What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-02-10 compared with 2022-02-11 · 661 added, 380 removed, 1758 unchanged (37% of the section changed)

4 unchanged sentences

2022 2021 2020

Revenues including excise taxes

Revenues including excise taxes (includes $ 8,269 in 2022, $ 7,822 in 2021 and $ 7,572 in 2020 from related parties)

$ 80,669 $ 82,223 $ 76,047

1 unchanged sentence

48,907 50,818 47,353

Net revenues (includes $ 3,658 in 2022, $ 3,330 in 2021 and $ 3,233 in 2020 from related parties) (Note 18)

31,762 31,405 28,694

Cost of sales

Cost of sales (Notes 4 & 5)

11,402 10,030 9,569

2 unchanged sentences

8,114 8,400 7,457

Amortization of intangibles

Operating income

26 unchanged sentences

( 1,268 ) 58 ( 1,265 )

(Gains)/losses transferred to earnings - deconsolidation of RBH, net of income taxes of $ 0 in 2021, 2020 and 2019 (Note 20)

Change in net loss and prior service cost:

3 unchanged sentences

and $( 67 ) in 2020

(Gains)/losses transferred to earnings - deconsolidation of RBH, net of income taxes of $ 0 in 2021, $ 0 in 2020 and

$( 15 ) in 2019 (Note 20)

Change in fair value of derivatives accounted for as hedges:

21 unchanged sentences

Finished product

Other current assets

Other current assets (Note 3)

Total current assets

11 unchanged sentences

Deferred income taxes

Other assets (less allowances of $ 21 in 2021 and $ 22 in 2020)

Other assets (less allowances of $ 20 in 2022 and $ 21 in 2021) (Note 3)

$ 61,681 $ 41,290

(1) Includes trade receivables from related parties of $ 688 million and $ 518 million as of December 31, 2022, and 2021, respectively (less allowances of $ 7 million in 2022 and $ 1 million in 2021).

For further details, see Note 6.

Related Parties - Equity Investments and Other.

See notes to consolidated financial statements.

1 unchanged sentence

Short-term borrowings (Note 8)

$ 5,637 $ 225

Current portion of long-term debt (Note 8)

17 unchanged sentences

Stockholders’ (Deficit) Equity

Common stock, no par value ( 2,109,316,331 shares issued in 2021 and 2020)

Common stock, no par value ( 2,109,316,331 shares issued in 2022 and 2021) (Note 9)

Additional paid-in capital

1 unchanged sentence

34,289 33,082

Accumulated other comprehensive losses

Accumulated other comprehensive losses (Note 17)

( 9,559 ) ( 9,577 )

17 unchanged sentences

Adjustments to reconcile net earnings to operating cash flows:

Depreciation and amortization

Depreciation, amortization and impairment of intangibles 1,189 998 981

Deferred income tax (benefit) provision

10 unchanged sentences

( 261 ) ( 260 ) ( 260 )

Pension plan contributions

( 269 ) ( 102 ) ( 200 )

Pension plan contributions, net of refunds (Note 14)

3 ( 269 ) ( 102 )

4 unchanged sentences

( 1,077 ) ( 748 ) ( 602 )

Acquisitions, net of acquired cash (Note 6) ( 2,111 ) — —

Acquisition of Swedish Match AB, net of acquired cash (Note 3) ( 13,976 ) — —

Other acquisitions, net of acquired cash (Note 3) — ( 2,111 ) —

Altria Group, Inc.

agreement (Note 3) ( 1,002 ) — —

Equity investments

( 20 ) ( 34 ) ( 47 )

Deconsolidation of RBH (Note 20) — — ( 1,346 ) (2)

Net investment hedges

Net investment hedges and other derivatives (Note 16)

284 466 ( 551 )

1 unchanged sentence

( 15,679 ) ( 2,358 ) ( 1,154 )

(1) Includes amounts from related parties of $( 166 ) million, $( 149 ) million and $ 88 million in 2022, 2021 and 2020, respectively

See notes to consolidated financial statements.

5 unchanged sentences

Repayments - maturities longer than 90 days ( 795 ) — ( 45 )

Borrowings under credit facilities related to Swedish Match AB acquisition 13,920 — —

Repayments under credit facilities related to Swedish Match AB acquisition ( 4,000 ) — —

Long-term debt proceeds 5,965 — 3,713

2 unchanged sentences

Dividends paid ( 7,812 ) ( 7,580 ) ( 7,364 )

Payments to noncontrolling interests and Other

Payments to acquire Swedish Match AB noncontrolling interests (Note 3) ( 1,495 ) — —

Payments to noncontrolling interests and Other (Note 3)

( 854 ) ( 580 ) ( 776 )

Net cash used in financing activities ( 11,977 ) ( 8,496 ) ( 8,061 )

Net cash provided by (used in) financing activities 3,806 ( 11,977 ) ( 8,496 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 213 ) ( 417 ) 258

7 unchanged sentences

Income taxes $ 2,751 $ 2,936 $ 2,785

(1) Includes the Loss on Deconsolidation of RBH ($ 239 million) and the Canadian tobacco litigation-related charge ($ 194 million) that were included in marketing, administration and research costs in the consolidated statements of earnings for the year ended December 31, 2019.

For further details on these charges, see Note 20.

Deconsolidation of RBH .

(2) Includes deconsolidation of RBH cash and cash equivalents of $ 1,323 million and restricted cash of $ 23 million.

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $ 10 million, $ 4 million and $ 5 million as of December 31, 2022, 2021 and 2020, respectively, which were included in other current assets in the consolidated balance sheets.

13 unchanged sentences

Other comprehensive earnings (losses), net of income taxes

Issuance of stock awards

( 1,818 ) 38 ( 1,780 )

Issuance of stock awards (Note 10) 69 91 160

Dividends declared ($ 4.74 per share)

( 7,405 ) ( 7,405 )

Payments to noncontrolling interests ( 378 ) ( 378 )

Deconsolidation of RBH (Note 20) 529 529

Dividends paid to noncontrolling interests ( 602 ) ( 602 )

Other 17 ( 14 ) 3

3 unchanged sentences

1,604 ( 79 ) 1,525

Issuance of stock awards

Issuance of stock awards (Note 10) 119 78 197

Dividends declared ($ 4.90 per share)

( 7,665 ) ( 7,665 )

Payments to noncontrolling interests ( 602 ) ( 602 )

Other 17 ( 14 ) 3

Dividends paid to noncontrolling interests ( 560 ) ( 560 )

Common stock repurchased ( 785 ) ( 785 )

Balances, December 31, 2021 — 2,225 33,082 ( 9,577 ) ( 35,836 ) 1,898 ( 8,208 )

2 unchanged sentences

189 ( 135 ) 54

Issuance of stock awards

Issuance of stock awards (Note 10) 37 118 155

Dividends declared ($ 5.04 per share)

( 7,841 ) ( 7,841 )

Payments to noncontrolling interests ( 560 ) ( 560 )

Dividends paid to noncontrolling interests ( 472 ) ( 472 )

Common stock repurchased ( 199 ) ( 199 )

Acquisitions (Note 3) 2,379 2,379

Purchases of shares from noncontrolling interests (Note 3) ( 32 ) ( 171 ) ( 1,503 ) ( 1,706 )

Balances, December 31, 2022 $ — $ 2,230 $ 34,289 $ ( 9,559 ) $ ( 35,917 ) $ 2,646 $ ( 6,311 )

4 unchanged sentences

is a holding company incorporated in Virginia, U.S.A.

(also referred to herein as the U.S., the United States or the United States of America), whose subsidiaries and affiliates and their licensees are primarily engaged in the manufacture and sale of cigarettes and reduced-risk products including heat-not-burn, vapor and oral nicotine products, in markets outside of the United States of America.

In addition, during 2021, 2020 and 2019, PMI shipped versions of its Platform 1 device and its consumables authorized by the U.S.

Food and Drug Administration ("FDA") to Altria Group, Inc., for sale in the United States under license.

For further developments related to the sale of these products in the U.S., see Note 17.

Contingencies .

(also referred to herein as the U.S., the United States or the United States of America), whose subsidiaries and affiliates and their licensees are primarily engaged in the manufacture and sale of cigarettes and smoke-free products including heat-not-burn, vapor, and oral nicotine products.

Throughout these financial statements, the term "PMI" refers to Philip Morris International Inc.

and its subsidiaries.

Smoke-free products ("SFPs") is the term PMI primarily uses to refer to all of its products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral nicotine.

In addition, SFPs include wellness and healthcare products, as well as consumer accessories such as lighters and matches.

Reduced-risk products ("RRPs") is the term PMI uses to refer to products that present, are likely to present, or have the potential to present less risk of harm to smokers who switch to these products versus continuing smoking.

PMI has a range of RRPs in various stages of development, scientific assessment and commercialization.

PMI's RRPs are smoke-free products that contain and/or generate far lower quantities of harmful and potentially harmful constituents than found in cigarette smoke.

"Platform 1" is the term PMI uses to refer to PMI’s reduced-risk product that uses a precisely controlled heating device into which a specially designed and proprietary tobacco unit is inserted and heated to generate an aerosol.

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All intercompany transactions and balances have been eliminated.

In the third quarter of 2021, the former Latin America & Canada segment was renamed as the Americas segment.

Additionally, due to the acquisitions of Fertin Pharma A/S, Vectura Group plc.

In the fourth quarter of 2022, PMI acquired a controlling interest of the total issued shares in Swedish Match AB (“Swedish Match”).

The operating results of Swedish Match are included in a separate segment.

In the third quarter of 2021, PMI acquired Fertin Pharma A/S, Vectura Group plc.

and OtiTopic, Inc.

in the third quarter of 2021, PMI added an Other category.

For further details, see Note 6.

On March 31, 2022, PMI launched a new Wellness and Healthcare business consolidating these entities, Vectura Fertin Pharma.

The operating results of this business are reported in the Wellness and Healthcare segment.

For further details on these acquisitions, see Note 3.

Acquisitions and Note 13.

Segment Reporting .

As of March 22, 2019, PMI deconsolidated the financial results of its Canadian subsidiary, Rothmans, Benson & Hedges Inc.

("RBH") from PMI's financial statements.

For further details, see Note 20.

Deconsolidation of RBH .

Certain prior years' amounts have been reclassified to conform with the current year's presentation.

The changes did not have a material impact on PMI's consolidated financial position, results of operations or cash flows in any of the periods presented.

Following the Swedish Match acquisition and a review of PMI and Swedish Match’s combined product portfolio, PMI reclassified certain of its own products previously reported under its combustible tobacco product category to the newly created smoke-free product category to better reflect the characteristics of these products.

This reclassification did not impact PMI’s segment reporting, consolidated financial position, results of operations or cash flows in any of the periods presented.

For further details, see Note 13.

Segment Reporting .

During the first quarter of 2022, one of Fertin Pharma's product lines was moved from the Wellness and Healthcare segment to the European Union segment.

For further details, see Note 5.

Goodwill and Other Intangible Assets, net .

The change did not have a material impact on PMI's consolidated financial position, results of operations or cash flows in any of the periods presented.

Summary of Significant Accounting Policies:

PMI uses the acquisition method of accounting for acquired businesses.

Under the acquisition method, PMI’s consolidated financial statements reflect the operations of an acquired business starting from the closing date of the acquisition.

PMI allocates the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on the estimated fair values as of the acquisition date.

Any residual purchase price is recorded as goodwill.

The fair value of assets acquired and liabilities assumed in certain cases may be subject to revision based on the final determination of fair value during a period of time not to exceed 12 months from the acquisition date.

Contingent consideration liabilities are recognized at the estimated fair value on the acquisition date.

Subsequent changes to the fair value of contingent consideration are recognized in marketing, administration and research costs in the consolidated statement of earnings.

Transaction costs are expensed as incurred.

If PMI determines that assets acquired do not meet the definition of a business, the transaction will be accounted for as an acquisition of assets rather than a business combination and, therefore, no goodwill will be recorded.

In an asset acquisition, acquired in-process research and development ("IPR&D") with no alternative future use is charged to expense.

Cash and cash equivalents

43 unchanged sentences

If an impairment is determined to exist, any related impairment loss is calculated based on fair value.

Impairment losses on assets to be disposed of, if any, are based on the estimated proceeds to be received, less costs of disposal.

Impairment losses on assets to be disposed of, if any, are based on the lower of carrying value or estimated proceeds to be received less costs of disposal.

Impairment of investment in non-marketable equity securities

1 unchanged sentence

Upon determining that an impairment may exist, the security’s fair value is calculated and compared to its carrying value, and an impairment is recognized immediately if the carrying value exceeds the fair value.

For further details see Note 20.

Deconsolidation of RBH .

Impairment of equity method investments

11 unchanged sentences

PMI determines that a contract contains a lease if the contract conveys a right to control the use of the identified asset for a period of time in exchange for consideration.

Operating lease expense is recognized on a straight-line basis over the lease ter m.

Operating lease expense is recognized on a straight-line basis over the lease term.

Finance lease expense is amortized based on production activity or the lease term.

13 unchanged sentences

Revenue recognition

PMI recognizes revenue primarily through the manufacture and sale of cigarettes and reduced-risk products, including heat-not-burn, vapor and oral nicotine products.

PMI recognizes revenue primarily through the manufacture and sale of cigarettes and smoke-free products, including heat-not-burn, vapor and oral nicotine products.

The majority of PMI revenues are generated by sales through direct and indirect distribution networks with short-term payment conditions and where control is typically transferred to the customer either upon shipment or delivery of goods.

20 unchanged sentences

Stock Plans .

Acquisitions:

Transactions With Noncontrolling Interests

Turkey – In the first quarter of 2022, PMI acquired the remaining 25 % stake of its holding in Philip Morris Tütün Mamulleri Sanayi ve Ticaret A.Ş.

("PMTM") (formerly Philsa Philip Morris Sabancı Sigara ve Tütüncülük Sanayi ve Ticaret A.Ş.) and 24.75 % stake in Philip Morris Pazarlama ve Satış A.Ş.

("PMPS") (formerly Philip Morris SA, Philip Morris Sabancı Pazarlama ve Satış A.Ş.) from its Turkish partners, Sabanci Holding for a total acquisition price including transaction costs and remaining dividend entitlements of approximately $ 223 million.

As a result of this acquisition, PMI owned 100 % of these Turkish subsidiaries as of December 31, 2022.

The purchase of the remaining stakes in these holdings resulted in a decrease to PMI's additional paid-in capital of $ 30 million and an increase to accumulated other comprehensive losses of $ 171 million primarily following the reclassification of accumulated currency translation losses from noncontrolling interests to PMI’s accumulated other comprehensive losses during the first quarter of 2022.

In January 2023, PMI sold the acquired stakes of its holdings in PMTM and PMPS to Pioneers Tutun Yatirim Anonim Sirketi (“Pioneers”) for a consideration of approximately $ 205 million plus remaining dividend entitlements.

The transaction will be reflected in PMI's financial statements in 2023.

Business Combinations

Swedish Match AB – On November 11, 2022 (the acquisition date), Philip Morris Holland Holdings B.V.

(“PMHH”), a wholly owned subsidiary of PMI, acquired a controlling interest of 85.87 % of the total issued shares in Swedish Match AB (“Swedish Match”) and has acquired 94.81 % of its outstanding shares as of December 31, 2022.

The shares were acquired through acceptances of the tender offer and a series of open market and over-the-counter purchases.

PMI funded the acquisition through cash on-hand and debt proceeds, as described in Note 8.

Indebtedness.

The aggregate cash paid as of the acquisition date was $ 14,460 million (or $ 13,976 million net of cash acquired), which was included in investing activities in the consolidated statements of cash flows.

The cash paid in connection with the additional purchases of the noncontrolling interests after the acquisition date amounted to $ 1,495 million and was included in financing activities in the consolidated statements of cash flows.

Swedish Match is a market leader in oral nicotine delivery with a significant presence in the United States market.

The acquisition will accelerate PMI’s transformation to become a smoke-free company with a comprehensive global smoke-free portfolio with leadership positions in heat-not-burn, and the fastest growing category of oral nicotine, with the potential for accelerated international expansion.

Due to the timing of the acquisition, and limited access to detailed and disaggregated financial information of Swedish Match, the purchase price allocation is preliminary and it is likely subject to change, including the valuation of property, plant and equipment, intangible assets, income taxes and legal contingencies among other items.

