Grouped by the filing’s own headings.
Business Operations Risks
We may be unsuccessful in anticipating and responding to changes in adult tobacco consumer preferences and purchase behavior, including as a result of difficult economic conditions, which could have a material adverse effect on our business, results of operations, cash flows or financial position.
rewrittenMacro & demandRewritten to emphasize macroeconomic conditions driving consumer preference shifts, premium brand reliance, and need for cross-category portfolio expansion.
Our operating companies’ portfolios of tobacco products are largely comprised of premium brands, such as Marlboro, Copenhagen and Skoal. As adult tobacco consumer preferences evolve, consumers are increasingly moving across tobacco categories. 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, among other conditions, we have observed adult tobacco consumers reduce consumption, purchase more discount brands and consider lower-priced tobacco products, including different categories of tobacco products than those they traditionally purchase.
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 and 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.
Compare with the 2022 10-K
Prior heading: Altria and its tobacco operating companies may be unsuccessful in anticipating changes in adult tobacco consumer preferences, responding to changes in adult tobacco consumer purchase behavior or managing through difficult competitive and economic conditions, which could have an adverse effect on the consolidated results of operations and cash flows of Altria or the business of Altria’s tobacco operating companies.
Each of our tobacco Our operating companies is subject to intense competition and changes in adult tobacco consumer preferences. To be successful, they must continue to: ▪promote brand equity successfully; ▪anticipate and respond to new and evolving adult companies’ portfolios of tobacco consumer preferences; ▪develop, manufacture, market and distribute new and innovative products that appeal to adult tobacco consumers (including, where appropriate, through arrangements with, or investments in, third parties); ▪improve productivity; and ▪protect or enhance margins through cost savings and price increases. See Tobacco Space - Business Environment - Summary in Item 7 are largely comprised of premium brands, such as Marlboro, Copenhagen and the immediately preceding risk factor for additional discussion concerning evolving Skoal. As adult tobacco consumer preferences, specifically the growth of e-vapor and other innovative tobacco products and the effects on our preferences evolve, consumers are increasingly moving across tobacco operating companies. categories. The willingness of adult tobacco consumers to purchase premium consumer product brands depends in part on economic is affected by macroeconomic conditions, including inflation. inflation and overall economic stability. In periods of economic uncertainty and/or and high inflation, among other conditions, we have observed adult tobacco consumers may reduce consumption, purchase more discount brands and/or, in the case of tobacco products, and consider lower-priced tobacco products, including different categories of tobacco products than those they traditionally purchase, which purchase. 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 and protect or enhance margins through cost savings and price increases, could have a material adverse effect on the our business, consolidated results of operations, cash flows or financial position of Altria and its tobacco operating companies. While our tobacco operating companies work to broaden their brand portfolios to compete effectively with lower-priced products, the failure to do so could negatively impact their ability to compete in these circumstances. During the second half of 2021, discount cigarette products resumed share growth driven primarily by deep discount products. See Tobacco Space - Business Environment - Summary in Item 7 for further discussion of economic conditions, including the impact of the current high inflationary environment on our businesses.position.
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We face significant competition, and our failure to compete effectively could have a material adverse effect on our business, results of operations, cash flows or financial position and our ability to achieve our Vision.
rewrittenCompetitionRewritten to emphasize cross-category consumer movement, innovative product competition including e-vapor and JUUL investment, and illicit trade threats alongside lower-priced brands.
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. 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 profitability, market share (including as a result of down-trading to lower-priced competitive brands) and shipment volume, 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.
The growth of innovative tobacco products, including e-vapor products and oral nicotine pouches, has contributed to reductions in the consumption levels and industry sales volume of cigarettes and other tobacco products, including MST. Furthermore, the sale of synthetic nicotine products without authorization from the FDA could negatively impact the growth of other innovative tobacco products. If we are unable to compete effectively in innovative tobacco product categories, including through internal product development, on! oral nicotine pouch products, our investment in JUUL, potential future investments in the e-vapor category, our participation in Horizon and other potential future partnerships with Japan Tobacco, such inability could have a material adverse impact on our business, results of operations, cash flows or financial positions and our ability to achieve our Vision.
PM USA also 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 tobacco 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, 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. Our failure to compete with lower-priced cigarette 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.
Compare with the 2022 10-K
Prior heading: Altria’s tobacco businesses face significant competition (including across categories) and their failure to compete effectively could have an adverse effect on the consolidated results of operations or cash flows of Altria, or the business of Altria’s tobacco operating companies and on Altria’s ability to achieve its Vision.
Each of Altria’s tobacco Our operating companies operates operate in highly competitive tobacco categories. This competition also exists across categories as adult tobacco consumer preferences evolve. environments. Significant methods of competition include exists with respect to product quality, taste, price, product innovation, marketing, packaging, distribution and promotional activities. This highly competitive environment 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 the profitability, market share (including as a result of down-trading to lower-priced competitive brands) and shipment volume of Altria’s tobacco operating companies, volume, which could have an a material adverse effect on the consolidated our business, results of operations or operations, cash flows of Altria. See Tobacco Space - Business Environment - Summary in Item 7 for additional discussion concerning evolving adult tobacco consumer preferences. Growth of the e-vapor product category or financial position and other our ability to achieve our Vision. The growth of innovative tobacco products, including e-vapor products and oral nicotine pouches, has further contributed to reductions in cigarette the consumption levels and cigarette industry sales volume and in the consumption levels and sales volumes of cigarettes and other tobacco products, including MST. In addition, growth Furthermore, the sale of unregulated synthetic nicotine products, which may not be subject to products without authorization from the same regulatory restrictions (including marketing restrictions and FDA pre-marketing requirements) as the tobacco-derived e-vapor and oral nicotine products of Altria’s tobacco operating companies and JUUL, could negatively impact the growth of e-vapor and other innovative tobacco products. If we are unable to compete effectively in innovative tobacco product categories, including through internal product development, on! oral nicotine pouch products. Continued growth products, our investment in these categories JUUL, potential future investments in the e-vapor category, our participation in Horizon and other potential future partnerships with Japan Tobacco, such inability could have a material adverse impact on the our business, results of operations, cash flows or financial position of Altria positions and its tobacco operating companies if they are unable to compete effectively (directly or through Altria’s investments) in these innovative product categories, which could also negatively impact Altria’s our ability to achieve its our Vision. PM USA also 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 tobacco 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 payments, which are inflation-adjusted, are significant for PM USA, as described in Liquidity and Capital Resources - Payments under State Settlement Agreements USA and FDA Regulation in Item 7. These settlements, among other factors, resulted in have contributed to substantial cigarette price increases to help cover the cost of the settlement payments. 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, 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.brands. Our failure to compete with lower-priced cigarette 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.
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We may be unsuccessful in commercializing innovative products, including tobacco products with reduced health risks relative to certain other tobacco products and that appeal to adult tobacco consumers, which may have a material adverse effect on our business, results of operations, cash flows or financial position and our ability to achieve our Vision.
addedAI & technologyAdded risk that company may fail to commercialize innovative reduced-risk tobacco products and heat-not-burn products through Horizon joint venture with Japan Tobacco.
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. If we are not successful in executing these strategies, there could be a material negative impact on our business and our ability to achieve our Vision.
In October 2022, we entered into a joint venture with JTIUH to form Horizon for the marketing and commercialization of HTS products in the U.S. Horizon’s success 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. Also, if the parties are unsuccessful in collaborating on the development and global commercialization of additional innovative smoke-free tobacco products, such an outcome could have a negative effect on our ability to generate new revenue streams and enter new geographic markets.
In September 2022, we exercised our option to be released from our JUUL non-competition obligations. As a result, we now have less voting power and influence over JUUL’s financial and operating policies, and JUUL has greater flexibility to pursue strategic options with respect to its business. If we are unable to identify and execute on new opportunities to acquire, develop or commercialize innovative products within the e-vapor space, we could be at a competitive disadvantage in the e-vapor category, which could have a negative effect on our ability to generate new revenue streams.
We cannot predict whether regulators, including the FDA, will permit the marketing or sale of any particular innovative products (including products with claims of reduced risk to adult tobacco consumers), the speed with which they may make such determinations or whether they will impose a burdensome regulatory framework on such products. In addition, the FDA could, for a variety of reasons, determine that innovative products on the market but pending FDA review of the associated PMTA (such as on! oral nicotine pouches), or those that have previously received authorization, including with a claim of reduced exposure, are not appropriate for the public health, and the FDA could require such products be taken off the market.
We also cannot guarantee that any innovative products we commercialize will appeal to adult tobacco consumers or whether adult tobacco consumers’ purchasing decisions would be affected by reduced-risk claims on such products if permitted.
If we do not succeed in commercializing innovative tobacco products that appeal to adult tobacco consumers or we fail to obtain or maintain regulatory approval 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.
Failure to complete or manage strategic transactions, including acquisitions, dispositions, joint ventures and investments in third parties, could have a material adverse effect on our business and our ability to achieve our Vision.
addedOtherAdded risk that strategic transactions including acquisitions, dispositions, and joint ventures may fail to deliver expected benefits; cites JUUL and Cronos investments as examples of unmet expectations.
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 realize the expected benefits of the transaction in the expected time frame or at all. Furthermore, 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 that does not achieve anticipated sales levels and profitability. We can provide no assurance that we will be able to enter into attractive business relationships or execute strategic transactions on favorable terms or at all or that any such relationships or transactions will improve our competitive position or have the intended financial outcomes.
For example, to date, our investments in JUUL and Cronos have not resulted in the economic and competitive advantages expected at the time the investments were made. If any 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 our ability to achieve our Vision.
