and not subsequently modified (“Pre-existing Tobacco Products”) and new or modified products authorized through the PMTA, Substantial Equivalence (“SE”) or SE Exemption pathways. Subsequent FDA rules also provide a Supplemental PMTA pathway designed to increase the efficiency of submission and review for modified versions of previously authorized products.

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

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

▪cigarette and smokeless tobacco products that were modified or first introduced into the market between February 15, 2007 and March 22, 2011 are generally considered “Provisional Products” for which SE reports were required to be filed by March 22, 2011. These reports must demonstrate that the product has the same characteristics as a product on the market as of February 15, 2007 or to a product previously determined to be substantially equivalent, or has different characteristics but does not raise different questions of public health;

▪tobacco products that were first regulated by the FDA in 2016, including cigars, e-vapor products and oral nicotine pouches that are not Pre-existing Tobacco Products, are generally products for which either an SE report or PMTA needed to be filed by September 9, 2020; and

▪tobacco products containing nicotine from any source other than tobacco (e.g., synthetic nicotine) that were on the market between March 15, 2022 and April 14, 2022 and are not Pre-existing Tobacco Products are generally products for which a

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manufacturer must have filed a PMTA by May 14, 2022. A manufacturer was permitted to keep such a product on the market until July 13, 2022 provided that a PMTA was filed by May 14, 2022. Thereafter, unless the FDA granted the product a marketing order, the product is unlawful and subject to possible FDA enforcement.

Modifications to currently marketed products, including modifications that result from, for example, changes to the quantity of tobacco product(s) in a package, a manufacturer being unable to acquire ingredients or a supplier being unable to maintain the consistency required in ingredients, could trigger the FDA’s pre-market review processes. Through these processes, a manufacturer could receive (i) a “not substantially equivalent” determination, (ii) a denial of a PMTA or (iii) a marketing order withdrawal by the FDA on one or more products, which would require the removal of the product or products from the market. In addition, new scientific data continues to be developed relating to innovative tobacco products, which could impact the FDA’s determination as to whether a product is, or continues to be, appropriate for the protection of public health and could, therefore, result in the removal of one or more products from the market. Any such actions affecting our operating companies’ products could have a material adverse impact on our business, results of operations, cash flows or financial position.

Products Regulated in 2009:Most cigarette and smokeless tobacco products currently marketed by PM USA and USSTC are “Provisional Products.” PM USA and USSTC timely submitted SE reports for these Provisional Products and have received SE determinations on certain Provisional Products. Those products that were found by the FDA to be not substantially equivalent (certain smokeless tobacco products) had been discontinued for business reasons prior to the FDA’s determinations; therefore, those determinations did not impact business results. PM USA and USSTC have other Provisional Products that continue to be subject to the FDA’s pre-market review process. In the meantime, they can continue marketing these products unless the FDA determines that a specific Provisional Product is not substantially equivalent.

In addition, the FDA has communicated that it will not review a certain subset of Provisional Product SE reports and that the products that are the subject of those reports can continue to be legally marketed without further FDA review. PM USA and USSTC have Provisional Products included in this subset of products.

While we believe PM USA’s and USSTC’s current Provisional Products meet the statutory requirements of the FSPTCA, we cannot predict how the FDA will ultimately apply law, regulation and guidance to their various SE reports. Should PM USA or USSTC receive unfavorable determinations on any SE reports currently pending with the FDA, we believe PM USA and USSTC can replace the vast majority of these product volumes with other FDA authorized products or with Pre-existing Tobacco Products.

Cigarette and smokeless tobacco products introduced into the market or modified after March 22, 2011 are “Non-Provisional Products” and must receive a marketing order from the FDA prior to being offered for sale. Marketing orders for Non-Provisional Products may be obtained by filing an SE report, PMTA or using another pre-market pathway established by the FDA. PM USA and USSTC may not be able to obtain a marketing order for non-provisional products because the FDA may determine that any such product does not meet the statutory requirements for approval.

Products Regulated in 2016: Manufacturers of products first regulated by the FDA in 2016, including cigars, oral nicotine pouches and e-vapor products, that were on the market as of August 8, 2016 and not subsequently modified must have filed an SE report or PMTA by the filing deadline of September 9, 2020 in order for their products to remain on the market. These products can remain on the market during FDA review through court-allowed, case-by-case discretion, so long as the report or application was timely filed with the FDA. In September 2022, the FDA represented that it had resolved more than 99% of the timely applications it had received, with the vast majority resulting in a denial. A number of the denials are subject to litigation challenges initiated by the affected manufacturers. For those products still under FDA review, it is uncertain when and for how long the FDA may permit continued marketing and sale of those products pursuant to its case-by-case discretion. For products (new or modified) not on the market as of August 8, 2016, manufacturers must file an SE report or PMTA and receive FDA authorization prior to marketing and selling the product.

Helix submitted PMTAs for on! oral nicotine pouches in May 2020. As of February 23, 2023, the FDA has not issued marketing order decisions for any on! products. In addition, as of February 23, 2023, Middleton has received market orders or exemptions that cover over 99% of its cigar product volume. JUUL submitted PMTAs for its e-vapor device and the related tobacco and menthol flavors in July 2020. In June 2022, the FDA issued MDOs to JUUL for all of JUUL’s products currently marketed in the United States. These MDOs are currently stayed. See FDA Regulatory Actions - Electronic Nicotine Delivery System Products below for further discussion.

In April 2019, the FDA authorized the PMTA for the IQOS Systemand in July 2020, the FDA authorized the marketing of this system as an MRTP with a reduced exposure claim. In December 2020, the FDA authorized the PMTA for IQOS 3, an updated version of the IQOS devices, and in March 2022 authorized the marketing of the IQOS 3 device as an MRTP with the same reduced exposure claim. We have agreed to assign the exclusive U.S. commercialization rights to the IQOS System to PMI effective April 2024 in exchange for a total cash payment of approximately $2.7 billion (plus interest).

In September 2021, in connection with a patent dispute, the ITC issued a cease and desist order, effective as of November 29, 2021, banning (i) the importation of the IQOS devices, Marlboro HeatSticks and infringing components into the United States and (ii) the sale, marketing and distribution of such imported products in the United States. As a result, PM USA removed the products from the marketplace. For a further discussion of the ITC decision, see Note 17.

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In October 2021, the FDA authorized the marketing and sale of four of USSTC’s Verve oral nicotine products, including Green Mint and Blue Mint varieties, representing the first flavored product authorizations issued by the FDA for newly deemed innovative products. These products are not currently marketed or sold.

Post-Market Surveillance: Manufacturers that receive product authorizations through the PMTA process must adhere to the FDA post-market record keeping and reporting requirements, as detailed in market orders and in the final PMTA rule that went into effect in November 2021. This includes notification of all marketing activities. The FDA may amend requirements of a market order or withdraw the market order based on this information if, among other reasons, it determines that the continued marketing of the products is no longer appropriate for the protection of the public health.

Effect of Adverse FDA Determinations: FDA review time frames have varied. It is therefore difficult to predict the duration of FDA reviews of SE reports or PMTAs. An unfavorable determination on an application, the withdrawal by the FDA of a prior marketing order or other changes in FDA regulatory requirements could result in the removal of products from the market. These manufacturers would have the option of marketing their products that have received FDA pre-market authorization or Pre-existing Tobacco Products. A “not substantially equivalent” determination, a denial of a PMTA or a marketing order withdrawal by the FDA on one or more products (which would require the removal of the product or products from the market) could have a material adverse impact on our business, results of operations, cash flows or financial position. Also, adverse FDA determinations on innovative tobacco products could have a material adverse effect on our ability to achieve our Vision.