The following table summarizes the preliminary purchase price allocation for the fair value of assets acquired and liabilities assumed as of the acquisition date:

(in millions)

Cash and cash equivalents $ 484

Trade receivables 135

Other receivables 53

Inventories 444

Other current assets 524

Property, plant and equipment 627

Other intangible assets 4,512

Other non-current assets 214

Current portion of long-term debt 224

Accounts payable 120

Other current liabilities 531

Income taxes 14

Long-term debt 1,126

Deferred income taxes 1,253

Other non-current liabilities 187

Identifiable net assets acquired 3,538

Noncontrolling interest 2,379

Goodwill 13,301

Total consideration transferred $ 14,460

The total fair value step-up adjustment for inventories was $ 146 million, of which $ 125 million was recognized in cost of sales in the fourth quarter of 2022, with the remaining balance expected to be recognized in the first quarter of 2023.

The fair value of long-term debt was determined using readily available market prices as of the acquisition date and the total purchase price adjustment of $( 102 ) million is being amortized as an increase to interest expense, net over the lives of the related debt.

Goodwill is primarily attributable to future growth opportunities, anticipated synergies in the U.S.

and intangible assets that did not qualify for separate recognition.

The goodwill is not deductible for income tax purposes.

Identifiable intangible assets of Swedish Match consist of:

Type Useful Life Estimated Fair Value (in millions)

Trademarks Non-amortizable $ 2,077

Trademarks Amortizable 20 years 904

Developed technology, including patents 10 years 367

Customer relationships 10 years 1,164

Total identifiable intangible assets $ 4,512

The significant assumptions used in determining the preliminary fair values of the identifiable intangible assets included royalty rates, revenue growth rates, profit margins, customer attrition rate and discount rates.

Trademarks primarily relate to $ 2,077 million for the ZYN trademark, which has been determined to have an indefinite life due to the fast growth and the leading position of the brand in the market.

All other trademarks have been preliminarily determined to have a 20 years useful life.

The preliminary fair values of the trademarks have been determined using the relief from royalty method supported by revenue growth rates assumptions and royalty rates benchmarking analysis at product category level (smoke-free brands, including

ZYN , cigar brands and lights).

In 2023, during the measurement period, the useful life, revenue growth rate and the royalty rate of each individual trademark will be reassessed to determine its final purchase price.

Developed technology, including patents, relates to the nicotine pouch technology of $ 367 million.

The patent has been assigned a useful life of 10 years, which is in line with the patent's protection.

The preliminary fair value of the patent has been determined using the relief from royalty method.

Customer relationships have been valued separately by geographic locations, namely for the US market, Scandinavia, and other markets using the multiple periods excess earnings method, preliminarily reflecting a general market attrition rate for retail and revenue allocation and profit margin assumptions by customer type, which will be further assessed during the measurement period.

PMI consolidated statements of earnings for the year ended December 31, 2022, include $ 316 million of net revenues and $( 26 ) million of net losses associated with the results of operations of Swedish Match from the acquisition date to December 31, 2022.

The operating results of Swedish Match are included in a separate segment.

Acquisition related transaction costs, which were comprised primarily of regulatory, financial advisory and legal fees, totaled $ 59 million for the year ended December 31, 2022, and were included in marketing, administration and research costs in the consolidated statements of earnings.

Bridge and term loan credit agreement related fees associated with the issuance of debt amounted to $ 54 million, of which $ 37 million were capitalized at the acquisition date.

The fair value of the noncontrolling interest was based on the tender offer as of the acquisition date.

PMI’s approval of the acquisition by the European Commission, under the EU Merger Regulation, was subject to PMHH’s divestiture of Swedish Match’s subsidiary, SMD Logistics AB, following the completion of the offer to tender all shares in Swedish Match to PMHH.

As a result, these assets have been accounted for as assets held for sale and included within other current assets and other accrued liabilities in PMI’s consolidated balance sheets at December 31, 2022.

The unaudited pro forma combined financial information was prepared using the acquisition method of accounting and was based on the historical financial information of PMI and Swedish Match.

In order to reflect the occurrence of the acquisition on January 1, 2021, as required, the unaudited pro forma financial information includes adjustments to reflect the following:

• incremental amortization expense to be incurred based on the current preliminary fair values of the identifiable intangible assets acquired;

• incremental cost of products sold related to the fair value adjustments associated with acquisition date inventory;

• additional interest expense associated with the issuance of debt to finance the acquisition, including the effects of the related derivative financial instruments designated to hedge interest rate risks as well as economic hedges;

• reclassification of non-recurring acquisition-related costs incurred during the year ended December 31, 2022, to the year ended December 31, 2021;

• impact of a deferred tax cost of $ 430 million in 2022 and $ 321 million in 2021 related to the theoretical unrealized foreign currency gains on intercompany loans related to the acquisition financing.

These theoretical unrealized pre-tax foreign currency movements were fully offset in the consolidated statements of earnings and were reflected as currency translation adjustments in PMI's consolidated statements of stockholders' (deficit) equity, while the corresponding deferred tax impacts were reflected in PMI's consolidated statements of earnings;

• other immaterial items (i.e., the alignment of accounting policies from IFRS to US GAAP.)

The unaudited pro forma financial information is not necessarily indicative of what the consolidated results of operations would have been had the acquisition been completed on January 1, 2021.

In addition, the unaudited pro forma financial information is not a projection of future results of operations of the combined company, nor does it reflect the expected realization of any synergies or cost savings associated with the acquisition.

The unaudited pro forma financial information is as follows:

For the Years Ended December 31,

(in millions) 2022 2021

Net revenues $ 33,690 $ 33,577

Net earnings attributable to PMI $ 8,875 $ 8,610

AG Snus - On May 6, 2021, PMI acquired 100 % of AG Snus Aktieselskab ("AG Snus"), a company based in Denmark, and its Swedish subsidiary Tobacco House of Sweden AB fully owned by AG Snus, which operates in the oral tobacco (i.e.

snus) and modern oral (i.e.

nicotine pouches) product categories.

The purchase price was $ 28 million in cash, net of cash acquired, with additional contingent payments of up to $ 10 million, primarily relating to product development and performance targets over a less than two-year period.

In the fourth quarter of 2022, the additional contingent payment was settled for $ 9 million.

The operating results of AG Snus are included in the European Union segment, and were not material.

Fertin Pharma – On September 15, 2021, PMI acquired 100 % of Fertin Pharma A/S (“Fertin Pharma”), a company based in Denmark.

Fertin Pharma is a developer and manufacturer of pharmaceutical and well-being products based on oral and intra-oral delivery systems.

The acquisition was funded with existing cash.

The total consideration of $ 821 million (DKK 5.2 billion) included cash of $ 580 million and the payment of $ 241 million related to the settlement of Fertin Pharma’s indebtedness.

The purchase price of $ 821 million was allocated to cash ($ 24 million), current assets including receivables and inventories ($ 69 million), non-current assets including property, plant and equipment ($ 228 million), goodwill ($ 378 million), and other intangible assets ($ 245 million, which primarily consisted of customer relationships, developed technology, and in-process research and development ("IPR&D")), partially offset by current liabilities ($ 44 million, which primarily consisted of accrued liabilities and accounts payable) and non-current liabilities ($ 79 million, primarily deferred income tax).

Goodwill is primarily attributable to future growth opportunities provided by acquired R&D capabilities and any intangibles that did not qualify for separate recognition.

The goodwill is not deductible for income tax purposes.

The amortizable intangible assets are being amortized over their estimated useful lives of 8 to 19 years.

During 2022, PMI did not record any measurement period adjustments to the purchase price allocation.

The final purchase price allocation was reflected in the consolidated balance sheets as of December 31, 2022.

Vectura – During the third quarter and up to September 15, 2021, PMI acquired a controlling interest of 74.77 % of the total issued shares in Vectura Group plc (“Vectura”), an inhaled therapeutics company based in the United Kingdom.

The shares were acquired through a series of open market purchases and acceptances of the tender offer at a price of 165 pence per share.

As a result of additional acceptances of the offer and the exercise of the right to acquire compulsorily the Vectura shares, in accordance with the applicable English law, PMI completed the acquisition of 100 % of Vectura in the fourth quarter of 2021.

The acquisition was funded with existing cash from a designated account operated solely for the purpose of funding this acquisition.

The total purchase price of $ 1,384 million (GBP 1.0 billion) for 100 % of the Vectura shares was allocated to cash ($ 136 million), current assets including receivables and inventories ($ 89 million), non-current assets including property, plant and equipment ($ 67 million), goodwill ($ 780 million), and other intangible assets ($ 486 million, which primarily consisted of developed technology, and IPR&D), partially offset by current liabilities ($ 100 million, primarily accrued liabilities), and non-current liabilities ($ 74 million, primarily deferred income tax).

Goodwill is primarily attributable to future growth opportunities provided by acquired R&D capabilities and any intangibles that did not qualify for separate recognition.

The goodwill is not deductible for income tax purposes.

The amortizable intangible assets are being amortized over their estimated useful lives of 3 to 13 years.

During 2022, PMI made certain measurement period adjustments to the purchase price allocation to reflect facts and circumstances in existence as of the acquisition date, which resulted in an increase to goodwill of $ 190 million.

The increase was primarily due to a decrease in other intangible assets ($ 233 million), and a decrease in deferred income tax liabilities ($ 43 million).

The final purchase price allocation was reflected in the consolidated balance sheets as of December 31, 2022.

Pro forma results of operations for AG Snus, Fertin Pharma and Vectura have not been presented as the aggregate impact is not material to PMI's consolidated statements of earnings.

Altria Group, Inc.

On October 20, 2022, PMI announced that it had reached an agreement with Altria Group, Inc.

to end the companies' relationship regarding the IQOS commercialization rights in the U.S.

as of April 30, 2024.

As a result of PMI reacquiring these rights, effective May 1, 2024, PMI will have the full rights to commercialize IQOS in the U.S.

As part of the agreement, PMI agreed to pay a total cash consideration of $ 2.7 billion, with $ 1.0 billion paid at the inception of the agreement and the remaining $ 1.7 billion (plus interest, at a per annum rate equal to six percent ( 6 %)), to be paid by July 2023 at the latest.

The cash consideration paid at the inception of the agreement of $ 1.0 billion has been accounted for within other assets in PMI’s consolidated balance sheets as of December 31, 2022.

As of May 2024, when PMI can exercise its ability to commercialize IQOS in the U.S., PMI will finalize the accounting for this transaction by assigning the consideration to the respective assets.

Asset Acquisition

On August 9, 2021, PMI acquired 100 % of OtiTopic, Inc., a U.S.

respiratory drug development company with a late-stage dry powder inhalation aspirin treatment for acute myocardial infarction.

The transaction price was $ 38 million in cash, plus transaction costs, with additional contingent payment of $ 13 million, primarily related to certain key milestones that PMI deemed probable.

Additionally, PMI may owe up to $ 25 million in future additional contingent payments dependent upon the achievement of certain milestones.

PMI accounted for this transaction as an asset acquisition since the IPR&D of the dry powder inhalation aspirin treatment represented substantially all of the fair value of the gross assets acquired.

At the date of acquisition, PMI determined that the acquired IPR&D had no alternative future use.

As a result, PMI recorded a charge of $ 51 million to research and development costs within marketing, administration and research costs in the consolidated statements of earnings for the year ended December 31, 2021.

As previously discussed in Note 1.

Background and Basis of Presentation on March 31, 2022, PMI launched a new Wellness and Healthcare business, Vectura Fertin Pharma, which consolidates Fertin Pharma, Vectura and OtiTopic, Inc.

into one operating segment.

War in Ukraine:

Since the onset of the war in Ukraine in February 2022, PMI's main priority has been the safety and security of its more than 1,300 employees and their families in the country.

PMI temporarily suspended its commercial and manufacturing operations in Ukraine, including the closing of its factory in Kharkiv at the end of February 2022, in order to preserve the safety of its employees.

PMI subsequently resumed some retail activities where safety allowed, in order to provide product availability and service to adult consumers, and began to supply the market from production centers outside Ukraine, as well as through a contract manufacturing arrangement.

Production at the factory in Kharkiv remains suspended.

While the effects of the war are unpredictable and could trigger impairment reviews for long-lived assets, as of December 31, 2022, PMI is unable to estimate the information required to perform impairment analyses (i.e., forecast of revenues, manufacturing and commercial plans).

PMI is not aware of any major damage to its production facilities, inventories or other assets in Ukraine.

As a result, PMI has not recorded an impairment of long-lived assets.

As of December 31, 2022, PMI’s Ukrainian operations had approximately $ 414 million in total assets, excluding intercompany balances.

These total assets included $ 69 million, $ 279 million and $ 31 million in receivables, inventories and property, plant and equipment, respectively.

PMI has suspended its planned investments in the Russian Federation including all new product launches and commercial, innovation, and manufacturing investments.

PMI has also taken steps to scale down its manufacturing operations in Russia amid ongoing supply chain disruptions and the evolving regulatory environment.

PMI is continuously assessing the evolving situation in Russia, including:

recent regulatory constraints in the market that entail very complex terms and conditions that must be met for any divestment transaction to be granted approval by the authorities;

and restrictions resulting from international regulations.

As a result of PMI continuing operations within Russia as of December 31, 2022, it has not recorded an impairment of long-lived and other assets.

However, PMI recorded specific asset write downs as referred to in the table below.

PMI’s Russian operations as of December 31, 2022 had approximately $ 2.5 billion in total assets, excluding intercompany balances.

These total assets included $ 578 million, $ 541 million, $ 786 million, $ 334 million and $ 161 million in cash (primarily held in local currency), receivables, inventories, property, plant and equipment and goodwill, respectively.

In addition, there was approximately $ 806 million of cumulative foreign currency translation losses reflected in accumulated other comprehensive losses in the consolidated statement of stockholders’ equity as of December 31, 2022.

As of December 31, 2022, PMI recorded in its consolidated statements of earnings pre-tax charges related to circumstances driven by the war as follows:

(in millions) For the Year Ended December 31, 2022

Cost of sales Marketing, administration and research costs Total

$ 42 $ 36 $ 78

Total $ 62 $ 89 $ 151

1 The charges were primarily due to an inventory write down, additional allowance for receivables and the cost of PMI’s humanitarian efforts, which includes salary continuation for its employees.

2 The charges were primarily due to machinery and inventory write downs related to the commercial decisions noted above.

PMI will continue to monitor the situation as it evolves and will determine if further charges are needed.

Goodwill and Other Intangible Assets, net:

The movements in goodwill were as follows:

(in millions) European Union Eastern Europe Middle East & Africa South & Southeast Asia East Asia & Australia Americas Other Total

(in millions) European Union Eastern Europe Middle East & Africa South & Southeast Asia East Asia & Australia Americas Swedish Match Wellness & Healthcare Total

Balances at January 1, 2021 $ 1,434 $ 317 $ 86 $ 2,915 $ 559 $ 653 $ — $ — $ 5,964

Changes due to:

Acquisitions 54 — — — — — — 944 998

Currency ( 91 ) ( 22 ) ( 7 ) ( 87 ) ( 20 ) ( 42 ) — ( 13 ) ( 282 )

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Currency ( 82 ) ( 17 ) ( 5 ) ( 256 ) ( 46 ) 4 ( 5 ) ( 109 ) ( 516 )

Other — — — — — — — 190 190

Balances, December 31, 2022 $ 1,315 $ 278 $ 74 $ 2,572 $ 493 $ 615 $ 13,296 $ 1,012 $ 19,655

The increase in goodwill in 2021 was due primarily to the preliminary purchase price allocation of PMI's business combinations.

The increase in goodwill in 2022 was due primarily to the final purchase price allocation associated with Vectura Group plc acquisition in 2021 (reflected in "changes due to other" in Wellness and Healthcare segment) and the preliminary purchase price allocation associated with the Swedish Match AB acquisition in the fourth quarter of 2022, partially offset by currency movements.

For further details on these business combinations, see Note 3.

Acquisitions .

At December 31, 2021, goodwill primarily reflects PMI’s business combinations in Colombia, Greece, Indonesia, Mexico, Pakistan, the Philippines and Serbia, as well as the preliminary purchase price allocation of Fertin Pharma A/S and Vectura Group plc., which were acquired in September 2021.

At December 31, 2022, goodwill primarily reflects PMI’s business combinations in Greece, Indonesia, Mexico, the Philippines and Serbia, as well as the final purchase price allocation of Fertin Pharma A/S and Vectura Group plc., which were acquired in September 2021, and the preliminary purchase price allocation of Swedish Match AB, which was acquired in the fourth quarter of 2022.