Significant changes in price, availability or quality of tobacco, other raw materials or component parts could have a material adverse effect on our profitability and business.
rewrittenSupply chainRewritten to add macroeconomic conditions, geopolitical instability, Russian invasion of Ukraine, tariffs, climate change, and reduced tobacco demand from smoke-free product growth.
Shifts in crops (such as those driven by macroeconomic 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 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.
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 have a material adverse effect on our business and profitability.
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). Furthermore, challenging economic conditions can create the risk that our suppliers, distributors, logistics providers or other third-party partners suffer financial or operational difficulties, which may impact their ability to provide us with or distribute finished product, raw materials and component parts and services in a timely manner or at all.
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 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 products.
If we are unable to compensate for supply shortages or elevated commodity and other costs through sustained price increases, cost efficiencies, such as in manufacturing and distribution, or otherwise manage the exposure through sourcing strategies, the limited use of commodity hedging contracts or through other initiatives, our business, results of operations, cash flows and financial condition could be materially adversely impacted.
Compare with the 2022 10-K
Prior heading: Significant changes in price, availability or quality of tobacco, other raw materials or component parts could have an adverse effect on the profitability and business of Altria’s tobacco operating companies and investees.
Any significant change Shifts in crops (such as those driven by macroeconomic conditions and adverse weather patterns), government restrictions and mandated prices, quality 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 availability natural disasters may increase the cost or reduce the supply or quality of tobacco, other raw materials materials, ingredients or component parts, including as parts used to manufacture our 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 result material adverse effect on our business and profitability. For varieties of tobacco only available in limited geographies, government-mandated prices and production control programs, political instability or government prohibitions on the COVID-19 pandemic, economic 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 have a material adverse effect on our business and profitability. Current macroeconomic conditions and geopolitical instability (including high inflation, high gas prices, rising interest rates, labor shortages shortages, supply and demand imbalances and the Russian invasion of Ukraine) are causing worldwide disruptions and delays to supply chain disruptions) or other factors, could adversely affect our chains and commercial markets, which limit access to, and increase the cost of, raw materials, ingredients and component parts (for example, tobacco operating companies’ leaf and our investees’ profitability resins and business, as well as aluminum used in our packaging). Furthermore, challenging economic conditions can create the risk that our suppliers, distributors, logistics providers or other third-party partners suffer financial or operational difficulties, which may impact their ability to remain compliant provide us with FDA or distribute finished product, raw materials and other regulatory requirements for tobacco component parts and services in a timely manner or at all. 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 products. For further discussion, see Tobacco Space - Business Environment - Price, Availability and Quality example, additional taxes on the use of Tobacco, Other Raw Materials certain single-use plastics have been proposed by the U.S. Congress, which, if passed, could increase the costs of, and Component Parts impair our ability to, source certain materials used in Item 7.the packaging for our products. If we are unable to compensate for supply shortages or elevated commodity and other costs through sustained price increases, cost efficiencies, such as in manufacturing and distribution, or otherwise manage the exposure through sourcing strategies, the limited use of commodity hedging contracts or through other initiatives, our business, results of operations, cash flows and financial condition could be materially adversely impacted.
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Our operating companies rely on a few significant facilities and a small number of key suppliers, distributors and distribution chain service providers, and an extended disruption at a facility or in service by a supplier, distributor or distribution chain service provider could have a material adverse effect on our business, results of operations, cash flows or financial position.
rewrittenSupply chainNarrowed scope from Altria and investees to operating companies only; simplified language on facility and supplier disruption risks.
Our operating companies face risks inherent in reliance on a few significant manufacturing facilities and a small number of key suppliers, distributors and distribution chain service providers. A natural or man-made disaster, cyber-incident, global pandemic or other disruption that affects the manufacturing operations of any of our companies, the operations of any key supplier, distributor or distribution chain service provider of any of our operating companies or any other disruption in the supply or distribution of goods or services (including a key supplier’s inability to comply with government regulations, lack of available workers or unwillingness to supply goods or services to a tobacco company) could adversely impact operations. Operations of our operating companies, suppliers, distributors and distribution chain service providers could be suspended temporarily once or multiple times, or halted permanently, depending on various factors.
An extended disruption in operations experienced by one or more of our operating companies or in the supply or distribution of goods or services by one or more key suppliers, distributors or distribution chain service providers, could have a material adverse effect on our business, results of operations, cash flows or financial position.
Compare with the 2022 10-K
Prior heading: Altria’s tobacco operating companies and investees rely on a few significant facilities and a small number of key suppliers, distributors and distribution chain service providers. An extended disruption at a facility or in service by a supplier, distributor or distribution chain service provider could have a material adverse effect on the business, the consolidated results of operations, cash flows or financial position of Altria and its tobacco operating companies and investees.
Altria’s tobacco Our operating companies and investees face risks inherent in reliance on a few significant manufacturing facilities and a small number of key suppliers, distributors and distribution chain service providers. A natural or man-made disaster, cyber-incident, global pandemic or other disruption that affects the manufacturing operations of any of Altria’s tobacco operating companies or investees, our companies, the operations of any key supplier, distributor or distribution chain service provider of any of Altria’s tobacco our operating companies or investees or any other disruption in the supply or distribution of goods or services (including a key supplier’s inability to comply with government regulations, lack of available workers or unwillingness to supply goods or services to a tobacco company) could adversely impact the operations of the affected subsidiaries and investees. operations. Operations of Altria’s tobacco our operating companies, suppliers, distributors and distribution chain service providers and those of its investees could be suspended temporarily once or multiple times, or closed halted permanently, depending on various factors. An extended disruption in operations experienced by one or more of Altria’s tobacco our operating companies, investees companies or in the supply or distribution of goods or services by one or more key suppliers, distributors or distribution chain service providers, could have a material adverse effect on the our business, the consolidated results of operations, cash flows or financial position of Altria and its tobacco operating companies and investees.position.
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We may be required to write down intangible assets, including trademarks and goodwill, due to impairment, which could have a material adverse effect on our results of operations or financial position.
rewrittenMacro & demandExpanded impairment risk factors to include macroeconomic and geopolitical conditions; removed COVID-19 pandemic reference.
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 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. Certain events also can trigger an immediate review of intangible assets. If an impairment is determined to exist, we will incur impairment losses, which could have a material adverse effect on our results of operations or financial position.
Compare with the 2022 10-K
Prior heading: Altria may be required to write down intangible assets, including goodwill, due to impairment, 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 economic conditions (such as continued uncertainty of the COVID-19 pandemic), 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. Certain events also can trigger an immediate review of intangible assets. If an impairment is determined to exist in either situation, exist, we will incur impairment losses, which could have a material adverse effect on our results of operations or financial position. For further discussion, see Discussion and Analysis - Critical Accounting Policies and Estimates in Item 7.position.
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We could decide, or be required to, recall products, which could have a material adverse effect on our business, reputation, results of operations, cash flows or financial position.
rewrittenLitigationRewritten to add that unsuccessful recall claims generate negative publicity and competitor product issues reduce category-wide consumption.
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 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.
Compare with the 2022 10-K
Prior heading: Altria’s tobacco operating companies and investees could decide or be required to recall products, which could have a material adverse effect on the business, reputation, consolidated results of operations, cash flows or financial position of Altria, its tobacco operating companies and investees.
In addition to a recall required by the FDA, as referenced above, our tobacco operating companies and investees We could decide, or other laws or regulations could require them, 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 adulteration, product adulteration, misbranding or product tampering. Product A product recall or a product liability or other claim (even if unsuccessful or without merit) could 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 the our business, reputation, consolidated results of operations, cash flows or financial position of Altria, its tobacco operating companies and investees.position.
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We face various risks related to health epidemics and pandemics, such as the COVID-19 pandemic, and such events, and the measures that international, federal, state and local governments, agencies, law enforcement and health authorities implement to address them, could have a material adverse effect on our business, results of operations, cash flows or financial position.
addedClimate & physicalAdded risk that epidemics, pandemics, or public health emergencies and government responses could disrupt operations and harm financial results.
An epidemic, pandemic or other significant public health emergency, and the measures taken by governmental authorities to address it, could significantly disrupt our ability to operate our businesses in the ordinary course. Furthermore, any associated economic consequences could have a material adverse effect on our business, results of operations, cash flows or financial position.
If COVID-19 resurged or any similar public health emergency occurred in the future, we could experience negative impacts. In addition, the specific characteristics of any future public health emergency and associated governmental responses could result in other negative impacts that we cannot foresee. Accordingly, any future emergence or resurgence of an epidemic, pandemic or other public health emergency could have a material adverse effect on our business, results of operations, cash flows or financial position.
We may be unable to attract and retain a highly skilled and diverse workforce due to the decreasing social acceptance of tobacco usage, tobacco control actions and other factors, which could have a material adverse effect on our business and our ability to achieve our Vision.
rewrittenLabor & talentReframed talent attraction risk to emphasize 'highly skilled and diverse workforce' and competition for such workers; added material adverse effect language.
Our ability to implement our strategy of attracting and retaining a highly skilled and diverse workforce may be impaired by the decreasing social acceptance of tobacco usage, tobacco regulation and control actions and other factors. The tobacco industry competes for talent with the consumer products industry and other companies that may enjoy greater societal acceptance and fewer long-term challenges. As a result, we may be unable to attract and retain highly skilled and diverse talent. In addition, our ability to retain a highly skilled and diverse workforce may be adversely affected by current labor market dynamics in which the number of U.S. workers leaving their jobs and the competition for highly skilled and diverse workers have increased significantly. Failure to attract and retain highly skilled and diverse talent could have a material adverse effect on our business and our ability to achieve our Vision.