▪FDA Regulatory Actions

▪Graphic Warnings:In March 2020, the FDA issued a final rule requiring 11 textual warnings accompanied by color graphics depicting certain negative health consequences of smoking on cigarette packaging and advertising. The final rule was set to become effective on October 6, 2023. However, PM USA and other cigarette manufacturers filed lawsuits challenging the final rule on substantive and procedural grounds. In December 2022, the U.S. District Court for the Eastern District of Texas found in favor of cigarette manufacturers in one such suit and blocked the rule, finding it unconstitutional on the basis that it compelled speech in violation of the First Amendment. The FDA has appealed the decision.

▪Underage Access and Use of Certain Tobacco Products:The FDA announced regulatory actions in September 2018 to address underage access and use of e-vapor products. We have engaged with the FDA on this topic and have reaffirmed to the FDA our ongoing and long-standing commitment to preventing underage use. For example, we advocated raising the minimum legal age to purchase all tobacco products to 21 at the federal and state levels to further address underage use, which is now federal law. See Federal, State and Local Legislation to Increase the Legal Age to Purchase Tobacco Products below for further discussion. In addition, through our retailer incentive program, stores representing over 80% of PM USA’s cigarette volume have implemented point-of-sale age validation technology.

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

▪Electronic Nicotine Delivery System Products: In June 2022, the FDA issued MDOs to JUUL ordering all of JUUL’s products currently marketed in the United States off the market. JUUL filed a petition for review of the MDOs with the U.S. Court of Appeals for the D.C. Circuit. JUUL subsequently moved the D.C. Circuit for a temporary administrative stay of the MDOs, which the court granted to provide sufficient opportunity for the court to consider JUUL’s emergency motion for a stay pending the court’s consideration of JUUL’s challenge to the MDOs. In July 2022, the FDA administratively stayed the MDOs on a temporary basis, citing its determination that there are scientific issues unique to the JUUL PMTAs that warrant additional review. This administrative stay temporarily suspends the MDOs, and JUUL’s products remain on the market. The proceedings in the U.S. Court of Appeals for the D.C. Circuit are being held in abeyance pending completion of the FDA’s additional review, and JUUL has withdrawn its motion for an emergency stay with respect to the MDOs, without prejudice to refiling at a later date. In light of these developments, the D.C. Circuit dissolved the administrative stay it had previously granted and directed the parties to file motions to govern further proceedings within 14 days of FDA’s completion of its additional review process.

▪As of February 23, 2023, many manufacturers of menthol and other flavored e-vapor products received MDOs for failure to provide sufficiently strong product-specific scientific evidence to demonstrate that the benefit of their products to adult smokers overcomes the risk that their products pose to youth. The FDA has communicated in these MDOs that vapor products with non-tobacco flavors present unique questions relevant to the FDA’s “Appropriate for the Protection of Public Health” standard and that successful applications require strong, product-specific evidence. A number of these manufacturers are appealing the MDOs for their products.

▪Potential Product Standards

▪Nicotine in Cigarettes and Other Combustible Tobacco Products:In March 2018, the FDA issued an ANPRM seeking comments on the potential public health benefits and any possible adverse effects of lowering nicotine in combustible cigarettes to non-addictive or minimally addictive levels. Among other issues, the FDA sought comments on (i) whether smokers would

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compensate by smoking more cigarettes to obtain the same level of nicotine as with their current product and (ii) whether the proposed rule would create an illicit trade of cigarettes containing nicotine at levels higher than a non-addictive threshold that may be established by the FDA. The FDA also sought comments on whether a nicotine product standard should apply to other combustible tobacco products, including cigars. In January 2023, the Biden Administration published its Fall 2022 Unified Regulatory Agenda, which includes the FDA’s plans to propose, by October 2023, a product standard that would establish a maximum nicotine level in cigarettes and other combustible tobacco products. Any proposed product standard would proceed through the rulemaking process, which we believe will take multiple years to complete.

▪Flavors in Tobacco Products:In April 2022, the FDA issued two proposed product standards: (i) banning menthol in cigarettes and (ii) banning all characterizing flavors (including menthol) in cigars. The Biden Administration’s Fall 2022 Unified Regulatory Agenda includes the FDA’s plans to complete rulemaking with respect to these proposed product standards by the end of 2023. We submitted comments during the notice-and-comment period and plan to continue engaging with the FDA through the rulemaking process. The FDA could propose an additional product standard for flavors in innovative tobacco products, including e-vapor products and oral nicotine products.

▪N-nitrosonornicotine (“NNN”) in Smokeless Tobacco:In January 2017, the FDA proposed a product standard for NNN levels in finished smokeless tobacco products.

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

▪Good Manufacturing Practices: The FSPTCA requires that the FDA promulgate good manufacturing practice regulations (referred to by the FDA as “Requirements for Tobacco Product Manufacturing Practice”) for tobacco product manufacturers, but does not specify a timeframe for such regulations. Compliance with any such regulations could result in increased costs, which could have a material adverse effect on our business, results of operations, cash flows or financial position.

▪Impact on Our Business; Compliance Costs and User Fees: FDA regulatory actions under the FSPTCA could have a material adverse effect on our business, results of operations, cash flows or financial position in various ways. For example, actions by the FDA could:

▪impact the consumer acceptability of tobacco products;

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

▪limit adult tobacco consumer choices;

▪impose restrictions on communications with adult tobacco consumers;

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

▪impose additional manufacturing, labeling or packaging requirements;

▪impose additional restrictions at retail;

▪result in increased illicit trade in tobacco products; and/or

▪otherwise significantly increase the cost of doing business.

The FSPTCA imposes user fees on cigarette, cigarette tobacco, smokeless tobacco, cigar and pipe tobacco manufacturers and importers to pay for the cost of regulation and other matters. The FSPTCA does not impose user fees on e-vapor or oral nicotine pouch manufacturers. The cost of the FDA user fee is allocated first among tobacco product categories subject to FDA user fees and then among manufacturers and importers within each respective category based on their relative market shares, all as prescribed by the FSPTCA and FDA regulations. Payments for user fees are adjusted for several factors, including market share and industry volume. See Liquidity and Capital Resources - Payments Under State Settlement Agreements and FDA Regulation below for a discussion of our FDA user fee payments. In addition, compliance with the FSPTCA’s regulatory requirements has resulted, and will continue to result, in additional costs. The amount of additional compliance and related costs has not been material in any given quarter or year-to-date period but could become material, either individually or in the aggregate. The failure to comply with FDA regulatory requirements, even inadvertently, and FDA enforcement actions also could have a material adverse effect on our business, results of operations, cash flows or financial position.

▪Investigation and Enforcement: The FDA has a number of investigatory and enforcement tools available to it, including document requests and other required information submissions, facility inspections, facility closures, examinations and investigations, injunction proceedings, monetary penalties, product withdrawal and recall orders, and product seizures. Investigations or enforcement actions could result in significant costs or otherwise have a material adverse effect on our business, results of operations, cash flows or financial position.

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Excise Taxes

Tobacco products are subject to substantial excise taxes in the United States. Significant increases in tobacco-related taxes or fees have been proposed or enacted (including with respect to e-vapor products) and are likely to continue to be proposed or enacted at the federal, state and local levels within the United States. The frequency and magnitude of excise tax increases can be influenced by various factors, including the composition of executive and legislative bodies.

Federal, state and local cigarette excise taxes have increased substantially over the past two decades, far outpacing the rate of inflation. Between the end of 1998 and February 23, 2023, the weighted-average state cigarette excise tax increased from $0.36 to $1.89 per pack. No state enacted new legislation increasing cigarette excise taxes in 2022, and, as of February 23, 2023, no state has enacted new legislation increasing excise taxes in 2023. However, various increases are under consideration or have been proposed.

