Altria Group Inc.: 10-K Risk Factor Changes

Tax laws and regulations are complex and subject to varying interpretations. Changes to federal or state tax laws or challenges to one or more of our positions with respect to those laws, including with respect to the availability of duty drawback, which allows manufacturers to receive refunds of certain duties, taxes and fees paid on imported tobacco products when offsetting volumes of those products or substantially similar products are subsequently exported, could give rise to additional liabilities (including interest and potential penalties) or reduce the amount of duties, taxes and fees paid by our operating companies for which refunds are available. Accordingly, a successful challenge to one or more of our tax positions, an increase in the corporate income tax rate or other changes to federal or state tax laws, including changes to how foreign investments are taxed, could materially adversely affect our earnings or cash flows.

Tax laws and regulations are complex and subject to varying interpretations. A successful challenge to one or more of our tax positions (which could give rise to additional liabilities, including interest and potential penalties), an increase in the corporate income tax rate or other changes to federal or state tax laws, including changes to how foreign investments are taxed, could materially adversely affect our earnings or cash flows.

Illicit trade in nicotine products has had, and could continue to have, an adverse impact on our business, including the sales volumes and market shares of our operating companies’ innovative and smoke-free products and traditional tobacco products. Illicit trade in nicotine products can take many forms, including the sale of counterfeit products; the sale of products that do not comply with the FSPTCA and FDA regulations; the sale of products in the United States that are intended for sale outside the country; the sale of untaxed products over the Internet and by other means designed to avoid the collection of applicable taxes; and the diversion into one taxing jurisdiction of products intended for sale in another jurisdiction. Counterfeit versions of our operating companies’ products can negatively affect adult nicotine consumer experiences with and opinions of those brands as well as other stakeholders’ perceptions and opinions of our companies and brands. Illicit trade in nicotine 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 nicotine 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 nicotine products or members of the trade channels through which such nicotine products are legally distributed and sold, each of which could have an adverse effect on our business, results of operations, cash flows or financial position. In the e-vapor category, illicit flavored disposable product usage has significantly increased, and such products now comprise the majority of the e-vapor category. The impacts of this dynamic include declines in FDA-authorized e-vapor product volume and increased cross-category movement among adult cigarette smokers that has contributed to domestic cigarette industry volume declines. Recent enforcement actions by regulatory agencies have not had a material impact in curbing the proliferation and sale of illicit flavored disposable e-vapor products. This dynamic has made the operating environment challenging for our businesses. We have increased engagement with the FDA and other government agencies to encourage enforcement action against these illicit products, but such enforcement has been inadequate to date. We also have taken legal action to protect our e-vapor business, which exposes us to additional costs and expenses. Our failure to counter the impacts of illicit flavored disposable e-vapor products and the FDA’s failure to take meaningful enforcement actions against manufacturers and products that violate the law could have a material adverse effect on our business, results of operations, cash flows or financial position and our ability to achieve our Vision.

Illicit trade in tobacco products has had, and could continue to have, an adverse impact on our business, including the sales volumes and market shares of our operating companies’ innovative and smoke-free products and traditional tobacco products. Illicit trade can take many forms, including the sale of counterfeit tobacco products; the sale of tobacco products that do not comply with the FSPTCA and FDA regulations; 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 the diversion into one taxing jurisdiction of tobacco products intended for sale in another jurisdiction. Counterfeit versions of our operating companies’ products can negatively affect adult tobacco consumer experiences with and opinions of those brands as well as other stakeholders’ perceptions and opinions of our companies and 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 legally distributed and sold, each of which could have an adverse effect on our business, results of operations, cash flows or financial position. In the e-vapor category, illicit flavored disposable product usage has significantly increased, and such products now comprise the majority of the e-vapor category. The impacts of this dynamic include declines in pod-based e-vapor product volume and increased cross-category movement among adult cigarette smokers that has contributed to higher than expected domestic cigarette industry volume declines. Recent enforcement actions by regulatory agencies have not had a material impact in curbing the proliferation and sale of illicit disposable e-vapor products. This dynamic has made the operating environment challenging for our businesses. We have increased engagement with the FDA and other government agencies to encourage enforcement action against these illicit products, but such enforcement has been inadequate to date. We also have taken legal action to protect our lawful e-vapor business, which exposes us to additional costs and expenses. Our failure to counter the impacts of illicit flavored disposable e-vapor products and the FDA’s failure to take meaningful enforcement actions against manufacturers and products that violate the law could have a material adverse effect on our business, results of operations, cash flows or financial position and our ability to achieve our Vision.