Compare with the 2022 10-K
Prior heading: Altria may be unable to attract and retain the best talent due to the impact of decreasing social acceptance of tobacco usage, tobacco control actions and other factors, which could adversely affect Altria’s ability to achieve its Vision.
Our ability to implement our strategy of attracting and retaining the best talent a highly skilled and diverse workforce may be impaired by the impact of decreasing social acceptance of tobacco usage and usage, tobacco regulation and control actions. actions and other factors. The tobacco industry competes for talent with the consumer products industry and other companies that may enjoy greater societal acceptance and fewer longer-term long-term challenges. As a result, we may be unable to attract and retain the best highly skilled and diverse talent. In addition, our ability to retain the best talent a highly skilled and diverse workforce may be adversely affected by current labor market dynamics in which the number of U.S. workers leaving their jobs and the competition for highly skilled and diverse workers have increased significantly. Failure to attract and retain the best highly skilled and diverse talent could adversely affect Altria’s have a material adverse effect on our business and our ability to achieve its our Vision.
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Litigation, Legislative and Regulatory Risks
Unfavorable outcomes with respect to litigation proceedings or any governmental investigations could materially adversely affect our results of operations, cash flows or financial position.
rewrittenLitigationAdded governmental investigations and detailed JUUL-related e-vapor lawsuits, state attorney general actions, FTC antitrust proceedings, and potential remedies including divestiture.
Legal proceedings covering a wide range of matters are pending or threatened in various U.S. and foreign jurisdictions against us and our subsidiaries, including PM USA, as well as our and their respective indemnitees and indemnitors. Various types of claims may be raised in these proceedings, including product liability, unfair trade practices, antitrust, tax, contraband-related claims, patent infringement, employment matters, claims alleging violations of the Racketeer Influenced and Corrupt Organizations Act, claims for contribution and claims of competitors, shareholders and distributors. Legislative action, such as changes to tort law, also may expand the types of claims and remedies available to plaintiffs.
Altria and/or one or more of our subsidiaries, including PM USA, are named as defendants in various e-vapor individual and class action lawsuits related to JUUL e-vapor products, including independent lawsuits initiated by certain state attorneys general.
Litigation is subject to significant uncertainty, and there could be adverse developments in pending or future cases. An unfavorable outcome or settlement of pending tobacco-related or other litigation could encourage the commencement of additional litigation. Damages claimed in some tobacco-related or other litigation are significant and, in certain cases, have ranged in the billions of dollars. The variability in pleadings in multiple jurisdictions and the actual experience of management in litigating claims demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome.
In certain cases, plaintiffs claim that defendants’ liability is joint and several. In such cases, we may face the risk that one or more co-defendants decline or otherwise fail to participate in the bonding required for an appeal or to pay their proportionate or jury-allocated share of a judgment. As a result, we may have to pay more than our proportionate share of any bonding- or judgment-related amounts under certain circumstances. Furthermore, in cases where plaintiffs are successful, we also may be required to pay interest and attorneys’ fees.
Although we historically have been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from seeking to collect judgments while adverse verdicts have been appealed, there remains a risk that such relief may not be obtainable in all cases. This risk has been substantially reduced given that 47 states and Puerto Rico now limit the dollar amount of bonds or require no bond at all. However, tobacco litigation plaintiffs have challenged the constitutionality of Florida’s bond cap statute in several cases and plaintiffs may challenge state bond cap statutes in other jurisdictions as well. Such challenges may include the applicability of state bond caps in federal court.
Although we cannot predict the outcome of such challenges, it is possible that our business, results of operations, cash flows or financial position could be materially adversely affected in a particular fiscal quarter or fiscal year by an unfavorable outcome of one or more such challenges.
In certain litigation, we and our subsidiaries may face potentially significant non-monetary remedies that could have a material adverse effect on our businesses. For example, in the Federal Government’s lawsuit, the district court did not impose monetary penalties but ordered significant non-monetary remedies, including the issuance of “corrective statements.” In the patent lawsuit adjudicated before the ITC, the ITC banned the importation of IQOS devices, Marlboro HeatSticks and component parts into the United States and the sale and marketing of any such products previously imported into the United States. As a result of the ITC’s decision, PM USA removed the IQOS devices, Marlboro HeatSticks and any infringing components from the marketplace.
Additionally, the U.S. Federal Trade Commission (“FTC”) has issued an administrative complaint against Altria and JUUL on antitrust grounds that, if successful, would allow the FTC to order a broad range of non-monetary remedies with respect to our investment in JUUL, including divestiture of our minority investment in JUUL, rescission of the transaction and all associated agreements, a requirement of FTC approval of future agreements related to the development, manufacture, distribution or sale of e-vapor products and prohibition against any officer or director of either Altria or JUUL serving on the other party’s board of directors or attending meetings of the other party’s board of directors and notice to the FTC in advance of certain corporate actions, including acquisitions, mergers or certain corporate restructurings.
Each of Altria and its subsidiaries named as a defendant in pending litigation believe, and each has been so advised by counsel handling the respective cases, that it has valid defenses to the litigation pending against it, as well as valid bases for appeal of adverse verdicts.
We have defended, and will continue to defend, vigorously against litigation challenges. However, we may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.
From time to time, we are subject to federal and state governmental investigations on a range of matters. We currently are subject to a number of governmental investigations concerning various aspects of our investment in, and relationship with, JUUL.
We cannot predict the outcome of any litigation proceedings or governmental investigations, and unfavorable outcomes in any such proceedings or investigations could materially adversely affect our results of operations, cash flows or financial position.
Compare with the 2022 10-K
Prior heading: Unfavorable litigation outcomes could materially adversely affect the consolidated results of operations, cash flows or financial position of Altria or the businesses of one or more of its subsidiaries or investees and Altria’s ability to achieve its Vision.
Legal proceedings covering a wide range of matters are pending or threatened in various United States U.S. and foreign jurisdictions against Altria us and its our subsidiaries, including PM USA, as well as our and their respective indemnitees, indemnitors indemnitees and Altria’s investees. indemnitors. Various types of claims may be raised in these proceedings, including product liability, unfair trade practices, antitrust, tax, contraband-related claims, patent infringement, employment matters, claims alleging violations of the Racketeer Influenced and Corrupt Organizations Act (“RICO”), Act, claims for contribution and claims of competitors, shareholders and distributors. Legislative action, such as changes to tort law, also may expand the types of claims and remedies available to plaintiffs. Altria and/or one or more of our subsidiaries, including PM USA, are named as defendants in various e-vapor individual and class action lawsuits related to JUUL e-vapor products, including independent lawsuits initiated by certain state attorneys general. Litigation is subject to uncertainty significant uncertainty, and it is possible that there could be adverse developments in pending or future cases. An unfavorable outcome or settlement of pending tobacco-related or other litigation could encourage the commencement of additional litigation. Damages claimed in some tobacco-related or other litigation are significant and, in certain cases, have ranged in the billions of dollars. The variability in pleadings in multiple jurisdictions, together with jurisdictions and the actual experience of management in litigating claims, claims demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome. In certain cases, plaintiffs claim that defendants’ liability is joint and several. In such cases, Altria or its subsidiaries we may face the risk that one or more co-defendants decline or otherwise fail to participate in the bonding required for an appeal or to pay their proportionate or jury-allocated share of a judgment. As a result, Altria or its subsidiaries under certain circumstances we may have to pay more than their our proportionate share of any bonding- or judgment-related amounts. amounts under certain circumstances. Furthermore, in those cases where plaintiffs are successful, Altria or its subsidiaries may we also may be required to pay interest and attorneys’ fees. Although PM USA has we historically have been able to obtain required bonds or relief from bonding requirements in order to prevent plaintiffs from seeking to collect judgments while adverse verdicts have been appealed, there remains a risk that such relief may not be obtainable in all cases. This risk has been substantially reduced given that 47 states and Puerto Rico now limit the dollar amount of bonds or require no bond at all. As discussed in Note 18, However, tobacco litigation plaintiffs have challenged the constitutionality of Florida’s bond cap statute in several cases and plaintiffs may challenge state bond cap statutes in other jurisdictions as well. Such challenges may include the applicability of state bond caps in federal court. Although we cannot predict the outcome of such challenges, it is possible that the consolidated our business, results of operations, cash flows or financial position of Altria, or the businesses of one or more of its subsidiaries or investees, could be materially adversely affected in a particular fiscal quarter or fiscal year by an unfavorable outcome of one or more such challenges. In certain litigation, Altria, its subsidiaries we and its investees our subsidiaries may face potentially significant non-monetary remedies that could have a material adverse effect on our businesses. For example, in the Federal Government’s lawsuit discussed in Note 18, lawsuit, the district court did not impose monetary penalties but ordered significant non-monetary remedies, including the issuance of “corrective statements.” In the patent lawsuit adjudicated before the ITC discussed in Note 18, ITC, the ITC banned the importation of the IQOS devices, Marlboro HeatSticks and component parts into the United States and the sale and marketing of any such products previously imported into the United States. As a result of the ITC’s decision, PM USA removed the IQOS devices, Marlboro HeatSticks and any infringing components from the marketplace. In 2019, we determined that our investment in JUUL was impaired in part due to the increase in the number and type of legal cases pending against JUUL. Altria and PM USA are also defendants in many of these cases. In addition, in April 2020 marketplace. Additionally, the U.S. Federal Trade Commission (“FTC”) has issued an administrative complaint against Altria and JUUL alleging that Altria’s 35% investment in JUUL and the associated agreements constitute unreasonable restraint on trade. In February 2022, the administrative law judge dismissed antitrust grounds that, if successful, would allow the FTC’s complaint. FTC complaint counsel appealed that decision to the FTC Commissioners. E-vapor litigation and the FTC action, including the order a broad range of non-monetary remedies the FTC is seeking, are further discussed with respect to our investment in Item 3. Legal Proceedings JUUL, including divestiture of this Form 10-K (“Item 3”) and Note 18. Altria and its subsidiaries have achieved substantial success our minority investment in managing litigation. Nevertheless, litigation is subject to uncertainty, JUUL, rescission of the transaction and significant challenges remain. It is possible that all associated agreements, a requirement of FTC approval of future agreements related to the consolidated results development, manufacture, distribution or sale of operations, cash flows e-vapor products and prohibition against any officer or financial position director of Altria, either Altria or JUUL serving on the businesses other party’s board of one directors or more attending meetings of its subsidiaries or investees, could be materially adversely affected the other party’s board of directors and notice to the FTC in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement advance of certain pending litigation. In addition, an unfavorable outcome in corporate actions, including acquisitions, mergers or certain pending litigation could adversely affect our ability to achieve our Vision. corporate restructurings. Each of Altria and each of its subsidiaries named as a defendant in pending litigation believe, and each has been so advised by counsel handling the respective cases, that it has valid defenses to the litigation pending against it, as well as valid bases for appeal of adverse verdicts. Each of the companies has verdicts. We have defended, and will continue to defend, vigorously against litigation challenges. However, Altria and its subsidiaries we may enter into settlement discussions in particular cases if they we believe it is in the our best interests of Altria to do so. See Item 3, Note 18 and Exhibits 99.1 so. From time to time, we are subject to federal and 99.2 state governmental investigations on a range of matters. We currently are subject to this Form 10-K for a discussion number of pending tobacco-related litigation.governmental investigations concerning various aspects of our investment in, and relationship with, JUUL. We cannot predict the outcome of any litigation proceedings or governmental investigations, and unfavorable outcomes in any such proceedings or investigations could materially adversely affect our results of operations, cash flows or financial position.