A majority of states currently tax MST using an ad valorem method, which is calculated as a percentage of the price of the product, typically the wholesale price. This ad valorem method results in more tax being paid on premium products than is paid on lower-priced products of equal weight. We support legislation to convert ad valorem taxes on MST to a weight-based methodology because, unlike the ad valorem tax, a weight-based tax subjects cans of equal weight to the same tax. As of February 23, 2023, the federal government, 23 states, Puerto Rico, Philadelphia, Pennsylvania and Cook County, Illinois have adopted a weight-based tax methodology for MST.

An increasing number of states and localities also are imposing excise taxes on e-vapor products and oral nicotine pouches. As of February 23, 2023, 30 states, the District of Columbia, Puerto Rico and a number of cities and counties have enacted legislation to tax e-vapor products. These taxes are calculated in varying ways and may differ based on the e-vapor product form. Similarly, 11 states and the District of Columbia have enacted legislation to tax oral nicotine pouches.

Tax increases are expected to continue to have an adverse impact on sales of our operating companies’ products through lower consumption levels and the potential shift in adult tobacco consumer purchases from premium to non-premium or discount cigarettes, to lower taxed tobacco products or to counterfeit and contraband products. Lower sales volume and reported share performance of our operating companies’ products could have a material adverse effect on our business, results of operations, cash flows or financial position. In addition, substantial excise tax increases on e-vapor and oral nicotine products may negatively impact adult smokers’ transition to these products, which could materially adversely affect our ability to achieve our Vision.

International Treaty on Tobacco Control

The World Health Organization’s Framework Convention on Tobacco Control (the “FCTC”) entered into force in February 2005. As of February 23, 2023, 181 countries, as well as the European Union, have become parties to the FCTC. While the United States is a signatory of the FCTC, it is not currently a party to the agreement, as the agreement has not been submitted to, or ratified by, the U.S. Senate. The FCTC is the first international public health treaty and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation. The treaty recommends (and in certain instances, requires) signatory nations to enact legislation that would address various tobacco-related issues.

There are a number of proposals currently under consideration by the governing body of the FCTC, some of which call for substantial restrictions on the manufacture, marketing, distribution and sale of tobacco products. It is not possible to predict the outcome of these proposals or the impact of any FCTC actions on legislation or regulation in the United States, either indirectly or as a result of the United States becoming a party to the FCTC, or whether or how these actions might indirectly influence FDA regulation and enforcement.

State Settlement Agreements

As discussed in Note 17, during 1997 and 1998, PM USA and other major domestic cigarette manufacturers entered into the State Settlement Agreements. These settlements require participating manufacturers to make substantial annual payments, which are adjusted for several factors, including inflation, operating income, market share and industry volume. Increases in inflation can increase our financial liability under the State Settlement Agreements. The State Settlement Agreements’ inflation calculations require us to apply the higher of 3% or the U.S. Bureau of Labor Statistics’ Consumer Price Index for All Urban Consumers (“CPI-U”) percentage rate as published in January of each year. As of December 2022, the inflation calculation was approximately 6.5% based on the latest CPI-U data; however, the increase in the annual payments did not have a material impact on our financial position. We believe that inflation will continue at increased levels in 2023, but do not expect the corresponding increase in annual payments to result in a material financial impact. However, we will continue to monitor the impact of increased inflation on the macroeconomic environment and our businesses.

For a discussion of the impact of the State Settlement Agreements on us, see Liquidity and Capital Resources - Payments Under State Settlement Agreements and FDA Regulation below and Note 17. The State Settlement Agreements also place numerous requirements and restrictions on participating manufacturers’ business operations, including prohibitions and restrictions on the advertising and marketing of cigarettes and smokeless tobacco products. Among these are prohibitions of outdoor and transit brand advertising, payments for product placement and free sampling (except in adult-only facilities). The State Settlement Agreements also place restrictions on the use of brand name sponsorships and brand name non-tobacco products and prohibitions on targeting youth and the use of cartoon characters. In addition, the State Settlement Agreements require companies to affirm corporate principles directed at reducing underage use of cigarettes; impose requirements regarding lobbying activities; limit the industry’s ability to challenge certain tobacco

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control and underage use laws; and provide for the dissolution of certain tobacco-related organizations and place restrictions on the establishment of any replacement organizations.

In November 1998, USSTC entered into the Smokeless Tobacco Master Settlement Agreement (the “STMSA”) with the attorneys general of various states and United States territories to resolve the remaining health care cost reimbursement cases initiated against USSTC. The STMSA required USSTC to adopt various marketing and advertising restrictions. USSTC is the only smokeless tobacco manufacturer to sign the STMSA.

Other International, Federal, State and Local Regulation and Governmental and Private Activity

▪International, Federal, State and Local Regulation:Various states and localities have enacted or proposed legislation that imposes restrictions on tobacco products (including cigarettes, smokeless tobacco, cigars, e-vapor products and oral nicotine pouches), such as legislation that (i) prohibits the sale of all tobacco products or certain tobacco categories, such as e-vapor, (ii) prohibits the sale of tobacco products with characterizing flavors, such as menthol cigarettes and flavored e-vapor products, (iii) requires the disclosure of health information separate from or in addition to federally mandated health warnings and (iv) restricts commercial speech or imposes additional restrictions on the marketing or sale of tobacco products. The legislation varies in terms of the type of tobacco products, the conditions under which such products are or would be restricted or prohibited, and exceptions to the restrictions or prohibitions. For example, a number of proposals involving characterizing flavors would prohibit smokeless tobacco products with characterizing flavors without providing an exception for mint- or wintergreen-flavored products. As of February 23, 2023, multiple states and localities are considering legislation to ban flavors in one or more tobacco products, and six states (California, Massachusetts, New Jersey, Utah, New York and Illinois) and the District of Columbia have passed such legislation. Some of these states, such as New York, Utah and Illinois, exempt certain products that have received FDA market authorization through the PMTA pathway. The legislation in California, which became effective in December 2022, bans the sale of most tobacco products with characterizing flavors, including menthol, mint and wintergreen.

Massachusetts passed legislation capping the amount of nicotine in e-vapor products. Similar legislation is pending in two other states.

Similar restrictions to those enacted or proposed in various U.S. states and localities on e-vapor and oral nicotine pouch products have been enacted or proposed internationally.

We have challenged and will continue to challenge certain federal, state and local legislation and other governmental action, including through litigation. It is possible, however, that legislation, regulation or other governmental action could be enacted or implemented that could have a material adverse impact on our business, results of operations, cash flows or financial position. Such action also could negatively impact adult smokers’ transition to smoke-free products, which could materially adversely affect our ability to achieve our Vision.

▪Federal, State and Local Legislation to Increase the Legal Age to Purchase Tobacco Products: After a number of states and localities proposed and enacted legislation to increase the minimum age to purchase all tobacco products, including e-vapor products, in December 2019, the federal government passed legislation increasing the minimum age to purchase all tobacco products, including e-vapor products, to 21 nationwide. As of February 23, 2023, 41 states, the District of Columbia and Puerto Rico have enacted laws increasing the legal age to purchase tobacco products to 21. Although an increase in the minimum age to purchase tobacco products may have a negative impact on our operating companies’ sales volumes, as discussed above under Underage Access and Use of Certain Tobacco Products, we support raising the minimum legal age to purchase all tobacco products to 21 at the federal and state levels, reflecting our longstanding commitment to combat underage tobacco use.

▪Health Effects of Tobacco Products, Including E-vapor Products: Reports with respect to the health effects of smoking have been publicized for many years, including various reports by the U.S. Surgeon General. We believe that the public should be guided by the messages of the U.S. Surgeon General and public health authorities worldwide in making decisions concerning the use of tobacco products, including e-vapor products.

Most jurisdictions within the United States have restricted smoking in public places and some have restricted vaping in public places. Some public health groups have called for, and various jurisdictions have adopted or proposed, bans on smoking and vaping in outdoor places, in private apartments and in cars transporting children. It is not possible to predict the results of ongoing scientific research or the types of future scientific research into the health risks of tobacco exposure and the impact of such research on legislation and regulation.