Nicotine products are subject to substantial taxation, including excise taxes. Significant increases in taxes or fees on nicotine products (including traditional tobacco products as well as e-vapor and oral nicotine products) have been proposed or enacted and are likely to continue to be proposed or enacted within the United States at the federal, state and local levels. The frequency and magnitude of excise tax increases can be influenced by various factors, including federal and state budgets and the composition of executive and legislative bodies. Tax increases are expected to continue to have an adverse impact on sales of our operating companies’ products through lower consumption levels and the potential shift in adult nicotine consumer purchases from the premium to the non-premium or discount segments, to other low-priced or low-taxed products or to counterfeit and contraband products. Such shifts may also have an adverse impact on the reported share performance of our operating companies’ products. Any increases in taxes or fees applicable to our operating companies’ products could have a material adverse impact on our business, results of operations, cash flows or financial position. In addition, substantial excise tax increases on e-vapor and oral nicotine products could negatively impact adult smokers’ transition to these products, which could materially adversely affect our ability to achieve our Vision.

Tobacco products are subject to substantial taxation, including excise taxes. Significant increases in taxes or fees on tobacco products (including traditional products as well as e-vapor and oral nicotine products) have been proposed or enacted and are likely to continue to be proposed or enacted within the United States at the federal, state and local levels. The frequency and magnitude of excise tax increases can be influenced by various factors, including federal and state budgets and the composition of executive and legislative bodies. Tax increases are expected to continue to have an adverse impact on sales of our operating companies’ tobacco products through lower consumption levels and the potential shift in adult tobacco consumer purchases from the premium to the non-premium or discount segments, to other low-priced or low-taxed tobacco products or to counterfeit and contraband products. Such shifts may also have an adverse impact on the reported share performance of our tobacco products. Any increases in tobacco-related taxes or fees could have a material adverse impact on our business, results of operations, cash flows or financial position. In addition, substantial excise tax increases on e-vapor and oral nicotine products could negatively impact adult smokers’ transition to these products, which could materially adversely affect our ability to achieve our Vision.