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Significant federal, state and local governmental actions, including FDA regulatory actions, and various private sector actions may continue to have a material adverse impact on our operating companies’ sales volumes and our business.
rewrittenRegulatoryExpanded FDA regulatory risk to detail ten specific adverse actions: restricting communications, product differentiation, manufacturing requirements, illicit trade, and product location restrictions.
We face significant governmental and private sector actions, including efforts aimed at reducing the incidence of tobacco use and efforts seeking to hold us responsible for the adverse health effects associated with both smoking and exposure to environmental tobacco smoke. These actions, combined with the diminishing social acceptance of smoking, have resulted in reduced cigarette industry volume, and we expect that these factors will continue to reduce cigarette consumption levels, which could have a material adverse effect on our business, results of operations, cash flows or financial position.
In addition, actions by the FDA and other federal, state or local governments or agencies may (i) impact the adult tobacco consumer acceptability of or access to tobacco products (for example, through nicotine or constituent limits or menthol or other flavor bans), (ii) delay or prevent the launch of new or modified tobacco products or products with claims of reduced risk, (iii) limit adult tobacco consumer choices, (iv) restrict communications to adult tobacco consumers, (v) restrict the ability to differentiate tobacco products, (vi) create a competitive advantage or disadvantage for certain tobacco companies, (vii) impose additional manufacturing, labeling or packing requirements, (viii) interrupt manufacturing or otherwise significantly increase the cost of doing business, (ix) result in increased illicit trade in tobacco products or (x) restrict or prevent the use of specified tobacco products in certain locations or the sale of tobacco products by certain retail establishments.
Legislative and regulatory action could also require the recall or other removal of tobacco products from the marketplace (for example as a result of (i) a determination relating to product contamination, (ii) legislation and rulemaking banning menthol or other flavors, (iii) a determination by the FDA that one or more tobacco products do not satisfy the statutory requirements for substantial equivalence, (iv) an FDA requirement that a currently marketed tobacco product proceed through the pre-market review process, (v) the FDA’s failure to authorize a PMTA or (vi) the FDA’s determination that removal is otherwise necessary for the protection of public health).
Any federal, state or local governmental action, including regulatory actions by the FDA, may 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 these products, which could materially adversely affect our ability to achieve our Vision.
Compare with the 2022 10-K
Prior heading: Significant federal, state and local governmental actions, including actions by the FDA, and various private sector actions may continue to have an adverse impact on Altria and its tobacco operating companies’ or its investees’ businesses and sales volumes and on Altria’s ability to achieve its Vision.
As described in Tobacco Space - Business Environment in Item 7, PM USA faces We face significant governmental and private sector actions, including efforts aimed at reducing the incidence of tobacco use and efforts seeking to hold PM USA us responsible for the adverse health effects associated with both smoking and exposure to environmental tobacco smoke. These actions, combined with the diminishing social acceptance of smoking, have resulted in reduced cigarette industry volume, and we expect that these factors will continue to reduce cigarette consumption levels. More broadly, levels, which could have a material adverse effect on our business, results of operations, cash flows or financial position. In addition, actions by the FDA and other federal, state or local governments or agencies, including those specific actions described in Tobacco Space - Business Environment in Item 7, agencies may (i) impact the adult tobacco consumer acceptability of or access to tobacco products (for example, through nicotine or constituent limits or menthol or other flavor bans), (ii) delay or prevent the launch of new or modified tobacco products or products with claims of reduced risk, (iii) limit adult tobacco consumer choices, (iv) require the recall or other removal of tobacco products from the marketplace (for example as a result of (a) product contamination, (b) legislation and rulemaking that bans menthol or other flavors, (c) a determination by the FDA that one or more tobacco products do not satisfy the statutory requirements for substantial equivalence, (d) because the FDA requires that a currently marketed tobacco product proceed through the pre-market review process or (e) because the FDA does not authorize a PMTA or otherwise determines that removal is necessary for the protection of public health), (v) restrict communications to adult tobacco consumers, (vi) (v) restrict the ability to differentiate tobacco products, (vii) (vi) create a competitive advantage or disadvantage for certain tobacco companies, (viii) (vii) impose additional manufacturing, labeling or packing requirements, (ix) (viii) interrupt manufacturing or otherwise significantly increase the cost of doing business, (x) (ix) result in increased illicit trade in tobacco products or (xi) (x) restrict or prevent the use of specified tobacco products in certain locations or the sale of tobacco products by certain retail establishments. Any Legislative and regulatory action could also require the recall or other removal of tobacco products from the marketplace (for example as a result of (i) a determination relating to product contamination, (ii) legislation and rulemaking banning menthol or other flavors, (iii) a determination by the FDA that one or more tobacco products do not satisfy the statutory requirements for substantial equivalence, (iv) an FDA requirement that a currently marketed tobacco product proceed through the pre-market review process, (v) the FDA’s failure to authorize a PMTA or (vi) the FDA’s determination that removal is otherwise necessary for the protection of these public health). Any federal, state or local governmental action, including regulatory actions by the FDA, may have a material adverse impact on the our business, consolidated results of operations, cash flows or financial position of Altria and its tobacco operating companies, including position. Such action also could negatively impact adult smokers’ transition to these products, which could materially adversely affecting Altria’s investment in JUUL and Altria’s affect our ability to achieve its Vision. See Tobacco Space - Business Environment in Item 7 for a more detailed discussion.our Vision.
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Tobacco products are subject to substantial taxation, and any increases in tobacco product-related taxes could have a material adverse impact on sales of our operating companies’ products.
rewrittenRegulatoryNarrowed focus to tax increases on tobacco products including e-vapor and oral nicotine; removed JUUL and Vision achievement references.
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 may 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 may negatively impact adult smokers’ transition to these products, which could materially adversely affect our ability to achieve our Vision.
Compare with the 2022 10-K
Prior heading: Tobacco products are subject to substantial taxation, which could have an adverse impact on sales of the tobacco products of Altria’s tobacco operating companies and JUUL and on Altria’s ability to achieve its Vision.
Tobacco products are subject to substantial taxation, including excise taxes, and significant taxes. Significant increases in tobacco product-related 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 the tobacco products of our tobacco operating companies and JUUL 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 or 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 products. Any increases in tobacco-related taxes or fees may have a material adverse impact on our business, results of Altria’s tobacco operating companies. operations, cash flows or financial position. In addition, substantial excise taxes tax increases on e-vapor and oral nicotine products may negatively impact adult smokers’ transition to these products, which could materially adversely affect Altria’s our ability to achieve its Vision. For further discussion, see Tobacco Space - Business Environment - Excise Taxes in Item 7.our Vision.
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International business operations subject us to various U.S. and foreign laws and regulations, and violations of such laws or regulations could result in reputational harm, legal challenges and significant penalties and other costs.
rewrittenRegulatoryAdded 'penalties and other costs' and 'joint venture partners' to international operations compliance risks.
While we are primarily engaged in business activities in the United States, we engage (directly or indirectly) in certain international business activities that are subject to various U.S. and foreign laws and regulations, such as foreign privacy laws, the U.S. Foreign Corrupt Practices Act and other laws prohibiting bribery and corruption. Although we have a Code of Conduct for Compliance and Integrity and a compliance system designed to prevent and detect violations of applicable law, no system can provide assurance that it will always protect against improper actions by employees, joint venture partners, investees or third parties. Violations of these laws, or allegations of such violations could result in reputational harm, legal challenges and significant penalties and other costs.
Compare with the 2022 10-K
Prior heading: International business operations subject Altria, its subsidiaries and its investees to various United States and foreign laws and regulations, and violations of such laws or regulations could result in reputational harm, legal challenges and/or significant costs.