As discussed in Note 1.

Background and Basis of Presentation , during the first quarter of 2022, one of Fertin Pharma's product lines was moved from the Wellness and Healthcare segment to the European Union segment.

As a result, the December 31, 2021 goodwill balance in the table above included a reclassification of $ 24 million from the Wellness and Healthcare segment to the European Union segment (reflected in changes due to acquisitions in 2021).

Details of other intangible assets were as follows:

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Developed technology, including patents 8 years 975 243 732 859 63 796

12 years 238 90 148 126 87 39

Customer relationships and other 10 years 1,390 112 1,278 238 90 148

Total other intangible assets $ 7,761 $ 1,029 $ 6,732 $ 3,610 $ 792 $ 2,818

(1) Primarily includes distribution networks and customer relationships.

Non-amortizable intangible assets substantially consist of trademarks from PMI’s acquisitions in Indonesia and Mexico.

The increase since December 31, 2020, was due to the preliminary purchase price allocation associated with PMI's business combinations in 2021

(primarily in-process research and development ("IPR&D")) in the amount of $ 53 million, partially offset by currency movements of ($ 30 million).

For further details, see Note 6.

Non-amortizable intangible assets substantially consist of trademarks from PMI’s acquisitions in Indonesia and Mexico, as well as the preliminary purchase price allocation associated with the Swedish Match acquisition in 2022, and PMI's business combinations in 2021 (primarily in-process research and development).

The increase since December 31, 2021 was due to the preliminary purchase price allocation associated with the Swedish Match acquisition in 2022 of $ 2,077 million, partially offset by the final purchase price allocation associated with Vectura Group plc acquisition in 2021 in the amount of $( 3 ) million and currency movements of $( 40 ) million.

The increase in the gross carrying amount of amortizable intangible assets from December 31, 2021, was due to the preliminary purchase price allocation associated with the Swedish Match acquisition in 2022 of $ 2,435 million, partially offset by final purchase price allocation associated with PMI's business combinations in 2021 and other movements in the amount of $( 225 ) million, and currency movements of $( 93 ) million.

For further details on these business combinations, see Note 3.

Acquisitions .

The increase in the gross carrying amount of amortizable intangible assets from December 31, 2020, was due to the preliminary purchase price allocation associated with PMI's business combinations in 2021 (primarily developed technology and customer relationships) in the amount of $ 917 million, partially offset by currency movements of ($ 71 million).

The change in the accumulated amortization from December 31, 2020 was mainly due to the 2021 amortization of $ 96 million, partially offset by currency movements of ($ 26 million).

Amortization expense for each of the next five years (including PMI's 2021 acquisitions of Fertin Pharma A/S and Vectura Group plc.) is estimated to be $ 152 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

The change in the accumulated amortization from December 31, 2021, was mainly due to the 2022 amortization of $ 159 million and impairment charge of $ 112 million, partially offset by currency movements of $ 34 million.

The amortization of intangibles for the year ended December 31, 2022 was recorded in cost of sales ($ 58 million) and in marketing, administration and research costs ($ 101 million) on PMI's consolidated statements of earnings.

Amortization expense for each of the next five years is estimated to be $ 310 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

This estimate is subject to change based on the finalization of the preliminary purchase price allocation of the Swedish Match acquisition.

During the second quarter of 2022, PMI completed its annual review of goodwill and non-amortizable intangible assets for potential impairment, and no impairment charges were required as a result of this review.

However, there are still risks related to PMI’s Russian reporting unit’s assets as the fair value of these assets is difficult to predict due to the volatility in foreign currency and commodity markets, supply chain, and current economic, political and social conditions.

For more information see Note 4.

War in Ukraine .

Each of PMI’s reporting units had fair values substantially in excess of its carrying value with the exception of the Wellness and Healthcare reporting unit, which had less than 20 % excess of fair value over its carrying value in the period of the latest review of goodwill for potential impairment.

The Wellness and Healthcare reporting unit's fair value was determined using the discounted cash flow model.

PMI will continue to monitor this reporting unit as any changes in assumptions, estimates or market factors could result in a future impairment.

PMI recorded a pre-tax impairment charge of $ 112 million in the third quarter of 2022, reflecting the impact of general economic and market conditions resulting in a reduction in future estimated cash flows on certain products within the Wellness and Healthcare segment.

The impairment reduces the carrying values of developed technology definite-lived intangible assets in the Wellness and Healthcare segment to $ 325 million.

The fair value of these intangible assets was primarily determined using the multi-period excess earnings method.

This impairment charge was recorded within cost of sales in the consolidated statements of earnings for the year ended December 31, 2022.

Related Parties - Equity Investments and Other:

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At December 31, 2022 and 2021, PMI received year-to-date dividends from equity method investees of $ 9 million and $ 176 million, respectively.

PMI holds a 23 % equity interest in Megapolis Distribution BV, the holding company of CJSC TK Megapolis, PMI's distributor in Russia (Eastern Europe segment).

PMI holds a 23 % equity interest in Megapolis Distribution BV, the holding company of CJSC TK Megapolis, PMI's distributor in Russia (Eastern Europe segment), which as of December 31, 2022 had a carrying value of $ 458 million.

While as of December 31, 2022, there have been no impairment indicators based on the business’ performance, there are still risks related to this investment as the fair value of these assets is difficult to predict due to the volatility in foreign currency and commodity markets, supply chain, and current economic, political and social conditions.

For more information, see Note 4.

War in Ukraine .

Additionally, there was approximately $ 469 million of cumulative foreign currency translation losses associated with Megapolis Distribution BV reflected in accumulated other comprehensive losses in the consolidated statement of stockholders’ equity as of December 31, 2022.

PMI holds a 49 % equity interest in United Arab Emirates-based Emirati Investors-TA (FZC) (“EITA”).

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Following the deconsolidation of RBH on March 22, 2019, PMI recorded the continuing investment in RBH, PMI's wholly owned subsidiary in Canada, at fair value of $ 3,280 million at the date of deconsolidation, within equity investments.

For further details, see Note 20.

Deconsolidation of RBH .

Transactions between PMI and RBH are considered to be related-party transactions from the date of deconsolidation and are included in the tables below.

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $ 283 million and $ 256 million for the years ending December 31, 2021 and 2020, respectively.

Unrealized pre-tax gains (losses) of $ 19 million and $( 76 ) million ($ 15 million and $( 60 ) million net of tax) on these equity securities were recorded in the consolidated statements of earnings for the years ended December 31, 2021 and 2020, respectively.

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $ 326 million and $ 283 million for the years ended December 31, 2022 and 2021, respectively.

Unrealized pre-tax gains (losses) of $ 43 million and $ 19 million ($ 33 million and $ 15 million net of tax) on these equity securities were recorded in equity investments and securities (income)/loss, net on the consolidated statements of earnings for the years ended December 31, 2022 and 2021, respectively.

For a description of the fair value hierarchy and the three levels of inputs used to measure fair values, see Note 2 .

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PMM sells, under license, PMI brands in Egypt through an exclusive distribution agreement with a local entity that is also controlled by TTI.

Additionally, as of December 31, 2022, TTI holds a 32.9 % non-controlling interest in United Tobacco Company (“UTC”), an entity incorporated in Egypt which manufactures products for PMM under license.

Godfrey Phillips India Ltd ("GPI") is one of the non-controlling interest holders in IPM India, which is a 56.3 % owned PMI consolidated subsidiary in the South & Southeast Asia segment.

GPI also acts as contract manufacturer and distributor for IPM India.

Amounts in the tables below include transactions between these related parties.

Financial activity with the above related parties:

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(in millions) 2022 2021 2020

Net revenues:

Megapolis Group $ 2,485 $ 2,207 $ 2,174

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Balance at end of period $ 104 $ 113

Acquisitions:

Business Combinations

snus) and modern oral (i.e.

nicotine pouches) product categories.

The operating results of AG Snus are included in the European Union segment, and were not material.

Fertin Pharma – On September 15, 2021, PMI acquired 100 % of Fertin Pharma A/S (“Fertin Pharma”), a company based in Denmark.

Fertin Pharma is a developer and manufacturer of pharmaceutical and well-being products based on oral and intra-oral delivery systems.

The acquisition was funded with existing cash.

The total consideration of $ 821 million (DKK 5.2 billion) included cash of $ 580 million and the payment of $ 241 million related to the settlement of Fertin Pharma’s indebtedness.

The purchase price of $ 821 million was preliminarily allocated to cash ($ 24 million), current assets including receivables and inventories ($ 69 million), non-current assets including property, plant and equipment ($ 228 million), goodwill ($ 378 million), and other intangible assets ($ 245 million, which primarily consisted of customer relationships, developed technology, and in-process research and development ("IPR&D")), partially offset by current liabilities ($ 44 million, which primarily consisted of accrued liabilities and accounts payable) and non-current liabilities ($ 79 million, primarily deferred income tax).

Goodwill is primarily attributable to future growth opportunities provided by acquired R&D capabilities and any intangibles that did not qualify for separate recognition.

The amortizable intangible assets are being amortized over their estimated useful lives of 8 to 19 years.

Subsequent to the acquisition date, PMI made certain measurement period adjustments to the preliminary purchase price allocation, which resulted in an increase to goodwill of $ 41 million.

The increase was primarily due to a decrease in other intangible assets ($ 82 million), partially offset by a decrease in deferred income tax liabilities ($ 21 million), and an increase in property, plant and equipment ($ 19 million).

The purchase price allocation is preliminary and continues to be subject to refinement.

PMI is evaluating the deductibility of goodwill for income tax purposes.

Fertin Pharma's results of operations from the acquisition date through December 31, 2021 were included in PMI's consolidated statements of earnings, and were not material.

The shares were acquired through a series of open market purchases and acceptances of the tender offer at a price of 165 pence per share.

The acquisition was funded with existing cash from a designated account operated solely for the purpose of funding this acquisition.

The total purchase price of $ 1,384 million (GBP 1.0 billion) for 100 % of the Vectura shares was preliminarily allocated to cash ($ 136 million), current assets including receivables and inventories ($ 89 million), non-current assets including property, plant and equipment ($ 67 million), goodwill ($ 590 million), and other intangible assets ($ 719 million, which primarily consisted of developed technology, and IPR&D), partially offset by current liabilities ($ 100 million, primarily accrued liabilities), and non-current liabilities ($ 117 million, primarily deferred income tax).

Goodwill is primarily attributable to future growth opportunities provided by acquired R&D capabilities and any intangibles that did not qualify for separate recognition.

The amortizable intangible assets are being amortized over their estimated useful lives of 3 to 15 years.

Subsequent to the acquisition date, PMI made certain measurement period adjustments to the preliminary purchase price allocation, which resulted in a decrease to goodwill of $ 115 million.

The decrease was primarily due to increase in other intangible assets ($ 73 million), and a decrease in deferred income tax liabilities ($ 22 million).

The purchase price allocation is preliminary and continues to be subject to refinement.

PMI is evaluating the deductibility of goodwill for income tax purposes.

Vectura's results of operations from September 15, 2021 through December 31, 2021 were included in PMI's consolidated statements of earnings, and were not material.

Pro forma results of operations for the above business combinations have not been presented as the aggregate impact is not material to PMI's consolidated statements of earnings.

PMI elected to early adopt ASU No.

2021-08 “Business Combinations (Topic 805) Accounting for Contract Assets and Contract Liabilities from Contracts with Customers,” which did not have a material impact on PMI’s consolidated operating results, statement of financial position or cash flows.

Asset Acquisition

On August 9, 2021, PMI acquired 100 % of OtiTopic, Inc., a U.S.

respiratory drug development company with a late-stage dry powder inhalation aspirin treatment for acute myocardial infarction.

The transaction price was $ 38 million in cash, plus transaction costs, with additional contingent payment of $ 13 million, primarily related to certain key milestones that PMI deemed probable.

Additionally, PMI may owe up to $ 25 million in future additional contingent payments dependent upon the achievement of certain milestones.

PMI accounted for this transaction as an asset acquisition since the IPR&D of the dry powder inhalation aspirin treatment represented substantially all of the fair value of the gross assets acquired.

At the date of acquisition, PMI determined that the acquired IPR&D had no alternative future use.

While PMI builds and organizes its future capabilities in wellness and healthcare, Fertin Pharma, Vectura and OtiTopic are considered separate operating segments with their operating results included in the Other category.

For additional information see Note 12.

Segment Reporting .

Indebtedness:

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295 7.5 225 12.0

dollar credit facility borrowings related to Swedish Match AB acquisition 4,430 4.9 — —

$ 5,637 $ 225

Given the mix of subsidiaries and their respective local economic environments, the average interest rate for bank loans above can vary significantly from day to day and country to country.

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Euro notes, 0.125 % to 3.125 % (average interest rate 1.877 %), due through 2039

Swiss franc notes, 1.625 %, due 2024

Swiss franc notes, 1.625 % to 2.125 % (average interest rate 1.768 %), due through 2024

Euro credit facility borrowings related to Swedish Match AB acquisition, (average interest rate 2.234 %), due through 2027

Swedish krona notes, 1.395 % to 3.654 % (average interest rate 2.110 %), due through 2029

Other (average interest rate 3.346 %), due through 2029 (a)

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Summary of Significant Accounting Policies .

Debt Issuances Outstanding:

PMI’s debt issuances outstanding at December 31, 2021, were as follows:

Financing of the Swedish Match Acquisition

In connection with PMI’s all-cash recommended public offer to the shareholders of Swedish Match AB ("Swedish Match"), a public limited liability company organized under the laws of Sweden, for all the outstanding shares of Swedish Match, on May 11, 2022, PMI entered into a credit agreement relating to a 364 -day senior unsecured bridge facility.

The facility provided for borrowings up to an aggregate principal amount of $ 17 billion, expiring 364 days after the occurrence of certain events unless extended.

On June 23, 2022, PMI entered into a new € 5.5 billion (approximately $ 5.8 billion at the date of signing) senior unsecured term loan credit agreement consisting of a € 3.0 billion (approximately $ 3.2 billion at the date of signing) tranche expiring three years after the occurrence of certain events and a € 2.5 billion (approximately $ 2.6 billion at the date of signing) tranche expiring on June 23, 2027.

In connection with the term loan facility, the aggregate principal amount of commitments under the 364 -day senior unsecured bridge facility was reduced from $ 17 billion to $ 11 billion.

On November 11, 2022, PMI acquired a controlling interest of 85.87 % of the total issued shares in Swedish Match and has acquired 94.81 % of its outstanding shares as of December 31, 2022.

PMI borrowed $ 8.4 billion under the bridge facility by delivering notices of borrowing for advances of $ 7.9 billion and $ 0.5 billion on November 7, 2022 and November 10, 2022, respectively.

All amounts borrowed under the bridge facility will become due on November 8, 2023 unless prepaid or such maturity date is extended pursuant to the terms of the bridge facility.

On November 7, 2022, PMI also delivered notices of borrowing for advances totaling € 5.5 billion under the term loan facility, of which € 3.0 billion will become due on November 9, 2025 and € 2.5 billion will become due on June 23, 2027 unless prepaid pursuant to the terms of the credit agreement.

On November 21, 2022, PMI repaid $ 4.0 billion under the bridge facility.

As of December 31, 2022, outstanding borrowings under the bridge facility amounted to $ 4.4 billion and $ 1.1 billion commitments remained available for drawing.

As of December 31, 2022, the € 5.5 billion (approximately $ 5.9 billion) term loan facility was fully drawn and remained outstanding.

The proceeds under the bridge facility and the term loan facility were used, directly or indirectly, to finance the acquisition, including, the payment of related fees and expenses.

For further details on this acquisition, see Note 3.

Acquisitions .