Our operating companies operate in highly competitive environments. Significant competition exists with respect to product quality, taste, price, product innovation, marketing, packaging, distribution and promotional activities. Because many of our operating companies’ products are market leaders, we are subject to antitrust risk. In addition, as adult nicotine consumer preferences evolve, consumers are increasingly moving across nicotine product categories. Our operating companies’ failure to compete effectively in these environments could negatively impact their profitability, market share and shipment volume. The growth of innovative nicotine products, including legal and illicit e-vapor products and oral nicotine pouches, has contributed to reductions in the consumption levels and industry sales volumes of cigarettes and other tobacco products, including MST products. These reductions have negatively impacted our business. Furthermore, the proliferation of illicit flavored disposable e-vapor products has negatively impacted the growth of FDA-authorized e-vapor products, including NJOY’s products. If we are unable to compete effectively in innovative nicotine product categories, including through internal product development, on! oral nicotine pouch products, NJOY e-vapor products, our participation in Horizon and other potential future relationships and investments, such inability could have a material adverse impact on our business, results of operations, cash flows or financial position and our ability to achieve our Vision. The competitive environments in which our operating companies compete and our operating companies’ competitive positions can be significantly impacted by the price differentials between premium and discount brands. PM USA faces competition from lower-priced brands sold by certain domestic and foreign manufacturers that have cost advantages because they are not parties to settlements of certain healthcare cost recovery litigation in the United States and, as such, are not required to make annual settlement payments as required by the parties to the settlements. These settlement payments, which are inflation-adjusted, are significant for PM USA and have contributed to substantial cigarette price increases to help cover their cost. Manufacturers not party to the settlements are subject to state escrow legislation requiring escrow deposits. Such manufacturers may avoid these escrow obligations by concentrating on certain states where escrow deposits are not required or are required on fewer than all such manufacturers’ cigarettes sold in such states. Additional price competition has resulted from diversion into the United States market of cigarettes intended for sale outside the United States, diversion of tobacco products intended for sale in one taxing jurisdiction within the United States into another taxing jurisdiction, the sale of counterfeit cigarettes by third parties, the sale of cigarettes by third parties over the Internet and by other means designed to avoid collection of applicable taxes and imports of foreign lower-priced brands. Tobacco products imported to the United States are subject to the same federal excise tax as those manufactured domestically. Manufacturers of tobacco products imported to the United States can receive refunds of certain duties, taxes and fees paid on those products when offsetting volumes of the same or substantially similar products are subsequently exported out of the United States. The program that allows for these refunds is referred to as “duty drawback.” If PM USA is unable to realize duty drawback to the same extent as other manufacturers, we may be at a competitive disadvantage with respect to our ability to invest in the long-term growth of our core tobacco businesses and contribute to the strategic growth of our innovative nicotine product portfolio. Our failure to compete effectively, including as a result of litigation settlement obligations, the impacts of illicit trade in nicotine products, the price differentials between premium and discount brands and our inability to realize available tax advantages, could have a material adverse effect on our business, results of operations, cash flows or financial position.

Our operating companies operate in highly competitive environments. Significant competition exists with respect to product quality, taste, price, product innovation, marketing, packaging, distribution and promotional activities. Because many of our operating companies’ products are market leaders, we are subject to antitrust risk. In addition, as adult tobacco consumer preferences evolve, consumers are increasingly moving across tobacco categories. Our operating companies’ failure to compete effectively in these environments could negatively impact their profitability, market share and shipment volume. The growth of innovative tobacco products, including legal and illicit e-vapor products and oral nicotine pouches, has contributed to reductions in the consumption levels and industry sales volumes of cigarettes and other tobacco products, including MST products. These reductions have negatively impacted our business. Furthermore, the proliferation of illicit flavored disposable e-vapor products has negatively impacted the growth of pod-based e-vapor products, including NJOY. If we are unable to compete effectively in innovative tobacco product categories, including through internal product development, on! oral nicotine pouch products, NJOY e-vapor products, our participation in Horizon, other potential future partnerships with Japan Tobacco and potential future relationships and investments, such inability could have a material adverse impact on our business, results of operations, cash flows or financial position and our ability to achieve our Vision. The competitive environments in which our operating companies compete and our operating companies’ competitive positions can be significantly influenced by the price differentials between premium and discount brands. PM USA faces competition from lower-priced brands sold by certain United States and foreign manufacturers that have cost advantages because they are not parties to settlements of certain healthcare cost recovery litigation in the United States and, as such, are not required to make annual settlement payments as required by the parties to the settlements. These settlement payments, which are inflation-adjusted, are significant for PM USA and have contributed to substantial cigarette price increases to help cover their cost. Manufacturers not party to the settlements are subject to state escrow legislation requiring escrow deposits. Such manufacturers may avoid these escrow obligations by concentrating on certain states where escrow deposits are not required or are required on fewer than all such manufacturers’ cigarettes sold in such states. Additional competition has resulted from diversion into the United States market of cigarettes intended for sale outside the United States, diversion of tobacco products intended for sale in one taxing jurisdiction within the United States into another taxing jurisdiction, the sale of counterfeit cigarettes by third parties, the sale of cigarettes by third parties over the Internet and by other means designed to avoid collection of applicable taxes and imports of foreign lower-priced brands. Competition may also result from tax advantages available to companies with significant imports and exports of finished goods. Our failure to compete with lower-priced brands and counter the impacts of illicit trade in tobacco products could have a material adverse effect on our business, results of operations, cash flows or financial position.

