What changed in this filing

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Item 1. Financial Statements

2023-04-26 compared with 2022-10-27 · 508 added, 550 removed, 1015 unchanged (51% of the section changed)

4 unchanged sentences

(in millions of dollars, except per share data)

For the Nine Months Ended September 30,

Revenues including excise taxes $ 60,638 $ 61,393

Excise taxes on products 37,028 38,092

Net revenues (Note 10) 23,610 23,301

Cost of sales (Notes 3 & 6) 8,191 7,223

Gross profit 15,419 16,078

Marketing, administration and research costs (Notes 3 & 17) 6,097 6,050

Operating income 9,322 10,028

Interest expense, net 418 482

Pension and other employee benefit costs (Note 5) 16 82

Earnings before income taxes 8,888 9,464

Provision for income taxes 1,835 2,078

Equity investments and securities (income)/loss, net 20 ( 95 )

Net earnings $ 7,033 $ 7,481

Net earnings attributable to noncontrolling interests 382 465

Net earnings attributable to PMI $ 6,651 $ 7,016

Per share data (Note 8):

Basic earnings per share $ 4.28 $ 4.49

Diluted earnings per share $ 4.27 $ 4.48

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of dollars, except per share data)

For the Three Months Ended September 30,

Revenues including excise taxes $ 20,888 $ 21,617

For the Three Months Ended March 31,

Revenues including excise taxes (includes $ 1,845 in 2023 and $ 1,629 in 2022 from related parties)

$ 19,318 $ 19,341

Excise taxes on products 11,299 11,595

Net revenues 8,032 8,122

Cost of sales (Notes 3 & 6) 2,935 2,596

Net revenues (includes $ 873 in 2023 and $ 678 in 2022 from related parties) (Note 14)

Cost of sales (Note 3) 3,038 2,608

Gross profit 4,981 5,138

17 unchanged sentences

(in millions of dollars)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

Net earnings $ 2,102 $ 2,465

2 unchanged sentences

Unrealized gains (losses), net of income taxes of $ 52 in 2023 and $( 31 ) in 2022

Change in net loss and prior service cost:

Net gains (losses) and prior service costs, net of income taxes of $ 29 in 2022 and $( 7 ) in 2021

Amortization of net losses, prior service costs and net transition costs, net of income taxes of $( 37 ) in 2022 and $( 54 ) in 2021

Change in fair value of derivatives accounted for as hedges:

Gains (losses) recognized, net of income taxes of $( 106 ) in 2022 and $( 15 ) in 2021

(Gains) losses transferred to earnings, net of income taxes of $ 18 in 2022 and $ 3 in 2021

( 255 ) ( 194 )

Total other comprehensive earnings (losses) 292 594

Total comprehensive earnings 7,325 8,075

Less comprehensive earnings attributable to:

Noncontrolling interests 385 398

Comprehensive earnings attributable to PMI $ 6,940 $ 7,677

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

For the Three Months Ended September 30,

Net earnings $ 2,222 $ 2,588

Other comprehensive earnings (losses), net of income taxes:

Change in currency translation adjustments:

Unrealized gains (losses), net of income taxes of $( 158 ) in 2022 and $( 9 ) in 2021

Change in net loss and prior service cost:

6 unchanged sentences

Total comprehensive earnings

Less comprehensive earnings attributable to:

Less comprehensive earnings (losses) attributable to:

Noncontrolling interests ( 36 ) 279

5 unchanged sentences

(in millions of dollars)

September 30,

2023 December 31,

13 unchanged sentences

Deferred income taxes 585 603

Other assets (less allowances of $ 19 in 2022 and $ 21 in 2021)

Other assets (less allowances of $ 20 in 2023 and $ 20 in 2022) (Note 2)

TOTAL ASSETS $ 62,060 $ 61,681

(1) Includes trade receivables from related parties of $ 708 million and $ 688 million as of March 31, 2023, and December 31, 2022, respectively (less allowances of $ 17 million as of March 31, 2023 and $ 7 million as of December 31, 2022).

For further details, see Note 14.

Related Parties - Equity Investments and Other.

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in millions of dollars, except share data)

September 30,

2023 December 31,

21 unchanged sentences

Earnings reinvested in the business 34,303 34,289

Accumulated other comprehensive losses ( 9,288 ) ( 9,577 )

Accumulated other comprehensive losses (Note 13) ( 9,614 ) ( 9,559 )

26,877 26,960

11 unchanged sentences

(in millions of dollars)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

10 unchanged sentences

Income taxes ( 88 ) ( 93 )

Pension plan contributions, net of refunds (Note 5) 38 ( 219 )

Pension plan contributions (Note 5) ( 45 ) ( 34 )

Other 159 162

Net cash provided by operating activities 7,710 7,935

Net cash provided by (used in) operating activities ( 955 ) 1,118

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

Capital expenditures ( 279 ) ( 229 )

Acquisitions, net of acquired cash (Note 2) — ( 1,869 )

Equity investments ( 8 ) ( 20 )

2 unchanged sentences

Net cash used in investing activities ( 591 ) ( 196 )

(1) Includes amounts from related parties of $( 76 ) million and $( 202 ) million for March 31, 2023 and 2022, respectively

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in millions of dollars)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

3 unchanged sentences

Repayments - maturities longer than 90 days ( 138 ) —

Repayments under credit facilities related to Swedish Match AB acquisition ( 4,430 ) —

Long-term debt proceeds 5,203 —

Long-term debt repaid ( 682 ) ( 496 )

1 unchanged sentence

Dividends paid ( 1,987 ) ( 1,952 )

Payments to noncontrolling interests and Other (Note 2)

( 663 ) ( 457 )

Net cash used in financing activities ( 6,071 ) ( 8,176 )

Payments to acquire Swedish Match AB noncontrolling interests (Note 2) ( 883 ) —

Noncontrolling interests activity and Other (Note 2)

Net cash provided by (used in) financing activities 864 ( 701 )

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 89 ) ( 95 )

3 unchanged sentences

Balance at end of period $ 2,446 $ 4,626

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $ 6 million and $ 309 million as of September 30, 2022 and 2021, respectively, and $ 4 million and $ 5 million as of December 31, 2021 and 2020, respectively, which were included in other current assets in the condensed consolidated balance sheets.

As of September 30, 2021, the restricted cash was primarily related to the remaining funding of PMI’s acquisition of Vectura Group plc (“Vectura").

For further details on the acquisition of Vectura, see Note 2.

Acquisitions .

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $ 18 million and $ 4 million as of March 31, 2023 and 2022, respectively, and $ 10 million and $ 4 million as of December 31, 2022 and 2021, respectively, which were included in other current assets in the condensed consolidated balance sheets.

See notes to condensed consolidated financial statements.

2 unchanged sentences

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Nine Months Ended September 30, 2022 and 2021

For the Three Months Ended March 31, 2023 and 2022

(in millions of dollars, except per share amounts)

13 unchanged sentences

( 1,945 ) ( 1,945 )

Payments to noncontrolling interests ( 459 ) ( 459 )

Dividends paid to noncontrolling interests ( 101 ) ( 101 )

Common stock repurchased ( 199 ) ( 199 )

Acquisitions 44 44

Balances, September 30, 2021 $ — $ 2,181 $ 32,935 $ ( 10,520 ) $ ( 35,147 ) $ 1,919 $ ( 8,632 )

Purchase of subsidiary shares from noncontrolling interests (Note 2) ( 30 ) ( 171 ) ( 10 ) ( 211 )

Balances, March 31, 2022 $ — $ 2,118 $ 33,468 $ ( 9,760 ) $ ( 35,924 ) $ 1,895 $ ( 8,203 )

Balances, January 1, 2023 $ — $ 2,230 $ 34,289 $ ( 9,559 ) $ ( 35,917 ) $ 2,646 $ ( 6,311 )

4 unchanged sentences

( 1,981 ) ( 1,981 )

Payments to noncontrolling interests ( 368 ) ( 368 )

Common stock repurchased ( 199 ) ( 199 )

Other (Note 2) ( 30 ) ( 171 ) ( 10 ) ( 211 )

Balances, September 30, 2022 $ — $ 2,204 $ 33,865 $ ( 9,288 ) $ ( 35,918 ) $ 1,734 $ ( 7,403 )

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Three Months Ended September 30, 2022 and 2021

(in millions of dollars, except per share amounts)

PMI Stockholders’ (Deficit) Equity

Stock Additional

Capital Earnings

Reinvested in

Business Accumulated

Comprehensive Losses Cost of

Stock Noncontrolling

Interests Total

Balances, July 1, 2021 $ — $ 2,143 $ 32,465 $ ( 10,665 ) $ ( 35,056 ) $ 1,913 $ ( 9,200 )

Net earnings 2,426 162 2,588

Other comprehensive earnings (losses), net of income taxes 145 ( 39 ) 106

Issuance of stock awards 38 3 41

Dividends declared ($ 1.25 per share)

( 1,956 ) ( 1,956 )

Payments to noncontrolling interests ( 161 ) ( 161 )

Common stock repurchased ( 94 ) ( 94 )

Acquisitions 44 44

Balances, September 30, 2021 $ — $ 2,181 $ 32,935 $ ( 10,520 ) $ ( 35,147 ) $ 1,919 $ ( 8,632 )

Balances, July 1, 2022 $ — $ 2,165 $ 33,755 $ ( 9,043 ) $ ( 35,921 ) $ 1,784 $ ( 7,260 )

Net earnings 2,087 135 2,222

Other comprehensive earnings (losses), net of income taxes ( 245 ) ( 74 ) ( 319 )

Issuance of stock awards 39 3 42

Dividends declared ($ 1.27 per share)

( 1,977 ) ( 1,977 )

Payments to noncontrolling interests ( 111 ) ( 111 )

Balances, September 30, 2022 $ — $ 2,204 $ 33,865 $ ( 9,288 ) $ ( 35,918 ) $ 1,734 $ ( 7,403 )

Dividends paid to noncontrolling interests ( 93 ) ( 93 )

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests (Note 2) 21 179 ( 825 ) ( 625 )

Balances, March 31, 2023 $ — $ 2,188 $ 34,303 $ ( 9,614 ) $ ( 35,801 ) $ 1,871 $ ( 7,053 )

See notes to condensed consolidated financial statements.