Notes Outstanding:

PMI’s notes outstanding at December 31, 2022, were as follows:

(in millions)

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Rate Issuance Maturity

$ 500 2.625 % February 2017 February 2022

$ 750 2.375 % August 2017 August 2022

$ 750 2.500 % August 2012 August 2022

$ 750 2.500 % November 2017 November 2022

$ 600 2.625 % March 2013 March 2023

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$ 750 3.250 % November 2014 November 2024

$ 1,000 5.125 % November 2022 November 2024

$ 750 1.500 % May 2020 May 2025

$ 750 3.375 % August 2015 August 2025

$ 750 5.000 % November 2022 November 2025

$ 750 2.750 % February 2016 February 2026

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$ 500 3.125 % August 2017 August 2027

$ 1,500 5.125 % November 2022 November 2027

$ 500 3.125 % November 2017 March 2028

$ 50 4.000 % May 2013 May 2028

$ 750 3.375 % May 2019 August 2029

$ 1,250 5.625 % November 2022 November 2029

$ 750 2.100 % May 2020 May 2030

$ 750 1.750 % November 2020 November 2030

$ 1,500 5.750 % November 2022 November 2032

$ 1,500 6.375 % May 2008 May 2038

(in millions)

Face Value Interest

Rate Issuance Maturity

$ 750 4.375 % November 2011 November 2041

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€ 300 (approximately $ 308 )

0.875 % September 2016 September 2024

€ 500 (approximately $ 582 )

0.625 % November 2017 November 2024

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€ 200 (approximately $ 205 )

1.200 % November 2017 November 2025

€ 50 (approximately $ 51 )

1.200 % December 2020 November 2025

€ 50 (approximately $ 51 )

1.200 % June 2021 November 2025

€ 1,000 (approximately $ 1,372 )

2.875 % March 2014 March 2026

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€ 300 (approximately $ 308 )

0.875 % February 2020 February 2027

€ 500 (approximately $ 697 )

2.875 % May 2014 May 2029

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CHF 100 (approximately $ 104 )

2.125 % June 2013 June 2023

Swiss franc notes

CHF 250 (approximately $ 283 )

1.625 % May 2014 May 2024

(a) These notes are a further issuance of the 4.250 % notes issued by PMI in November 2014.

(b) USD equivalents for foreign currency notes were calculated based on exchange rates on the date of issuance.

The net proceeds from the sale of the securities listed in the table above were used for general corporate purposes, including working capital requirements and repurchase of PMI's common stock.

On January 18, 2022, PMI redeemed all of its outstanding 2.625 % U.S.

dollar notes due February 18, 2022.

As of December 31, 2021, $ 500 million aggregate principal amount of the U.S.

dollar notes were outstanding.

The pre-tax loss related to this debt extinguishment, which was not material, will be included in Interest expense, net on PMI’s condensed consolidated statements of earnings for the three months ended March 31, 2022.

Swedish krona notes (a)

SEK 800 (approximately $ 76 )

1.600 % February 2018 February 2023

Swedish krona notes (a)

SEK 200 (approximately $ 19 )

floating February 2018 February 2023

Swedish krona notes (a)

SEK 250 (approximately $ 24 )

floating October 2017 October 2023

Swedish krona notes (a)

SEK 1,000 (approximately $ 95 )

2.710 % January 2019 January 2026

Swedish krona notes (a)

SEK 700 (approximately $ 67 )

1.395 % February 2021 February 2026

Swedish krona notes (a)

SEK 100 (approximately $ 10 )

1.395 % March 2021 February 2026

Swedish krona notes (a)

SEK 200 (approximately $ 19 )

1.395 % September 2021 February 2026

Swedish krona notes (a)

SEK 200 (approximately $ 19 )

1.395 % January 2022 February 2026

Swedish krona notes (a)

SEK 300 (approximately $ 29 )

2.190 % April 2021 April 2029

(a) Notes issued by Swedish Match AB.

USD equivalents for foreign currency notes were calculated based on exchange rates on the date of acquisition.

(b) These notes are a further issuance of the 4.250 % notes issued by PMI in November 2014.

The net proceeds from the sale of the securities listed in the table above were primarily used for general corporate purposes, including working capital requirements and repurchase of PMI's common stock.

Aggregate maturities:

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Thereafter 7,348

Debt discounts ( 219 )

Debt discounts and fair value adjustments ( 397 )

Total long-term debt $ 37,486

Credit Facilities

At December 31, 2021, PMI’s total committed credit facilities were as follows:

(in billions) Committed

364-day revolving credit, expiring February 1, 2022 $ 1.8

Revolving Credit Facilities

At December 31, 2022, PMI’s total committed revolving credit facilities were as follows:

(in billions) Committed Revolving Credit Facilities

364-day revolving credit, expiring January 31, 2023 (1)

Multi-year revolving credit, expiring February 10, 2026 (2)

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Total facilities

(1) On January 25, 2023, PMI entered into an agreement to amend and extend the term of its $ 1.8 billion 364 -day committed revolving credit facility from January 31, 2023, to January 30, 2024.

(2) On January 28, 2022, PMI entered into an agreement, effective February 10, 2022, to amend and extend the term of its $ 2.0 billion multi-year revolving credit facility, for an additional year covering the period February 11, 2026 to February 10, 2027, in the amount of $ 1.9 billion.

(3) Includes pricing adjustments that may result in the reduction or increase in both the interest rate and commitment fee under the credit agreement if PMI achieves, or fails to achieve, certain specified targets.

At December 31, 2021, there were no borrowings under these committed credit facilities, and the entire committed amounts were available for borrowing.

These facilities do not include any credit rating triggers, material adverse change clauses or any provisions that could require PMI to post collateral.

On January 28, 2022, PMI entered into an agreement to amend and extend the term of its $ 1.8 billion 364 -day revolving credit facility from February 1, 2022, to January 31, 2023.

On January 28, 2022, PMI also entered into an agreement, effective February 10, 2022, to amend and extend the term of its $ 2.0 billion multi-year revolving credit facility, for an additional year covering the period February 11, 2026 to February 10, 2027, in the amount of $ 1.9 billion.

In addition to the committed credit facilities discussed above, certain subsidiaries maintain short-term credit arrangements to meet their respective working capital needs.

These credit arrangements, which amounted to approximately $ 2.3 billion at December 31,

2021, and approximately $ 2.7 billion at December 31, 2020, are for the sole use of the subsidiaries.

(4) On September 20, 2022, PMI entered into an agreement, effective September 29, 2022, to amend and extend the term of its $ 2.5 billion multi-year revolving credit facility, for an additional year covering the period September 30, 2026 to September 29, 2027, in the amount of $ 2.3 billion.

At December 31, 2022, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.

These committed revolving credit facilities do not include any credit rating triggers, material adverse change clauses or any provisions that could require PMI to post collateral.

In addition to the committed revolving credit facilities discussed above, certain subsidiaries maintain short-term credit arrangements to meet their respective working capital needs.

These credit arrangements, which amounted to approximately $ 1.9 billion at December 31, 2022, and approximately $ 2.3 billion at December 31, 2021, are for the sole use of the subsidiaries.

Borrowings under these arrangements and other bank loans amounted to $ 295 million at December 31, 2022, and $ 225 million at December 31, 2021.

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Balances, December 31, 2020 2,109,316,331 ( 551,942,600 ) 1,557,373,731

Repurchase of shares ( 8,514,629 ) ( 8,514,629 )

Issuance of stock awards 1,310,891 1,310,891

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On July 22, 2021, PMI began repurchasing shares under this new share repurchase program.

From July 22, 2021 through December 31, 2021, PMI repurchased 8.5 million shares of its common stock at a cost of $ 785 million.

From July 22, 2021 through March 31, 2022, PMI repurchased 10.5 million shares of its common stock at a cost of approximately $ 1.0 billion.

During the first three months of 2022, PMI repurchased 2.0 million shares of its common stock at a cost of $ 199 million.

On May 11, 2022, PMI announced the suspension of its three-year share repurchase program following the recommended public offer to acquire the outstanding shares of Swedish Match from its shareholders.

For further details, see Note 3.

Acquisitions .

Prior to the suspension of the program, PMI made no share repurchases during the second quarter of 2022.

At December 31, 2022, 33,284,616 shares of common stock were reserved for stock awards under PMI’s stock plans, and 250 million shares of preferred stock, without par value, were authorized but unissued.

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2022 Performance Incentive Plan (the “2022 Plan”).

The 2022 Plan replaced the 2017 Performance Incentive Plan, and there will be no additional grants under the replaced plan.

Under the 2022 Plan, PMI may grant to eligible employees restricted shares and restricted share units, performance-based cash incentive awards and performance-based equity awards.

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At December 31, 2022, shares available for grant under the 2022 Plan were 24,856,420 .

In May 2017, PMI’s shareholders also approved the Philip Morris International Inc.

In May 2017, PMI’s shareholders approved the Philip Morris International Inc.

2017 Stock Compensation Plan for Non-Employee Directors (the “2017 Non-Employee Directors Plan”).

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recipients may not sell, assign, pledge or otherwise encumber such awards.

The PSU awards require the achievement of certain performance factors, which are predetermined at the time of grant, typically over a three-year performance cycle.

The performance metrics for such PSU's granted during 2021 and 2020 consisted of PMI's Total Shareholder Return ("TSR") relative to a predetermined peer group and on an absolute basis ( 40 % weight), PMI’s currency-neutral compound annual adjusted diluted earnings per share growth rate ( 30 % weight), and PMI’s performance against specific measures of PMI’s transformation, defined as net revenues from PMI's RRPs and any other non-combustible products as a percentage of PMI's total net revenues in the last year of the performance cycle ( 30 % weight).

The performance metrics for such PSUs granted during 2019 consisted of PMI’s TSR relative to a predetermined peer group and on an absolute basis ( 50 % weight), PMI’s currency-neutral compound annual adjusted operating income growth rate, excluding acquisitions ( 30 % weight), and PMI’s performance against specific measures of PMI’s transformation ( 20 % weight).

The PSU awards require the achievement of certain performance metrics, which are predetermined at the time of grant, typically over a three-year performance cycle.

The performance metrics for such PSU's granted during 2022 consisted of PMI's Total Shareholder Return ("TSR") relative to a predetermined peer group and on an absolute basis ( 40 % weight), PMI’s currency-neutral compound annual adjusted diluted earnings per share growth rate ( 30 % weight), and a Sustainability Index, which consists of two drivers:

• Pro duct Sustainability ( 20 % weight) measuring progress on PMI's efforts to maximize the benefits of smoke-free products, purposefully phase out cigarettes, seek net positive impact in wellness and healthcare, and reduce post-consumer waste;

• Operational Sustainability ( 10 % weight) measuring progress on PMI's efforts to tackle climate change, preserve nature, improve the quality of life of people in its supply chain, and foster an empowered, and inclusive workplace.

The performance metrics for such PSU's granted during 2021 and 2020 consisted of PMI's TSR relative to a predetermined peer group and on an absolute basis ( 40 % weight), PMI’s currency-neutral compound annual adjusted diluted earnings per share growth rate ( 30 % weight), and PMI’s performance against specific measures of PMI’s transformation, defined as net revenues from PMI's RRPs and any other non-combustible products as a percentage of PMI's total net revenues in the last year of the performance cycle ( 30 % weight).

The aggregate of the weighted performance factors for the three metrics in each such PSU award determines the percentage of PSUs that will vest at the end of the three-year performance cycle.

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During 2022, the activity for PSU awards was as follows:

Shares Grant Date

Fair Value Subject to Other Performance Factors Grant Date

Fair Value Subject to TSR Performance Factor

Shares Weighted-

Average Grant Date

Fair Value Subject to Other Performance Metrics Weighted-

Average Grant Date

Fair Value Subject to TSR Performance Metric

(Per Share) (Per Share)

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Vested ( 669,960 ) 77.26 83.59

Adjustments for performance achievement 223,320 77.26 83.59

Forfeited ( 56,030 ) 87.23 107.46

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During the years ended December 31, 2022, 2021 and 2020, the grant date fair value of the PSU awards granted to PMI employees and the recorded compensation expense related to PSU awards were as follows:

(in millions, except per PSU award granted) PSU Grant Date Fair Value Subject to Other Performance Factors PSU Grant Date Fair Value Subject to TSR Performance Factor Compensation Expense related to PSU Awards

(in millions, except per PSU award granted) Weighted-

Average PSU Grant Date Fair Value Subject to Other Performance Factors Weighted-

Average PSU Grant Date Fair Value Subject to TSR Performance Factor Compensation Expense related to PSU Awards

Total Per PSU Award Total Per PSU Award Total

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2020 $ 28 $ 86.04 $ 28 $ 80.36 $ 38

The grant date fair value of the PSU awards subject to the other performance factors was determined by using the average of the high and low market price of PMI’s stock at the date of the grant.

The grant date fair value of the PSU awards subject to the other performance factors was determined by using the market price of PMI’s stock on the date of the grant.

The grant date fair value of the PSU market-based awards subject to the TSR performance factor was determined by using the Monte Carlo simulation model.

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2022 2021 2020

Risk-free interest rate (a)

Average risk-free interest rate (a)

1.7 % 0.2 % 1.4 %

Expected volatility (b)

Average expected volatility (b)

28.3 % 31.7 % 23.5 %

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$ ( 75 ) $ 73 $ ( 80 )

( 139 ) 27 53

Total United States

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$ 2,244 $ 2,671 $ 2,377

On March 11, 2021, the American Rescue Plan Act of 2021 ("the Act") was signed into law in the U.S.

On August 16, 2022, the Inflation Reduction Act ("the Act") was signed into law in the U.S.

The Act includes a new corporate alternative minimum tax and an excise tax on stock buybacks effective after December 31, 2022.

As of December 31, 2022, PMI has determined that the Act had no significant tax impacts on its consolidated financial statements.

On March 11, 2021, the American Rescue Plan Act of 2021 ("the ARP Act") was signed into law in the U.S.

to provide certain relief as a result of the COVID-19 pandemic.

As of December 31, 2021, PMI has determined that the Act had no significant impact on PMI's effective tax rate.

PMI has determined that the ARP Act had no significant impact on PMI's effective tax rate.

On July 20, 2020, the U.S.

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Years still open to examination by foreign tax authorities in major jurisdictions include Germany (2018 onward), Indonesia (2014 onward), Russia (2022 onward) and Switzerland (2017 onward).

In October 2021, a subsidiary of PMI in Indonesia, PT Hanjaya Mandala Sampoerna Tbk ("HMS"), received a tax assessment in the amount of 3.8 trillion Indonesian rupiah (approximately $ 260 million) primarily relating to corporate income taxes on domestic and other intercompany transactions for the years 2017 to 2019.

In October 2021, a subsidiary of PMI in Indonesia, PT Hanjaya Mandala Sampoerna Tbk ("HMS"), received a tax assessment in the amount of 3.8 trillion Indonesian rupiah (approximately $ 260 million in the period of payment) primarily relating to corporate income taxes on domestic and other intercompany transactions for the years 2017 to 2019.

HMS paid the assessment in the fourth quarter of 2021 in order to avoid potential penalties and filed an objection letter with the tax office in January 2022.

The amount paid was included in other assets in PMI’s consolidated balance sheets at December 31, 2021 and negatively impacted net cash provided by operating activities in the consolidated statements of cash flows in the period of payment.

The amount paid was

included in other assets in PMI’s consolidated balance sheets at December 31, 2022 and 2021, and negatively impacted net cash provided by operating activities in the consolidated statements of cash flows in the period of payment.

It is reasonably possible that within the next 12 months certain tax examinations will close, which could result in a change in unrecognized tax benefits along with related interest and penalties.

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Foreign derived intangible income ( 0.8 ) ( 0.7 ) ( 0.6 )

Foreign exchange ( 1.7 ) — —

Other ( 0.5 ) 0.2 —

Effective tax rate 19.3 % 21.8 % 21.7 %

The 2022 effective tax rate decreased 2.5 percentage point to 19.3 %.

The change in the effective tax rate for 2022, as compared to 2021, was favorably impacted by changes in income tax reserves, a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the consolidated statements of earnings ($ 203 million), while the underlying pre-tax foreign currency movements fully offset in the consolidated statements of earnings and were reflected as currency translation adjustments in its consolidated statements of stockholders' (deficit) equity, and by a reduction in

deferred tax liabilities related to pension plan assets ($ 40 million), partially offset by an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($ 10 million).

For further details, see Note 6.

Related Parties - Equity Investments and Other .

The 2021 effective tax rate increased 0.1 percentage point to 21.8 %.

The change in the effective tax rate for 2021, as compared to 2020, was unfavorably impacted by repatriation cost differences and foreign tax credit limitations related to GILTI, partially offset by the corporate income tax rate reduction in the Philippines (enacted in the first quarter of 2021) and changes in earnings mix by taxing jurisdiction.

The 2020 effective tax rate decreased 1.5 percentage points to 21.7 %.

The change in the effective tax rate for 2020, as compared to 2019, was favorably impacted by changes in earnings mix by taxing jurisdiction, a reduction of U.S.

state tax expense, a reduction of estimated U.S.

income tax liabilities for years 2018 and 2019 due to the GILTI regulations mentioned above ($ 93 million) and the

corporate income tax rate reduction in Indonesia, partially offset by a decrease in deductions related to foreign-derived intangible income for the years 2018 and 2019 and repatriation cost differences.