Our operating companies could decide, or laws or regulations could require them, to recall products due to the failure to meet quality standards or specifications, suspected or confirmed and deliberate or unintentional product contamination, or other product adulteration, misbranding or tampering. Similar issues may subject us to liability with respect to products our operating companies manufacture for third parties under contract manufacturing agreements. A product recall or a product liability or other claim (even if unsuccessful or without merit) could have negative economic consequences and also generate negative publicity about us and our operating companies’ products. In addition, if another company recalls or experiences negative publicity related to a product in a category in which one of our operating companies competes, adult nicotine consumers might reduce their overall consumption of products in the category. Any of these events could have a material adverse effect on our business, reputation, results of operations, cash flows or financial position.

We could decide, or laws or regulations could require us, to recall products due to the failure to meet quality standards or specifications, suspected or confirmed and deliberate or unintentional product contamination, or other product adulteration, misbranding or tampering. A product recall or a product liability or other claim (even if unsuccessful or without merit) could have negative economic consequences and also generate negative publicity about us and our products. In addition, if another company recalls or experiences negative publicity related to a product in a category in which we compete, adult tobacco consumers might reduce their overall consumption of products in the category. Any of these events could have a material adverse effect on our business, reputation, results of operations, cash flows or financial position.

We regularly evaluate potential strategic transactions, including acquisitions, dispositions, joint ventures and commercial relationships with and investments in third parties. Opportunities for strategic transactions may be limited, and the success of any such transaction is dependent upon our ability to complete and realize the expected benefits of the transaction in the expected time frame or at all. Following the completion of a transaction, there may be certain financial, managerial, staffing and talent and operational risks, including diversion of management’s attention from existing core businesses, difficulties integrating other businesses into existing operations and 7 7 7 Table of Contents Table of Contents other challenges. We may not be able to enter into attractive business relationships or execute and complete strategic transactions on favorable terms or at all. Any such relationships or transactions may not improve our competitive position or have the intended financial outcomes and may subject us to increased legal risk, including with respect to intellectual property infringement or breach of contract claims. For example, our former investment in JUUL Labs, Inc. (“JUUL”) did not result in and, to date, our investment in Cronos has not, resulted in the economic and competitive advantages expected at the time the investments were made. We may not be able to realize the expected benefits of our acquisition of NJOY Holdings, Inc. (“NJOY Transaction”) in the expected manner or timeframe, if at all, including due to the ITC exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE in the United States. In 2025, we recorded impairments of the value of the goodwill and other intangible assets within our e-vapor reporting unit as a result of these orders and our expectation that effective enforcement against illicit flavored disposable e-vapor products would occur more gradually than initially anticipated. Other factors that could negatively impact our ability to realize the expected benefits of the NJOY Transaction in the expected manner or timeframe, if at all, include (i) our failure to receive or maintain regulatory authorizations; (ii) changes in adult nicotine consumer preferences; (iii) our failure to comply with regulatory requirements; (iv) prevailing economic, market, regulatory or business conditions, or changes in such conditions negatively affecting our business and our plans with respect to the e-vapor category and (v) the outcome of any current or future legal proceeding or investigation related to the NJOY Transaction, NJOY or its products. PM USA imports cigarettes manufactured outside the United States for sale domestically, and PM USA has entered into strategic commercial relationships to manufacture cigarettes in the United States for export to third parties for sale in international markets. If PM USA is unable to maintain, expand upon or enter into new relationships of this type, it may hinder PM USA’s ability to increase the efficiency of its cigarette manufacturing operations, develop capabilities needed to comply with various international product and other standards and invest in the long-term growth of our core tobacco businesses and the strategic growth of our innovative nicotine product portfolio. If the NJOY Transaction, our strategic relationships with respect to contract manufacturing or any other acquisition, disposition, joint venture, investment in a third party or other strategic relationship is not successful, there could be a material negative impact on our business, financial position and results of operations and our ability to achieve our Vision.