While Altria and its subsidiaries we are primarily engaged in business activities in the United States, they do we engage (directly or indirectly) in certain international business activities that are subject to various United States U.S. and foreign laws and regulations, such as foreign privacy laws, the U.S. Foreign Corrupt Practices Act and other laws prohibiting bribery and corruption. Although we have a Code of Conduct for Compliance and Integrity and a compliance system designed to prevent and detect violations of applicable law, no system can provide assurance that it will always protect against improper actions by employees, joint venture partners, investees or third parties. Altria’s investees also engage in international business operations. Violations of these laws, or allegations of such violations, by Altria, its subsidiaries or its investees violations could result in reputational harm, legal challenges and/or and significant penalties and other costs.
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A challenge to our tax positions, an increase in the income tax rate or other changes to federal or state tax laws could materially adversely affect our earnings or cash flows.
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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.
Legal and regulatory requirements related to climate change and other environmental sustainability matters could have a material adverse impact on our business and results of operations.
addedClimate & physicalAdded risk that new climate change and environmental sustainability regulations on greenhouse gas emissions, alternative energy, and single-use plastics could increase compliance costs and harm reputation.
The increased concern over climate change and other sustainability matters is likely to result in new or additional legal and regulatory requirements intended to reduce or mitigate environmental issues and may relate to, among other things, greenhouse gas emissions, alternative energy policy, single-use plastics and additional disclosure obligations. This additional regulation may materially adversely affect our business, results of operations, cash flows and financial condition by increasing our compliance and manufacturing costs and negatively impacting our reputation if we are unable to, or are perceived not to, satisfy such requirements.
Capital Markets and Financing Risks
Disruption and uncertainty in the credit and capital markets could materially adversely affect our business.
rewrittenCredit & liquidityRewritten to add that high interest rates and tighter credit markets disrupt suppliers and service providers, materially impacting operations.
Access to the credit and capital markets is important for us to satisfy our liquidity and financing needs. We typically access the commercial paper market in the second quarter to help fund payments under the Master Settlement Agreement (the “MSA”), tax obligations and shareholder dividends. Disruption and uncertainty in the credit or capital markets or high interest rates could negatively impact the availability or cost of capital and adversely affect our liquidity, cash flow, earnings and dividend rate. In addition, tighter credit markets may lead to business disruptions for our suppliers and service providers, which could, in turn, materially adversely impact our business, results of operations, cash flows and financial condition.
Compare with the 2022 10-K
Prior heading: Disruption and uncertainty in the credit and capital markets could adversely affect Altria’s access to these markets, earnings and dividend rate.
Access to the credit and capital markets is important for us to satisfy our liquidity and financing needs. For example, we We typically access the commercial paper market early in the second quarter to help fund payments under the Master Settlement Agreement (the “MSA”) “MSA”), tax obligations and shareholder dividends. Disruption and uncertainty in these markets and any resulting adverse impact on credit availability, pricing, the credit terms or credit rating may capital markets or high interest rates could negatively affect impact the amount availability or cost of credit available to us and may also increase our costs capital and adversely affect our liquidity, cash flow, earnings or our and dividend rate.rate. In addition, tighter credit markets may lead to business disruptions for our suppliers and service providers, which could, in turn, materially adversely impact our business, results of operations, cash flows and financial condition.
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A downgrade or potential downgrade of our credit ratings could adversely impact our borrowing costs and access to credit and capital markets, which could materially adversely affect our financial condition.
addedCredit & liquidityAdded risk that credit rating downgrade, especially below investment grade, could increase borrowing costs and impair access to capital markets and commercial paper market.
Rating agencies routinely evaluate us, and their ratings are based on a number of factors, including our cash generating capability, levels of indebtedness, policies with respect to shareholder distributions, the impact of strategic transactions and our financial strength generally, as well as factors beyond our control, such as the state of the economy and our industry. Any downgrade or announcement that we are under review for a potential downgrade of our credit ratings, as occurred following our investment in JUUL, especially any downgrade to below investment grade, could increase our future borrowing costs, impair our ability to access the credit and capital markets, including the commercial paper market, on terms commercially acceptable to us or at all or result in a reduction in our liquidity, requiring us to rely on more expensive types of debt financing. Any such outcome could have a material adverse impact our financial condition.
We may be unable to attract investors due to increasing investor expectations of our performance relating to environmental, social and governance factors.
rewrittenOtherRewritten from social acceptance to investor ESG expectations, third-party ratings criteria, corporate responsibility goals, and stakeholder sustainability focus.
There is an increasing focus from investors and other stakeholders on corporate responsibility, including with respect to environmental, social and governance (“ESG”) matters. There has been an increase in third-party providers of ESG assessments and ratings to satisfy investor demand for measurement of corporate responsibility performance, and the criteria by which these third parties measure such performance may vary or change over time. Investors may use these non-financial performance factors to guide investment strategies and, in some cases, may choose not to invest in us if their policies prevent them from investing in tobacco companies or if they believe our policies, actions or disclosures on corporate responsibility issues are inadequate.
There is also increased focus, including by governmental and non-governmental organizations, investors, customers, consumers, our employees and other stakeholders, on sustainability matters. Despite our efforts, any failure to achieve our corporate responsibility goals, including those aimed at reducing the harm associated with our companies’ products, could result in adverse publicity, materially adversely affect our business and reputation and impair our ability to attract and retain investors, which could have a material negative impact on the market value of our stock.
Compare with the 2022 10-K
Prior heading: Altria may be unable to attract investors due to the impact of decreasing social acceptance of tobacco usage.
There is an increasing investor focus from investors and other stakeholders on corporate responsibility, including with respect to environmental, social and governance (“ESG”) matters. Organizations that provide ESG information to investors have developed ratings processes for evaluating companies on their approach to There has been an increase in third-party providers of ESG matters. Such assessments and ratings are used by some investors to inform their investment and voting decisions. Decreasing social acceptance satisfy investor demand for measurement of tobacco products corporate responsibility performance, and the criteria by which these third parties measure such performance may vary or unfavorable ESG ratings change over time. Investors may lead use these non-financial performance factors to increased negative investor sentiment toward Altria, which could result guide investment strategies and, in shareholders choosing some cases, may choose not to divest invest in us if their ownership policies prevent them from investing in Altria stock tobacco companies or potential investors choosing not if they believe our policies, actions or disclosures on corporate responsibility issues are inadequate. There is also increased focus, including by governmental and non-governmental organizations, investors, customers, consumers, our employees and other stakeholders, on sustainability matters. Despite our efforts, any failure to invest achieve our corporate responsibility goals, including those aimed at reducing the harm associated with our companies’ products, could result in Altria stock adverse publicity, materially adversely affect our business and reputation and impair our ability to attract and retain investors, which could have a material negative impact on the market performance value of Altria our stock.
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Information Technology and Data Privacy Risks
The failure of our, or our service providers’ or key suppliers’, information systems to function as intended, or cyber-attacks or security breaches, could have a material adverse effect on our business, reputation, results of operations, cash flows or financial position.
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We rely extensively on information systems, many of which are managed by third-party service providers (such as cloud data service providers), to support a variety of business processes and activities, including: complying with regulatory, legal, financial reporting and tax requirements; engaging in marketing and e-commerce activities; managing and improving the effectiveness of our operations; manufacturing and distributing our products; collecting and storing sensitive data and confidential information; and communicating with employees, investors, suppliers, trade customers, adult tobacco consumers and others. Our suppliers and supply chain service providers also rely extensively on information systems. We continue to make appropriate investments in administrative, technical and physical safeguards to protect our information systems and data from cyber-threats, including human error and malicious acts.
Our safeguards include employee training, testing and auditing protocols, backup systems and business continuity plans, maintenance of security policies and procedures, monitoring of networks and systems, and third-party risk management.
From time-to-time, we and our suppliers experience attempts to infiltrate and interrupt information systems. While infiltration attempts have increased, to date, interruptions of these information systems as a result of infiltration attempts have not had a material impact on our operations. However, because technology is increasingly complex and cyber-attacks are increasingly sophisticated and more frequent, there can be no assurance that such incidents will not have a material adverse effect on us in the future. Failure of our, or our service providers’ or key suppliers’, information systems to function as intended, or cyber-attacks or security breaches, could result in loss of revenue, assets, personal data, intellectual property, trade secrets or other sensitive and confidential data, violation of applicable privacy and data security laws, reputational harm to the companies and their brands, operational disruptions, legal challenges and significant remediation and other costs.
Our failure to comply with personal data protection and privacy laws could materially adversely affect our business.
addedCyber & dataAdded risk that failure to comply with evolving personal data protection and privacy laws across jurisdictions could result in litigation, fines, penalties, and reputational damage.
We are subject to a variety of continuously evolving and developing laws and regulations in numerous jurisdictions regarding personal data protection and privacy laws. These laws and regulations may be interpreted and applied differently from country to country or, within the United States, from state to state, and can create inconsistent or conflicting requirements. Our efforts to comply with these laws and regulations impose significant costs and challenges that are likely to continue to increase over time, particularly as additional jurisdictions adopt similar regulations. Failure to comply with these laws and regulations or to otherwise protect personal data from unauthorized access, use or other processing, could result in litigation, claims, legal or regulatory proceedings, inquiries or investigations, damage to our reputation, fines or penalties, all of which can have a material adverse effect on our business.
Risks Relating to Our Investments in Equity Securities
The expected benefits of our investment in ABI may not materialize in the expected manner or timeframe or at all, which could have a material adverse impact on our financial position or earnings.
rewrittenCredit & liquidityRewritten from earnings/dividend focus to emphasize impairment risk, tax liabilities, board representation loss, and fair value decline below carrying value.