The 2020 effective tax rate was favorably impacted by the above-mentioned reduction of estimated U.S.

income tax liabilities for years 2018 and 2019 due to the GILTI regulations and the corporate income tax rate reduction in Indonesia.

The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities consisted of the following:

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Net operating loss carryforwards and tax credits 384 408

Foreign exchange — 27

Other 112 124

Total deferred income tax assets 1,058 1,491

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Deferred income tax liabilities:

Trade names ( 591 ) ( 374 )

Intangible assets ( 1,485 ) ( 591 )

Property, plant and equipment ( 200 ) ( 140 )

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Foreign exchange ( 175 ) ( 146 )

Other ( 32 ) —

Total deferred income tax liabilities

( 2,033 ) ( 1,083 )

Net deferred income tax assets $ 169 $ 726

(1) Includes deferred tax charges of $ 153 million and $ 209 million in 2021 and 2020, respectively, related to intercompany transactions.

Net deferred income tax assets (liabilities) $ ( 1,353 ) $ 169

(1) Includes deferred tax charges of $ 153 million in 2021 related to intercompany transactions.

At December 31, 2022, PMI recorded deferred tax assets for net operating loss carryforwards and tax credits of $ 384 million, with varying dates of expiration, primarily after 2027, including $ 173 million with an unlimited carryforward period.

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Segment Reporting:

PMI’s subsidiaries and affiliates are primarily engaged in the manufacture and sale of cigarettes and RRPs, including heat-not-burn, vapor and oral nicotine products, in markets outside of the United States of America.

PMI's segments are generally organized by geographic region and managed by segment managers who are responsible for the operating and financial results of the regions inclusive of combustible and reduced-risk product categories sold in the region.

PMI’s subsidiaries and affiliates are primarily engaged in the manufacture and sale of cigarettes and smoke-free products, including heat-not-burn, vapor, and oral nicotine products.

Excluding the Wellness and Healthcare segment and the 2022 acquisition of Swedish Match, PMI's segments are generally organized by geographic region and managed by segment managers who are responsible for the

operating and financial results of the regions inclusive of combustible tobacco and smoke-free product categories sold in the region.

PMI currently has six geographical segments:

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and Americas;

as well as an Other category.

Other consists of the 2021 acquisitions of Fertin Pharma A/S, Vectura Group plc.

and OtiTopic, Inc.

as well as the Swedish Match segment and the Wellness and Healthcare segment.

The Swedish Match segment represents the fourth quarter 2022 acquisition of the company.

The Wellness and Healthcare segment reflects the operating results of PMI's new business, Vectura Fertin Pharma.

For further details on these acquisitions, see Note 3.

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PMI records net revenues and operating income to its geographical segments based upon the geographic area in which the customer resides.

Revenues from shipments of Platform 1 devices, heated tobacco units and accessories to Altria Group, Inc.

for sale under license in the United States are included in net revenues of the Americas segment.

PMI’s chief operating decision maker evaluates geographical segment performance and allocates resources based on regional operating income, which includes results from all product categories sold in each region.

Business operations in the Other category are managed and evaluated separately.

Interest expense, net, and provision for income taxes are centrally managed and, accordingly,

such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by management.

PMI’s chief operating decision maker evaluates geographical segment performance and allocates resources based on regional operating income, which includes results from substantially all product categories sold in each region.

Business operations in the Wellness and Healthcare segment and the Swedish Match segment are managed and evaluated separately.

Interest expense, net, and provision for income taxes are centrally managed and, accordingly, such items are not presented by segment since they are excluded from the measure of segment profitability reviewed by management.

Information about total assets by segment is not disclosed because such information is not reported to or used by PMI’s chief operating decision maker.

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Summary of Significant Accounting Policies.

PMI disaggregates its net revenue from contracts with customers by both geographic location and product category for each of PMI's six geographical segments.

For the 2021 acquisitions discussed above, net revenues from contracts with customers are included in the Other category.

PMI disaggregates its net revenues from contracts with customers by product category for each of PMI's six geographical segments and for the Swedish Match segment.

For the Wellness and Healthcare business, Vectura Fertin Pharma discussed above, net revenues from contracts with customers are included in the Wellness and Healthcare segment.

PMI believes this best depicts how the nature, amount, timing and uncertainty of its revenue and cash flows are affected by economic factors.

Net revenues by geographic segment and Other category were as follows:

Net revenues by segment were as follows:

For the Years Ended December 31,

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Americas 1,903 1,843 1,701

Other 101 — —

Swedish Match 316 — —

Wellness and Healthcare 271 101 —

Net revenues $ 31,762 $ 31,405 $ 28,694

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(in millions) 2022 2021 2020

Combustible products:

Combustible tobacco products:

European Union $ 7,212 $ 8,211 $ 8,052

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Americas 1,804 1,706 1,577

Total combustible products $ 22,190 $ 21,867 $ 24,218

Reduced-risk products:

Swedish Match 70 — —

Total combustible tobacco products 21,572 22,067 21,747

Smoke-free products:

Smoke-free products excluding Wellness and Healthcare:

European Union 4,907 4,064 2,650

4 unchanged sentences

Americas 99 137 124

Total reduced-risk products $ 9,115 $ 6,827 $ 5,587

Other $ 101 $ — $ —

Swedish Match 246 — —

Total smoke-free products excluding Wellness and Healthcare 9,919 9,237 6,947

Wellness and Healthcare 271 101 —

Total smoke-free products 10,190 9,338 6,947

Total PMI net revenues $ 31,762 $ 31,405 $ 28,694

Sum of product categories or Regions might not foot to total PMI due to roundings.

Net revenues related to combustible products refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes.

These net revenue amounts consist of the sale of PMI's cigarettes and other tobacco products combined.

Other tobacco products primarily include roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos and do not include reduced-risk products.

Net revenues related to reduced-risk products refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes.

These net revenue amounts consist of the sale of PMI's heated tobacco units, heat-not-burn devices and related accessories, and other nicotine-containing products, which primarily include PMI's e-vapor and oral nicotine products.

Net revenues in the Other category primarily consist of operating revenues generated from the sale of inhaled therapeutics, and oral and intra-oral delivery systems resulting from the third quarter 2021 acquisitions of Fertin Pharma A/S, Vectura Group plc.

and OtiTopic, Inc.

Operating income (loss) by geographic segment and Other category were as follows:

This reclassification did not impact PMI’s segment reporting, consolidated financial position, results of operations or cash flows in any of the periods presented.

Net revenues related to combustible tobacco products refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes.

These net revenue amounts consist of the sale of PMI's cigarettes and other tobacco products that are combusted.

Other tobacco products primarily include roll-your-own and make-your-own cigarettes, pipe tobacco, cigars and cigarillos and do not include smoke-free products.

Net revenues related to smoke-free products refer to the operating revenues generated from the sale of these products, including shipping and handling charges billed to customers, net of sales and promotion incentives, and excise taxes, if applicable.

These net revenue amounts consist of the sale of all of PMI's products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral nicotine, also including wellness and healthcare products, as well as consumer accessories such as lighters and matches.

Net revenues related to wellness and healthcare products consist of operating revenues generated from the sale of products primarily associated with inhaled therapeutics, and oral and intra-oral delivery systems that are included in the operating results of PMI's new Wellness and Healthcare business, Vectura Fertin Pharma.

Operating income (loss) by segment were as follows:

For the Years Ended December 31,

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Americas 436 487 564

Other ( 52 ) — —

Swedish Match ( 22 ) — —

Wellness and Healthcare ( 258 ) ( 52 ) —

Operating income

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Items affecting the comparability of results from operations were as follows:

• Charges related to the war in Ukraine - See Note 4.

War in Ukraine for details of the $ 151 million pre-tax charges in the Eastern Europe segment for the year ended December 31, 2022.

• Swedish Match AB acquisition accounting related item - See Note 3.

Acquisitions for details of the $ 125 million pre-tax purchase accounting adjustments related to the sale of acquired inventories stepped up to fair value included in the Swedish Match segment for the year ended December 31, 2022.

• Impairment of intangibles - See Note 5.

Goodwill and Other Intangible Assets, net for the details of the $ 112 million pre-tax impairment charge included in the Wellness and Healthcare segment within the operating income table above for the year ended December 31, 2022.

• Asset impairment and exit costs - See Note 20.

Asset Impairment and Exit Costs for details of the $ 216 million, $ 149 million and $ 422 million pre-tax charges for the year ended December 31, 2021, 2020 and 2019, respectively, as well as a breakdown of these costs by segment.

Asset Impairment and Exit Costs for details of the $ 216 million and $ 149 million pre-tax charges for the year ended December 31, 2021 and 2020, respectively, as well as a breakdown of these costs by segment.

• Saudi Arabia customs assessments - See Note 18.

Contingencies for the details of the $ 246 million reduction in net revenues of combustible products included in the Middle East & Africa segment for the year ended December 31, 2021.

Contingencies for the details of the $ 246 million reduction in net revenues of combustible tobacco products included in the Middle East & Africa segment for the year ended December 31, 2021.

• Asset acquisition cost - See Note 3.

Acquisitions for the details of the $ 51 million pre-tax charge associated with the asset acquisition of OtiTopic, Inc.

included in Other within the operating income table above for the year ended December 31, 2021.

• Russia excise and VAT audit charge - See Note 17.

Contingencies for details of the $ 374 million pre-tax charge included in the Eastern Europe segment for the year ended December 31, 2019.

• Canadian tobacco litigation-related expense - See Note 17.

Contingencies and Note 20.

Deconsolidation of RBH for details of the $ 194 million pre-tax charge included in the Americas segment for the year ended December 31, 2019.

• Loss on deconsolidation of RBH - See Note 20.

Deconsolidation of RBH for details of the $ 239 million loss included in the Americas segment for the year ended December 31, 2019.

included in the Wellness and Healthcare segment within the operating income table above for the year ended December 31, 2021.

• Brazil indirect tax credit - Following a final and enforceable decision by the highest court in Brazil in October 2020, PMI recorded a gain of $ 119 million for tax credits representing overpayments of indirect taxes for the period from March 2012 through December 2019;

1 unchanged sentence

This amount was included as a reduction in marketing, administration and research costs in the consolidated statements of earnings for the year ended December 31, 2020 and was included in the operating income of the Americas segment.

An additional amount of overpaid indirect taxes of approximately $ 90 million is dependent on a potential tax authority challenge.

An additional amount of overpaid indirect taxes of approximately $ 90 million is dependent on the outcome of a challenge by the local tax authority.

Other segment data were as follows:

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2022 2021 2020

Depreciation expense:

Depreciation, amortization and impairment of intangibles expense:

European Union $ 349 $ 342 $ 300

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Americas 74 71 78

Total depreciation expense

Swedish Match 34 — —

Wellness and Healthcare 197 34 —

Total depreciation, amortization and impairment of intangibles expense

$ 1,189 $ 998 $ 981

PMI’s total capital expenditures and total property, plant and equipment, net and other assets by geographic area were:

For the Years Ended December 31,

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Americas 1,282 666 784

Other 292 — —

Total long-lived assets 9,183 8,507 8,482

Altria Group, Inc.

agreement 1,002 — —

Financial instruments 456 210 650

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other intangible assets, net;

deferred tax assets, equity investments, and financial instruments.

deferred tax assets, equity investments, financial instruments and payment under the agreement with Altria Group, Inc, see Note 3, Acquisitions .

PMI's largest markets in terms of long-lived assets are Switzerland, Italy and Indonesia.

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Pension coverage for employees of PMI’s subsidiaries is provided, to the extent deemed appropriate, through separate plans, many of which are governed by local statutory requirements.

In addition, PMI provides health care and other benefits to substantially all U.S.

In addition, PMI provides health care and other benefits to certain U.S.

retired employees and certain non-U.S.

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Obligations and Funded Status

The postretirement health care plans are not funded.

The projected benefit obligations, plan assets and funded status of PMI’s pension plans, and the accumulated benefit obligation and net amount accrued for PMI's postretirement health care plans, at December 31, 2021 and 2020, were as follows:

The projected benefit obligations, plan assets and funded status of PMI’s pension plans, and the accumulated benefit obligation, plan assets and net amount accrued for PMI's postretirement health care plans, at December 31, 2022 and 2021, were as follows:

Postretirement

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( 434 ) ( 587 ) ( 5 ) ( 4 )

Acquisition of Swedish Match 316 85 —

14 26 ( 2 ) —

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Fair value of plan assets at January 1,

9,337 8,746 — —

Actual return on plan assets

Employer contributions

( 1,061 ) 1,054 — —

Employer contributions, net of refunds

( 3 ) 269 9 —

Employee contributions

2 unchanged sentences

( 14 ) ( 37 ) — —

( 333 ) ( 444 ) — —

Acquisition of Swedish Match 303 — 3 —

Other ( 2 ) 21 — —

Fair value of plan assets at December 31,

7,939 9,337 3 —

Net pension and postretirement liability recognized at December 31,

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based defined benefit retirement plans.

At December 31, 2021, actuarial losses (gains) consisted primarily of gains for assumption changes related to higher discount rates year-over-year for Swiss, German and Dutch plans.

At December 31, 2020, actuarial losses (gains) consisted primarily of losses for assumption changes related to lower discount rates year-over-year for Swiss, German and Dutch plans.

At December 31, 2022 and 2021, actuarial losses (gains) consisted primarily of gains for assumption changes related to higher discount rates year-over-year for Swiss, German and Dutch plans.

At December 31, 2022 and 2021, the Swiss pension plan represented 64 % and 65 % of the benefit obligation, respectively, and approximately 60 % and 60 % of the fair value of plan assets at December 31, 2022 and 2021, respectively.

At December 31, 2022 and 2021, the U.S.

pension plan represented 4 % and 4 % of the benefit obligation, respectively, and approximately 3 % and 4 % of the fair value of plan assets at December 31, 2021 and 2020, respectively.

pension plans represented 7 % and 4 % of the benefit obligation, respectively, and approximately 6 % and 3 % of the fair value of plan assets at December 31, 2022 and 2021, respectively.

At December 31, 2022 and 2021, the amounts recognized on PMI's consolidated balance sheets for the pension and postretirement plans were as follows:

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181 314 265 2 3 2

Prior service cost

Prior service cost (credit)

( 2 ) 1 1 — — —

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equity securities, international equity securities and investment-grade debt securities.

PMI’s plans have no investments in hedge funds, private equity or derivatives.

PMI attempts to mitigate investment risk by rebalancing between equity and debt asset classes once a year or as PMI’s contributions and benefit payments are made.

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6,419 4,870 $ 1,549

International government bonds

Government bonds

Corporate bonds

35 — 3 32 (c)

Total assets in the fair value hierarchy

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Russell 3000;

S&P 500 for equities, and Citigroup EMU and JP Morgan EMBI for bonds), primarily consist of mutual funds, common trust funds and commingled funds.

S&P 500 for equities, and Citigroup EMU, Citigroup Non-EGBI EuroBIG, SBI AAA-BBB and JP Morgan EMBI for bonds), primarily consist of mutual funds, common trust funds and commingled funds.

Of these funds, 57 % are invested in U.S.

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The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statement of financial position.

Asset Category

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and international government bonds;

12 % were invested in real estate, and 9 % were invested in corporate bonds.

14 % were invested in corporate bonds, and 12 % were invested in real estate.

(b) In accordance with FASB ASC Subtopic 820-10, certain investments measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy.

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Summary of Significant Accounting Policies .

PMI makes, and plans to make, contributions to the extent that they are tax deductible and to meet specific funding requirements of its funded pension plans.

PMI makes, and plans to make, contributions, to the extent that they are tax deductible and meet specific funding requirements of its funded pension plans.

Currently, PMI anticipates making contributions of approximately $ 121 million in 2023 to its pension plans, based on current tax and benefit laws.

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Postemployment Benefit Plans

PMI and certain of its subsidiaries sponsor postemployment benefit plans covering substantially all salaried and certain hourly employees.

PMI and certain of its subsidiaries sponsor postemployment benefit plans covering certain designated salaried and hourly employees.

The cost of these plans is charged to expense over the working life of the covered employees.

