Goodwill and Other Intangible Assets, net

6 Months Ended

Jun. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets, net

Goodwill and Other Intangible Assets, net

Goodwill and other intangible assets, net, were as follows:

	Goodwill				Other Intangible Assets, net
(in millions)	June 30, 2023		December 31, 2022		June 30, 2023		December 31, 2022
Smokeable products segment	$	99	$	99	$	2,977	$	2,989
Oral tobacco products segment	5,078		5,078		9,081		9,097
Other	1,613		—		1,691		298
Total	$	6,790	$	5,177	$	13,749	$	12,384

Other intangible assets consisted of the following:

	June 30, 2023				December 31, 2022
(in millions)	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Indefinite-lived intangible assets	$	11,443	$	—	$	11,443	$	—
Definite-lived intangible assets	2,821		515		1,411		470
Total other intangible assets	$	14,264	$	515	$	12,854	$	470

At June 30, 2023, substantially all of our indefinite-lived intangible assets consisted of our trademarks from our 2009 acquisition of UST ($8.8 billion) and 2007 acquisition of Middleton ($2.6 billion). Definite-lived intangible assets, consisting primarily of intellectual property (which includes developed technology), certain cigarette trademarks, e-vapor trademarks, customer relationships and supplier agreements are amortized over a weighted-average period of 18 years. Pre-tax amortization expense for definite-lived intangible assets was $45 million and $35 million for the six months ended June 30, 2023 and 2022, respectively, and $27 million and $18 million for the three months ended June 30, 2023 and 2022, respectively. Our annualized amortization expense, which includes the impact of the NJOY Transaction, for each of the next five years is estimated to be approximately $160 million, assuming no additional transactions occur that require the amortization of intangible assets.

In July 2023, we received the remaining payment of approximately $1.8 billion (including interest) from Philip Morris International Inc. (“PMI”) as part of the agreement with PMI to, among other things, transition and ultimately conclude our relationship with respect to the IQOS Tobacco Heating System (“IQOS System”) in the United States (“Remaining PMI Payment”). In 2022, we received $1.0 billion from PMI upon entering into the agreement. For the six and three months ended June 30, 2023, we recorded interest income related to the Remaining PMI Payment of $51 million and $26 million, respectively, in our condensed consolidated statements of earnings. At June 30, 2023, our condensed consolidated balance sheet included a pre-tax $2.7 billion deferred gain, which we expect to recognize in earnings when we relinquish our rights to the IQOS System effective April 30, 2024.

The changes in goodwill and net carrying amount of intangible assets were as follows:

	For the Six Months Ended June 30, 2023				For the Year Ended December 31, 2022
(in millions)	Goodwill		Other Intangible Assets, net		Goodwill		Other Intangible Assets, net
Balance at January 1	$	5,177	$	12,384	$	5,177	$	12,306
Changes due to:
Acquisitions (1)	1,613		1,410		—		151
Amortization	—		(45)		—		(73)
Balance at end of period	$	6,790	$	13,749	$	5,177	$	12,384

(1) 2023 amounts attributable to the NJOY Transaction. For additional information regarding the NJOY Transaction, see Note 2. Acquisition of NJOY. 2022 amounts attributable to certain intellectual property for other tobacco products.

We conduct a required annual review of goodwill and indefinite-lived intangibles for potential impairment, and more frequently if an event occurs or circumstances change that would require us to perform an interim review. There have been no events or changes in circumstances that indicate an interim impairment review was required as of June 30, 2023. We will perform our annual impairment testing during the fourth quarter of 2023.