We regularly evaluate potential strategic transactions, including acquisitions, dispositions, joint ventures and investments in third parties. Opportunities for strategic transactions may be limited, and the success of any such transaction is dependent upon our ability to complete and realize the expected benefits of the transaction in the expected time frame or at all. Following the completion of a transaction there may be certain financial, managerial, staffing and talent and operational risks, including diversion of management’s attention from existing core businesses, difficulties integrating other businesses into existing operations and other challenges presented by a transaction 7 7 7 Table of Contents Table of Contents that does not achieve anticipated sales levels and profitability. We may not be able to enter into attractive business relationships or execute and complete strategic transactions on favorable terms or at all, and any such relationships or transactions may not improve our competitive position or have the intended financial outcomes. For example, our former investment in JUUL did not result in and, to date, our investment in Cronos has not, resulted in the economic and competitive advantages expected at the time the investments were made. We may not be able to realize the expected benefits of the NJOY Transaction in the expected manner or timeframe, if at all, including due to failure to receive or maintain regulatory authorizations, changes in adult tobacco consumer preferences, failure to comply with regulatory requirements, prevailing economic, market, regulatory or business conditions, or changes in such conditions negatively affecting our business and our plans with respect to the e-vapor category, the outcome of any current or future legal proceeding or investigation related to the NJOY Transaction or NJOY or its products and the occurrence of any event requiring us to write down the value of NJOY’s goodwill or intangible assets, or both, due to impairment. For example, in January 2025, in a patent lawsuit adjudicated before the ITC, the ITC imposed a ban on the importation of NJOY ACE into the United States and the sale and marketing of NJOY ACE products previously imported into the United States. If the ban on the importation into the United States and the sale and marketing of NJOY ACE becomes effective, it could have a material adverse effect on our ability to realize the anticipated benefits of the NJOY Transaction. If the NJOY Transaction or any other acquisition, disposition, joint venture, investment in a third party or other strategic relationship is not successful, there could be a material negative impact on our business, financial position and results of operations and our ability to achieve our Vision.

Our operating companies’ portfolios of nicotine products are largely comprised of premium brands, such as Marlboro, Copenhagen and Skoal. The willingness of adult nicotine consumers to purchase premium brands is affected by macroeconomic conditions, including inflation and overall economic stability. In periods of economic uncertainty and high inflation, we have observed that adult nicotine consumers reduce consumption, purchase more discount brands and consider lower-priced nicotine products, increasing the market share of competitive discount products. If our operating companies are unable to take actions to mitigate the effects of inflationary pressures and other factors that contribute to their products’ industry volume decline rates, it could negatively impact our business, results of operations, cash flows or financial position. For example, due to inflationary pressures and other adverse macroeconomic factors, our operating companies may be unable to sufficiently increase the prices of their premium products to offset volume declines from consumers down-trading to lower-priced competitive brands or moving across nicotine product categories. This inability to increase product prices could have a material adverse effect on our business, results of operations, cash flows or financial position and our ability to achieve our Vision. In addition, as adult nicotine consumer preferences evolve, consumers are increasingly moving across nicotine product categories, including selecting different categories of nicotine products than those they traditionally purchase and purchasing illicit flavored e-vapor 5 5 5 Table of Contents Table of Contents products. These evolving preferences have primarily resulted in domestic cigarette industry volume declines, which have negatively impacted our business. Our ability to effectively respond to new and evolving adult nicotine consumer purchase behavior catalyzed by challenging macroeconomic conditions and changes in adult nicotine consumer preferences depends on our ability to promote brand equity successfully among our premium and discount brands and broaden our product portfolios across price-points and categories, including by bringing to market new and innovative nicotine products that appeal to adult nicotine consumers. Our failure to do so or our failure to anticipate changing adult nicotine consumer preferences, improve productivity or protect or enhance margins through cost savings and price increases, could have a material adverse effect on our business, results of operations, cash flows or financial position.