The expected benefits of our investment in ABI may not materialize in the expected manner or timeframe or at all, including due to foreign currency exchange rates; ABI’s business results; ABI’s share price; impairment losses on the value of our investment; our incurrence of additional tax liabilities related to our investment in ABI; and potential reductions in the number of directors that we can have appointed to the ABI board of directors.
We account for our investment in ABI under the equity method of accounting. For purposes of financial reporting, the earnings from and carrying value of our equity investment in ABI are translated into U.S. dollars (“USD”) from various local currencies. In addition, ABI pays dividends in euros, which we convert into USD. During times of a strengthening USD against these currencies, our reported earnings from and carrying value of our equity investment in ABI will be reduced because these currencies will translate into fewer USD and the dividends that we receive from ABI will convert into fewer USD. Dividends and earnings from and carrying value of our equity investment in ABI are also subject to the risks encountered by ABI in its business, its business outlook, cash flow requirements and financial performance, the state of the market and the general economic climate.
For example, in 2020, as a result of the uncertainty, volatility and impact of the COVID-19 pandemic on ABI’s business, ABI reduced by 50% its final 2019 dividend paid in the second quarter of 2020 and did not pay its interim 2020 dividend that would have been paid in the fourth quarter of 2020, which resulted in a reduction of cash dividends we received from ABI.
We assess the value of our equity investment in ABI as required by accounting principles generally accepted in the United States. If the carrying value of our investment in ABI exceeds its fair value and any loss in value is other than temporary, we record appropriate impairment losses. In prior periods, we have concluded that the fair value of our equity investment in ABI declined below the carrying value of our investment in ABI and that this decline in fair value was other than temporary. As a result, we recorded non-cash, pre-tax impairment charges for those periods. It is possible that we may be required to record significant impairment charges in the future and, if we do so, our net income and carrying value of our equity investment in ABI could be materially adversely affected.
In the event that our ownership percentage in ABI were to decrease below certain levels, (i) we may be subject to additional tax liabilities, (ii) the number of directors that we have the right to have appointed to the ABI board of directors could be reduced from two to one or zero and (iii) we may be unable to continue to account for our investment in ABI under the equity method of accounting.
Compare with the 2022 10-K
Prior heading: Altria’s reported earnings from and carrying value of its equity investment in ABI and the dividends paid by ABI on shares owned by Altria may be adversely affected by various factors, including foreign currency exchange rates and ABI’s business results, including as a result of the COVID-19 pandemic, and ABI’s stock price.
The expected benefits of our investment in ABI may not materialize in the expected manner or timeframe or at all, including due to foreign currency exchange rates; ABI’s business results; ABI’s share price; impairment losses on the value of our investment; our incurrence of additional tax liabilities related to our investment in ABI; and potential reductions in the number of directors that we can have appointed to the ABI board of directors. We account for our investment in ABI under the equity method of accounting. For purposes of financial reporting, the earnings from and carrying value of our equity investment in ABI are translated into U.S. dollars (“USD”) from various local currencies. In addition, ABI pays dividends in euros, which we convert into USD. During times of a strengthening USD against these currencies, our reported earnings from and carrying value of our equity investment in ABI will be reduced because these currencies will translate into fewer USD and the dividends that we receive from ABI will convert into fewer USD. Dividends and earnings from and carrying value of our equity investment in ABI are also subject to the risks encountered by ABI in its business, its business outlook, cash flow requirements and financial performance, the state of the market and the general economic climate, including the impact of the COVID-19 pandemic. climate. For example, in 2020, as a result of the uncertainty, volatility and impact of the COVID-19 pandemic on ABI’s business, ABI reduced by 50% its final 2019 dividend paid in the second quarter of 2020 and did not pay its interim 2020 dividend that would have been paid in the fourth quarter of 2020, which resulted in a reduction of cash dividends Altria we received from ABI.ABI. We assess the value of our equity investment in ABI as required by accounting principles generally accepted in the United States. If the carrying value of our investment in ABI exceeds its fair value and any loss in value is other than temporary, we record appropriate impairment losses. In prior periods, we have concluded that the fair value of our equity investment in ABI declined below the carrying value of our investment in ABI and that this decline in fair value was other than temporary. As a result, we recorded non-cash, pre-tax impairment charges for those periods. It is possible that we may be required to record significant impairment charges in the future and, if we do so, our net income and carrying value of our equity investment in ABI could be materially adversely affected. In the event that our ownership percentage in ABI were to decrease below certain levels, (i) we may be subject to additional tax liabilities, (ii) the number of directors that we have the right to have appointed to the ABI board of directors could be reduced from two to one or zero and (iii) we may be unable to continue to account for our investment in ABI under the equity method of accounting.
Added · Removed · word-level comparison of the two filings
A challenge to our investment in JUUL, if successful, could result in a broad range of resolutions, including divestiture of the investment or rescission of the transaction.
rewrittenLitigationAdded FTC approval requirements for future e-vapor agreements and board/FTC notice requirements for corporate actions related to JUUL investment.
A challenge to our investment in JUUL, if successful, could result in a broad range of resolutions such as divestiture of the investment or rescission of the transaction. In April 2020, the FTC issued an administrative complaint against Altria and JUUL alleging that our 35% investment in JUUL and the associated agreements constitute an unreasonable restraint of trade in violation of Section 1 of the Sherman Act and Section 5 of the FTC Act, and substantially lessened competition in violation of Section 7 of the Clayton Act. The FTC seeks a broad range of remedies, including divestiture of our minority investment in JUUL, rescission of the transaction and all associated agreements, a requirement of FTC approval of future agreements related to the development, manufacture, distribution or sale of e-vapor products and prohibition against any officer or director of either Altria or JUUL serving on the other party’s board of directors or attending meetings of the other party’s board of directors and notice to the FTC in advance of certain corporate actions, including acquisitions, mergers or certain corporate restructurings.
The administrative trial was held before an FTC administrative law judge in June 2021. In February 2022, the administrative law judge dismissed the FTC’s complaint. FTC complaint counsel appealed that decision to the FTC Commissioners. Any adverse ruling the FTC Commissioners issue following their review may be appealed to a federal appellate court.
Also, various putative class action lawsuits have been filed against Altria (and in some cases, subsidiaries of Altria) and JUUL. The lawsuits cite the FTC administrative complaint referenced above and allege claims similar to those made by the FTC. Plaintiffs in these lawsuits are seeking various remedies, including treble damages, attorneys’ fees, a declaration that the agreements between Altria and JUUL are invalid, divestiture of our investment in JUUL and rescission of the transaction.
A successful challenge by the FTC or the plaintiffs in the lawsuits to the investment would adversely affect us, including by eliminating, or substantially limiting, our rights with respect to our investment in JUUL and our flexibility to pursue other investments in the e-vapor space.
Compare with the 2022 10-K
Prior heading: A challenge to our investment in JUUL, if successful, could result in a broad range of resolutions, including divestiture of the investment or rescission of the transaction.
A challenge to our investment in JUUL, if successful, could result in a broad range of resolutions such as divestiture of the investment or rescission of the transaction. In April 2020, the FTC issued an administrative complaint against Altria and JUUL alleging that Altria’s our 35% investment in JUUL and the associated agreements constitute an unreasonable restraint of trade in violation of Section 1 of the Sherman Act and Section 5 of the FTC Act, and substantially lessened competition in violation of Section 7 of the Clayton Act. The FTC seeks a broad range of remedies, including divestiture of Altria’s our minority investment in JUUL, rescission of the transaction and all associated agreements, a requirement of FTC approval of future agreements related to the development, manufacture, distribution or sale of e-vapor products and prohibition against any officer or director of either Altria or JUUL serving on the other’s other party’s board of directors or attending meetings. meetings of the other party’s board of directors and notice to the FTC in advance of certain corporate actions, including acquisitions, mergers or certain corporate restructurings. The administrative trial was held before an FTC administrative law judge in June 2021. In February 2022, the administrative law judge dismissed the FTC’s complaint. FTC complaint counsel appealed that decision to the FTC Commissioners. Any adverse ruling the FTC Commissioners issue following their review may be appealed to a federal appellate court. Also, various putative class action lawsuits have been filed against Altria (and in some cases, subsidiaries of Altria) and JUUL. The lawsuits cite the FTC administrative complaint referenced above and allege claims similar to those made by the FTC. Plaintiffs in these lawsuits are seeking various remedies, including treble damages, attorneys’ fees, a declaration that the agreements between Altria and JUUL are invalid, divestiture of Altria’s our investment in JUUL and rescission of the transaction. A successful challenge by the FTC or the plaintiffs in the lawsuits to the investment would adversely affect us, including by eliminating, or substantially limiting, our rights with respect to our investment in JUUL, JUUL and could adversely affect the estimated fair value of our investment. For further discussion of flexibility to pursue other investments in the FTC administrative complaint, see Item 3 and Note 18.e-vapor space.
Added · Removed · word-level comparison of the two filings
Our investment in Cronos subjects us to certain risks associated with Cronos’s business, including legal, regulatory and reputational risks.
rewrittenRegulatoryRewritten from transaction benefits to Cronos legal, regulatory and reputational risks including Controlled Substances Act, anti-money laundering laws, and capital availability impacts.
Our equity investment in Cronos, a Canadian cannabinoid company, subjects us to various risks relating to Cronos’s business, such as legal, regulatory and reputational risks. Cronos is engaged in the manufacture, marketing and distribution of U.S. hemp-derived cannabinoid supplements and cosmetic products in the United States and the cultivation, manufacture and marketing of cannabis and cannabis-derived products for the medical and adult-use markets in various international jurisdictions. Accordingly, Cronos’s operations are subject to laws, regulations and guidelines promulgated by various U.S. and international governmental authorities. In the United States, these laws include the Controlled Substances Act, the Civil Assets Forfeiture Reform Act (as it relates to violation of the Controlled Substances Act), all related applicable anti-money laundering laws and FDA regulations.