▪Other Legislation or Governmental Initiatives: In addition to the actions discussed above, other regulatory initiatives affecting the tobacco industry have been adopted or are being considered at the federal level and in a number of state and local jurisdictions. For example, in recent years, legislation has been introduced or enacted at the state or local level to subject tobacco products to various reporting requirements and performance standards; establish educational campaigns relating to tobacco consumption or tobacco control programs or provide additional funding for governmental tobacco control activities; restrict the sale of tobacco products in certain retail establishments and the sale of tobacco products in certain package sizes; prohibit the sale of tobacco products based on environmental concerns; impose responsibility on manufacturers for the disposal, recycling or other treatment of post-consumer goods such as plastic packaging; require tax stamping of smokeless tobacco products; require the use of state tax stamps using

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data encryption technology; and further restrict the sale, marketing and advertising of cigarettes and other tobacco products. Such legislation may be subject to constitutional or other challenges on various grounds, which may or may not be successful. In addition, if the COVID-19 pandemic resurges, state and local governments may reimpose additional health and safety requirements for all businesses, which could result in the potential temporary closure of certain businesses and facilities. It is possible that tobacco manufacturing and other facilities and the facilities of our suppliers, our suppliers’ suppliers and our trade partners could be subject to additional government-mandated temporary closures and restrictions.

It is not possible to predict what, if any, additional legislation, regulation or other governmental action will be enacted or implemented (and, if challenged, upheld) relating to the manufacturing, design, packaging, marketing, advertising, sale or use of tobacco products, or the tobacco industry generally. Any such legislation, regulation or other governmental action could have a material adverse impact on our business, results of operations, cash flows or financial position.

▪Governmental Investigations: From time to time, we are subject to governmental investigations on a range of matters. For example: (i) the FTC issued a Civil Investigative Demand (“CID”) to us while conducting its antitrust review of our investment in JUUL seeking information regarding, among other things, our role in the resignation of JUUL’s former chief executive officer and the hiring by JUUL of any current or former Altria director, executive or employee (see Note 17 for a description of the FTC’s administrative complaint against us and JUUL); (ii) the SEC commenced an investigation relating to our acquisition, disclosures and accountingcontrols in connection with the JUUL investment; and (iii) the New York State Office of the Attorney General and the Commonwealth of Massachusetts Office of the Attorney General, separately, issued independent subpoenas to us seeking documents relating to our investment in and provision of services to JUUL.

Additionally, JUUL is currently under investigation by various federal and state agencies, including the SEC, the FDA and the FTC, and state attorneys general. Such investigations vary in scope but at least some include JUUL’s marketing practices, particularly as such practices relate to youth, and we may be asked in the context of those investigations to provide information concerning our investment in JUUL or relating to our marketing of Nu Mark LLC e-vapor products.

In December 2022, JUUL and 33 states and Puerto Rico finalized a settlement regarding an investigation of JUUL’s marketing practices. Pursuant to the settlement, JUUL will pay approximately $440 million to the states and territory over a period of six to 10 years and refrain from certain marketing practices. As of February 23, 2023, one state has opted out of the multistate settlement in objection to certain conditions. We remain a party to lawsuits initiated by the attorneys general of Alaska, Hawaii, Minnesota and New Mexico. JUUL is also named in other attorneys general lawsuits in which we currently are not named.

Private Sector Activity on Tobacco Products

A number of retailers, including national chains, have discontinued the sale of all tobacco products, and others have discontinued the sale of e-vapor products. Reasons for the discontinuation include change in corporate policy and, with respect to e-vapor products, reported illnesses and the uncertain regulatory environment. Furthermore, third-party digital platforms, such as app stores, have restricted, and in some cases prohibited, communications with adult tobacco consumers concerning tobacco products. It is possible that if this private sector activity becomes more widespread it could have an adverse effect on our business, results of operations, cash flows or financial position.

Illicit Trade in Tobacco Products

Illicit trade in tobacco products can have an adverse impact on our business. Illicit trade can take many forms, including the sale of counterfeit tobacco products; the sale of tobacco products in the United States that are intended for sale outside the country; the sale of untaxed tobacco products over the Internet and by other means designed to avoid the collection of applicable taxes; and diversion into one taxing jurisdiction of tobacco products intended for sale in another. Counterfeit tobacco products, for example, are manufactured by unknown third parties in unregulated environments. Counterfeit versions of our products can negatively affect adult tobacco consumer experiences with and opinions of those brands. Illicit trade in tobacco products also harms law-abiding wholesalers and retailers by depriving them of lawful sales and undermines the significant investment we have made in legitimate distribution channels. Moreover, illicit trade in tobacco products results in federal, state and local governments losing tax revenues. Losses in tax revenues can cause such governments to take various actions, including increasing excise taxes, imposing legislative or regulatory requirements, or asserting claims against manufacturers of tobacco products or members of the trade channels through which such tobacco products are distributed and sold, each of which may have an adverse effect on our business, results of operations, cash flows or financial position.

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

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

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

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companies’ products. Any significant change in such factors could restrict our ability to continue manufacturing and marketing existing products or impact adult consumer product acceptability and have a material adverse effect on our business and profitability.

As with other agricultural commodities, tobacco price, quality and availability can be influenced by variations in weather patterns, including those caused by climate change, and macroeconomic conditions and imbalances in supply and demand, among other factors. For varieties of tobacco only available in limited geographies, government-mandated prices and production control programs, political instability or government prohibitions on the import or export of tobacco in certain countries pose additional risks to price, availability and quality. In addition, as consumer demand increases for smoke-free products and decreases for combustible products, the volume of tobacco leaf required for production may decrease, resulting in reduced demand. The reduced demand for tobacco leaf may result in the reduced supply and availability of domestic tobacco as growers divert resources to other crops or cease farming. The unavailability or unacceptability of any one or more particular varieties of tobacco leaf necessary to manufacture our operating companies’ products could restrict our ability to continue marketing existing products or impact adult tobacco consumer product acceptability, which could result in increased costs to us.

Current macroeconomic conditions and geopolitical instability (including high inflation, high gas prices, rising interest rates, labor shortages, supply and demand imbalances and the Russian invasion of Ukraine) are causing worldwide disruptions and delays to supply chains and commercial markets, which limit access to, and increase the cost of, raw materials, ingredients and component parts (for example, tobacco leaf and resins and aluminum used in our packaging). We are implementing various strategies to help secure sufficient supplies of raw materials, ingredients and component parts for production.

In addition, government taxes, restrictions and prohibitions on the sale and use of certain products may limit access to, and increase the costs of, raw materials and component parts and, potentially, impede our ability to sell certain of our operating companies’ products. For example, additional taxes on the use of certain single-use plastics have been proposed by the U.S. Congress, which, if passed, could increase the costs of, and impair our ability to, source certain materials used in the packaging for our operating companies’ products.

We work to mitigate these risks by maintaining inventory levels of certain tobacco varieties that cover several years, purchasing raw materials, ingredients and component parts from disperse geographic regions throughout the world and entering into long-term contracts with some of our tobacco growers and direct material suppliers. To date, the impact on us of changes in the price, availability and quality of tobacco, other raw materials, ingredients and component parts has not been material. However, the effects of the current macroeconomic and geopolitical conditions on prices, availability and quality of such items may continue, which could have a material adverse effect on our business, results of operations, cash flows or financial position.

Timing of Sales

In the ordinary course of business, we are subject to many influences that can impact the timing of sales to customers, including the timing of holidays and other annual or special events, the timing of promotions, customer incentive programs and customer inventory programs, as well as the actual or speculated timing of pricing actions and tax-driven price increases.