Our operating companies’ portfolios of tobacco products are largely comprised of premium brands, such as Marlboro, Copenhagen and Skoal. The willingness of adult tobacco consumers to purchase premium brands is affected by macroeconomic conditions, including inflation and overall economic stability. In periods of economic uncertainty and high inflation, we have observed that adult tobacco consumers reduce consumption, purchase more discount brands and consider lower-priced tobacco products, increasing the market share of competitive discount products. In addition, as adult tobacco consumer preferences evolve, consumers are increasingly moving across tobacco categories, including selecting different categories of tobacco products than those they traditionally purchase and purchasing illicit flavored e-vapor products. 5 5 5 Table of Contents Table of Contents The primary impacts of these conditions include higher than expected domestic cigarette industry volume declines and declines in pod-based product volume within the e-vapor category, which have negatively impacted our business. If our operating companies are unable to take actions to mitigate the effects of inflationary pressures and other factors that contribute to their products’ industry volume decline rates, it could negatively impact our business, results of operations, cash flows or financial position. For example, the inability of our operating companies to sufficiently increase the prices of their premium products to offset volume declines from consumers down-trading to lower-priced competitive brands or moving across tobacco categories could have a material adverse effect on our business, results of operations, cash flows or financial position and our ability to achieve our Vision. Furthermore, our ability to effectively respond to new and evolving adult tobacco consumer purchase behavior catalyzed by challenging macroeconomic conditions and changes in adult tobacco consumer preferences depends on our ability to promote brand equity successfully among our premium and discount brands and broaden our product portfolios across price-points and categories, including by bringing to market new and innovative tobacco products that appeal to adult tobacco consumers. Our failure to do so or our failure to anticipate changing adult tobacco consumer preferences, improve productivity or protect or enhance margins through cost savings and price increases, could have a material adverse effect on our business, results of operations, cash flows or financial position.

We periodically calculate the fair value of our reporting units and intangible assets to test for impairment. These calculations may be affected by several factors, including general macroeconomic conditions, the proliferation of illicit products, government actions, including FDA regulatory actions and inaction, changes in category growth (decline) rates as a result of changing adult nicotine consumer preferences, success of planned new product expansions, competitive activity, unfavorable outcomes with respect to litigation proceedings, including actions brought against us alleging patent infringement, and income and excise taxes. Certain events also can trigger an immediate review of intangible assets. In 2025, we recorded impairments of the values of the goodwill and other intangible assets within our e-vapor reporting unit as a result of the ITC exclusion order and cease-and-desist orders prohibiting the importation and sale of NJOY ACE into the United States and our expectation that effective enforcement against illicit flavored disposable e-vapor products would occur more gradually than initially anticipated. If we experience unfavorable outcomes with respect to litigation proceedings (including actions alleging patent infringement), the discount rate used to estimate the fair values of the goodwill and other intangible assets within our e-vapor reporting unit increases or any of the judgments or assumptions we made regarding the future state of the e-vapor category and NJOY’s business fail to materialize, we could record additional non-cash impairments of our e-vapor reporting unit goodwill in future periods. The judgments and assumptions we made regarding the future state of the e-vapor category and NJOY’s business include the (i) timing and extent of effective enforcement against illicit flavored disposable e-vapor products; (ii) timing and likelihood of regulatory authorizations of e-vapor products, including of NJOY’s products; (iii) timing of the commercialization of NJOY e-vapor products in the United States; (iv) long-term growth of the e-vapor category; and (v) conversion rates of illicit flavored disposable e-vapor consumers to FDA-authorized e-vapor products and, specifically, NJOY’s e-vapor products. Fair value calculations are sensitive to changes in these judgments and assumptions, some of which relate to broader macroeconomic conditions and governmental actions outside of our control. In the second quarter of 2024, we recorded an impairment of the value of the Skoal trademark. This impairment was the result of the decrease in the fair value of the Skoal trademark caused by decreases in the size of the MST products category, which were due, in part, to the growth of nicotine pouch volumes. If Skoal’s actual revenue and income or long-term outlook are significantly unfavorable compared to forecasted performance used to estimate the fair value or if the discount rate used to estimate the fair value increases, we could have an additional non-cash impairment of the carrying value of the Skoal trademark in future periods. 9 9 9 Table of Contents Table of Contents We continue to monitor several factors that impact the fair value of our goodwill and intangible assets. If any impairment is determined to exist, we will incur impairment charges, which could have a material adverse effect on our results of operations or financial position.