A failure by Cronos or Altria to comply with these and other applicable laws, including cannabis laws, could result in criminal, civil or tax liability, negative impacts on the availability and cost of capital and credit or reputational harm for Altria.
Compare with the 2022 10-K
Prior heading: The expected benefits of the Cronos transaction may not materialize in the expected manner or timeframe or at all.
In March 2019, we acquired common shares representing a 45% Our equity interest investment in Cronos, a warrant Canadian cannabinoid company, subjects us to acquire common shares representing an additional 10% equity interest in Cronos and anti-dilution protections various risks relating to purchase Cronos’s business, such as legal, regulatory and reputational risks. Cronos shares to maintain our ownership percentage. There can be no assurance that we will realize is engaged in the expected benefits manufacture, marketing and distribution of U.S. hemp-derived cannabinoid supplements and cosmetic products in the Cronos transaction, including due to United States and the risks encountered by Cronos in its business, some cultivation, manufacture and marketing of which are described in various risk factors above, such as operational risks cannabis and legal cannabis-derived products for the medical and regulatory risks; unanticipated impacts on adult-use markets in various international jurisdictions. Accordingly, Cronos’s relationships with third parties, its management, or its current or future plans and operations due are subject to the Cronos transaction or other factors; or domestic or laws, regulations and guidelines promulgated by various U.S. and international litigation developments, tax disputes, investigations, or otherwise; or that Cronos will successfully execute its business plans governmental authorities. In the United States, these laws include the Controlled Substances Act, the Civil Assets Forfeiture Reform Act (as it relates to violation of the Controlled Substances Act), all related applicable anti-money laundering laws and strategies. Further, a FDA regulations. A failure by Cronos or Altria to comply with these and other applicable laws, including cannabis laws, could result in criminal, civil or tax liability liability, negative impacts on the availability and cost of capital and credit or reputational harm for Altria.
Added · Removed · word-level comparison of the two filings
Removed this year
Risk factors in the 2022 10-K with no counterpart in this one. Shown as they read last year.
removed Unfavorable outcomes of any governmental investigations could materially affect the businesses of Altria and its subsidiaries or its investees and Altria’s ability to achieve its Vision.
Regulatory · Removed risk that unfavorable outcomes of federal and state governmental investigations could materially affect Altria and its investees' businesses.
Last year’s text
From time to time, Altria, its subsidiaries and its investees are subject to federal and state governmental investigations on a range of matters. For further discussion of current pending investigations, see Tobacco Space - Business Environment - Other International, Federal, State and Local Regulation and Governmental and Private Activity in Item 7. We cannot predict the outcome of any such investigation, and it is possible that our business or the businesses of our subsidiaries and investees and our ability to achieve our Vision could be materially adversely affected by an unfavorable outcome of any current or future investigation.
removed Altria, its subsidiaries and its investees face various risks related to health epidemics and pandemics, including the COVID-19 pandemic and similar outbreaks, which could have a material adverse effect on the business, consolidated results of operations, cash flows or financial position of Altria and its tobacco operating companies and investees.
Climate & physical · Removed detailed pandemic risk covering COVID-19 impacts on recession, credit markets, product demand, consumer access, behavior changes, and supply chain disruptions.
Last year’s text
Altria’s, its subsidiaries’ and its investees’ business and financial results, consolidated results of operations, cash flows or financial position could be negatively impacted by health epidemics, pandemics and similar outbreaks. The continuing COVID-19 pandemic could have negative impacts, such as (i) a global or U.S. recession or other economic crisis, including a financial crisis, (ii) credit and capital markets volatility (and limited access to these markets, including by those in the distribution and supply chains), (iii) significant volatility in demand for our tobacco operating companies’ and investees’ products, (iv) changes in adult tobacco consumer accessibility to those products, including due to government action, (v) changes in adult tobacco consumer behavior and preferences, including trading down to lower-priced products or the reduction in, or the cessation of, product use due to public health actions or concerns and economic conditions (including those stemming from potential changes in government stimulus or reductions in unemployment payments or other benefits), and (vi) extended or multiple disruptions in our tobacco operating companies’ or investees’ manufacturing operations, or in their distribution and supply chains. In addition, our subsidiaries and investees may incur increased costs and otherwise be negatively affected if significant portions of their respective workforces (or the workforces within their respective distribution or supply chains) are unable to work or work effectively, including because of illness, unavailability of personal protective equipment, quarantines, government actions, facility closures or other restrictions. The impact of the COVID-19 pandemic depends on factors beyond our knowledge or control, including the duration and severity of the outbreak (including new variants), increases in the number of cases in future periods, and actions taken to contain its spread and mitigate the public health effects. We cannot at this time predict the impact of the COVID-19 pandemic on our or our investees’ future financial or operational results, but the impact could be material over time. See the risks below related to extended disruptions at a facility, of a distributor or in service by a service provider and the risks related to our investments in JUUL, ABI and Cronos and the earnings from and carrying value of those investments. For further discussion on the impact of the COVID-19 pandemic on our tobacco operating companies and investees, see Executive Summary - COVID-19 Pandemic in Item 7.
removed Altria’s tobacco operating companies and investees may be unsuccessful in developing and commercializing innovative products or processes, including tobacco products that may reduce the health risks associated with certain other tobacco products and that appeal to adult tobacco consumers, which may have an adverse effect on their ability to grow new revenue streams and/or put them at a competitive disadvantage and may also have an adverse effect on Altria’s ability to achieve its Vision.
Regulatory · Removed risk regarding IQOS importation ban and cease-and-desist orders by ITC, and performance objectives for PMI license renewal expiring April 2024.
Last year’s text
Altria and its tobacco operating companies have growth strategies involving moves and potential moves into innovative products or processes. Some innovative tobacco products may reduce the health risks associated with 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. Examples include tobacco-containing and nicotine-containing products that reduce or eliminate exposure to cigarette smoke and/or constituents identified by public health authorities as harmful, such as electronically heated tobacco products, oral nicotine pouches and e-vapor products. In addition to internal product development, these efforts include arrangements with, or investments in, third parties such as our arrangement with PMI to commercialize IQOS devices and related Marlboro HeatSticks in the United States, which is governed by an exclusive license and distribution agreement. The IQOS devices and related Marlboro HeatSticks are currently subject to an importation ban and cease-and-desist orders imposed by the ITC. PM USA does not expect to have access to IQOS devices or the related Marlboro HeatSticks for sale and distribution during 2022. In addition, the initial 5-year term of this agreement expires in April 2024 and renews at our option for an additional 5-year period so long as we have achieved certain performance objectives. The initial term performance objectives are based on achieving 0.5% dollar share of the cigarette category within a certain period of time in a certain number of geographic areas. In addition, we maintain our exclusive distribution rights as to PMI during the term of the agreement so long as we have achieved certain performance objectives within a specified time period by April 2022. The exclusive distribution rights performance objectives are based on achieving 0.5% dollar share of the cigarette category within a certain period of time in a single geographic area. While we believe Altria has met the initial term and exclusive distribution rights performance objectives, PMI has communicated to us that it disagrees as to whether those objectives have been met. If we do not resolve this disagreement in a manner favorable to PM USA, it could result in the loss of (i) our unilateral right to extend the agreement for the additional 5-year period, and therefore we would no longer be able to commercialize IQOS devices and related Marlboro HeatSticks after April 2024, or (ii) our exclusive distribution rights as to PMI. For further discussion, see Note 18. Additionally, our investment in JUUL subjects us to non-competition obligations restricting us from investing or engaging in the e-vapor business other than through JUUL, subject to certain exceptions. Our tobacco operating companies and investees may not succeed in their efforts to develop and commercialize these innovative products, which would have an adverse effect on the ability to grow new revenue streams and on our ability to achieve our Vision. Further, we cannot predict whether regulators, including the FDA, will permit the marketing or sale of any particular innovative products (including products with claims of reduced risk to adult tobacco consumers), the speed with which they may make such determinations or whether regulators will impose an unduly burdensome regulatory framework on such products. In addition, the FDA could, for a variety of reasons, determine that innovative products currently on the market but pending FDA review of the associated PMTA (such as on! oral nicotine pouches), or those that have previously received authorization, including with a claim of reduced exposure (such as IQOS), are not appropriate for the public health and the FDA could require such products be taken off the market. See Tobacco Space - Business Environment - FSPTCA and FDA Regulation in Item 7 for further discussion. We also cannot predict whether these products will appeal to adult tobacco consumers or whether adult tobacco consumers’ purchasing decisions would be affected by reduced-risk claims on such products if permitted. Adverse developments on any of these matters could negatively impact the commercial viability of such products. If our tobacco operating companies or investees do not succeed in their efforts to develop and commercialize innovative tobacco products or to obtain or maintain regulatory approval for the marketing or sale of products, including with claims of reduced risk, but one or more of their competitors does succeed, our tobacco operating companies or investees may be at a competitive disadvantage, which could have an adverse effect on their financial performance and on our ability to achieve our Vision.
removed The expected benefits of the JUUL transaction may not materialize in the expected manner or timeframe or at all.
Litigation · Removed risk that JUUL transaction benefits may not materialize due to FTC challenge, regulatory risks, litigation, and underage use concerns.