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employment Total

Net (losses) gains

$ ( 1,437 ) $ ( 14 ) $ ( 753 ) $ ( 2,204 )

Prior service cost

Prior service (cost) credit

70 1 ( 21 ) 50

Net transition obligation

Net transition (obligation) asset

( 3 ) — — ( 3 )

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employment Total

Net (losses) gains

$ ( 2,495 ) $ ( 64 ) $ ( 884 ) $ ( 3,443 )

Prior service cost

Prior service (cost) credit

71 1 ( 22 ) 50

Net transition obligation

Net transition (obligation) asset

( 3 ) — — ( 3 )

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employment Total

Net (losses) gains

$ ( 4,147 ) $ ( 64 ) $ ( 839 ) $ ( 5,050 )

Prior service cost

Net transition obligation

Prior service (cost) credit

22 2 ( 22 ) 2

Net transition (obligation) asset

( 3 ) — — ( 3 )

Deferred income taxes

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Amortization:

Net losses (gains)

$ 178 $ 3 $ 85 $ 266

Prior service cost

Net transition obligation

Prior service cost (credit)

( 4 ) — — ( 4 )

Other income/expense:

Prior service cost

Net losses (gains)

Prior service cost (credit)

Deferred income taxes

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Other movements during the year:

Net (losses) gains

878 46 46 970

Prior service cost

Prior service (cost) credit

Deferred income taxes

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Amortization:

Net losses (gains)

$ 294 $ 4 $ 85 $ 383

Prior service cost

Net transition obligation

Prior service cost (credit)

Other income/expense:

Prior service cost

Net losses (gains)

Prior service cost (credit)

Deferred income taxes

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Other movements during the year:

( 682 ) ( 4 ) ( 142 ) ( 828 )

Prior service cost

Net (losses) gains

1,353 ( 5 ) ( 130 ) 1,218

Prior service (cost) credit

Deferred income taxes ( 241 ) 1 30 ( 210 )

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Amortization:

$ 198 $ 3 $ 77 $ 278

Prior service cost

Net losses (gains)

$ 250 $ 3 $ 78 $ 331

Prior service cost (credit)

Net transition obligation (asset)

Other income/expense:

Net losses (gains)

Prior service cost (credit)

Deferred income taxes ( 49 ) ( 1 ) ( 17 ) ( 67 )

Other movements during the year:

Net (losses) gains

( 682 ) ( 4 ) ( 142 ) ( 828 )

Prior service cost

Prior service (cost) credit

( 12 ) — ( 22 ) ( 34 )

Deconsolidation of RBH (net of deferred income taxes) 26 1 — 27

Deferred income taxes 99 1 39 139

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Financial Instruments:

PMI operates in markets outside of the United States of America, with manufacturing and sales facilities in various locations around the world.

PMI operates in markets primarily outside of the United States of America, with manufacturing and sales facilities in various locations around the world.

PMI utilizes certain financial instruments to manage foreign currency and interest rate exposures.

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If it were deemed probable that the forecasted transaction would not occur, the gain or loss would be recognized in earnings.

PMI uses deliverable and non-deliverable forward foreign exchange contracts, foreign currency swaps and foreign currency options, collectively referred to as foreign exchange contracts ("foreign exchange contracts"), and interest rate contracts to mitigate its exposure to changes in exchange and interest rates from third-party and intercompany actual and forecasted transactions.

PMI uses deliverable and non-deliverable forward foreign exchange contracts, foreign currency swaps and foreign currency options, collectively referred to as foreign exchange contracts ("foreign exchange contracts"), and interest rate contracts to mitigate its exposure to changes in exchange and interest rates related to net investments in foreign operations, third-party and intercompany actual and forecasted transactions.

Both foreign exchange contracts and interest rate contracts are collectively referred to as derivative contracts ("derivative contracts").

The primary currencies to which PMI is exposed include the Euro, Indonesian rupiah, Japanese yen, Mexican peso, Philippine peso, Russian ruble and Swiss franc.

At December 31, 2021 and 2020, PMI had contracts with aggregate notional amounts of $ 20.7 billion and $ 26.5 billion, respectively.

Of the $ 20.7 billion aggregate notional amount at December 31, 2021, $ 3.8 billion related to cash flow hedges, $ 6.2 billion related to hedges of net investments in foreign operations, $ 0.4 billion related to fair value hedges and $ 10.3 billion related to other derivatives that primarily offset currency exposures on intercompany financing.

Of the $ 26.5 billion aggregate notional amount at December 31, 2020, $ 5.0 billion related to cash flow hedges, $ 8.9 billion related to hedges of net investments in foreign operations and $ 12.6 billion related to other derivatives that primarily offset currency exposures on intercompany financing.

The primary currencies to which PMI is exposed include the Euro, Egyptian pound, Indonesian rupiah, Japanese yen, Mexican peso, Philippine peso, Russian ruble and Swiss franc.

The gross notional amounts for outstanding derivatives as of December 31, 2022 and 2021, were as follows:

(in millions) 2022 2021

Derivative contracts designated as hedging instruments:

Foreign exchange contracts $ 17,627 $ 9,501

Interest rate contracts 1,019 900

Derivative contracts not designated as hedging instruments:

Foreign exchange contracts 21,755 10,337

Total $ 40,401 $ 20,738

The fair value of PMI’s derivative contracts included in the consolidated balance sheets as of December 31, 2022 and 2021, were as follows:

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Derivative contracts designated as hedging instruments:

Other current assets $ 173 $ 130 Other accrued liabilities $ 34 $ 241

Foreign exchange contracts Other current assets $ 376 $ 166 Other accrued liabilities $ 126 $ 31

Other assets 341 22 Income taxes and other liabilities 147 187

Interest rate contracts Other current assets — 7 Other accrued liabilities 27 3

Other assets — — Income taxes and other liabilities 56 3

Derivative contracts not designated as hedging instruments:

Other current assets

Foreign exchange contracts Other current assets

156 37 Other accrued liabilities 165 75

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Cash flow hedges:

Foreign exchange contracts $ 288 $ 138 $ ( 61 )

Net revenues $ 233 $ 59 $ ( 3 )

2 unchanged sentences

Interest expense, net ( 7 ) ( 6 ) ( 6 )

Fair value hedges Interest expense, net $ 1 $ — $ —

Net investment hedges (a)

484 ( 514 ) 369 Interest expense, net (b)

Derivative contracts not designated as hedging instruments Interest expense, net 55 71 94

Marketing, administration and research costs (c)

Interest rate contracts 292 6 ( 20 ) Interest expense, net ( 2 ) ( 1 ) ( 5 )

Fair value hedges:

Interest rate contracts Interest expense, net (a)

$ ( 83 ) $ 1 $ —

Net investment hedges (b):

Foreign exchange contracts 300 484 ( 514 ) Interest expense, net (c)

Derivative contracts not designated as hedging instruments:

Foreign exchange contracts Interest expense, net 112 55 71

Marketing, administration and research costs (d)

( 169 ) 215 ( 368 )

Total $ 880 $ 628 $ ( 595 ) $ 254 $ 42 $ 20 $ 41 $ 421 $ ( 103 )

(a) Amount of gains (losses) on hedges of net investments principally related to changes in exchange and interest rates between the Euro and U.S.

(b) Represent the gains for amounts excluded from the effectiveness testing

(c) The gains (losses) from these contracts attributable to changes in foreign currency exchange rates substantially offset the (losses) and gains generated by the underlying intercompany and third-party loans being hedged

(a) The gains (losses) from these contracts are offset by the changes in the fair value of the hedged item

(b) Amount of gains (losses) on hedges of net investments principally related to changes in exchange and interest rates between the Euro and U.S.

(d) The gains (losses) from these contracts attributable to changes in foreign currency exchange rates are partially offset by the (losses) and gains generated by the underlying intercompany and third-party loans being hedged

Cash Flow Hedges

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Gains and losses associated with qualifying cash flow hedge contracts are deferred as components of accumulated other comprehensive losses until the underlying hedged transactions are reported in PMI’s consolidated statements of earnings.

As of December 31, 2021, PMI has hedged forecasted transactions for periods not exceeding the next twelve months , with the exception of one derivative contract that expires in May 2024.

As of December 31, 2022, PMI has hedged forecasted transactions with derivative contracts expiring at various dates through May 2028.

The impact of these hedges is primarily included in operating cash flows on PMI’s consolidated statements of cash flows.

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For derivative contracts that are designated and qualify as fair value hedges the gain or loss on the derivative, as well as the offsetting gain or loss on the hedged items attributable to the hedged risk, is recognized in current earnings.

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of December 31, 2021 was $ 398 million, and is recorded in long-term debt in the consolidated balance sheets.

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of December 31, 2022 was $ 913 million, and is recorded in long-

term debt in the consolidated balance sheets.

The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $ 83 million as of December 31, 2022.

Hedges of Net Investments in Foreign Operations

PMI designates derivative contracts and certain foreign currency denominated debt instruments as net investment hedges, primarily of its Euro net assets.

The amount of pre-tax gain/(loss) related to these debt instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustment, was $ 278 million , $( 465 ) million and $ 234 million, for the years ended December 31, 2021, 2020 and 2019, respectively.

The amount of pre-tax gain/(loss) related to these debt instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was $ 521 million , $ 278 million and $( 465 ) million, for the years ended December 31, 2022, 2021 and 2020, respectively.

The premiums paid for, and settlements of, net investment hedges are included in investing cash flows on PMI’s consolidated statements of cash flows.

Other Derivatives

PMI has entered into derivative contracts to hedge the foreign currency exchange and interest rate risks related to intercompany loans between certain subsidiaries, and third-party loans.

PMI has entered into derivative contracts to hedge the foreign currency exchange and interest rate risks related to intercompany loans between certain subsidiaries, third-party loans and acquisition related transactions.

While effective as economic hedges, no hedge accounting is applied for these contracts;

therefore, the gains (losses) relating to these contracts are reported in PMI’s consolidated statements of earnings.

Acquisition related transactions are included in investing cash flows on PMI’s consolidated statements of cash flows.

Qualifying Hedging Activities Reported in Accumulated Other Comprehensive Losses

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Reclassifications from Other Comprehensive Earnings

The movements in accumulated other comprehensive losses and the related tax impact, for each of the components above, that are due to current period activity and reclassifications to the income statement, including those related to the deconsolidation of RBH, are shown on the consolidated statements of comprehensive earnings for the years ended December 31, 2021, 2020, and 2019.

The movements in accumulated other comprehensive losses and the related tax impact, for each of the components above, that are due to current period activity and reclassifications to the income statement are shown on the consolidated statements of comprehensive earnings for the years ended December 31, 2022, 2021, and 2020.

For additional information, see Note 3.

Benefit Plans for disclosures related to PMI's pension and other benefits, Note 15.

Financial Instruments for disclosures related to derivative financial instruments and Note 20.

Deconsolidation of RBH for disclosures related to the deconsolidation of RBH.

Acquisitions (Transactions With Noncontrolling Interests) for disclosures related to currency translation adjustments , Note 14.

Benefit Plans for disclosures related to PMI's pension and other benefits and Note 16.

Financial Instruments for disclosures related to derivative financial instruments.

Contingencies:

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The initial CCAA order made by the Ontario Superior Court on March 22, 2019 authorizes RBH to pay all expenses incurred in carrying on its business in the ordinary course after the CCAA filing, including obligations to employees, vendors, and suppliers.

As further described in Note 20.

Deconsolidation of RBH , RBH's financial results have been deconsolidated from our consolidated financial statements since March 22, 2019.

RBH's financial results have been deconsolidated from our consolidated financial statements since March 22, 2019.

As part of the CCAA proceedings, there is currently a comprehensive stay up to and including March 31, 2023 of all tobacco-related litigation pending in Canada against RBH and the other defendants, including PMI and our indemnitees (PM USA and Altria), namely, the smoking and health class actions filed in various Canadian provinces and health care cost recovery actions.

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On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court’s findings of liability and the total amount of punitive damages awarded allocating CAD 57 million including interest (approximately $ 42 million) to RBH.

See the Blais description above and Note 20.

Deconsolidation of RBH below for further detail concerning the security order pertaining to both Létourneau and Blais cases and the impact of the decision on PMI’s financial statements.

See the Blais description above for further detail concerning the security order pertaining to both Létourneau and Blais cases and the impact of the decision on PMI’s financial statements.

RBH and PMI believe the findings of liability and damages in both Létourneau and the Blais cases were incorrect and in contravention of applicable law on several grounds including the following:

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The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic bronchitis and severe sinus infections resulting from the use of tobacco products.

She is seeking compensatory and punitive damages on behalf of a proposed class

comprised of all smokers, their estates, dependents and family members, restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products.

She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products.

To date, we, our subsidiaries, and our indemnitees have not been properly served with the complaint.

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The plaintiff, an individual smoker, alleges his own addiction to tobacco products and heart disease resulting from the use of tobacco products.

He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from heart disease allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed.

He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who

were alive on June 12, 2007, and who suffered from heart disease allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed.

In the eighth class action pending in Canada, Bourassa v.

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Our subsidiary challenged the amount determined by the court.

The Mar del Plata Court of Appeals granted our subsidiary's challenge to the escrow amount determined by the trial court.

The Civil and Commercial Court of Appeals of Mar del Plata granted our subsidiary's challenge to the escrow amount determined by the trial court.

As a result, on December 16, 2021, ARS 893,428 (approximately $ 4,739 ) was returned to our subsidiary.

If our subsidiary ultimately prevails on appeal, the remaining deposited amounts will be returned to our subsidiary.

If our subsidiary ultimately prevails, the remaining deposited amounts will be returned to our subsidiary.

On May 31, 2022, the Civil and Commercial Court of Appeals of Mar del Plata ruled that the statute of limitations barred plaintiff's claim and reversed the trial court's decision.

On June 15, 2022, plaintiff filed an extraordinary appeal.

Pending claims related to tobacco products generally fall within the following categories:

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As of December 31, 2022, there were a number of smoking and health cases pending against us, our subsidiaries or indemnitees, as follows:

• 40 cases brought by individual plaintiffs in Argentina ( 31 ), Brazil ( 2 ), Canada ( 2 ), Chile ( 1 ) , the Philippines ( 1 ), Turkey ( 1 ) and Scotland ( 1 ), as well as 1 case brought by an individual plaintiff in the United States District Court for the District of Oregon in May 2021.

The provisions of the 2008 Share Distribution Agreement between PMI and Altria provide for indemnities to PMI for certain liabilities concerning tobacco products as described above under the caption " Tobacco-Related Litigation, "compared with 43 such cases on December 31, 2020, and 50 cases on December 31, 2019;

• 40 cases brought by individual plaintiffs in Argentina ( 30 ), Canada ( 2 ), Chile ( 4 ) , the Philippines ( 1 ), Turkey ( 1 ) and Scotland ( 1 ), as well as 1 case brought by an individual plaintiff in the United States District Court for the District of Oregon in May 2021.

(See information regarding the provisions of the 2008 Share Distribution Agreement between PMI and Altria that provide for indemnities to PMI for certain liabilities concerning tobacco products under the caption " Tobacco-Related Litigation " described above), compared with 40 such cases on December 31, 2021, and 43 cases on December 31, 2020;

• 9 cases brought on behalf of classes of individual plaintiffs, compared with 9 such cases on December 31, 2021 and 9 such cases on December 31, 2020.

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These cases, brought by governmental and non-governmental plaintiffs, seek reimbursement of health care cost expenditures allegedly caused by tobacco products.

Plaintiffs' allegations of liability in these cases are based on various theories of recovery including unjust enrichment, negligence, negligent design, strict liability, breach of express and implied warranties, violation of a voluntary undertaking or special duty, fraud, negligent misrepresentation, conspiracy, public nuisance, defective product, failure to warn, sale of cigarettes to minors, and claims under statutes governing competition and deceptive trade practices.

Plaintiffs' allegations of liability in these cases are based on

various theories of recovery including unjust enrichment, negligence, negligent design, strict liability, breach of express and implied warranties, violation of a voluntary undertaking or special duty, fraud, negligent misrepresentation, conspiracy, public nuisance, defective product, failure to warn, sale of cigarettes to minors, and claims under statutes governing competition and deceptive trade practices.

Plaintiffs in these cases seek various forms of relief including compensatory and other damages, and injunctive and equitable relief.

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The trial court dismissed the case in its entirety on November 20, 2020.

Plaintiff appealed.

The Appellate court granted the Plaintiff a de novo

appeal in 2021 and determined that the appellate proceedings will take place in stages:

wrongful conduct/product defect allegations first, then causation and finally issues such as standing/direct action.