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Operating Results

Smokeable Products Segment

Financial Results

The following table summarizes operating results, includes reported and adjusted OCI margins and provides a reconciliation of reported OCI to adjusted OCI for our smokeable products segment:

Operating Results

For the Years Ended December 31,

NPM Adjustment Items (63) (53)

Tobacco and health and certain other litigation items 101 83

Reported OCI margins (1) 58.8 % 57.4 %

Adjusted OCI margins (1) 59.0 % 57.6 %

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

2022 Compared with 2021

Net revenues, which include excise taxes billed to customers, decreased $390 million (1.7%), due primarily to lower shipment volume ($2,506 million), partially offset by higher pricing ($2,083 million), which includes lower promotional investments.

Reported OCI increased $294 million (2.8%), due primarily to higher pricing, which includes lower promotional investments, partially offset by lower shipment volume ($1,525 million), higher costs ($247 million) and higher per unit settlement charges.

Adjusted OCI increased $302 million (2.9%), due primarily to higher pricing, which includes lower promotional investments, partially offset by lower shipment volume, higher costs and higher per unit settlement charges.

Marketing, administration and research costs for the smokeable products segment include PM USA’s cost of administering and litigating product liability claims. Litigation defense costs are influenced by a number of factors, including the number and types of cases filed, the number of cases tried annually, the results of trials and appeals, the development of the law controlling relevant legal issues, and litigation strategy and tactics. For further discussion on these matters, see Note 17 and Item 3. For the years ended December 31, 2022 and 2021, product liability defense costs for PM USA were $133 million and $111 million, respectively. Product liability defense costs for our smokeable products segment increased primarily due to the increase in trials and related preparation over the previous year. Cases that were previously postponed as a result of court closures due to the COVID-19 pandemic in 2021 were resumed in 2022 and new cases were filed. Since regular trial activity has resumed, we expect future product liability defense costs for our smokeable products segment to approximate $150 million, which reflects spending levels similar to 2019.

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Shipment Volume and Retail Share Results

The following table summarizes our smokeable products segment’s shipment volume performance:

Shipment Volume

For the Years Ended December 31,

Cigarettes:

Cigars:

Note: Cigarettes shipment volume includes Marlboro; Other premium brands, such as Virginia Slims, Parliament, Benson & Hedges and Nat’s; and Discount brands, which include L&M, Basic and Chesterfield. Cigarettes volume includes units sold as well as promotional units but excludes units sold for distribution to Puerto Rico, U.S. Territories to overseas military and by Philip Morris Duty Free Inc., none of which, individually or in the aggregate, is material to our smokeable products segment.

The following table summarizes our cigarettes retail share performance:

Retail Share

For the Years Ended December 31,

Cigarettes:

Other premium 2.3 2.3

Note: Retail share results for cigarettes are based on data from IRI/Management Science Associates, Inc., a tracking service that uses a sample of stores and certain wholesale shipments to project market share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes. For other trade classes selling cigarettes, retail share is based on shipments from wholesalers to retailers through the Store Tracking Analytical Reporting System (“STARS”). This service is not designed to capture sales through other channels, including the internet, direct mail and some illicitly tax-advantaged outlets. It is IRI’s standard practice to periodically refresh its services, which could restate retail share results that were previously released in this service.

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

2022 Compared with 2021

Our smokeable products segment’s reported domestic cigarettes shipment volume decreased 9.7%, driven primarily by the industry’s decline rate and retail share losses (both of which were impacted by macroeconomic pressures on adult tobacco consumers’ disposable income) and calendar differences, partially offset by trade inventory movements. When adjusted for calendar differences and trade inventory movements, our smokeable products segment’s reported domestic cigarettes shipment volume decreased by an estimated 9.5%. When adjusted for trade inventory movements, calendar differences and other factors, total estimated domestic cigarette industry volume decreased by an estimated 8%.

Shipments of premium cigarettes accounted for 93.6% and 93.0% of our smokeable products segment’s reported domestic cigarettes shipment volume for 2022 and 2021, respectively.

Our smokeable products segment’s reported cigar shipment volume decreased 4.0%, driven primarily by macroeconomic pressures on adult tobacco consumers’ disposable income, trade inventory movements and other factors.

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Marlboro’sretail share of the total cigarette category was 42.5%, a decrease of 0.4 share points, primarily due to increased macroeconomic pressures on adult tobacco consumers’ disposable income and increased competitive activity. However, Marlboro’s share of the premium segment grew to 58.2%, an increase of 0.5 share points.

Total cigarettes industry discount category retail share increased 1.4 share points to 26.9%, primarily due to increased macroeconomic pressures on adult tobacco consumers’ disposable income and increased competitive activity.

For a discussion regarding discount category dynamics in 2022 and the economic conditions, including a high inflationary environment, that impact adult tobacco consumer purchasing behavior, see Operating Results by Business Segment - Tobacco Space - Business Environment - Summary above.

Pricing Actions

PM USA and Middleton executed the following pricing and promotional allowance actions during 2022 and 2021:

▪Effective October 16, 2022, PM USA increased the list price of Marlboro, L&M, Basic and Chesterfield by $0.15 per pack. PM USA also increased the list price of all its other cigarette brands by $0.20 per pack.

▪Effective July 17, 2022, PM USA increased the list price on all of its cigarette brands by $0.15 per pack.

▪Effective May 22, 2022, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.17 per five-pack.

▪Effective April 24, 2022, PM USA increased the list price of Marlboro, L&M, Basic and Chesterfield by $0.15 per pack. PM USA also increased the list price of all its other cigarette brands by $0.20 per pack.

▪Effective January 9, 2022, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.13 per five-pack.

▪Effective December 12, 2021, PM USA increased the list price of Marlboro, L&M and Chesterfield by $0.15 per pack. In addition, PM USA increased the list price of all of its other cigarette brands by $0.20 per pack.

▪Effective August 15, 2021, PM USA increased the list price of Marlboro, L&M and Chesterfield by $0.14 per pack. In addition, PM USA increased the list price of all of its other cigarette brands by $0.17 per pack.

▪Effective January 24, 2021, PM USA increased the list price on all of its cigarette brands by $0.14 per pack.

▪Effective January 10, 2021, Middleton increased various list prices across substantially all of its cigar brands resulting in a weighted-average increase of approximately $0.07 per five-pack.

In addition:

▪Effective January 22, 2023, PM USA increased the list price of Marlboro, L&M, Basic and Chesterfield by $0.15 per pack. PM USA also increased the list price of all its other cigarette brands by $0.20 per pack.

Oral Tobacco Products Segment

Financial Results

The following table summarizes operating results, includes reported and adjusted OCI margins and provides a reconciliation of reported OCI to adjusted OCI for our oral tobacco products segment:

Operating Results

For the Years Ended December 31,

Revenues net of excise taxes $ 2,461 $ 2,476

Reported OCI margins (1) 66.3 % 67.0 %

Adjusted OCI margins (1) 66.3 % 68.5 %

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

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2022 Compared with 2021

Net revenues, which include excise taxes billed to customers, decreased $28 million (1.1%) due primarily to lower shipment volume and a higher percentage of on! shipment volume relative to MST (“volume/mix”) versus 2021 ($104 million), partially offset by higher pricing ($86 million), which includes higher promotional investments in on!.

Reported OCI decreased $27 million (1.6%), due primarily to lower volume/mix ($116 million) and higher costs ($26 million), partially offset by higher pricing, which includes higher promotional investments in on!, andacquisition-related costs in 2021 ($37 million).

Adjusted OCI decreased $64 million (3.8%), due primarily to lower volume/mix and higher costs, partially offset by higher pricing, which includes higher promotional investments in on!.