5 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.

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.

3 unchanged sentences

GAAP") and such principles are applied on a consistent basis.

Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with U.S.GAAP have been omitted.

It is the opinion of PMI’s management that all adjustments necessary for a fair statement of the interim results presented have been reflected therein.

1 unchanged sentence

Net revenues and net earnings attributable to PMI for any interim period are not necessarily indicative of results that may be expected for the entire year.

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.

For further details, see Note 2.

Acquisitions and Note 9.

Segment Reporting .

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

and OtiTopic, Inc.

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 (formerly the Other category).

On March 31, 2022, PMI launched a 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, see Note 9.

Acquisitions and Note 9.

Segment Reporting .

To further support the growth of PMI's smoke-free business, reinforce consumer centricity, and increase the speed of innovation and deployment, in January 2023, PMI began managing its business in four geographical segments, down from six previously, in addition to its continuing Swedish Match and Wellness and Healthcare segments.

The four geographical segments are as follows:

Europe Region;

South and Southeast Asia, Commonwealth of Independent States, Middle East and Africa Region ("SSEA, CIS & MEA");

East Asia, Australia, and PMI Duty Free Region ("EA, AU & PMI DF");

and Americas Region.

Certain prior years' amounts have been reclassified to conform with the current year's 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 (reduced-risk product category).

As a result of the new regional structure discussed above, certain goodwill amounts under the former six geographical segments were reallocated to the four geographical segments under the new structure.

For further details, see Note 6.

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.

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.

For further details, see Note 9.

Segment Reporting.

These reclassifications did not impact PMI’s consolidated financial position, results of operations or cash flows in any of the periods presented.

These statements should be read in conjunction with the audited consolidated financial statements and related notes, which appear in PMI’s Annual Report on Form 10-K for the year ended December 31, 2022.

3 unchanged sentences

Acquisitions:

Purchase of Noncontrolling Interests

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.

(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.

(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 now owns 100 % of these Turkish subsidiaries.

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

("PMPS") (formerly Philip Morris SA, Philip Morris Sabanci Pazarlama ve Satiş 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 $ 258 million, including transaction costs and dividend entitlements.

The sale resulted in an increase to PMI's additional paid-in capital of $ 36 million and a decrease to accumulated other comprehensive losses of $ 179 million, following the reclassification of accumulated other comprehensive losses from PMI’s accumulated other comprehensive losses to noncontrolling interests.

Business Combinations

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.

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 the nine months ended September 30, 2022, PMI did not record any measurement period adjustments to the purchase price allocation.

The final purchase price allocation was reflected in the condensed consolidated balance sheets as of September 30, 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.

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 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 12.

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 for the year ended December 31, 2022.

The cash paid in connection with the additional purchases of the noncontrolling interests after the acquisition date and through December 31, 2022 amounted to $ 1,495 million and was included in financing activities in the consolidated statements of cash flows for the year ended December 31, 2022.

In accordance with the Swedish Companies Act, PMI subsequently exercised its right to compulsorily redeem the remaining shares for which acceptances were not received and obtained legal title to 100 % of the shares in Swedish Match on February 17, 2023.

Cash paid in connection with such legal title, together with an immaterial amount attributable to open market purchases that were executed in December 2022 but settled in January 2023, amounted to $ 883 million and was included in financing activities in the condensed consolidated statements of cash flows for the three months ended March 31, 2023.

While we have paid the referenced amounts and have acquired legal title to the shares, the redemption process will not be complete under the Swedish Companies Act until a final redemption price is determined by an arbitral tribunal.

This process may take 6 to 12 months to complete, but we believe the likelihood it will result in additional payments to be remote.

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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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.

During the first quarter of 2023, PMI did not record any measurement period adjustments to the preliminary purchase price allocation.

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 and the remaining balance 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.

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

During the third quarter of 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

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.

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

income tax liabilities ($ 43 million).

The final purchase price allocation was reflected in the condensed consolidated balance sheets as of September 30, 2022.

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.

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 third quarter of 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.

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 U.S.

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 condensed consolidated balance sheets at March 31, 2023 and 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.)

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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 condensed consolidated balance sheets as of March 31, 2023 and 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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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 operations in Ukraine, including the closing of its factory in Kharkiv at the end of February 2022.

While the effects of the war are unpredictable and could trigger impairment reviews for long-lived assets, as of September 30, 2022, PMI is unable to estimate the information required to perform impairment analyses (i.e., forecast of revenues, manufacturing and commercial plans).

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 March 31, 2023, 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 September 30, 2022, PMI’s Ukrainian operations had approximately $ 471 million in total assets, excluding intercompany balances.

As of March 31, 2023, PMI’s Ukrainian operations had approximately $ 485 million in total assets, excluding intercompany balances.

These total assets included $ 69 million, $ 324 million and $ 30 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 and is working on options to exit the Russian market in an orderly manner.

As a result of PMI continuing operations within Russia as of September 30, 2022, it has not recorded an impairment of long-lived and other assets.

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 March 31, 2023, 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 September 30, 2022 had approximately $ 2.6 billion in total assets, excluding intercompany balances.

These total assets included $ 635 million, $ 683 million, $ 424 million and $ 150 million in receivables, inventories, property, plant and equipment and goodwill respectively.

In addition, there was approximately $ 440 million of cumulative foreign currency translation losses reflected in accumulated other comprehensive losses in the condensed consolidated statement of stockholders’ equity as of September 30, 2022.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of September 30, 2022, PMI recorded in its condensed consolidated statements of earnings pre-tax charges related to circumstances driven by the war as follows:

(in millions) For the Nine Months Ended September 30, 2022 For the Three Months Ended September 30, 2022

Cost of sales Marketing, administration and research costs Total Cost of sales Marketing, administration and research costs Total

$ 28 $ 31 $ 59 $ 3 $ 5 $ 8

PMI’s Russian operations as of March 31, 2023 had approximately $ 2.4 billion in total assets, excluding intercompany balances.

These total assets included $ 393 million, $ 560 million, $ 932 million, $ 307 million and $ 164 million in cash (primarily held in local currency), receivables, inventories, property, plant and equipment and goodwill, respectively.

In addition, there was approximately $ 928 million of cumulative foreign currency translation losses reflected in accumulated other comprehensive losses in the condensed consolidated statement of stockholders’ equity as of March 31, 2023.

During the three months ended March 31, 2023, PMI did not record any material charges related to the war in Ukraine.

During the three months ended March 31, 2022, PMI recorded in its condensed consolidated statements of earnings pre-tax charges related to circumstances driven by the war as follows:

(in millions) For the Three Months Ended March 31, 2022

Cost of sales Marketing, administration and research costs Total

$ 11 $ 16 $ 27

Total $ 26 $ 16 $ 42

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.

1 The pre-tax 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 pre-tax charges were primarily due to 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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

In May 2022, PMI’s shareholders approved the Philip Morris International Inc.

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.

Up to 25 million shares of PMI’s common stock may be issued under the 2022 Plan.

At September 30, 2022, shares available for grant under the 2022 Plan were 24,976,300 .

At March 31, 2023, shares available for grant under the 2022 Plan were 22,158,790 .

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

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Up to 1 million shares of PMI common stock may be awarded under the 2017 Non-Employee Directors Plan.

At September 30, 2022, shares available for grant under the plan were 894,346 .

At March 31, 2023, shares available for grant under the plan were 894,346 .