Label-Related Cases:

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Plaintiffs in these cases seek various forms of relief including injunctive relief such as banning cigarettes, descriptors, smoking in certain places and advertising, as well as implementing communication campaigns and reimbursement of medical expenses incurred by public or private institutions.

As of December 31, 2021, there was 1 public civil action pending against our subsidiary in Venezuela ( 1 ), compared with 2 such cases on December 31, 2020, and 2 such cases on December 31, 2019.

As of December 31, 2022, there was 1 public civil action pending against our subsidiary in Venezuela ( 1 ), compared with 1 such case on December 31, 2021, and 2 such cases on December 31, 2020.

In a public civil action in Venezuela, Federation of Consumers and Users Associations (“FEVACU”), et al.

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Plaintiff alleged that our subsidiaries advertise the product in contravention of law and in a manner that misleads consumers by portraying the product in a positive light, and further asserts that the Platform 1 vapor contains many toxic compounds, creates a high level of dependence, and has damaging second-hand effects.

Plaintiff sought injunctive relief and damages on her behalf and on a behalf of two classes (class 1 - all Platform 1 consumers in Colombia who seek damages for the purchase price of the product and personal injuries related to the alleged addiction, and class 2 - all residents of the neighborhood where the advertising allegedly took place who seek damages for exposure to the alleged illegal advertising).

Plaintiff sought injunctive relief and damages on her behalf and on behalf of two classes (class 1 - all Platform 1 consumers in Colombia who seek damages for the purchase price of the product and personal injuries related to the alleged addiction, and class 2 - all residents of the neighborhood where the advertising allegedly took place who seek damages for exposure to the alleged illegal advertising).

Our subsidiaries answered the complaint in January 2020, and in February 2020, plaintiff filed an amended complaint.

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In June 2021, our subsidiaries answered the amended complaint.

The court has scheduled evidentiary hearings to take place in February 2023.

Other Litigation

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On January 18, 2016, the Public Prosecutor filed charges against our subsidiary and seven former and current employees in the Bangkok Criminal Court alleging that PM Thailand and the individual defendants jointly and with the intention to defraud the Thai government, under-declared import prices of cigarettes to avoid full payment of taxes and duties in connection with import entries of cigarettes from the Philippines during the period of July 2003 to June 2006.

The government is seeking a fine of approximately THB 80.8 billion (approximately $ 2.4 billion).

The government sought a fine of approximately THB 80.8 billion (approximately $ 2.4 billion).

In May 2017, Thailand enacted a new customs act.

The new act, which took effect in November 2017, substantially limits the amount of fines that Thailand could seek in these proceedings.

PM Thailand believes that its declared import prices are in compliance with the Customs Valuation Agreement of the World Trade Organization and Thai law and that the allegations of the Public Prosecutor are inconsistent with several decisions already taken by Thai Customs and other Thai governmental agencies.

PM Thailand believes that its declared import prices are in compliance with the Customs Valuation

Agreement of the World Trade Organization and Thai law and that the allegations of the Public Prosecutor are inconsistent with several decisions already taken by Thai Customs and other Thai governmental agencies.

Trial in the case began in November 2017 and concluded in September 2019.

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This payment is included in other assets on the consolidated balance sheets and negatively impacted net cash provided by operating activities in the consolidated statements of cash flows in the period of payment.

Our subsidiary filed an appeal of the trial court's decision.

In addition, the Public Prosecutor filed an appeal of the trial court's decision challenging the dismissal of charges against the individual defendants and the amount of the fine imposed.

If our subsidiary ultimately prevails on appeal, then Thailand will be required to return this payment to our subsidiary.

The appellate court is scheduled to issue its decision on the appeals on June 1, 2022.

Both our subsidiary and the Public Prosecutor filed an appeal of the trial court's decision.

The appellate court issued its decision on the appeals on June 1, 2022.

The appellate court affirmed the findings of under-declaration of import prices of cigarettes but reduced the fine to approximately THB 122 million (approximately $ 3.6 million) finding the trial court erred in its calculation of the under-declaration and fine.

The appellate court affirmed the acquittals of the individual defendants.

Our subsidiary has appealed the decision to the Supreme Court of Thailand.

The Public Prosecutor has also filed an appeal challenging the dismissal of charges against the individual defendants and the amount of the fine imposed.

Thailand is required to refund any payment made by our subsidiary in excess of any fine asserted by the courts.

The DSI also conducted an investigation into alleged underpayment by PM Thailand of customs duties and excise taxes relating to imports from Indonesia covering the period 2000-2003.

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In April 2020, as required by Thai law, our subsidiary paid the fine.

This payment is included in other assets on the condensed consolidated balance sheets and negatively impacted net cash provided by operating activities in the condensed consolidated statements of cash flows in the period of payment.

Our subsidiary filed an appeal of the trial court's decision.

In addition, the Public Prosecutor filed an appeal of the trial court's decision challenging the dismissal of charges against the individual defendant and the amount of the fine imposed.

If our subsidiary ultimately prevails on appeal, then Thailand will be required to return this payment to our subsidiary.

The appellate court issued its decision on the appeals on January 31, 2023.

The appellate court affirmed the findings of under-declaration of import prices of cigarettes but reduced the fine imposed by the trial court.

The appellate court directed the Public Prosecutor to coordinate with customs officials to calculate such reduced fine in accordance with the appellate court’s decision, which will occur at a later date.

The appellate court affirmed the acquittal of the individual defendant.

Both the Public Prosecutor and our subsidiary may appeal the decision to the Supreme Court of Thailand.

Thailand is required to refund any payment made by our subsidiary in excess of any fine assessed by the courts.

The South Korean Board of Audit and Inspection (“BAI”) conducted an audit of certain Korean government agencies and the tobacco industry into whether inventory movements ahead of the January 1, 2015 increase of cigarette-related taxes by tobacco companies, including Philip Morris Korea Inc.

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If the tax authorities and government agencies ultimately lose, then they would be required to return the paid amounts to PM Korea.

The Moscow Tax Inspectorate for Major Taxpayers (“MTI”) conducted an audit of AO Philip Morris Izhora (“PM Izhora”), our Russian subsidiary, for the 2015-2017 financial years.

On July 26, 2019, MTI issued its initial assessment, claiming that intercompany sales of cigarettes between PM Izhora and another Russian subsidiary prior to excise tax increases and submission by PM Izhora of the maximum retail sales price notifications for cigarettes to the tax authorities were improper under Russian tax laws and resulted in underpayment of excise taxes and VAT.

In August 2019, PM Izhora submitted its objections disagreeing with MTI’s allegations set forth in the initial assessment and MTI’s methodology for calculating the alleged underpayments.

MTI accepted some of PM Izhora’s arguments, and in September 2019, issued the final tax assessment claiming an underpayment of RUB $ 24.3 billion (approximately $ 374 million), including penalties and interest.

In accordance with Russian tax laws, PM Izhora paid the entire amount of MTI’s final assessment.

This amount was neither imposed on, nor concurrent with, the specific revenue-producing transaction, nor was it collected from customers of our Russian subsidiaries.

In the third quarter of 2019, PMI recorded a pre-tax charge of $ 374 million, in marketing, administration and research costs in the condensed consolidated statements of earnings, representing $ 315 million net of an associated income tax benefit of $ 59 million.

The Saudi Arabia Customs General Authority issued its assessments requiring our distributors to pay additional customs duties in the amount of approximately 1.5 billion Saudi Riyal, or approximately $ 396 million, in relation to the fees paid by these distributors under their agreements with our subsidiary for exclusive rights to distribute our products in Saudi Arabia.

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Both distributors appealed, and in June 2021, the Customs Appeal Committee in Riyadh notified the distributors of its decisions to largely reject their appeals.

On the basis of the above-mentioned decisions, in June 2021, PMI recorded a pre-tax charge of $ 246 million in relation to the period of 2014 through 2020 in line with existing and contemplated arrangements with the distributors.

The estimated amounts for 2021 are immaterial.

On the basis of the above-mentioned decisions, in June 2021, PMI recorded a pre-tax charge of $ 246 million in relation to the period of 2014 through 2020 in line with existing and

contemplated arrangements with the distributors.

The estimated amounts for 2021 and 2022 are immaterial.

In accordance with U.S.

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On September 10, 2021, the court granted defendant's motion to dismiss plaintiffs' amended complaint in its entirety.

On October 8, 2021, the plaintiffs filed a Notice of Appeal to the U.S.

Plaintiffs have filed an appeal with the U.S.

Court of Appeal for the Second Circuit.

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, in the federal court in the Eastern District of Virginia, where PMI's subsidiary, Philip Morris Products S.A., as well as Altria Group, Inc.'s subsidiaries, are defendants.

Plaintiffs seek damages and injunctive relief against the commercialization of the Platform 1 products in the United States.

Plaintiffs seek damages and injunctive relief against the commercialization of the Platform 1 blade products in the United States.

In April 2020, BAT affiliates filed a complaint against PMI, Philip Morris Products S.A., Altria Group, Inc., and its subsidiaries before the International Trade Commission ("ITC").

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The ITC evidentiary hearing closed on February 1, 2021.

On May 14, 2021, the administrative law judge issued an Initial and Recommended Determination ("ID/RD") finding that the Platform 1 product infringes two of the three patents asserted by Plaintiffs, recommending that the ITC issue a Limited Exclusion order against infringing products, and recommending against a cease-and-desist, as well as recommending against a bond pending Presidential review of the ITC's Final Determination ("FD").

On May 14, 2021, the administrative law judge issued an Initial and Recommended Determination ("ID/RD") finding that the Platform 1 blade products infringe two of the three patents asserted by Plaintiffs, recommending that the ITC issue a Limited Exclusion order against infringing products, and recommending against a cease-and-desist, as well as recommending against a bond pending Presidential review of the ITC's Final Determination ("FD").

Defendants and Plaintiffs filed separate Petitions for Review with the ITC of the ID on May 28, 2021;

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and (b) a cease-and-desist order against Altria Client Services, LLC and its affiliate prohibiting, inter alia, sales of imported Platform 1 products.

The ITC predicated the orders on its finding that Platform 1 products infringe two patents owned by a BAT affiliate.

The ITC also found that Platform 1 products do not infringe a third patent owned by a BAT affiliate.

The ITC predicated the orders on its finding that Platform 1 blade products infringe two patents owned by a BAT affiliate.

The ITC also found that Platform 1 blade products do not infringe a third patent owned by a BAT affiliate.

The ITC further held that there were insufficient concerns over public interest to prevent the issuance of remedial orders.

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the ITC denied the motion on January 20, 2022 and the Federal Circuit denied the motion on January 25, 2022.

The Federal Circuit heard oral argument on defendants' appeal of the FD on October 3, 2022 and a decision is awaited.

We estimate that an adverse ruling is probable due to our inability to import the products and components impacted by the ITC's FD with immaterial financial impact.

In the Eastern District of Virginia case, the defendants also counterclaimed that BAT infringed their patents relating to certain e-vapor products, seeking damages for, and injunctive relief against, the commercialization of these products by BAT.

defendants' claims against BAT are set for trial beginning the week of June 6, 2022.

The trial of Defendant PMPSA’s counterclaims took place from June 8-14, 2022 and, on June 15, 2022, the jury returned a verdict for PMPSA awarding approximately $ 10.8 million in damages for infringement up to December 31, 2021 of two PMPSA patents by BAT’s affiliate and two of BAT’s e-vapor products;

the jury also found BAT’s affiliate did not infringe one of the two PMPSA patents and that the BAT affiliates had failed to prove one of the two PMPSA patents was invalid.

PMPSA filed a motion for an injunction or, in the alternative, an ongoing royalty on August 12, 2022 which remains pending.

Upon petition of Philip Morris Products S.A., the Patent Trial and Appeal Board ("PTAB") of the United States Patent and Trademark Office has instituted review of certain claims pertaining to four of the six patents asserted by BAT affiliates in both proceedings.

On January 11, 2022, PTAB issued its final decision on one of the two patents underlying the ITC's FD, invalidating all challenged claims of BAT's patent.

We expect PTAB's final decision on the second of the two BAT patents underlying the ITC's FD to arrive on or before April 2, 2022;

the parties may appeal PTAB results to the U.S.

On March 30, 2022, PTAB issued its final decision on the second of the two patents underlying the ITC's FD, finding the challenged claims patentable.

The parties have filed appeals of these PTAB results to the U.S.

Court of Appeals for the Federal Circuit.

On July 21, 2022, PMPSA filed a Request for Rehearing of PTAB's November 2020

decision not to institute review of certain claims in the second of the two patents underlying the ITC's FD;

PTAB denied the Request on October 13, 2022.

In April 2020, BAT’s affiliate commenced patent infringement proceedings, Nicoventures Trading Limited v.

PM GmbH, et al., against PMI’s German subsidiary, Philip Morris GmbH, and Philip Morris Products S.A., in the Regional Court in Munich, Germany.

Plaintiffs seek damages and injunctive relief against the commercialization of the Platform 1 products in Germany.

Plaintiffs seek damages and injunctive relief against the commercialization of the Platform 1 blade products in Germany.

In June 2021, the court stayed the proceeding in respect of one of the two patents asserted by BAT’s Affiliate.

Following the December 2022 confirmation of the revocation of the other BAT patent by the European Patent Office Board of Appeal, BAT withdrew its initial claim based on that patent;

the stayed action based on the second patent remains pending.

In September 2020, BAT’s affiliates commenced patent infringement and unfair competition proceedings, RAI Strategic Holdings, Inc., et al.

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and Philip Morris Italia S.r.l., in the Court of Milan, Italy.

Plaintiffs seek damages, as well as injunctive relief against the manufacture in Italy of the Platform 1 heated tobacco units allegedly infringing the asserted patents and the commercialization of the Platform 1 products in Italy.

As part of this proceeding, in October 2020, BAT’s affiliates filed a

request based on one of the two asserted patents seeking preliminary injunctive relief against the manufacture and commercialization of the Platform 1 products in Italy.

Plaintiffs seek damages, as well as injunctive relief against the manufacture in Italy of the Platform 1 blade heated tobacco units allegedly infringing the asserted patents and the commercialization of the Platform 1 blade products in Italy.

As part of this proceeding, in October 2020, BAT’s affiliates filed a request based on one of the two asserted patents seeking preliminary injunctive relief against the manufacture and commercialization of the Platform 1 blade products in Italy.

In July 2022, the court dismissed plaintiffs’ request for preliminary injunction in its entirety and plaintiffs did not appeal this ruling.

In October 2020, BAT’s affiliates commenced patent infringement proceedings, RAI Strategic Holdings, Inc., et al.

Philip Morris Japan, Limited , et al ., against PMI’s Japanese subsidiary, Philip Morris Japan Limited, and a third-party distributor in the Tokyo District Court.

Plaintiffs seek damages and injunctive relief against the commercialization of the Platform 1 products in Japan.

Plaintiffs seek damages and injunctive relief against the commercialization of the Platform 1 blade products in Japan.

On December 23, 2022, the Court dismissed BAT’s claims with respect to one of the two patents that it asserted, finding no infringement;

BAT filed an appeal of this dismissal.

In November 2020, BAT’s affiliates commenced patent infringement proceedings, RAI Strategic Holdings, Inc., et al.

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and Philip Morris Trading S.R.L., and a third-party distributor in the Court of Law of Bucharest, Civil Registry.

Plaintiffs seek damages and preliminary and permanent injunctive relief against the manufacture and commercialization of the Platform 1 products in Romania.

Plaintiffs seek damages and preliminary and permanent injunctive relief against the manufacture and commercialization of the Platform 1 blade products in Romania.

In February 2021, the court dismissed plaintiffs’ request for a preliminary injunction.

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Philip Morris Korea, Co., Ltd., against PM Korea in the Seoul Central District Court.

Plaintiffs seek damages and injunctive relief against the commercialization of the Platform 1 heated tobacco units in South Korea.

Plaintiffs seek damages and injunctive relief against the commercialization of the Platform 1 blade heated tobacco units in South Korea.

On May 30, 2022, the Korean Patent Office issued a decision that all of the challenged claims in the patent asserted by Plaintiffs are invalid;

Plaintiffs filed an appeal of this decision.

In July, 2021, Philip Morris Products, S.A.

filed a claim at the High Court of Justice of England and Wales against BAT affiliates Nicoventures Trading Limited and British American Tobacco (Investments) Limited seeking revocation of the UK parts of two BAT European patents.

