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Goodwill and Other Intangible Assets, net | 6 Months Ended
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Jun. 30, 2024
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, 2024 |  | December 31, 2023 |  | June 30, 2024 |  | December 31, 2023
Smokeable products segment | $ | 99 |  |  | $ | 99 |  |  | $ | 2,951 |  |  | $ | 2,963 |
Oral tobacco products segment | 5,078 |  |  | 5,078 |  |  | 8,695 |  |  | 9,065 |
Other | 1,768 |  |  | 1,614 |  |  | 1,402 |  |  | 1,658 |
Total | $ | 6,945 |  |  | $ | 6,791 |  |  | $ | 13,048 |  |  | $ | 13,686 |
Other intangible assets consisted of the following:
| June 30, 2024 |  | December 31, 2023
(in millions) | Gross Carrying Amount |  | Accumulated Amortization |  | Gross Carrying Amount |  | Accumulated Amortization
Indefinite-lived intangible assets | $ | 11,089 |  |  | $ | — |  |  | $ | 11,443 |  |  | $ | — |
Definite-lived intangible assets | 2,621 |  |  | 662 |  |  | 2,841 |  |  | 598 |
Total other intangible assets | $ | 13,710 |  |  | $ | 662 |  |  | $ | 14,284 |  |  | $ | 598 |
At June 30, 2024, substantially all of our indefinite-lived intangible assets consisted of (i) MST and snus trademarks of $8.5 billion, which consists of Copenhagen, Skoal and other MST and snus trademarks of $4.0 billion, $3.6 billion and $0.9 billion, respectively, from our 2009 acquisition of UST, and (ii) cigar trademarks of $2.6 billion from our 2007 acquisition of Middleton. Definite-lived intangible assets, consisting primarily of intellectual property (which includes developed technology), certain cigarette trademarks, e-vapor trademarks and customer relationships, are amortized over a weighted-average period of approximately 19 years. Pre-tax amortization expense for definite-lived intangible assets was $64 million and $45 million for the six months ended June 30, 2024 and 2023, respectively, and $37 million and $27 million for the three months ended June 30, 2024 and 2023, respectively. We estimate our annualized amortization expense, which includes the impact of the NJOY Transaction and related measurement period adjustments, for each of the next five years to be approximately $150 million, assuming no additional transactions occur that require the amortization of intangible assets. On April 30, 2024, we assigned the exclusive U.S. commercialization rights to the IQOS Tobacco Heating System (“IQOS System”) to Philip Morris International Inc. (“PMI”) pursuant to the terms of a purchase agreement entered into with PMI in October 2022. In exchange for the assignment of the U.S. commercialization rights to the IQOS System, we received total cash payments of approximately $2.8 billion ($1.0 billion in 2022 and $1.8 billion, including interest, in the third quarter of 2023), $2.7 billion of which was classified as a deferred gain on our condensed consolidated balance sheet at December 31, 2023. Upon the assignment of the U.S. commercialization rights to the IQOS System, we recorded a pre-tax gain of $2.7 billion for the six and three months ended June 30, 2024 in our condensed consolidated statements of earnings. The changes in goodwill and net carrying amount of intangible assets were as follows:
| For the Six Months Ended |  | For the Year Ended
| June 30, 2024 |  | December 31, 2023
(in millions) | Goodwill |  | Other Intangible Assets, net |  | Goodwill |  | Other Intangible Assets, net
Balance at January 1 | $ | 6,791 |  |  | $ | 13,686 |  |  | $ | 5,177 |  |  | $ | 12,384 |
Changes due to: |  |  |  |  |  |  |
Acquisitions (1) | 154 |  |  | (220) |  |  | 1,614 |  |  | 1,430 |
Asset impairment | — |  |  | (354) |  |  | — |  |  | — |
Amortization | — |  |  | (64) |  |  | — |  |  | (128) |
Balance at end of period | $ | 6,945 |  |  | $ | 13,048 |  |  | $ | 6,791 |  |  | $ | 13,686 |
(1) Substantially all of the 2023 amounts are attributable to the NJOY Transaction. The 2024 amount represents the measurement period adjustments made during the three months ended March 31, 2024 related to the NJOY Transaction. For additional information regarding the NJOY Transaction, see Note 2. Acquisition of NJOY. 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 quantitative impairment assessment. Apart from the factors leading us to perform a quantitative assessment for the Skoal intangible asset as discussed below, there have been no events or changes in circumstances that indicate an interim quantitative impairment assessment was required as of June 30, 2024. We will perform our annual impairment testing during the fourth quarter of 2024. At December 31, 2023, the estimated fair value of the Skoal trademark exceeded its carrying value of $3.9 billion by approximately 6% ($0.2 billion). Sales volumes of MST products, including Skoal, have continued to be negatively impacted due in part to evolving adult tobacco consumer preferences, which has resulted in consumers increasingly moving across tobacco categories. In connection with the preparation of our financial statements for the period ended June 30, 2024, we evaluated the accelerated growth of innovative tobacco products, including oral nicotine pouches, and the related increase in competitive activity among tobacco categories, which have continued to contribute to reductions in sales volumes for MST products, including Skoal. We concluded that the expected impact from the sales volume declines on the Skoal trademark represented a triggering event, and as a result of this conclusion, we performed an interim impairment assessment as of June 30, 2024. As a result of (i) lower projected revenue and income due to lower volume assumptions, (ii) a decrease in the perpetual growth rate to 0% (1% at October 1, 2023 valuation) and (iii) an increase in the discount rate to 11.5% (11.0% at October 1, 2023 valuation), we determined the estimated fair value of the Skoal trademark as of June 30, 2024, was below its carrying value and recorded a non-cash, pre-tax impairment of $354 million for the six and three months ended June 30, 2024 in our condensed consolidated statements of earnings. Our estimate of the fair value and carrying value of the Skoal trademark at June 30, 2024 was $3.6 billion, after recording the impairment. We used an income approach to estimate the fair value of the Skoal trademark. The income approach reflects the discounting of expected future cash flows at a rate of return that incorporates the risk-free rate for the use of those funds, the expected rate of inflation and the risks associated with realizing expected future cash flows. In performing the discounted cash flow analysis, we made various judgments, estimates and assumptions, the most significant of which were volume, revenue, income, operating margins, perpetual growth rate and discount rate. All significant inputs used in the valuation are classified in Level 3 of the fair value hierarchy. Our annual impairment test of goodwill and indefinite-lived intangible assets as of October 1, 2023 resulted in no impairment charges. At June 30, 2024 and December 31, 2023, there were no accumulated impairment losses related to goodwill.

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