Restricted share unit (RSU) awards

During the nine months ended September 30, 2022 and 2021, shares granted to eligible employees and the weighted-average grant date fair value per share related to RSU awards were as follows:

Granted Weighted-Average Grant Date Fair Value Per RSU Award Granted

2022 1,579,680 $ 104.96

2021 1,998,160 $ 82.06

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Compensation expense related to RSU awards was as follows:

Compensation Expense Related to RSU Awards

(in millions) For the Nine Months Ended September 30, For the Three Months Ended September 30,

During the three months ended March 31, 2023 and 2022, shares granted to eligible employees, the weighted-average grant date fair value per share and the recorded compensation expense related to RSU awards were as follows:

Granted Weighted-Average Grant Date Fair Value Per RSU Award Granted Compensation Expense Related to RSU Awards

(in millions)

2023 1,732,910 $ 102.01 $ 50

2022 1,551,050 $ 105.04 $ 39

As of September 30, 2022, PMI had $ 187 million of total unrecognized compensation cost related to non-vested RSU awards.

As of March 31, 2023, PMI had $ 277 million of total unrecognized compensation cost related to non-vested RSU awards.

The cost is recognized over the original restriction period of the awards, which is typically three years after the date of the award, or upon death, disability or reaching the age of 58 .

During the nine months ended September 30, 2022, 1,570,131 RSU awards vested.

During the three months ended March 31, 2023, 1,274,379 RSU awards vested.

The grant date fair value of all the vested awards was approximately $ 110 million.

The total fair value of RSU awards that vested during the nine months ended September 30, 2022 was approximately $ 171 million.

The total fair value of RSU awards that vested during the three months ended March 31, 2023 was approximately $ 128 million.

Performance share unit (PSU) awards

During the nine months ended September 30, 2022 and 2021, PMI granted PSU awards to certain executives.

During the three months ended March 31, 2023 and 2022, PMI granted PSU awards to certain executives.

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 the nine months ended September 30, 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:

The performance metrics for such PSU's granted during the three months ended March 31, 2023 and 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:

• Product 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 the nine months ended September 30, 2021 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.

The minimum percentage of such PSUs that can vest is zero , with a target percentage of 100 and a maximum percentage of 200 .

Each such vested PSU entitles the participant to one share of common stock.

Each such vested PSU entitles the participant to one share

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

of common stock.

An aggregate weighted PSU performance factor of 100 will result in the targeted number of PSUs being vested.

At the end of the performance cycle, participants are entitled to an amount equivalent to the accumulated dividends paid on common stock during the performance cycle for the number of shares earned.

During the nine months ended September 30, 2022 and 2021, shares granted to eligible employees and the grant date fair value per share related to PSU awards were as follows:

Number of Shares Granted Grant Date

Fair Value Subject to Other Performance Metrics Grant Date

Fair Value Subject to TSR Performance Metric

During the three months ended March 31, 2023 and 2022, shares granted to eligible employees, the grant date fair value per share and the recorded compensation expense related to PSU awards were as follows:

Number of Shares Granted Weighted-

Average PSU Grant Date

Fair Value Subject to Other Performance Factors Weighted-

Average PSU Grant Date

Fair Value Subject to TSR Performance Factors Compensation Expense Related to PSU Awards (in millions)

(Per Share) (Per Share)

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2022 451,790 $ 105.07 $ 143.94 $ 21

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

The grant date fair value of the PSU awards subject to the other performance metrics 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 metric was determined by using the Monte Carlo simulation model.

The following assumptions were used to determine the grant date fair value of the PSU awards subject to the TSR performance metric:

Risk-free interest rate (a)

Expected volatility (b)

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.

The following assumptions were used to determine the grant date fair value of the PSU awards subject to the TSR performance factor:

Average risk-free interest rate (a)

Average expected volatility (b)

24.3 % 28.6 %

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(b) Determined using the observed historical volatility.

Compensation expense related to PSU awards was as follows:

Compensation Expense Related to PSU Awards

(in millions) For the Nine Months Ended September 30, For the Three Months Ended September 30,

2022 $ 44 $ 13

2021 $ 58 $ 12

As of September 30, 2022, PMI had $ 54 million of total unrecognized compensation cost related to non-vested PSU awards.

As of March 31, 2023, PMI had $ 62 million of total unrecognized compensation cost related to non-vested PSU awards.

The cost is recognized over the performance cycle of the awards, or upon death, disability or reaching the age of 58 .

During the nine months ended September 30, 2022, 669,960 PSU awards vested.

During the three months ended March 31, 2023, 902,232 PSU awards vested.

The grant date fair value of all the vested awards was approximately $ 83 million.

The total fair value of PSU awards that vested during the nine months ended September 30, 2022 was approximately $ 74 million.

The total fair value of PSU awards that vested during the three months ended March 31, 2023 was approximately $ 91 million.

Benefit Plans:

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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Pension and other employee benefit costs per the condensed consolidated statements of earnings consisted of the following:

For the Nine Months Ended September 30, For the Three Months Ended September 30,

For the Three Months Ended March 31,

(in millions) 2023 2022

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Net periodic pension cost consisted of the following:

For the Nine Months Ended September 30, For the Three Months Ended September 30,

For the Three Months Ended March 31,

(in millions) 2023 2022

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Net loss 12 48

Prior service cost ( 1 ) 2 — 1

Prior service cost (credit) — ( 1 )

Net periodic pension cost $ 31 $ 35

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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.

Employer contributions of $ 85 million, excluding refunds, were made to the pension plans during the nine months ended September 30, 2022.

During the second quarter of 2022, PMI received a cash refund of $ 123 million from one of its pension plans due to a change in discount rate and value of assets that resulted in the overfunding of the plan.

Employer contributions of $ 45 million were made to the pension plans during the three months ended March 31, 2023.

Currently, PMI anticipates making additional contributions during the remainder of 2023 of approximately $ 83 million to its pension plans, based on current tax and benefit laws.

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The movements in goodwill were as follows:

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

Balances, December 31, 2021 $ 1,397 $ 295 $ 79 $ 2,828 $ 539 $ 611 $ 931 $ 6,680

(in millions) Europe SSEA, CIS & MEA

EA, AU & PMI DF

Americas Swedish Match Wellness & Healthcare Total

Balances at December 31, 2022 $ 1,370 $ 2,869 $ 493 $ 615 $ 13,296 $ 1,012 $ 19,655

Changes due to:

Currency 35 75 11 32 33 25 211

Other — — — — — — 190 190

Balances, September 30, 2022 $ 1,197 $ 259 $ 71 $ 2,590 $ 490 $ 605 $ 915 $ 6,127

The decrease in goodwill was due primarily to currency movements, partially offset by the final purchase price allocation associated with Vectura Group plc acquisition in 2021.

For further details on these business combinations, see Note 2.

Acquisitions .

At September 30, 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.

Balances, March 31, 2023 $ 1,405 $ 2,944 $ 504 $ 647 $ 13,329 $ 1,037 $ 19,866

As discussed in Note 1.

Background and Basis of Presentation , in January 2023, PMI began managing its business in four geographical segments, Swedish Match segment and Wellness and Healthcare segment.

As a result, the December 31, 2022 goodwill balance in the table above included the reclassifications from the former six geographical segments to the four geographical segments under the new structure.

At March 31, 2023, goodwill primarily reflects PMI’s business combinations in Greece, Indonesia, Mexico, the Philippines and Serbia, as well as the goodwill from the 2021 acquisitions of Fertin Pharma A/S and Vectura Group plc.

and the preliminary purchase price allocation of Swedish Match AB, which was acquired in the fourth quarter of 2022.

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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 opening goodwill balance in the table above included a reclassification of $ 24 million from the Wellness and Healthcare segment to the European Union segment.

Details of other intangible assets were as follows:

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(in millions) Weighted-Average Remaining Useful Life Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net

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Developed technology, including patents 8 years 984 269 715 975 243 732

11 years 213 90 123 238 90 148

Customer relationships and other 10 years 1,399 146 1,253 1,390 112 1,278

Total other intangible assets $ 7,843 $ 1,111 $ 6,732 $ 7,761 $ 1,029 $ 6,732

(1) Primarily includes distribution networks and customer relationships.

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

The decrease since December 31, 2021 was due to the final purchase price allocation associated with Vectura Group plc acquisition in 2021 in the amount of $ 3 million and currency movements of $ 42 million.

The decrease in the gross carrying amount of amortizable intangible assets from December 31, 2021, was due to the 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 $ 173 million.

For further details on these business combinations, see Note 2.

Acquisitions .

The change in the accumulated amortization from December 31, 2021, was mainly due to the 2022 amortization of $ 101 million and impairment charge of $ 112 million, partially offset by currency movements of ($ 62 million).

The amortization of intangibles for the nine months ended September 30, 2022 was recorded in cost of sales ($ 41 million) and in marketing, administration and research costs ($ 60 million) on PMI's condensed consolidated statements of earnings.

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, 2022 was due to currency movements of $ 59 million.

The increase in the gross carrying amount of amortizable intangible assets from December 31, 2022, was due to currency movements of $ 23 million.

The change in the accumulated amortization from December 31, 2022, was mainly due to the 2023 amortization of $ 81 million, combined with currency movements of $ 1 million.

The amortization of intangibles for the three months ended March 31, 2023 was recorded in cost of sales ($ 22 million) and in marketing, administration and research costs ($ 59 million) on PMI's condensed consolidated statements of earnings.