In March, the BAT affiliates stated that they would consent to revocation of one of the patents and filed a counterclaim against Philip Morris Products S.A.

and Philip Morris Limited seeking from the court a declaration that the remaining BAT affiliate patent is infringed by Platform 1 induction products, as well as damages and injunctive relief against the commercialization of the Platform 1 induction products in the U.K.

The trial took place from September 21-28, 2022, and a decision is awaited.

Other patent challenges by both parties are pending in various jurisdictions.

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Third-Party Guarantees

On October 17, 2020, Medicago Inc., an equity method investee of Philip Morris Investments B.V.

(“PMIBV”), a PMI subsidiary, entered into a contribution agreement with the Canadian government (the “Contribution Agreement”) whereby the Canadian government agreed to contribute up to CAD 173 million (approximately $ 131 million on the date of signing) to Medicago Inc., to support its on-going COVID-19 vaccine development and clinical trials, and for the construction of its Quebec City manufacturing facility (the “Project”).

PMIBV and the majority shareholder of Medicago Inc.

are also parties to the Contribution Agreement as guarantors of Medicago Inc.’s obligations thereunder on a joint and several basis (“Co-Guarantors”).

The Co-Guarantors agreed to repay amounts contributed by the Canadian government plus interest, if Medicago Inc.

fails to do so, and could be responsible for the costs of other Medicago’s obligations (such as the achievement of specific milestones of the Project).

The maximum amount of these obligations is currently non-estimable.

As of December 31, 2021, PMI has determined that these guarantees did not have a material impact on its consolidated financial statements.

In connection with the Contribution Agreement, PMIBV and the majority shareholder of Medicago Inc.

entered into a guarantors’ agreement that apportions Co-Guarantors’ obligations and limits those of PMIBV to its share of holdings in Medicago Inc.

During 2021, Medicago Inc.

initiated additional rounds of equity funding in which PMIBV did not participate.

As a result, PMIBV’s share of holdings in Medicago Inc.

was reduced from approximately 32 % to approximately 23 % as of December 31, 2021.

Until November 1, 2022, Medicago Inc.

("Medicago") was an equity method investee of Philip Morris Investments B.V.

(“PMIBV”), a PMI subsidiary.

On October 17, 2020, Medicago had entered into a contribution agreement with the Canadian government (the “Contribution Agreement”) whereby the Canadian government agreed to contribute up to CAD 173 million (approximately $ 131 million on the date of signing) to Medicago, to support its on-going COVID-19 vaccine development and clinical trials ("First Stage"), and for the construction of its Quebec City manufacturing facility ("Second Stage", and together with the First Stage, the “Project”).

On March 31, 2022, the Contribution Agreement was amended (the “Contribution Agreement Amendment”) to reflect an additional contribution from the Canadian government up to CAD 27 million (approximately $ 22 million on the date of signing) to Medicago for the Second Stage.

In August 2022, Medicago received the final tranche of the contribution from the Canadian government in relation to the First Stage, confirming thereby the completion of such first stage and consequently reducing by approximately CAD 123 million (approximately $ 93 million on the date of signing) the Repayment Obligations (as defined below).

PMIBV and Mitsubishi Tanabe Pharma Corporation (“MTPC”) are also parties to the Contribution Agreement and the Contribution Agreement Amendment as guarantors of Medicago’s obligations thereunder on a joint and several basis (“Co-Guarantors”).

The Co-Guarantors agreed to repay amounts contributed by the Canadian government plus interest, if Medicago fails to do so (the "Repayment Obligations"), and could be responsible for the costs of Medicago’s other obligations (such as the achievement of specific milestones of the Project).

The guarantees are in effect through March 31, 2026.

It is reasonably possible that PMI will be responsible for a portion of these costs and obligations.

The maximum amount of these obligations is currently non-estimable.

On November 1, 2022, PMIBV transferred all of the shares it owned in Medicago to MTPC Holdings Canada Inc., the majority shareholder of Medicago.

MTPC assumed and agreed to perform all of PMIBV's obligations under the guarantees and to indemnify and save PMIBV harmless in respect of any and all claims related to the guaranteed obligations.

On February 3, 2023, PMI learned through a public announcement that a decision has been taken to cease all operations at Medicago and to proceed with an orderly wind up of Medicago’s business and operations.

PMI has determined that these guarantees did not have a material impact on its consolidated financial statements for the year ended December 31, 2022.

Sale of Accounts Receivable:

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When applicable, a servicing liability is recorded for the estimated fair value of the servicing.

The amounts associated with the servicing liability were not material for the

years ended December 31, 2021 and 2020.

The amounts associated with the servicing liability were not material for the years ended December 31, 2022 and 2021.

Under the non-servicing arrangements, PMI does not provide any administrative support or servicing after the trade receivables have been sold to the unaffiliated financial institutions.

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The difference between the carrying amount of the trade receivables sold and the sum of the cash received is recorded as a loss on sale of trade receivables within marketing, administration and research costs in the consolidated statements of earnings.

For the years ended December 31, 2021, 2020 and 2019 the loss on sale of trade receivables was immaterial.

For the years ended December 31, 2022, 2021 and 2020 the loss on sale of trade receivables was $ 26 million, $ 9 million and $ 9 million, respectively.

Asset Impairment and Exit Costs:

For the years ended December 31, 2021, 2020 and 2019, PMI recorded total pre-tax asset impairment and exit costs of $ 216 million, $ 149 million and $ 422 million, respectively.

The total pre-tax asset impairment and exit costs were included in marketing, administration and research costs on the consolidated statements of earnings.

In the first quarter of 2021, PM Korea commenced the implementation of a new business operating model, which requires the restructuring of its current distribution agreements.

For the year ended December 31, 2022, PMI did not record any charges for asset impairment and exit costs related to restructuring activities.

As previously discussed, PMI recorded a pre-tax impairment charge on intangibles of $ 112 million for the year ended December 31, 2022 within the Wellness and Healthcare segment.

For further details, see Note 5.

Goodwill and Other Intangible Assets, net .

For the years ended December 31, 2021 and 2020, PMI recorded total pre-tax asset impairment and exit costs related to

restructuring activities of $ 216 million and $ 149 million, respectively.

These pre-tax asset impairment and exit costs were included in marketing, administration and research costs on the consolidated statements of earnings.

In 2021, PM Korea implemented a new business operating model, which required the restructuring of its current distribution agreements.

As a result, PMI recorded exit costs of $ 57 million in the year ended December 31, 2021, related to contract terminations and restructuring with certain distributors.

Organizational Design Optimization

As part of PMI’s transformation to a smoke-free future, PMI seeks to optimize its organizational design, which includes the elimination, relocation and outsourcing of certain operations center and centralized activities.

As part of PMI’s transformation to a smoke-free future, PMI sought to optimize its organizational design, which included the elimination, relocation and outsourcing of certain operations center and centralized activities.

In January 2020, PMI commenced a multi-phase restructuring project in Switzerland.

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Of this cumulative pre-tax amount, $ 300 million related to separation program charges and $ 8 million related to asset impairment charges.

Global Manufacturing Infrastructure Optimization

In light of declining PMI cigarette volumes resulting from lower total industry volumes and the shift to smoke-free alternatives, PMI continues to optimize its global manufacturing infrastructure.

During 2019, PMI recorded asset impairment and exit costs related to plant closures in Argentina, Colombia, Germany and Pakistan as part of its global manufacturing infrastructure optimization.

On November 4, 2019, PMI announced that, as part of its global manufacturing infrastructure optimization, its German affiliate, Philip Morris Manufacturing GmbH ("PMMG"), reached an agreement with employee representatives to end cigarette production in its factory in Berlin, Germany, by January 1, 2020.

As a result of this agreement, during 2019, PMI recorded pre-tax asset impairment and exit costs of $ 342 million in the European Union segment.

This amount included pension and employee separation costs of $ 251 million, which are paid in cash, and asset impairment costs of $ 91 million, primarily related to machinery and equipment, which were non-cash charges.

During 2019, PMI also recorded pre-tax asset impairment and exit costs of $ 80 million as part of its global manufacturing infrastructure optimization.

These costs were related to cigarette plant closures in Argentina ($ 15 million), Colombia ($ 45 million) and Pakistan ($ 20 million).

The charges were reflected in the Americas segment (Argentina and Colombia) and the South & Southeast Asia segment (Pakistan).

Asset Impairment and Exit Costs by Segment

During 2021, 2020 and 2019, PMI recorded the following pre-tax asset impairment and exit costs by segment:

During 2021 and 2020, PMI recorded the following pre-tax asset impairment and exit costs by segment related to restructuring activities:

(in millions)

2021 2020 2019

Separation programs:

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East Asia & Australia 31 25

Americas 8 9 49

Total separation programs 159 141

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East Asia & Australia — 1

Americas — — 11

Total asset impairment charges — 8

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Future cash payments for exit costs incurred to date are anticipated to be substantially paid by the end of 2023.

Deconsolidation of RBH:

As discussed in Note 17.

Contingencies, following the March 1, 2019, judgment of the Court of Appeal of Québec in two class action lawsuits against PMI's Canadian subsidiary, Rothmans, Benson & Hedges Inc.

("RBH"), PMI recorded in its consolidated results a pre-tax charge of $ 194 million, representing $ 142 million net of tax, in the first quarter of 2019.

This pre-tax Canadian tobacco litigation-related expense was included in marketing, administration and research costs on PMI's consolidated statement of earnings for the year ended December 31, 2019.

The charge reflects PMI’s assessment of the portion of the judgment that represents probable and estimable loss prior to the deconsolidation of RBH and corresponds to the trust account deposit required by the judgment.

RBH’s share of the deposit is approximately CAD 257 million.

On March 22, 2019, RBH obtained an initial order from the Ontario Superior Court of Justice granting it protection under the Companies’ Creditors Arrangement Act ("CCAA"), which is a Canadian federal law that permits a Canadian business to restructure its affairs while carrying on its business in the ordinary course with minimal disruption to its customers, suppliers and employees.

The administration of the CCAA process, principally relating to the powers provided to the court and the court appointed monitor, removes certain elements of control of the business from both PMI and RBH.

As a result, PMI has determined that it no longer has a controlling financial interest over RBH as defined in ASC 810 (Consolidation), and PMI deconsolidated RBH as of the date of the CCAA filing.

PMI has also determined that it does not exert "significant influence" over RBH as that term is defined in ASC 323 (Investments-Equity Method and Joint Ventures).

Therefore, as of March 22, 2019, PMI accounted for its continuing investment in RBH in accordance with ASC 321 (Investments-Equity Securities) as an equity security, without readily determinable fair value.

Following the deconsolidation, the carrying value of assets and liabilities of RBH was removed from the consolidated balance sheet of PMI, and the continuing investment in RBH was recorded at fair value at the date of deconsolidation.

The total amount deconsolidated from PMI’s balance sheet was $ 3,519 million, including $ 1,323 million of cash, $ 1,463 million of goodwill, $ 529 million of accumulated other comprehensive earnings, primarily related to historical currency translation and $ 204 million of other assets and liabilities, net.

While PMI is accounting for its investment in RBH as an equity security, PMI would recognize dividends as income upon receipt.

However, while it remains under creditor protection, RBH does not anticipate paying dividends.

The fair value of PMI’s continuing investment in RBH of $ 3,280 million was determined at the date of deconsolidation, recorded within equity investments and is assessed for impairment on an ongoing basis.

The estimated fair value of the underlying business was determined based on an income approach using a discounted cash flow analysis, as well as a market approach for certain contingent liabilities.

The information used in the estimate includes observable inputs, primarily a discount rate of 8 %, a terminal growth rate of 2.5 % and information about total tobacco market size in Canada and RBH’s share of the market, as well as unobservable inputs such as operating budgets and strategic plans, various inflation scenarios, estimated shipment volumes, and expected product pricing and projected margins.

The difference between the carrying value of the assets and liabilities of RBH that were deconsolidated and the fair value of the continuing investment, as determined at the date of deconsolidation, was $ 239 million, before tax, and this loss on deconsolidation is reflected within marketing, administration and research costs on PMI’s consolidated statement of earnings for the year ended December 31, 2019.

PMI also recorded a tax benefit of $ 49 million within the provision for income taxes for the year ended December 31, 2019, related to the reversal of a deferred tax liability on unremitted earnings of RBH.

RBH is party to transactions with PMI and its consolidated subsidiaries entered into in the normal course of business;

these transactions include royalty payments and recharge of various corporate expenses for services benefiting RBH.

Up to the date of the CCAA filing, these transactions were eliminated on consolidation and had no impact on PMI’s consolidated statement of earnings.

After deconsolidating RBH, these transactions are treated as third-party transactions in PMI’s financial statements.

The amount of these related-party transactions is included within Note 4.

Related Parties - Equity investments and Other.

Developments in the CCAA process, including resolution through a plan of arrangement or compromise of all pending tobacco-related litigation currently stayed in Canada, as discussed in Note 17.

Contingencies , could result in a material change in the fair value of PMI’s continuing investment in RBH.

PMI has operating and finance leases that are principally for real estate (office space, warehouses and retail store space), machinery and equipment, and vehicles.

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We believe that our audits provide a reasonable basis for our opinions.

As described in the Report of Management on Internal Control Over Financial Reporting, management has excluded Swedish Match AB from its assessment of internal control over financial reporting as of December 31, 2022 because it was acquired by the Company in a purchase business combination during 2022.

We have also excluded Swedish Match AB from our audit of internal control over financial reporting.

Swedish Match AB is a majority-owned subsidiary whose total assets and total third-party net revenues excluded from management’s assessment and our audit of internal control over financial reporting represent 4% and 1%, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2022.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the

maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;

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Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Tobacco-Related Litigation for Smoking and Health Class Actions and Health Care Cost Recovery Actions

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These procedures also included, among others, obtaining and evaluating the letters of audit inquiry with external and internal legal counsel, evaluating the reasonableness of management’s assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably estimable, and evaluating the sufficiency of the Company’s smoking and health class actions and health care cost recovery actions contingencies disclosures.

Preliminary Valuation of Trademarks and Customer Relationships - Acquisition of Swedish Match AB

As described in Note 3 to the consolidated financial statements, the Company acquired a controlling interest in Swedish Match AB for consideration of $14.5 billion in 2022, which resulted in $4.5 billion of intangible assets preliminarily being recorded, of which $4.1 billion relate to trademarks and customer relationships.

Management applied significant judgment in estimating the preliminary fair value of intangible assets acquired, which involved the use of significant estimates and assumptions with respect to the timing and amounts of revenue growth rates, royalty rates, and discount rates for trademarks, and profit margins, customer attrition rates, and discount rates for customer relationships.

The principal considerations for our determination that performing procedures relating to the preliminary valuation of trademarks and customer relationships acquired in the acquisition of Swedish Match AB is a critical audit matter are the significant judgment by management when developing the preliminary fair value estimate of the trademarks and customer relationships acquired, which in turn led to a high degree of auditor judgment, and subjectivity in performing procedures and evaluating management’s significant assumptions of revenue growth rates, royalty rates, and discount rates for trademarks, and profit margins, customer attrition rates, and

discount rates for customer relationships.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s preliminary valuation of the trademarks and customer relationships acquired and controls over the development of significant assumptions related to revenue growth rates, profit margins, customer attrition rates, royalty rates, and discount rates.

These procedures also included, among others, testing management’s process for estimating the preliminary fair value of trademarks and customer relationships.

Testing management’s process included evaluating the appropriateness of the valuation methods, testing the completeness and accuracy of data provided by management, and evaluating the reasonableness of significant assumptions related to revenue growth rates, profit margins, customer attrition rates, royalty rates, and discount rates.

Evaluating the reasonableness of the revenue growth rates and profit margins involved considering the past performance of the acquired business, as well as economic and industry forecasts.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s valuation methods, the appropriateness of the discounted cash flow model, and the reasonableness of the customer attrition rate, royalty rate, and discount rate assumptions.

/S/ PRICEWATERHOUSECOOPERS SA

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Management of Philip Morris International Inc.

(“PMI”) is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.

(“PMI” or "we") is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended.

PMI’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

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Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In November 2022 we acquired Swedish Match.

We have excluded the Swedish Match acquisition from our assessment of the effectiveness of internal control over financial reporting.

Total assets excluding goodwill and intangible assets (which are included in our assessment) represent 4% of consolidated assets as of December 31, 2022.

Total third-party net revenues represent 1% of consolidated net revenues for the year ended December 31, 2022.

Management assessed the effectiveness of PMI’s internal control over financial reporting as of December 31, 2022.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data