We periodically calculate the fair value of our reporting units and intangible assets to test for impairment. This calculation may be affected by several factors, including general macroeconomic conditions, the proliferation of illicit products, government actions, including FDA regulatory actions and inaction, changes in category growth (decline) rates as a result of changing adult tobacco consumer preferences, success of planned new product expansions, competitive activity, unfavorable outcomes with respect to litigation proceedings, including actions brought against us alleging patent infringement, and income and excise taxes. Certain events also can trigger an immediate review of intangible assets. For example, we recorded an impairment on the value of the Skoal trademark in the second quarter of 2024. The impairment was the result of the decrease in the fair value of the Skoal trademark caused by decreases in the size of the MST products category, which were due, in part, to the growth of nicotine pouch volumes. We continue to monitor several factors that impact the fair value of the Skoal trademark. For example, if Skoal’s actual revenue and income or long-term outlook are significantly different from forecasted performance used to estimate the fair value or if the discount rate used to estimate the fair value increases, we could have an additional non-cash impairment on the carrying value of the Skoal trademark in future periods. We monitor several factors that could impact the carrying value of our e-vapor reporting unit’s goodwill and related definite-lived intangible assets. Increasing sales of illicit flavored disposable e-vapor products and the lack of meaningful enforcement against these products have negatively impacted the volume growth of NJOY’s pod-based e-vapor products. Additionally, in January 2025, in a patent lawsuit adjudicated before the ITC, the ITC imposed bans on the importation of NJOY ACE into the United States and the sale and marketing of NJOY ACE products previously imported into the United States. If the bans on the importation into the United States and the sale and marketing of NJOY ACE become effective or continued illicit e-vapor product sales or other factors result in a significantly unfavorable long-term outlook for NJOY’s volume growth rates versus our projections used to estimate the fair value, either development could result in a non-cash impairment of our e-vapor reporting unit’s goodwill or related definite-lived intangible assets, or both, in future periods. If any impairment is determined to exist, we will incur impairment charges, which could have a material adverse effect on our results of operations or financial position.

We have growth strategies involving innovative products that may have reduced health risks relative to certain other nicotine products, while continuing to offer adult nicotine consumers (within and outside the United States) products that meet their taste expectations and evolving preferences. These strategies include e-vapor, heated tobacco and oral nicotine pouch products. For example, in the first quarter of 2026, we commercialized on! PLUS oral nicotine pouch products, and we have plans to commercialize additional on! and NJOY products. If the outcome of any legal proceedings or investigations involving NJOY prevent us from, or we are otherwise unsuccessful in, executing these strategies, there could be a material negative impact on our business and our ability to achieve our Vision. For example, as a result of a patent lawsuit adjudicated before the ITC, the ITC imposed bans on the importation of NJOY ACE 6 6 6 Table of Contents Table of Contents into the United States and our sale and marketing of NJOY ACE products previously imported into the United States. We have appealed these bans to the U.S. Court of Appeals for the Federal Circuit, but the bans will remain in effect during the pendency of the appeal. The success of Horizon, our joint venture with JTIUH for the marketing and commercialization of HTS products in the United States, in generating new revenue streams by commercializing current and future HTS products owned by us or Japan Tobacco is dependent upon a number of factors. These factors include (i) receipt of regulatory authorizations, (ii) prevailing economic, market, regulatory or business conditions, or changes in such conditions, negatively affecting the parties, (iii) changes in market or other conditions resulting in unanticipated delays in the design and development of future products or the commencement of test launches, (iv) the outcome of any legal proceedings or investigations that may be instituted against the parties or others related to the joint venture, (v) changes in the preferences of U.S. adult nicotine consumers and (vi) the failure to meet commercialization milestones. Such factors could have a negative effect on the success of Horizon and any future collaboration or partnership between the parties, which could impact our ability to generate new revenue streams and enter new geographic markets. Lengthy and unpredictable regulatory review periods complicate efforts to strategize and plan with respect to commercialization of new products, and we cannot predict or influence the speed with which the FDA reviews pre-market tobacco applications (“PMTA”). Our operating companies may decide to commercialize products that have not received marketing granted orders from the FDA if the operating company submitted a PMTA with respect to any such product in compliance with the FSPTCA and the FDA failed to issue a marketing order within the statutory review period. It is possible that the FDA may bring an enforcement action relating to commercialized products for which a PMTA has been pending longer than the statutory review period. If we do not succeed in commercializing innovative nicotine products that appeal to adult nicotine consumers or we fail to obtain or maintain regulatory authorization for the marketing or sale of these products, including with claims of reduced health risks, we could be at a competitive disadvantage, which could have a material adverse effect on our business, results of operations, cash flows or financial position and our ability to achieve our Vision.