Amortization expense for each of the next five years is estimated to be $ 322 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

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 3.

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 as of September 30, 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

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

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

Healthcare segment.

The impairment reduces the carrying values of developed technology definite-lived intangible assets in the Wellness and Healthcare segment to $ 308 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 condensed consolidated statements of earnings for the three months and nine months ended September 30, 2022.

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.

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 at the end of each period were as follows:

(in millions) At September 30, 2022 At December 31, 2021

(in millions) At March 31, 2023 At December 31, 2022

Derivative contracts designated as hedging instruments:

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Notes to Condensed Consolidated Financial Statements

The fair value of PMI’s derivative contracts included in the condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, were as follows:

The fair value of PMI’s derivative contracts included in the condensed consolidated balance sheets as of March 31, 2023 and December 31, 2022, were as follows:

Derivative Assets Derivative Liabilities

Fair Value Fair Value

(in millions) Balance Sheet Classification September 30, 2022 December 31, 2021 Balance Sheet Classification September 30, 2022 December 31, 2021

(in millions) Balance Sheet Classification March 31, 2023 December 31, 2022 Balance Sheet Classification March 31, 2023 December 31, 2022

Derivative contracts designated as hedging instruments:

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The fair value of PMI’s currency options is determined by using a Black-Scholes methodology based on foreign exchange spot rates and interest rate differentials, currency volatilities and maturity dates.

PMI’s derivative contracts have been classified within Level 2 at September 30, 2022 and December 31, 2021.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

For the nine months ended September 30, 2022 and 2021, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, in millions) For the Nine Months Ended September 30,

Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives Statement of Earnings

Classification of Gain/(Loss)

on Derivatives Amount of Gain/(Loss) Reclassified from Other Comprehensive Earnings/(Losses) into Earnings Amount of Gain/(Loss) Recognized in Earnings

2022 2021 2022 2021 2022 2021

Derivative contracts designated as hedging instruments:

Cash flow hedges:

Foreign exchange contracts $ 325 $ 93 Net revenues $ 151 $ 30

Cost of sales — —

Marketing, administration and research costs ( 17 ) ( 14 )

Interest expense, net ( 5 ) ( 5 )

Interest rate contracts 304 7 Interest expense, net ( 5 ) ( 4 )

Fair value hedges:

Interest rate contracts Interest expense, net (a)

Net investment hedges (b) :

Foreign exchange contracts 1,088 325 Interest expense, net (c)

Derivative contracts not designated as hedging instruments:

Foreign exchange contracts Interest expense, net 56 39

Marketing, administration and research costs (d)

Total $ 1,717 $ 425 $ 124 $ 7 $ ( 69 ) $ 454

(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

PMI’s derivative contracts have been classified within Level 2 at March 31, 2023 and December 31, 2022.

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

For the three months ended September 30, 2022 and 2021, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, in millions) For the Three Months Ended September 30,

For the three months ended March 31, 2023 and 2022, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

(pre-tax, in millions) For the Three Months Ended March 31,

Amount of Gain/(Loss) Recognized in Other Comprehensive Earnings/(Losses) on Derivatives Statement of Earnings

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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 condensed consolidated statements of earnings.

As of September 30, 2022, PMI has hedged forecasted transactions for periods not exceeding the next fifteen months with the exception of one derivative contract that expires in May 2024.

As of March 31, 2023, 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 condensed 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 September 30, 2022 was $ 911 million, and is recorded in long-term debt in the condensed consolidated balance sheets.

The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $ 84 million as of September 30, 2022.

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of March 31, 2023 was $ 916 million, and is recorded in long-term debt in the condensed consolidated balance sheets.

The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $ 80 million as of March 31, 2023.

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.

For the nine months ended September 30, 2022 and 2021, 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 $ 525 million and $ 181 million, respectively.

For the three months ended September 30, 2022 and 2021, 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 $ 267 million and $ 71 million, respectively.

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

For the three months ended March 31, 2023 and 2022, the amount of pre-tax gain/(loss) related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was $ 1 million and $ 66 million, respectively.

The premiums paid for, and settlements of, net investment hedges are included in investing cash flows on PMI’s condensed 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, third-party loans and anticipated acquisition related transactions.

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

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Hedging activity affected accumulated other comprehensive losses, net of income taxes, as follows:

(in millions) For the Nine Months Ended September 30, For the Three Months Ended September 30,

2022 2021 2022 2021

Gain/(loss) as of beginning of period $ 4 $ ( 85 ) $ 250 $ ( 6 )

(in millions) For the Three Months Ended March 31,

Gain/(loss) as of January 1, $ 266 $ 4

Derivative (gains)/losses transferred to earnings ( 29 ) ( 9 )

Change in fair value 59 110

Gain/(loss) as of September 30, $ 421 $ ( 4 ) $ 421 $ ( 4 )

At September 30, 2022, PMI expects $ 189 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed consolidated statement of earnings within the next 12 months.

Gain/(loss) as of March 31, $ 296 $ 105

At March 31, 2023, PMI expects $ 77 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed consolidated statement of earnings within the next 12 months.

These gains are expected to be substantially offset by the statement of earnings impact of the respective hedged transactions.

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While PMI does not anticipate non-performance, its risk is limited to the fair value of the financial instruments less any cash collateral received or pledged.

PMI actively monitors its exposure to credit risk through the use of credit approvals and credit limits and by selecting and continuously monitoring a diverse group of major international banks and financial institutions as counterparties.

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

actively monitors its exposure to credit risk through the use of credit approvals and credit limits and by selecting and continuously monitoring a diverse group of major international banks and financial institutions as counterparties.

Other Investments

A PMI investment, which is comprised primarily of money market funds, has been classified within Level 1 and had a fair value of $ 118 million at September 30, 2022.

For the nine months and three months ended September 30, 2022, the unrealized pre-tax gains on these investments were immaterial.

A certain PMI investment, which is comprised primarily of money market funds, has been classified within Level 1 and had a fair value of $ 173 million at March 31, 2023.

For the three months ended March 31, 2023, the unrealized pre-tax gains on these investments were immaterial.

Earnings Per Share:

Basic and diluted earnings per share (“EPS”) were calculated using the following:

(in millions) For the Nine Months Ended September 30, For the Three Months Ended September 30,

2022 2021 2022 2021

(in millions) For the Three Months Ended March 31,

Net earnings attributable to PMI $ 1,995 $ 2,331

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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 currently has six geographical segments:

the European Union;

Eastern Europe;

Middle East & Africa;

South & Southeast Asia;

East Asia & Australia;

and Americas;

as well as the Wellness and Healthcare segment.

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

For further details, see Note 2.

Acquisitions .

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

Effective in January 2023, PMI began managing its business in four geographical segments, down from six previously, in addition to its continuing Swedish Match and Wellness and Healthcare segments.

The four geographical segments are as follows:

Europe Region;

South and Southeast Asia, Commonwealth of Independent States, Middle East and Africa Region ("SSEA, CIS & MEA");

East Asia, Australia, and PMI Duty Free Region ("EA, AU & PMI DF");

and Americas Region.

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

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 Wellness and Healthcare segment are managed and evaluated separately.

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

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

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

For the Wellness and Healthcare business, Vectura Fertin Pharma, 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.

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Segment data were as follows:

(in millions) For the Nine Months Ended September 30, For the Three Months Ended September 30,

2022 2021 2022 2021

(in millions) For the Three Months Ended March 31,

Net revenues:

European Union $ 9,229 $ 9,250 $ 3,074 $ 3,192

Eastern Europe 2,733 2,632 1,109 941

Middle East & Africa 2,977 2,306 980 945

South & Southeast Asia 3,295 3,284 1,138 1,065

East Asia & Australia 3,810 4,509 1,200 1,523

Europe $ 2,910 $ 3,224

SSEA, CIS & MEA

EA, AU & PMI DF

Americas 445 424

Swedish Match 581 —

Wellness and Healthcare 86 66

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Operating income (loss):

European Union $ 4,441 $ 4,811 $ 1,395 $ 1,680

Eastern Europe 860 913 425 338

Middle East & Africa 1,451 739 432 388

South & Southeast Asia 1,135 1,208 384 348

East Asia & Australia 1,315 2,041 398 631

Europe $ 1,175 $ 1,558

SSEA, CIS & MEA

EA, AU & PMI DF

Americas 66 121

Swedish Match 193 —

Wellness and Healthcare ( 38 ) ( 31 )

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PMI's net revenues by product category were as follows:

(in millions) For the Nine Months Ended September 30, For the Three Months Ended September 30,

2022 2021 2022 2021

(in millions) For the Three Months Ended March 31,

Net revenues:

Combustible products:

European Union $ 5,625 $ 6,283 $ 1,862 $ 2,170

Eastern Europe 1,774 1,681 732 635

Middle East & Africa 2,771 2,208 909 901

South & Southeast Asia 3,279 3,277 1,132 1,061

East Asia & Australia 1,644 1,850 515 591

Combustible tobacco products:

Europe $ 1,815 $ 1,937

SSEA, CIS & MEA

EA, AU & PMI DF

Americas 430 402

Total combustible products $ 16,432 $ 16,577 $ 5,613 $ 5,796

Reduced-risk products:

European Union $ 3,604 $ 2,967 $ 1,212 $ 1,022

Eastern Europe 959 951 377 306

Middle East & Africa 206 98 71 44

South & Southeast Asia 16 7 6 4

East Asia & Australia 2,166 2,659 685 932

Swedish Match 136 —

Total combustible tobacco products 5,223 5,303

Smoke-free products:

Smoke-free products excluding Wellness and Healthcare:

Europe 1,095 1,287

SSEA, CIS & MEA

EA, AU & PMI DF

Americas 15 22

Total reduced-risk products $ 6,979 $ 6,724 $ 2,362 $ 2,326

Wellness and Healthcare:

Swedish Match 445 —

Total smoke-free products excluding Wellness and Healthcare 2,710 2,377

Wellness and Healthcare 86 66

Total smoke-free products 2,796 2,443

Total PMI net revenues $ 8,019 $ 7,746

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

• Charges related to the war in Ukraine - See Note 3.

