Item 1A. Risk Factors

Information regarding Risk Factors appears in Part I, Item 1A. Risk Factors of our 2021 Form 10-K. Except as set forth below, there have been no material changes to the risk factors previously disclosed in our 2021 Form 10-K. We elaborate on these and other risks we face throughout this Form 10-Q, particularly in the “Business Environment” section preceding our discussion of our operating results above in Part 1, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Risks Related to Our Investments

The expected benefits of the JUUL transaction may not materialize in the expected manner or timeframe or at all.

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, such as operational, competitive, regulatory and legislative risks at the international, federal, state and local levels, including actions by the FDA; adverse publicity due to underage use of e-vapor products and other factors; changes in JUUL’s relationships with employees, customers, suppliers, lenders and other third parties; potential disruptions to JUUL’s management or current or future plans and operations; adverse changes with respect to JUUL’s ability to satisfy its obligations under its debt arrangements and maintain adequate financing to fund its projected cash needs, which could result in JUUL seeking protection under bankruptcy or other insolvency law; or developments with respect to domestic or international litigation or investigations. JUUL and Altria and/or one or more of our 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 any of our subsidiaries is a party.

In preparing our financial statements for prior periods, we performed valuations of our investment in JUUL as a result of impairment indicators, determined that our investment in JUUL was impaired and recorded non-cash impairment charges in those periods totaling $11.2 billion. Since the time we recorded those impairments, we have elected to account for our equity method investment in JUUL under the fair value option. Under this option, we make various judgments, estimates and assumptions, including with respect to sales volume, operating margins, discount rates and perpetual growth rates, to estimate the fair value of our investment in JUUL, which is calculated quarterly. In June 2022, the FDA issued JUUL MDOs for all of JUUL’s products currently marketed in the United States. Although the MDOs are stayed on a temporary basis, the possibility of JUUL’s products being removed from the U.S. market and the likelihood and extent of JUUL being able to maintain adequate financing to fund projected cash needs negatively impacted the estimated fair value of our investment for the quarter ended June 30, 2022.

If the FDA ultimately denies JUUL authorization to market its products in the United States, or if the outcomes in connection with any of the other risks or circumstances discussed above deviate significantly from then-current expectations, such outcomes could materially impact the judgments, estimates and assumptions we make in connection with our quarterly estimate of the fair value of our investment in JUUL. Accordingly, negative developments with respect to the risks or circumstances discussed above could adversely impact the fair value of our investment in JUUL, create volatility in our consolidated financial position or earnings, adversely impact our ability to recognize the expected benefits of the JUUL transaction in the expected timeframe or at all and adversely affect our ability to achieve our Vision.

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.

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. In preparing our financial statements for the period ended June 30, 2022, we concluded that our equity method investment in Cronos had declined further and that there was not sufficient evidence to conclude that the impairment was temporary. As a result, we recorded non-cash, pre-tax impairment charges of $205 million and $107 million to (income) losses from equity investments in our consolidated statement of earnings (losses) for the year ended December 31, 2021 and the quarter ended June 30, 2022, respectively. 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.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

In January 2021, our Board of Directors authorized a $2.0 billion share repurchase program that it expanded to $3.5 billion in October 2021 (as expanded, the “January 2021 share repurchase program”), which we expect to complete by December 31, 2022. The timing of share repurchases under this program depends upon marketplace conditions and other factors, and the program remains subject to the discretion of our Board.

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Our share repurchase activity for each of the three months in the period ended June 30, 2022, was as follows:

(1) The total number of shares purchased includes (a) shares purchased under the January 2021 share repurchase program and (b) shares withheld in an amount equal to the statutory withholding taxes for vested stock-based awards previously granted to eligible employees (which totaled 1,309 in May and 1,449 in June).

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