We have growth strategies involving innovative products that may have reduced health risks relative to certain other tobacco products, while continuing to offer adult tobacco consumers (within and outside the United States) products that meet their taste expectations and evolving preferences. These strategies include e-vapor, heated tobacco and oral nicotine pouch products. For example, we have plans to commercialize next generation on! and NJOY products once regulatory authorizations are received. If the outcome of any legal proceedings or investigations involving NJOY prevent us from, or we are otherwise unsuccessful in, executing these strategies, there could be a material negative impact on our business and our ability to achieve our Vision. For example, in January 2025, in a patent lawsuit adjudicated before the U.S. International Trade Commission (“ITC”), the ITC imposed bans on the importation of NJOY ACE into the United States and the sale and marketing of NJOY ACE products previously imported into the United States. The ITC’s decision to impose these restrictions is currently under a 60-day review by the Office of the U.S. Trade Representative, which could approve or 6 6 6 Table of Contents Table of Contents reject the ITC’s decision. If the Office of the U.S. Trade Representative does not reject the ITC’s decision, the restrictions will take effect on March 31, 2025 or earlier if the Trade Representative notifies the ITC of approval before the 60 days elapse. The success of Horizon, our joint venture with JTIUH for the marketing and commercialization of HTS products in the United States, in generating new revenue streams by commercializing current and future HTS products owned by us or Japan Tobacco is dependent upon a number of factors. These factors include (i) receipt of regulatory authorizations, (ii) prevailing economic, market, regulatory or business conditions, or changes in such conditions, negatively affecting the parties or their plans for future collaboration and partnerships, (iii) changes in market or other conditions resulting in unanticipated delays in the design and development of future products or the commencement of test launches, (iv) the outcome of any legal proceedings or investigations that may be instituted against the parties or others related to the joint venture, (v) changes in the preferences of U.S. adult tobacco consumers, (vi) the failure to meet commercialization milestones and (vii) the ability of the parties to enter into future partnerships on terms acceptable to both parties and in the expected manner or timeframe, if at all. Such factors could have a negative effect on our ability to generate new revenue streams and enter new geographic markets. Lengthy and unpredictable regulatory review periods complicate efforts to strategize and plan with respect to commercialization of new products, and we cannot predict or influence the speed with which the FDA reviews PMTAs. For example, a protracted FDA review of one of our operating companies’ PMTAs would allow competitive products already on the market to establish market share, brand recognition and adult tobacco consumer loyalty in the absence of competition from our product. If we do not succeed in commercializing innovative tobacco products that appeal to adult tobacco consumers or we fail to obtain or maintain regulatory authorization for the marketing or sale of these products, including with claims of reduced health risks, we could be at a competitive disadvantage, which could have a material adverse effect on our business, results of operations, cash flows or financial position and our ability to achieve our Vision.