War in Ukraine for details of the $ 128 million and $ 6 million pre-tax charges in the Eastern Europe segment for the nine months and three months ended September 30, 2022, respectively.

• Impairment of intangibles - See Note 6.

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 nine months and three months ended September 30, 2022.

• Saudi Arabia customs assessments - See Note 10.

Contingencies for the details of the $ 246 million reduction in net revenues of combustible products included in the Middle East & Africa segment for the nine months ended September 30, 2021.

• Termination of distribution arrangement in the Middle East - In the first quarter of 2023, PMI recorded a pre-tax charge of $ 80 million following the termination of a distribution arrangement in the Middle East.

This pre-tax charge was recorded as a reduction of net revenues in the condensed consolidated statements of earnings, and was included in the SSEA, CIS & MEA segment results for the three months ended March 31, 2023.

• Charges related to the war in Ukraine - In the first quarter of 2022, PMI recorded a pre-tax charge of $ 42 million related to the war in Ukraine.

This pre-tax charge was included in the Europe segment for the three months ended March 31, 2022.

For further details, see Note 3.

War in Ukraine.

• Swedish Match AB acquisition accounting related item - See Note 2 .

Acquisitions for details of the $ 18 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 three months ended March 31, 2023.

• Asset impairment and exit costs - See Note 17.

Asset Impairment and Exit Costs for details of the $ 170 million and $ 43 million pre-tax charges and a breakdown of these costs by segment for the nine months and three months ended September 30, 2021, respectively.

• Asset acquisition cost - See Note 2.

Acquisitions for the details of the $ 51 million pre-tax charge associated with the 2021 asset acquisition of OtiTopic, Inc.

included in the Wellness and Healthcare segment within the operating income table above for the nine months and three months ended September 30, 2021.

Asset Impairment and Exit Costs for details of the $ 109 million pre-tax charges for the three months ended March 31, 2023, as well as a breakdown of these costs by segment.

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

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

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 related to wellness and healthcare products primarily consist of operating revenues generated from the sale of 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.

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 primarily 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 Wellness and Healthcare business, Vectura Fertin Pharma.

Contingencies:

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As a result of the Court of Appeal of Quebec’s decision in both the Létourneau and Blais cases described below, our subsidiary, Rothmans, Benson & Hedges Inc.

(“RBH”), and the other defendants, JTI Macdonald Corp., and Imperial Tobacco Canada Limited, sought protection in the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act (“CCAA”) on March 22, March 8, and March 12, 2019, respectively.

CCAA is a Canadian federal law that permits a Canadian

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

business to restructure its affairs while carrying on its business in the ordinary course.

(“CCAA”) on March 22, March 8, and March 12, 2019, respectively.

CCAA is a Canadian federal law that permits a Canadian business to restructure its affairs while carrying on its business in the ordinary course.

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 Item 8, Note 20.

Deconsolidation of RBH of PMI's Annual Report on Form 10-K for the year ended December 31, 2021, 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.

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 September 29, 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.

These proceedings are presented below under the caption “ Stayed Litigation — Canada .” Ernst & Young Inc.

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In the first class action pending in Canada, Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais v.

Imperial Tobacco Ltd., Rothmans, Benson & Hedges Inc.

Imperial Tobacco Canada Ltd., Rothmans, Benson & Hedges Inc.

and JTI-Macdonald Corp., Quebec Superior Court, Canada , filed in November 1998, RBH and other Canadian cigarette manufacturers (Imperial Tobacco Canada Ltd.

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The trial court issued its judgment on May 27, 2015.

The trial court found RBH and two other Canadian manufacturers liable and found that the class members’ compensatory damages totaled approximately CAD 15.5 billion, including pre-judgment interest (approximately $ 11.4 billion).

The trial court awarded compensatory damages on a joint and several liability basis, allocating 20 % to our subsidiary (approximately CAD 3.1 billion, including pre-judgment interest (approximately $ 2.3 billion)).

The trial court found RBH and two other Canadian manufacturers liable and found that the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $ 11.4 billion), including pre-judgment interest.

The trial court awarded compensatory damages on a joint and several liability basis, allocating 20 % to our subsidiary (approximately CAD 3.1 billion (approximately $ 2.3 billion), including pre-judgment interest).

In addition, the trial court awarded CAD 90,000 (approximately $ 66,000 ) in punitive damages, allocating CAD 30,000 (approximately $ 22,000 ) to RBH.

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The Court of Appeal ordered that the security is payable upon a final judgment of the Court of Appeal affirming the trial court’s judgment or upon further order of the Court of Appeal.

On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court’s findings of liability and the compensatory and punitive damages award while reducing the total amount of compensatory damages to approximately CAD 13.5 billion including interest (approximately $ 9.9 billion) due to the trial court’s error in the calculation of interest.

The compensatory damages award is on a joint and several basis with an allocation of 20 % to RBH (approximately CAD 2.7 billion, including pre-judgment interest (approximately $ 2.0 billion)).

On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court’s findings of liability and the compensatory and punitive damages award while reducing the total amount of compensatory damages to approximately CAD 13.5 billion (approximately $ 10 billion), including interest due to the trial court’s error in the calculation of interest.

The compensatory damages award is on a joint and several basis with an allocation of 20 % to RBH (approximately CAD 2.7 billion (approximately $ 1.9 billion), including pre-judgment interest).

The Court of Appeal upheld the trial court’s findings that defendants violated the Civil Code of Quebec, the Quebec Charter of Human Rights and Freedoms, and the Quebec Consumer Protection Act by failing to warn adequately of the dangers of smoking and by conspiring to prevent consumers from learning of the dangers of smoking.

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The trial court found that a claims process to allocate the awarded punitive damages to individual class members would be too expensive and difficult to administer.

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 Item 8, Note 20.

Deconsolidation of RBH in PMI's Annual Report on Form 10-K for the year ended December 31, 2021 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.

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 (approximately $ 42 million), including interest to RBH.

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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(ii) defendants cannot be liable to class members who would have smoked regardless of what warnings were given;

and (iii) defendants cannot be liable to all class members given the individual differences between class members.

and (iii) defendants cannot be liable to all class members given the individual differences among class members.

In the third class action pending in Canada, Kunta v.

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The legislation authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”

The table below lists the number of tobacco-related cases pertaining to combustible products pending against us and/or our subsidiaries or indemnitees as of September 30, 2022, and September 30, 2021:¹

Type of Case Number of Cases Pending as of September 30, 2022 Number of Cases Pending as of September 30, 2021

The table below lists the number of tobacco-related cases pertaining to combustible products pending against us and/or our subsidiaries or indemnitees as of March 31, 2023, and March 31, 2022:¹

Type of Case Number of Cases Pending as of March 31, 2023 Number of Cases Pending as of March 31, 2022

Individual Smoking and Health Cases 46 41

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Defenses raised in these cases include licit activity, failure to state a claim, lack of defect, lack of proximate cause, assumption of the risk, contributory negligence, and statute of limitations.

As of September 30, 2022, there were a number of smoking and health cases pending against us, our subsidiaries or indemnitees, as follows:

• 38 cases brought by individual plaintiffs in Argentina ( 30 ), Canada ( 2 ), Chile ( 2 ), 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 41 such cases on September 30, 2021;

As of March 31, 2023, there were a number of smoking and health cases pending against us, our subsidiaries or indemnitees, as follows:

• 46 cases brought by individual plaintiffs in Argentina ( 32 ), Canada ( 2 ), Chile ( 9 ), the Philippines ( 1 ), Turkey ( 1 ) and Scotland ( 1 ), compared with 41 such cases on March 31, 2022;

• 9 cases brought on behalf of classes of individual plaintiffs, compared with 9 such cases on March 31, 2022.

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

• 9 cases brought on behalf of classes of individual plaintiffs, compared with 9 such cases on September 30, 2021.