Last year’s text
Regardless of whether we successfully defend against the FTC’s challenge to the JUUL transaction, the expected benefits of the JUUL transaction may not materialize in the expected manner or timeframe or at all, including due to the risks encountered by JUUL in its business, some of which are described in various risk factors above, such as operational risks, competitive risks and regulatory and legislative risks at the international, federal, state and local levels, including actions by the FDA, and adverse publicity due to underage use of e-vapor products and other factors; unanticipated impacts on JUUL’s relationships with employees, customers, suppliers and other third parties; potential disruptions to JUUL’s management or current or future plans and operations; or domestic or international litigation developments, investigations or otherwise. As discussed in Note 18, JUUL and Altria and/or its subsidiaries, including PM USA, are named as defendants in various individual and class action lawsuits, including independent lawsuits initiated by certain state attorneys general. JUUL also is named in a significant number of additional individual and class action lawsuits to which neither Altria nor its subsidiaries is a party. See Tobacco Space - Business Environment in Item 7 for a discussion of certain FDA-related regulatory risks applicable to the e-vapor category, including the potential removal of certain e-vapor products from the market as a result of FDA enforcement action and the potential denial of new tobacco product applications for e-vapor products. Failure to realize the expected benefits of our JUUL investment could adversely affect the value of the investment and could also adversely affect our ability to achieve our Vision. As discussed in Note 6, as part of the preparation of our financial statements for the quarters ended September 30, 2019, December 31, 2019 and September 30, 2020, we performed valuations of our investment in JUUL as a result of the existence of impairment indicators. As a result, we determined that our investment in JUUL was impaired and recorded total non-cash pre-tax impairment charges of $11.2 billion. Following Share Conversion (as defined in Note 6) in the fourth quarter of 2020, Altria elected to account for its equity method investment in JUUL under the fair value option. Under this option, Altria’s consolidated statements of earnings (losses) include any cash dividends received from its investment in JUUL and any changes in the estimated fair value of its investment, which is calculated quarterly. While we believe the December 31, 2021 valuation of $1.7 billion is the appropriate current estimated fair value of our investment, the risks identified in this paragraph, some of which are also further discussed in Discussion and Analysis - Critical Accounting Policies and Estimates - Investment in JUUL and Tobacco Space - Business Environment in Item 7 and in Note 18, are ongoing with respect to the current estimated fair value. Quarterly fair value changes could create volatility in Altria’s consolidated financial position and earnings and, if the estimated fair value of our investment in JUUL decreases, it could have a material adverse effect on Altria’s consolidated financial position or earnings.
removed Tax authorities may challenge the tax treatment of the consideration Altria received in the October 2016 SABMiller plc/ABI business combination (“ABI Transaction”) and the tax treatment of our investment in ABI may not be as favorable as Altria anticipates.
Regulatory · Removed risk that tax authorities may challenge tax treatment of October 2016 SABMiller/ABI transaction consideration or ABI investment tax treatment.
Last year’s text
While we expect the tax treatment of the consideration that we received from the ABI Transaction to be respected, the statute of limitations for the tax year in which the transaction occurred has not expired. Therefore, we cannot provide any assurance that federal and state tax authorities will not challenge the expected tax treatment and, if they do, what the outcome of any such challenge will be. In addition, there is a risk that the tax treatment of our investment in ABI may not be as favorable as we anticipate.
removed Our investment in JUUL includes non-competition, standstill and transfer restrictions that prevent us from gaining control of JUUL. Furthermore, if we elect not to extend our non-competition obligations beyond December 20, 2024, we would lose certain of our governance, consent, preemptive and other rights with respect to our investment in JUUL.
Concentration · Removed risk regarding JUUL share transfer restrictions until December 20, 2024, non-competition obligations, and limited governance rights over JUUL.
Last year’s text
The shares of JUUL we hold generally cannot be sold or otherwise transferred until December 20, 2024, subject to limited exceptions. We also generally agreed not to compete with JUUL in the e-vapor category until at least December 20, 2024, which may be extended at our election. If, however, JUUL is prohibited by federal law from selling e-vapor products in the United States for at least one year or if Altria’s carrying value of the JUUL investment is not more than 10% of its initial carrying value of $12.8 billion, we may elect to compete with JUUL in the e-vapor category prior to December 20, 2024. In addition, in the event we elect to exercise our board designation rights at JUUL, JUUL’s board of directors will include nine members, three of whom will be designated by Altria, including one independent designee. JUUL’s strategy and its material decisions are not and will not be controlled by us, and the terms of our agreements with JUUL mean that we are required to bear the risks associated with our investment in JUUL and are restricted from competing with JUUL until at least December 20, 2024, subject to the exceptions mentioned above. Further, if we elect not to extend our non-competition obligations beyond that date or to terminate such obligations in the circumstances described above, we would lose some or all of our board designation rights, preemptive rights, consent rights and other rights with respect to our investment in JUUL.
removed If our percentage ownership in ABI were to decrease below certain levels, we may be subject to additional tax liabilities, incur a reduction in the number of directors that we can have appointed to the ABI board of directors and be unable to account for our investment in ABI under the equity method of accounting.
Regulatory · Removed risk that ABI ownership percentage decrease below certain levels could trigger tax liabilities, reduce board appointments, or eliminate equity method accounting.
Last year’s text
In the event that our ownership percentage in ABI were to decrease below certain levels, (i) we may be subject to additional tax liabilities, (ii) the number of directors that we have the right to have appointed to the ABI board of directors could be reduced from two to one or zero and (iii) we may be unable to continue to account for our investment in ABI under the equity method of accounting.
removed Acquisitions or other events may adversely affect Altria’s credit rating, and Altria may not achieve its anticipated strategic or financial objectives of a transaction.
Credit & liquidity · Removed risk that acquisitions or investments could negatively impact investment grade credit ratings, citing JUUL investment as prior example.
Last year’s text
From time to time, Altria considers acquisitions, investments or dispositions and may engage in confidential negotiations that are not publicly announced unless and until those negotiations result in a definitive agreement. Although we seek to maintain or improve our credit ratings over time, it is possible that completing a given acquisition, investment, disposition or the occurrence of other events could negatively impact our investment grade credit ratings or the outlook for those ratings as occurred following our investment in JUUL. Any such change in ratings or outlook may negatively affect the amount of credit available to us and also may increase our costs and adversely affect our earnings or our dividend rate. Furthermore, acquisition opportunities are limited, and acquisitions present risks of failing to achieve efficient and effective integration, strategic objectives and anticipated revenue improvements and cost savings. There can be no assurance that we will be able to acquire attractive businesses on favorable terms or that we will realize any of the anticipated benefits from an acquisition or an investment. Additionally, there can be no assurance that we will be able to dispose of our businesses or investments on favorable terms, which may result in a loss in our consolidated statements of earnings (losses).
removed If the carrying value of our investment in ABI exceeds its fair value and the loss in value is other than temporary, the investment is considered impaired, which would result in additional impairment losses and could have a material adverse effect on our consolidated financial position or earnings.
Credit & liquidity · Removed risk of additional impairment losses on ABI investment if carrying value exceeds fair value; prior $6.2 billion impairment charge recorded September 30, 2021.
Last year’s text
As further discussed in Note 6, in preparing our financial statements for the period ended September 30, 2021, we concluded that the carrying value of our investment in ABI exceeded the fair value of our equity investment in ABI and that the decline in fair value of our investment in ABI below its carrying value was other than temporary at September 30, 2021. As a result, we recorded a non-cash, pre-tax impairment charge of $6.2 billion for the nine and three months ended September 30, 2021 to (income) losses from equity investments in Altria’s condensed consolidated statements of earnings (losses). If ABI is unable to successfully execute its business plans and strategies and the carrying value of our investment in ABI again exceeds the fair value of our investment in ABI, it could result in additional impairment losses, which could have a material adverse effect on our consolidated financial position or earnings.
removed If the carrying value of our investment in Cronos exceeds its fair value and the loss in value is other than temporary, the investment is considered impaired, which would result in impairment losses and could have a material adverse effect on our consolidated financial position or earnings.
Credit & liquidity · Removed risk of additional impairment losses on Cronos investment; prior $205 million impairment charge recorded for year ended December 31, 2021.
Last year’s text
As further discussed in Note 6, in preparing our financial statements for the year ended December 31, 2021, we concluded that our equity method investment in Cronos declined below its carrying value and that there was not sufficient evidence to conclude that the impairment was temporary. As a result, we recorded a non-cash, pre-tax impairment charge of $205 million to (income) losses from equity investments in our consolidated statement of earnings (losses) for the year ended December 31, 2021. If Cronos is unable to successfully execute its business plans and strategies and the fair value of our investment in Cronos continues to decrease, it could result in additional impairment losses, which could have a material adverse effect on our consolidated financial position or earnings.
Mentions · how they’re counted
| Category | Underlined | Word counter | Model’s count |
|---|---|---|---|
| AI AI, artificial intelligence, generative AI, machine learning, large language model, LLM | 0 | — | — |
| Layoffs layoffs, RIF, headcount reduction, workforce optimization, restructuring | 2 | — | — |
| Recession recession, downturn, contraction, slowdown | 0 | — | — |
| Tariffs tariff, trade war, trade barriers, trade restrictions, trade policy | 1 | — | — |
| Buybacks share repurchase, buyback program | 0 | — | — |
Underlines use the same word lists the scores use. AI, recession and tariffs follow Palanor’s word counter, so those counts match it exactly on the same text. Layoffs and buybacks use the terms the model was given. The model’s count is an estimate by meaning, not by string, so it can differ from the underlines. This view is built from the parsed risk factors, so it can differ slightly from the section text the counts were taken on.
Source: SEC EDGAR · public domain · Highlights by Palanor