Shipment Volume and Retail Share Results

The following table summarizes our oral tobacco products segment’s shipment volume performance:

Shipment Volume

For the Years Ended December 31,

Note: Oral tobacco products shipment volume includes cans and packs sold, as well as promotional units, but excludes international volume, which is currently not material to our oral tobacco products segment. New types of oral tobacco products, as well as new packaging configurations of existing oral tobacco products, may or may not be equivalent to existing MST products on a can-for-can basis. To calculate volumes of cans and packs shipped, one pack of snus or one can of oral nicotine pouches, irrespective of the number of pouches in the pack or can, is assumed to be equivalent to one can of MST.

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

Retail Share

For the Years Ended December 31,

Total oral tobacco products 46.4 % 47.7 %

Note: Our oral tobacco products segment’s retail share results exclude international volume, which is currently not material to our oral tobacco products segment. Retail share results for oral tobacco products are based on data from IRI InfoScan, a tracking service that uses a sample of stores to project market share and depict share trends. This service tracks sales in the food, drug, mass merchandisers, convenience, military, dollar store and club trade classes on the number of cans and packs sold. Oral tobacco products is defined by IRI as MST, snus and oral nicotine pouches. New types of oral tobacco products, as well as new packaging configurations of existing oral tobacco products, may or may not be equivalent to existing MST products on a can-for-can basis. For example, one pack of snus or one can of oral nicotine pouches, irrespective of the number of pouches in the pack or can, is assumed to be equivalent to one can of MST. Because this service represents retail share performance only in key trade channels, it should not be considered a precise measurement of actual retail share. It is IRI’s standard practice to periodically refresh its InfoScan services, which could restate retail share results that were previously released in this service.

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

2022 Compared with 2021

Our oral tobacco products segment’s reported domestic shipment volume decreased 2.4%, driven primarily by retail share losses, trade inventory movements and calendar differences, partially offset by the industry’s growth rate and other factors. When adjusted for trade inventory movements and calendar differences, our oral tobacco products segment’s reported domestic shipment volume decreased by an estimated 2%.

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Total oral tobacco products category industry volume increased by an estimated 1% for the six months ended December 31, 2022, primarily driven by growth in oral nicotine pouches, partially offset by declines in MST volumes (which includes the impact of macroeconomic pressures on adult tobacco consumers’ disposable income).

Our oral tobacco products segment’s retail share was 46.4%, and Copenhagen continued to be the leading oral tobacco brand with a retail share of 27.0%. Share declines for MST products were primarily driven by the share growth of oral nicotine pouches.

The U.S. nicotine pouch category grew to 21.9% of the U.S. oral tobacco category, an increase of 6.5 share points versus the prior year. In addition, on! share of the nicotine pouch category grew to 23.0%, an increase of 6.1 share points versus the prior year.

Pricing Actions

USSTC executed the following pricing actions during 2022 and 2021:

▪Effective July 26, 2022, USSTC increased the list price on its Copenhagen popular price products by $0.13 per can. USSTC also decreased the list price on select Copenhagen brands by $0.11 per can. In addition, USSTC increased the list price on its Skoal and Red Seal brands and the balance of its Copenhagen brands by $0.09 per can and increased the list price on its Husky brand by $0.12 per can.

▪Effective May 24, 2022, USSTC increased the list price on its Copenhagen, Skoal and Red Seal brands by $0.09 per can. USSTC also increased the list price on its Husky brand by $0.12 per can.

▪Effective February 22, 2022, USSTC increased the list price on its Copenhagen, Skoal and Red Seal brands by $0.08 per can. USSTC also increased the list price on its Husky brand by $0.12 per can.

▪Effective October 26, 2021, USSTC increased the list price on its Copenhagen and Skoal brands by $0.08 per can. USSTC also increased the list price on its Husky brand by $0.12 per can. In addition, USSTC decreased the price on its Red Seal brand by $0.17 per can.

▪Effective June 29, 2021, USSTC increased the list price on its Skoal Blend products by $0.46 per can. USSTC also increased the list price on its Red Seal and Copenhagen brands and the balance of its Skoal products by $0.05 per can. In addition, USSTC decreased the price on its Husky brand by $1.65 per can.

▪Effective March 2, 2021, USSTC increased the list price on its Skoal Blend products by $0.16 per can. USSTC also increased the list price on its Husky, Red Seal and Copenhagen brands and the balance of its Skoal products by $0.08 per can.

In addition:

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

Liquidity and Capital Resources

We are a holding company that is primarily dependent on the capital resources of our subsidiaries to satisfy our liquidity requirements. Our access to the operating cash flows of our wholly owned subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany loans. At December 31, 2022, our significant wholly owned subsidiaries were not limited by contractual obligations in their ability to pay cash dividends or make other distributions with respect to their equity interests. In addition, we receive cash dividends on our interest in ABI and will continue to do so as long as ABI pays dividends.

At December 31, 2022, we had $4.0 billion of cash and cash equivalents. In addition to having access to the operating cash flows of our wholly owned subsidiaries, our capital resources include access to credit markets in the form of commercial paper, availability under our $3.0 billion Credit Agreement (as defined below), which we use for general corporate purposes, and access to credit markets through the issuance of long-term senior unsecured notes. For additional information, see Capital Markets and Other Matters below.

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

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

Capital Markets and Other Matters

Credit Ratings - Our cost and terms of financing and our access to commercial paper markets may be impacted by applicable credit ratings. The impact of credit ratings on the cost of borrowings under the Credit Agreement is discussed in Note 7. Short-Term Borrowings and Borrowing Arrangements to the consolidated financial statements in Item 8 (“Note 7”).

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At December 31, 2022, the credit ratings and outlook for our indebtedness by major credit rating agencies were:

Short-term Debt Long-term Debt Outlook

Moody’s Investors Service, Inc. (“Moody’s”) P-2 A3 Stable

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

Fitch Ratings Inc. F2 BBB Stable

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

In August 2022, we entered into an extension and amendment to our $3.0 billion senior unsecured 5-year revolving credit agreement (as amended, the “Credit Agreement”). At December 31, 2022, we had availability under the Credit Agreement for borrowings of up to an aggregate principal amount of $3.0 billion, and we were in compliance with the covenants in the Credit Agreement. We expect to continue to meet the covenants in the Credit Agreement. We monitor the credit quality of our bank group and are not aware of any potential non-performing credit provider in that group. For further discussion on short-term borrowings, see Note 7.

Any commercial paper issued by us and borrowings under the Credit Agreement are guaranteed by PM USA. For further discussion, see Supplemental Guarantor Financial Information below and Note 8.

Debt - At December 31, 2022 and 2021, our total debt was $26.7 billion and $28.0 billion, respectively.

In August 2022, we repaid in full our 2.850% senior unsecured notes in the aggregate principal amount of $1.1 billion at maturity.

All of our long-term debt outstanding at December 31, 2022 and 2021 was fixed-rate debt. The weighted-average coupon interest rate on total long-term debt was approximately 4.0% at December 31, 2022 and 2021.

In February 2023, we repaid in full our 1.000% senior unsecured Euro notes in the aggregate principal amount of $1.3 billion (€1.25 billion) at maturity.

For further details on long-term debt, see Note 8.

Altria and PMI Purchase Agreement; Altria and Japan Tobacco Joint Venture

▪In October 2022, we entered into an agreement with PMI to, among other things, transition and ultimately conclude our relationship with respect to the IQOS System in the United States. We received a payment of $1.0 billion and expect to receive an additional payment of $1.7 billion (plus interest) by July 2023 for a total cash payment of approximately $2.7 billion (plus interest). We expect to use the cash proceeds for several items, which may include investments in pursuit of our Vision, repayment of debt, share repurchases and general corporate purposes.