The class actions pending in Canada are described above under the caption “ Smoking and Health Litigation — Canada.

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Defenses raised in these cases include lack of proximate cause, remoteness of injury, failure to state a claim, adequate remedy at law, “unclean hands” (namely, that plaintiffs cannot obtain equitable relief because they participated in, and benefited from, the sale of cigarettes), and statute of limitations.

As of September 30, 2022, there were 17 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Brazil ( 1 ), Canada ( 10 ), Korea ( 1 ) and Nigeria ( 5 ), compared with 17 such cases on September 30, 2021.

As of March 31, 2023, there were 17 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Brazil ( 1 ), Canada ( 10 ), Korea ( 1 ) and Nigeria ( 5 ), compared with 17 such cases on March 31, 2022.

The health care cost recovery actions pending in Canada are described above under the caption “ Health Care Cost Recovery Litigation — Canada.

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British American Tobacco (Nigeria) Limited, et al., High Court of Ogun State, Abeokuta, Nigeria , filed February 26, 2008, we and other members of the industry are defendants.

Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20

Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases for the past 20 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages.

In May 2010, the trial court rejected our objections to the court's jurisdiction.

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages.

In May 2010, the trial court rejected our objections to the court's jurisdiction.

We have appealed.

Currently, the case is stayed in the trial court pending the appeals of certain co-defendants relating to service objections.

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Defenses raised include lack of causation, lack of reliance, assumption of the risk, and statute of limitations.

As of September 30, 2022, there were 6 label-related cases brought by individual plaintiffs in Italy ( 1 ) and Chile ( 5 ) pending against our subsidiaries, compared with 3 such cases on September 30, 2021.

As of March 31, 2023, there were 6 label-related cases brought by individual plaintiffs in Italy ( 1 ) and Chile ( 5 ) pending against our subsidiaries, compared with 5 such cases on March 31, 2022.

Public Civil Actions:

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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 September 30, 2022, there was 1 public civil action pending against our subsidiary in Venezuela ( 1 ), compared with 1 such case on September 30, 2021.

As of March 31, 2023, there was 1 public civil action pending against our subsidiary in Venezuela ( 1 ), compared with 1 such case on March 31, 2022.

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

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In October 2008, the court ruled that plaintiffs have standing to file the claim and that the claim meets the threshold admissibility requirements.

In December 2012, the court admitted our subsidiary and BAT's subsidiary as interested third parties.

In December 2012, the court admitted our subsidiary and a subsidiary of British American Tobacco plc as interested third parties.

In February 2013, our subsidiary answered the complaint.

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

The amended complaint modifies the

The amended complaint modifies the relief sought on behalf of the named plaintiff and on behalf of a single class (all consumers of Platform 1 products in Colombia who seek damages for the product purchase price and personal injuries related to the use of an allegedly harmful product).

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

relief sought on behalf of the named plaintiff and on behalf of a single class (all consumers of Platform 1 products in Colombia who seek damages for the product purchase price and personal injuries related to the use of an allegedly harmful product).

In June 2021, our subsidiaries answered the amended complaint.

June 2021, our subsidiaries answered the amended complaint.

The court conducted an evidentiary hearing on February 23, 2023.

Other Litigation

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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 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.

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.

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The appellate court affirmed the acquittals of the individual defendants.

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

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 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 is scheduled to issue its decision on the appeals on January 31, 2023.

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.

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.

("PM Korea"), our South Korean subsidiary, were in compliance with South Korean tax laws.

In November 2016, the tax authorities completed their audit and assessed allegedly underpaid taxes and penalties.

In order to avoid nonpayment financial costs, PM Korea paid approximately KRW 272 billion (approximately $ 190 million), of which KRW 100 billion (approximately $ 70 million) was paid in 2016 and KRW 172 billion (approximately $ 120 million) was paid in the first quarter of 2017.

These paid amounts are included in other assets in 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.

PM Korea appealed the assessments.

In January 2020, a trial court ruled that PM Korea

In November 2016, the tax authorities completed their audit and assessed allegedly underpaid taxes and

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

did not underpay taxes in the amount of approximately KRW 218 billion (approximately $ 153 million).

In order to avoid nonpayment financial costs, PM Korea paid approximately KRW 272 billion (approximately $ 204 million), of which KRW 100 billion (approximately $ 75 million) was paid in 2016 and KRW 172 billion (approximately $ 129 million) was paid in the first quarter of 2017.

PM Korea appealed the assessments.

In January 2020, a trial court ruled that PM Korea did not underpay taxes in the amount of approximately KRW 218 billion (approximately $ 164 million).

The tax authorities appealed this decision to the appellate court.

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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 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.

In order to challenge these assessments, the distributors posted bank guarantees.

To enable the distributors' challenge, our subsidiary agreed with the banks to bear a portion of the amount the authority may draw on the bank guarantees.

In September and October 2020, respectively, the distributors lost their challenges of the assessments.

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 and 2022 are immaterial.

In accordance with U.S.

GAAP, the charge was recorded as a reduction in net revenues on the consolidated statements of earnings for the three months and six months ended June 30, 2021.

Despite the unfavorable decisions, our subsidiary believes that customs duties paid in Saudi Arabia were in compliance with the applicable law and the WTO Customs Valuation Agreement.

A putative shareholder class action lawsuit, In re Philip Morris International Inc.

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On September 29, 2021, the ITC issued its FD finding a violation of section 337 of the U.S.

Tariff Act and issued (a) a limited exclusion order

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

against Philip Morris Products S.A., prohibiting, inter alia, the importation of Platform 1 product and infringing components;

Tariff Act and issued (a) a limited exclusion order against Philip Morris Products S.A., prohibiting, inter alia, the importation of Platform 1 product and infringing components;

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

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Defendants also filed motions in the ITC and Federal Circuit for a stay of the orders pending disposition of the appeal;

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.

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

January 25, 2022.

The Federal Circuit heard oral argument on defendants' appeal of the FD on October 3, 2022 and, on March 31, 2023, the Federal Circuit affirmed the FD.

We are evaluating options to further appeal this Federal Circuit decision, but 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.

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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.

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

On March 30, 2023, the court denied PMPSA's motion for an injunction and granted PMPSA an ongoing royalty against two of BAT's U.S.

e-vapor products.

The parties may appeal the jury verdict and court decisions.

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.

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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 and is stayed pending a possible appeal by BAT of the revocation of that second patent by the European Patent Office.

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

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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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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.

On May 30, 2022, the Korean

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

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.

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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 ("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 Inc.

for the Second Stage.

PMIBV and the majority shareholder of Medicago Inc.

are also parties to the Contribution Agreement and the Contribution Agreement Amendment 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 (the "Repayment Obligations"), and could be responsible for the costs of other Medicago’s obligations (such as the achievement of specific milestones of the Project).

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

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.

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

As of September 30, 2022, PMI has determined that these guarantees did not have a material impact on its condensed consolidated financial statements.

In connection with the Contribution Agreement and the Contribution Agreement Amendment, 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 2022, 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 23 % as of December 31, 2021 to approximately 21 % as of September 30, 2022.

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”).

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.

Income Taxes:

Income tax provisions for jurisdictions outside the United States of America, as well as state and local income tax provisions, were determined on a separate company basis, and the related assets and liabilities were recorded in PMI’s condensed consolidated balance sheets.

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 September 30, 2022, PMI has determined that the Act had no significant tax impacts on its consolidated financial statements.

PMI’s effective tax rates for the nine months and three months ended September 30, 2022 were 20.6 % and 22.0 %, respectively.

PMI's effective tax rates for the nine months and three months ended September 30, 2021 were 22.0 % and 22.4 %, respectively.

The effective tax rate for the nine months ended September 30, 2022, was favorably impacted by changes in earnings mix by

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.

As of March 31, 2023, PMI has determined that these guarantees did not have a material impact on its condensed consolidated financial statements.

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Notes to Condensed Consolidated Financial Statements

taxing jurisdiction and by a reduction in deferred tax liabilities related to pension plan assets ($ 40 million), as well as a decrease in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($ 13 million).

Income Taxes:

PMI’s effective tax rates for the three months ended March 31, 2023 and 2022 were 17.3 % and 19.7 %, respectively.

The effective tax rate for the three months ended March 31, 2023, was favorably impacted by a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 79 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity.

The effective tax rate for the three months ended March 31, 2022, was favorably impacted by changes in earnings mix by taxing jurisdiction, as well as a decrease in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($ 13 million).

For further details, see Note 14.

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PMI estimates that its full-year 2023 effective tax rate will be 20.5 % to 21.5 %, excluding discrete tax events.

Changes in currency exchange rates, earnings mix by taxing jurisdiction or future regulatory developments may have an impact on the effective tax rates, which PMI monitors each quarter.

Changes in currency exchange rates, earnings mix by taxing jurisdiction or future legislative or regulatory developments may have an impact on the effective tax rates, which PMI monitors each quarter.

Significant judgment is required in determining income tax provisions and in evaluating tax positions.

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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 condensed consolidated balance sheets at September 30, 2022 and 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 condensed consolidated balance sheets at March 31, 2023 and December 31, 2022, 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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Short-term Borrowings:

PMI's short-term borrowings, consisting of commercial paper and bank loans to certain PMI subsidiaries at September 30, 2022, and bank loans to certain PMI subsidiaries at December 31, 2021, had a carrying value of $ 2,818 million and $ 225 million, respectively.

At March 31, 2023 and December 31, 2022, PMI’s short-term borrowings and related average interest rates consisted of the following:

March 31, 2023 December 31, 2022

(in millions) Amount Outstanding Average Rate Amount Outstanding Average Rate

Commercial paper

$ 4,095 5.0 % $ 912 4.4 %

708 8.5 295 7.5

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

$ 4,803 $ 5,637

Given the mix of PMI's legal entities 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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

The fair values of PMI’s short-term borrowings, based on current market interest rates, approximate carrying value.

Long-term Debt:

At September 30, 2022 and December 31, 2021, PMI’s long-term debt consisted of the following:

(in millions) September 30, 2022 December 31, 2021

At March 31, 2023 and December 31, 2022, PMI’s long-term debt consisted of the following:

(in millions) March 31, 2023 December 31, 2022

dollar notes, 0.875 % to 6.375 % (average interest rate 4.151 %), due through 2044

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

Swiss franc note, 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 3.371 %), due through 2027

Swedish krona notes, 1.395 % to 4.767 % (average interest rate 2.266 %), due through 2029

Other (average interest rate 3.381 %), due through 2029 (a)

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$ 40,416 $ 34,875

(a) Includes mortgage debt in Switzerland as well as $ 69 million and $ 71 million in finance leases at September 30, 2022 and December 31, 2021, respectively.

(a) Includes mortgage debt in Switzerland as well as $ 31 million and $ 54 million in finance leases at March 31, 2023 and December 31, 2022, respectively.

The fair value of PMI’s outstanding long-term debt, which is utilized solely for disclosure purposes, is determined using quotes and market interest rates currently available to PMI for issuances of debt with similar terms and remaining maturities.

At September 30, 2022, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

At March 31, 2023, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:

(in millions)

September 30, 2022

March 31, 2023

Level 1 $ 34,318

Level 2 6,275

For a description of the fair value hierarchy and the three levels of inputs used to measure fair values, see Item 8, Note 2.

Summary of Significant Accounting Policies of PMI's Annual Report on Form 10-K for the year ended December 31, 2022.

Credit Facilities related to the Financing of the Swedish Match Acquisition

In connection with PMI's all-cash recommended public offer to the shareholders 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 € 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 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 would

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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 and February 17, 2023, PMI repaid $ 4.0 billion and $ 4.4 billion, respectively, under the bridge facility.

Effective February 20, 2023, the remaining outstanding commitments under the bridge facility were fully canceled and the bridge facility agreement was terminated in accordance with its terms.

As of March 31, 2023 and December 31, 2022, the € 5.5 billion (approximately $ 6.0 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 2.

Acquisitions .

Debt Issuances

PMI's debt issuances in the first three months of 2023 were as follows:

(in millions)

Type Face Value Interest Rate Issuance Maturity

dollar notes (a)

$ 1,250 4.875 % February 2023 February 2026

dollar notes (a)

$ 1,000 4.875 % February 2023 February 2028

dollar notes (a)

$ 1,500 5.125 % February 2023 February 2030

dollar notes (a)

$ 1,500 5.375 % February 2023 February 2033

(a) Interest is payable semi-annually, commencing in August 2023

On February 17, 2023, PMI applied a portion of the net proceeds of the debt issuances to prepay $ 4.4 billion under its bridge facility, which represented all borrowings outstanding under the bridge facility.

The remaining net proceeds of the offering have been or will be used for general corporate purposes.

Revolving Credit Facilities:

At September 30, 2022, PMI's total committed revolving credit facilities were as follows:

At March 31, 2023, PMI's total committed revolving credit facilities were as follows:

(in billions)

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(3) 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 September 30, 2022, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.

Financing of the Swedish Match Offer

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.

As of September 30, 2022, there were no borrowings under these two facilities.

If drawn upon, the proceeds under the bridge facility and the term loan facility will be used, directly or indirectly, to finance the offer, including, the payment of related fees and expenses.

At March 31, 2023, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

In addition to the committed revolving credit facilities discussed above, PMI maintains certain short-term credit arrangements, including uncommitted credit lines, to primarily meet working capital needs.

These credit arrangements amounted to approximately $ 3.1 billion at March 31, 2023, and approximately $ 1.9 billion at December 31, 2022.

Borrowings under these arrangements and other bank loans amounted to $ 708 million at March 31, 2023, and $ 295 million at December 31, 2022.

Accumulated Other Comprehensive Losses:

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(Losses) Earnings At At At

(in millions) September 30, 2022 December 31, 2021 September 30, 2021

(in millions) March 31, 2023 December 31, 2022 March 31, 2022

Currency translation adjustments $ ( 8,120 ) $ ( 8,003 ) $ ( 7,039 )

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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, are shown on the condensed consolidated statements of comprehensive earnings for the nine months and three months ended September 30, 2022 and 2021.

For additional information, see Note 2.

Acquisitions (Purchase of Noncontrolling Interests) for disclosures related to currency translation adjustments , Note 5.

Acquisitions (Transactions With Noncontrolling Interests) for disclosures related to currency translation adjustments , Note 5.

Benefit Plans for disclosures related to PMI's pension and other benefits and Note 7.

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Equity Method Investments:

At September 30, 2022 and December 31, 2021, PMI had total equity method investments of $ 1,033 million and $ 879 million, respectively.

At March 31, 2023 and December 31, 2022, PMI had total equity method investments of $ 997 million and $ 1,000 million, respectively.

Equity method investments are initially recorded at cost.

Under the equity method of accounting, the investment is adjusted for PMI's proportionate share of earnings or losses, dividends, capital contributions, changes in ownership interests and movements in currency translation adjustments.

The carrying value of our equity method investments at September 30, 2022 and December 31, 2021, exceeded our share of the investees' book value by $ 859 million and $ 764 million, respectively.

The difference between the investment carrying value and the amount of underlying equity in net assets, excluding $ 822 million and $ 728 million attributable to goodwill as of September 30, 2022 and December 31, 2021, respectively, which consists primarily of definite-lived intangible assets is being amortized on a straight-line basis.

At September 30, 2022 and December 31, 2021, PMI received year-to-date dividends from equity method investees of $ 8 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), which as of September 30, 2022 had a carrying value of $ 521 million.

While as of September 30, 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.

The carrying value of our equity method investments at March 31, 2023 and December 31, 2022, exceeded our share of the investees' book value by $ 724 million and $ 750 million, respectively.

The difference between the investment carrying value and the amount of underlying equity in net assets, excluding $ 693 million and $ 715 million attributable to goodwill as of March 31, 2023 and December 31, 2022, respectively, which consists primarily of definite-lived intangible assets is being amortized on a straight-line basis.

At March 31, 2023 PMI received no year-to-date dividends from equity method investees.

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

PMI holds a 23 % equity interest in Megapolis Distribution BV, the holding company of CJSC TK Megapolis, PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of March 31, 2023 had a carrying value of $ 440 million.

While as of March 31, 2023, 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 3.

War in Ukraine .

Additionally, there was approximately $ 361 million of cumulative foreign currency translation losses associated with Megapolis Distribution BV reflected in accumulated other comprehensive losses in the condensed consolidated statement of stockholders’ equity as of September 30, 2022.

Additionally, there was approximately $ 499 million of cumulative foreign currency translation losses associated with Megapolis Distribution BV reflected in accumulated other comprehensive losses in the condensed consolidated statement of stockholders’ equity as of March 31, 2023.

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

PMI holds an approximate 25 % economic interest in Société des Tabacs Algéro-Emiratie (“STAEM”), an Algerian joint venture that is 51 % owned by EITA and 49 % by the Algerian state-owned enterprise Management et Développement des Actifs et des Ressources Holding ("MADAR Holding"), which manufactures and distributes under license some of PMI’s brands (Middle East & Africa segment).

The initial investments in Megapolis Distribution BV and EITA were recorded at cost and are included in equity investments on the condensed consolidated balance sheets.

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

Holding ("MADAR Holding"), which manufactures and distributes under license some of PMI’s brands (SSEA, CIS & MEA segment).

The initial investments in Megapolis Distribution BV and EITA were recorded at cost and are included in equity investments on the condensed consolidated balance sheets.

Equity securities:

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 Item 8, Note 20.

Deconsolidation of RBH , in PMI's Annual Report on Form 10-K for the year ended December 31, 2021.

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 $ 211 million at September 30, 2022.

Unrealized pre-tax loss of $ 65 million ($ 52 million net of tax) on these equity securities was recorded in equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings for the nine months ended September 30, 2022, of which $ 5 million was recorded during the three months ended September 30, 2022.