▪In October 2022, we entered into a joint venture with Japan Tobacco for the U.S. marketing and commercialization of heated tobacco stick products. We hold a 75% economic interest in Horizon, the joint venture entity, with Japan Tobacco having a 25% economic interest. We are responsible for making initial capital contributions to Horizon of up to $150 million, as needed by the joint venture to fund operations. Any additional capital contributions made to Horizon after the initial $150 million will be split according to economic ownership.

For further discussion of these events, see Item 1, Note 1 and Note 4.

In October 2020, we filed a registration statement on Form S-3 with the SEC, under which we may offer debt securities or warrants to purchase debt securities from time to time over a three-year period from the date of filing.

Off-Balance Sheet Arrangements and Other Future Contractual Obligations

We had no off-balance sheet arrangements, including special purpose entities, other than guarantees and contractual obligations that are discussed below.

Guarantees and Other Similar Matters - As discussed in Note 17, we had unused letters of credit obtained in the ordinary course of business and guarantees (including third-party guarantees) outstanding at December 31, 2022. From time to time, we also issue lines of credit to affiliated entities. In addition, as discussed below in Supplemental Guarantor Financial Information and in Note 8, PM USA has issued guarantees relating to our obligations under our outstanding debt securities, borrowings under the Credit Agreement and amounts outstanding under the commercial paper program. These items have not had, and are not expected to have, a significant impact on our liquidity.

Long-Term Debt and Interest on Borrowings - In addition to maturities of long-term debt, we make interest payments based on stated coupon interest rates. For information on annual debt maturities and interest payments, see Note 8.

Purchase Obligations - we have entered into purchase obligations for inventory and production costs (such as raw materials, indirect materials and services, contract manufacturing, packaging, storage and distribution) and other commitments for projected needs to be

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used in the normal course of business. Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transaction. Most arrangements are cancelable without a significant penalty and with short notice (usually 30 days). At December 31, 2022, purchase obligations for inventory and production costs for the next 12 months were $841 million and $925 million thereafter.

At December 31, 2022, we had $598 million of other purchase obligation commitments for marketing, capital expenditures, information technology and professional services, which occur through the ordinary course of business. Substantially all of these commitments are expected to be satisfied within 12 months. Accounts payable and accrued liabilities are reflected on our consolidated balance sheet at December 31, 2022 and are excluded from the amounts above.

Payments Under State Settlement Agreements and FDA Regulation - As discussed previously and in Note 17, PM USA has entered into State Settlement Agreements with the states, the District of Columbia and certain U.S. territories that call for certain payments. In addition, PM USA, Middleton and USSTC are subject to quarterly user fees imposed by the FDA as a result of the FSPTCA. For further discussion of the resolutions of certain disputes with states and territories related to the NPM adjustment provision under the MSA, see Health Care Cost Recovery Litigation - NPM Adjustment Disputes in Note 17.

Based on current agreements, estimated market share, estimated annual industry volume decline rates and inflation rates, the estimated amounts that we may charge to cost of sales for payments related to State Settlement Agreements and FDA user fees are $4.0 billion on average for the next three years. These amounts exclude the potential impact of any NPM Adjustment Items.

The estimated amounts due under the State Settlement Agreements charged to cost of sales in each year are generally paid in April of the following year. The amounts charged to cost of sales for FDA user fees are generally paid in the quarter in which the fees are incurred. We paid approximately $4.6 billion and $4.7 billion for the years ended December 31, 2022 and 2021, respectively, in connection with the State Settlement Agreements and FDA user fees, primarily all of which was paid in the second quarter of each period. As previously stated, the payments due under the terms of the State Settlement Agreements and FDA user fees are subject to adjustment for several factors, including volume, operating income, inflation and certain contingent events and, in general, are allocated based on each manufacturer’s market share. The future payment amounts discussed above are estimates, and actual payment amounts will differ to the extent underlying assumptions differ from actual future results. For further discussion on the potential impact of inflation on future payments, see Operating Results by Business Segment - Tobacco Space - State Settlement Agreements.

Litigation-Related Deposits and Payments - With respect to certain adverse verdicts currently on appeal, to obtain stays of judgments pending appeals, as of December 31, 2022, PM USA had posted appeal bonds totaling $46 million, which have been collateralized with restricted cash that is included in assets on our consolidated balance sheet.

Litigation is subject to uncertainty, and an adverse outcome or settlement of litigation could have a material adverse effect on our results of operations, cash flows or financial position in a particular fiscal quarter or fiscal year, as more fully disclosed in Note 17, Item 3 and Item 1A.

Other Long-Term Liabilities - We had $1.1 billion of accrued postretirement health care costs on our consolidated balance sheet at December 31, 2022 and estimate approximately $100 million of annual payments. In addition, we had accrued pension obligations, substantially all of which are funded from plan assets. For further information on our postretirement health care and pension obligations, see Note 15. We are unable to estimate the timing of payments of other long-term liabilities (accrued postemployment costs, income taxes and tax contingencies, and other accruals) included on our consolidated balance sheet at December 31, 2022.

Equity and Dividends

As discussed in Note 10. Stock Plans to the consolidated financial statements in Item 8, during 2022 we granted an aggregate of 1.2 million restricted stock units and 0.2 million performance stock units to eligible employees.

At December 31, 2022, the number of shares to be issued upon vesting of restricted stock units and performance stock units was not significant.

Dividends paid in 2022 and 2021 were approximately $6.6 billion and $6.4 billion, respectively, an increase of 2.4%, reflecting a higher dividend rate, partially offset by fewer shares outstanding as a result of shares we repurchased under our share repurchase program.

In the third quarter of 2022, our Board of Directors declared a 4.4% increase in the quarterly dividend rate to $0.94 per share of our common stock versus the previous rate of $0.90 per share. Our current annualized dividend rate is $3.76 per share. We maintained our long-term objective of a dividend payout ratio target of approximately 80% of our adjusted diluted EPS. Future dividend payments remain subject to the discretion of our Board.

For a discussion of our share repurchase programs, see Note 9. Capital Stock to the consolidated financial statements in Item 8 and Part II, Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities in this Form 10-K.

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Financial Review

Cash Provided by/Used in Operating Activities

During 2022, net cash provided by operating activities was $8.3 billion compared with $8.4 billion during 2021. This decrease was due primarily to the sale of our wine business in October 2021.

We had a working capital deficit at December 31, 2022 and 2021. Our management believes that we have the ability to fund working capital deficits with cash provided by operating activities, borrowings under the Credit Agreement and access to the credit and capital markets.

Cash Provided by/Used in Investing Activities

During 2022, net cash provided by investing activities was $0.8 billion compared with $1.2 billion during 2021. This decrease was due primarily to proceeds from the Ste. Michelle Transaction in 2021, the purchase of certain intellectual property in 2022, lower proceeds from finance asset sales and higher capital expenditures, partially offset by proceeds from the sale of IQOS System commercialization rights in 2022.

Capital expenditures for 2022 increased 21.3% to $205 million. Capital expenditures were higher due primarily to increased investing in on! manufacturing capacity, partially offset by the sale of the wine business. We expect capital expenditures for 2023 to be in the range of $175 million to $225 million, which are expected to be funded from operating cash flows.

Cash Provided by/Used in Financing Activities

During 2022, net cash used in financing activities was $9.5 billion compared with $10.0 billion during 2021. This decrease was due primarily to the following:

▪repayment of $1.5 billion in full of our senior unsecured notes at scheduled maturity in May 2021;

▪2021 debt tender offers and redemption transactions, which included net proceeds of $5.5 billion from the issuance of long-term senior unsecured notes used to repurchase and redeem $5.0 billion of our senior unsecured notes and payment of $0.6 billion for related premiums and fees; and

▪purchase of the remaining 20% interest in Helix in 2021;

partially offset by:

▪repayment of $1.1 billion in full of our senior unsecured notes at scheduled maturity in August 2022;

▪higher repurchases of common stock in 2022; and

▪higher dividends paid in 2022.