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $ 332 million at March 31, 2023.

Unrealized pre-tax gain (loss) of $ 6 million ($ 5 million net of tax) on these equity securities was recorded in equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings for the three months ended March 31, 2023.

Other related parties:

United Arab Emirates-based Trans-Emirates Trading and Investments (FZC) ("TTI") holds a 33 % non-controlling interest in Philip Morris Misr LLC ("PMM"), an entity incorporated in Egypt which is consolidated in PMI’s financial statements in the Middle East & Africa segment.

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

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.

Additionally, 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 SSEA, CIS & MEA 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:

PMI’s net revenues and expenses with the above related parties were as follows:

For the Nine Months Ended September 30, For the Three Months Ended September 30,

For the Three Months Ended March 31,

(in millions) 2023 2022

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Net revenues (a)

$ 2,634 $ 2,470 $ 1,087 $ 872

Other $ 50 $ 12

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PMI’s balance sheet activity with the above related parties was as follows:

(in millions) At September 30, 2022 At December 31, 2021

(in millions) At March 31, 2023 At December 31, 2022

Megapolis Group $ 487 $ 478

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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 no t material as of September 30, 2022 and September 30, 2021.

The amounts associated with the servicing liability were no t material as of March 31, 2023 and March 31, 2022.

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.

Cumulative trade receivables sold, including excise taxes, for the nine months ended September 30, 2022 and 2021, were $ 8.4 billion and $ 8.6 billion, respectively.

Cumulative trade receivables sold, including excise taxes, for the three months ended March 31, 2023 and 2022, were $ 2.9 billion and $ 2.8 billion, respectively.

PMI’s operating cash flows were positively impacted by the amount of the trade receivables sold and derecognized from the condensed consolidated balance sheets, which remained outstanding with the unaffiliated financial institutions.

The trade receivables sold that remained outstanding under these arrangements as of September 30, 2022 and September 30, 2021, were $ 512 million, and $ 652 million, respectively.

The trade receivables sold that remained outstanding under these arrangements as of March 31, 2023 and March 31, 2022, were $ 970 million, and $ 598 million, respectively.

The net proceeds received are included in cash provided by operating activities in the condensed consolidated statements of cash flows.

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 condensed consolidated statements of earnings.

For the nine months and three months ended September 30, 2022 and 2021, the loss on sale of trade receivables was immaterial.

For the three months ended March 31, 2023 and 2022, the loss on sale of trade receivables was $ 10 million and $ 3 million, respectively.

Philip Morris International Inc.

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PMI accounts for its product warranties within other accrued liabilities.

At September 30, 2022 and December 31, 2021, these amounts were as follows:

(in millions) As of and For the Nine Months Ended September 30, 2022 As of and For the Year Ended December 31, 2021

At March 31, 2023 and December 31, 2022, these amounts were as follows:

(in millions) As of and For the Three Months Ended March 31, 2023 As of and For the Year Ended December 31, 2022

Balance at beginning of period $ 104 $ 113

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Asset Impairment and Exit Costs:

For the nine months and three months ended September 30, 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 nine months and three months ended September 30, 2022 within the Wellness and Healthcare segment.

For further details, see Note 6.

Goodwill and Other Intangible Assets, net .

For the nine months and three months ended September 30, 2021, PMI recorded total pre-tax asset impairment and exit costs related to restructuring activities of $ 170 million and $ 43 million, respectively.

These pre-tax charges for the nine months and three months ended September 30, 2021 were included in marketing, administration and research costs in the condensed 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 $ 42 million and $ 16 million in the nine months and three months ended September 30, 2021, respectively, related to contract terminations and restructuring with certain distributors.

The full cost of the program, which was recorded as exit costs during the year ended December 31, 2021, was $ 57 million.

Organizational Design Optimization

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.

PMI initiated the employee consultation procedures, as required under Swiss law, for the impacted employees.

The consultation procedures for the first two phases were completed in 2020 with the final phases initiated and completed in 2021.

Additionally, since the commencement of this multi-phase restructuring project in 2020, PMI launched a voluntary separation program in Switzerland for certain eligible employees and announced the outsourcing of certain activities in Argentina, Indonesia, Poland and the United States.

This multi-phase restructuring project was completed in the fourth quarter of 2021.

For the nine months and three months ended September 30, 2021, PMI recorded pre-tax charges of $ 128 million and $ 27 million, respectively, related to the organizational design optimization.

Since inception of this multi-phase restructuring project in January 2020 through December 31, 2021, approximately 1,020 positions in total were impacted, resulting in cumulative pre-tax charges of $ 308 million related to the organizational design optimization program.

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

For the three months ended March 31, 2023, PMI recorded total pre-tax asset impairment and exit costs of $ 109 million.

This pre-tax charge was included in marketing, administration and research costs in the condensed consolidated statements of earnings for the three months ended March 31, 2023.

For the three months ended March 31, 2022, PMI did not record any charges for asset impairment and exit costs.

e-Vapor Products Manufacturing Optimization

In the first quarter of 2023, PMI initiated a project to fully outsource and restructure the manufacturing of e-vapor devices and consumables.

As a result, PMI recorded pre-tax asset impairment and exit costs of $ 109 million.

This amount included contract termination costs for suppliers of $ 78 million, including $ 21 million of embedded finance lease terminations, which will be paid in cash.

This also included asset impairment costs of $ 31 million, primarily related to machinery and equipment, which were non-cash charges.

Philip Morris International Inc.

2 unchanged sentences

Asset Impairment and Exit Costs by Segment

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

(in millions) For the Nine Months Ended September 30, For the Three Months Ended September 30,

Separation programs:

European Union $ 56 $ 12

Eastern Europe 11 2

Middle East & Africa 13 3

South & Southeast Asia 17 4

East Asia & Australia 25 5

Total separation programs 128 27

PMI recorded the following pre-tax asset impairment and exit costs by segment:

(in millions) For the Three Months Ended March 31,

Contract termination charges:

East Asia & Australia 42 16

SSEA, CIS & MEA 25

EA, AU & PMI DF 15

Total contract termination charges 78

Asset impairment charges:

SSEA, CIS & MEA 9

EA, AU & PMI DF 6

Total asset impairment charges 31

Asset impairment and exit costs $ 109

(1) Organizational design optimization pre-tax charges in 2021 were allocated across all geographical segments.

Movement in Exit Cost Liabilities

The movement in exit cost liabilities for the nine months ended September 30, 2022 was as follows:

The movement in exit cost liabilities for the three months ended March 31, 2023 was as follows:

(in millions)

3 unchanged sentences

Currency/other 1

Liability balance, September 30, 2022 $ 54

Future cash payments for exit costs incurred to date are anticipated to be substantially paid by the end of 2023, with approximately $ 17 million expected to be paid in the remainder of 2022.

Liability balance, March 31, 2023 $ 112

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

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

The components of PMI’s lease cost were as follows for the nine months and three months ended September 30, 2022 and 2021:

For the Nine Months Ended September 30, For the Three Months Ended September 30,

The components of PMI’s lease cost were as follows for the three months ended March 31, 2023 and 2022:

For the Three Months Ended March 31,

(in millions) 2023 2022

5 unchanged sentences

Total lease cost $ 102 $ 98

Subsequent Event:

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

to end the companies' commercial relationship covering IQOS in the U.S.

as of April 30, 2024.

Thereafter, PMI will have the full rights to commercialize IQOS in the U.S.

As part of the agreement, effective October 19, 2022, PMI will pay a total cash consideration of $ 2.7 billion, of which $ 1.0 billion was paid at the inception of the agreement using available cash.

The remaining $ 1.7 billion, plus interest, at a per annum rate equal to six percent ( 6 %), will be paid by July 2023 at the latest.

PMI is currently evaluating the impact of this agreement on its consolidated financial statements.

Supply Chain Financing:

PMI has engaged with unaffiliated global financial institutions that offer a voluntary supply chain financing ("SCF") program to some of our suppliers.

Under the SCF program, the suppliers may elect, at their sole discretion, to sell PMI's payment obligations to these financial institutions.

The suppliers independently negotiate the sale arrangements directly with these financial institutions.

PMI does not participate in these negotiations, nor does it have any economic interest in these agreements, or in the designated suppliers’ voluntary decision to sell PMI's payment obligations to these financial institutions.

No guarantees or securities are provided by PMI or any of its subsidiaries under the SCF programs.

PMI's obligations to its suppliers, including amounts due and scheduled payment terms are not impacted by the suppliers’ decision to sell amounts under the SCF program.

The payment terms of PMI’s suppliers generally do not exceed 120 days.

All outstanding payable amounts related to suppliers that are participating in the SCF program are recorded in accounts payable in PMI's condensed consolidated balance sheets.

The associated payments are included in cash flows from operating activities within PMI's condensed consolidated statement of cash flows.

As of March 31, 2023 and December 31, 2022, the total amount due to suppliers participating in the SCF program was approximately $ 1.1 billion.

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-Q

Item 1. Financial Statements