New Accounting Guidance Not Yet Adopted

See Note 2for a discussion of issued accounting guidance applicable to, but not yet adopted by, us.

Contingencies

See Note 17 and Item 3 for a discussion of contingencies.

Supplemental Guarantor Financial Information

PM USA (the “Guarantor”), which is a 100% owned subsidiary of Altria Group, Inc. (the “Parent”), has guaranteed the Parent’s obligations under its outstanding debt securities, borrowings under its Credit Agreement and amounts outstanding under its commercial paper program (the “Guarantees”). Pursuant to the Guarantees, the Guarantor fully and unconditionally guarantees, as primary obligor, the payment and performance of the Parent’s obligations under the guaranteed debt instruments (the “Obligations”), subject to release under certain customary circumstances as noted below.

The Guarantees provide that the Guarantor guarantees the punctual payment when due, whether at stated maturity, by acceleration or otherwise, of the Obligations. The liability of the Guarantor under the Guarantees is absolute and unconditional irrespective of: any lack of validity, enforceability or genuineness of any provision of any agreement or instrument relating thereto; any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations, or any other amendment or waiver of or any consent to departure from any agreement or instrument relating thereto; any exchange, release or non-perfection of any collateral, or any release or amendment or waiver of or consent to departure from any other guarantee, for all or any of the Obligations; or any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Parent or the Guarantor.

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Under applicable provisions of federal bankruptcy law or comparable provisions of state fraudulent transfer law, the Guarantees could be voided, or claims in respect of the Guarantees could be subordinated to the debts of the Guarantor, if, among other things, the Guarantor, at the time it incurred the Obligations evidenced by the Guarantees:

▪received less than reasonably equivalent value or fair consideration therefor; and

▪either:

▪was insolvent or rendered insolvent by reason of such occurrence;

▪was engaged in a business or transaction for which the assets of the Guarantor constituted unreasonably small capital; or

▪intended to incur, or believed that it would incur, debts beyond its ability to pay such debts as they mature.

In addition, under such circumstances, the payment of amounts by the Guarantor pursuant to the Guarantees could be voided and required to be returned to the Guarantor, or to a fund for the benefit of the Guarantor, as the case may be.

The measures of insolvency for purposes of the foregoing considerations will vary depending upon the law applied in any proceeding with respect to the foregoing. Generally, however, the Guarantor would be considered insolvent if:

▪the sum of its debts, including contingent liabilities, was greater than the saleable value of its assets, all at a fair valuation;

▪the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

▪it could not pay its debts as they become due.

To the extent the Guarantees are voided as a fraudulent conveyance or held unenforceable for any other reason, the holders of the guaranteed debt obligations would not have any claim against the Guarantor and would be creditors solely of the Parent.

The obligations of the Guarantor under the Guarantees are limited to the maximum amount as will not result in the Guarantor’s obligations under the Guarantees constituting a fraudulent transfer or conveyance, after giving effect to such maximum amount and all other contingent and fixed liabilities of the Guarantor that are relevant under Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar federal or state law to the extent applicable to the Guarantees. For this purpose, “Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.

The Guarantor will be unconditionally released and discharged from the Obligations upon the earliest to occur of:

▪the date, if any, on which the Guarantor consolidates with or merges into the Parent or any successor;

▪the date, if any, on which the Parent or any successor consolidates with or merges into the Guarantor;

▪the payment in full of the Obligations pertaining to such Guarantees; and

▪the rating of the Parent’s long-term senior unsecured debt by S&P of A or higher.

The Parent is a holding company; therefore, its access to the operating cash flows of its wholly owned subsidiaries consists of cash received from the payment of dividends and distributions, and the payment of interest on intercompany loans by its subsidiaries. Neither the Guarantor nor other 100% owned subsidiaries of the Parent that are not guarantors of the debt (“Non-Guarantor Subsidiaries”) are limited by contractual obligations on their ability to pay cash dividends or make other distributions with respect to their equity interests.

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The following tables include summarized financial information for the Parent and the Guarantor. Transactions between the Parent and the Guarantor (including investment and intercompany balances as well as equity earnings) have been eliminated. The Parent’s and the Guarantor’s intercompany balances with Non-Guarantor Subsidiaries have been presented separately. This summarized financial information is not intended to present the financial position or results of operations of the Parent or the Guarantor in accordance with GAAP.

Summarized Balance Sheets

(in millions of dollars)

Parent Guarantor

Assets

Due from Non-Guarantor Subsidiaries $ — $ 278

Due from Non-Guarantor Subsidiaries $ 4,790 $ —

Liabilities

Due to Non-Guarantor Subsidiaries $ 2,342 $ 912

Total current liabilities $ 6,093 $ 4,837

Total non-current liabilities $ 26,591 $ 633

Summarized Statements of Earnings (Losses)

(in millions of dollars)

For the Year Ended December 31, 2022

Parent (1) Guarantor

(1) For the year ended December 31, 2022, net earnings (losses) includes $231 million of intercompany interest income from non-guarantor subsidiaries.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Interest Rate Risk

The fair value of our long-term debt, all of which is fixed-rate debt, is subject to fluctuations resulting primarily from changes in market interest rates. The following table provides the fair value of our long-term debt and the change in fair value based on a 1% increase or decrease in market interest rates at December 31:

Decrease in fair value from a 1% increase in market interest rates 1.7 2.7

Increase in fair value from a 1% decrease in market interest rates 2.0 3.2

We expect interest rates on borrowings under the Credit Agreement to be based on the Term Secured Overnight Financing Rate, plus a percentage based on the higher of the ratings of our long-term senior unsecured debt from Moody’s and S&P. The applicable percentage for borrowings under the Credit Agreement at December 31, 2022 was 1.0% based on our long-term senior unsecured debt ratings on that date. At December 31, 2022 and 2021, we had no borrowings under the Credit Agreement.

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Item 8. Financial Statements and Supplementary Data.

Altria Group, Inc. and Subsidiaries

Consolidated Balance Sheets

(in millions of dollars)

________________________

Assets

Cash and cash equivalents $ 4,030 $ 4,544

Receivables:

Receivable from the sale of IQOS System commercialization rights 1,721 —

Inventories:

Work in process 24 23

Property, plant and equipment, at cost:

Land and land improvements 123 123

Buildings and building equipment 1,478 1,422

Construction in progress 248 235

Less accumulated depreciation 2,819 2,879

See notes to consolidated financial statements.

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Altria Group, Inc. and Subsidiaries

Consolidated Balance Sheets (Continued)

(in millions of dollars, except share and per share data)

____________________________________________

Liabilities

Current portion of long-term debt $ 1,556 $ 1,105

Accrued liabilities:

Accrued postretirement health care costs 1,083 1,436

Deferred gain from the sale of IQOS System commercialization rights 2,700 —

Contingencies (Note 17)

Stockholders’ Equity (Deficit)

Accumulated other comprehensive losses (2,771) (3,056)

Total stockholders’ equity (deficit) attributable to Altria (3,973) (1,606)

Noncontrolling interests 50 —

Total stockholders’ equity (deficit) (3,923) (1,606)

Total Liabilities and Stockholders’ Equity (Deficit) $ 36,954 $ 39,523

See notes to consolidated financial statements.

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Altria Group, Inc. and Subsidiaries

Consolidated Statements of Earnings

(in millions of dollars, except per share data)

____________________________________

Marketing, administration and research costs 2,327 2,432 2,150

Loss on early extinguishment of debt — 649 —

Net periodic benefit income, excluding service cost (184) (202) (77)

(Income) losses from investments in equity securities 3,641 5,979 111

Impairment of JUUL equity securities — — 2,600

Loss on Cronos-related financial instruments 15 148 140

Net losses attributable to noncontrolling interests — — 13