What changed in this filing

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Item 1. Financial Statements

2024-04-26 compared with 2023-10-26 · 457 added, 865 removed, 937 unchanged (59% of the section changed)

4 unchanged sentences

(in millions of dollars, except per share data)

For the Nine Months Ended September 30,

Net revenues 1 & 2 (Note 14)

For the Three Months Ended March 31,

Net revenues 1 & 2 (Notes 7 & 12)

$ 8,793 $ 8,019

Cost of sales 3 (Notes 3 & 6)

Gross profit 16,696 15,419

Marketing, administration and research costs 4 (Notes 3, 6, 9, 10 & 17)

Operating income 8,667 9,322

Interest expense, net 788 418

Pension and other employee benefit costs (Note 5) 36 16

Earnings before income taxes 7,843 8,888

Provision for income taxes 2,019 1,835

Equity investments and securities (income)/loss, net ( 131 ) 20

Net earnings $ 5,955 $ 7,033

Net earnings attributable to noncontrolling interests 338 382

Net earnings attributable to PMI $ 5,617 $ 6,651

Per share data (Note 8):

Basic earnings per share $ 3.61 $ 4.28

Diluted earnings per share $ 3.61 $ 4.27

(1) Includes net revenues from related parties of $ 2,631 million and $ 2,634 million for the nine months ended September 30, 2023 and 2022, respectively

(2) Net of excise tax on products of $ 37,140 million and $ 37,028 million for the nine months ended September 30, 2023 and 2022, respectively

(3) Includes an impairment charge for other intangibles of $ 112 million for the nine months ended September 30, 2022.

For further details, see Note 6.

Goodwill and Other Intangible Assets, net

(4) Includes an impairment charge for goodwill and other intangibles of $ 680 million and a charge of $ 204 million for the South Korea indirect tax charge for the nine months ended September 30, 2023, respectively.

For further details, see Note 6.

Goodwill and Other Intangible Assets, net and Note 10.

Contingencies

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,

Net revenues 1 & 2 (Note 14)

Cost of sales 3 (Notes 3 & 6)

Cost of sales 3,195 3,038

Gross profit 5,598 4,981

Marketing, administration and research costs (Notes 3 & 9)

Marketing, administration and research costs (Note 15)

Operating income 3,045 2,731

10 unchanged sentences

Diluted earnings per share $ 1.38 $ 1.28

(1) Includes net revenues from related parties of $ 857 million and $ 1,087 million for the three months ended September 30, 2023 and 2022, respectively

(2) Net of excise taxes of $ 13,092 million and $ 12,856 million for the three months ended September 30, 2023 and 2022, respectively

(3) Includes an impairment charge for other intangibles of $ 112 million for the three months ended September 30, 2022.

For further details, see Note 6.

Goodwill and Other Intangible Assets, net

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 Nine Months Ended September 30,

Net earnings $ 5,955 $ 7,033

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

Change in currency translation adjustments:

Unrealized gains (losses), net of income taxes of $( 12 ) in 2023 and $( 340 ) in 2022

( 669 ) ( 352 )

(Gains)/losses transferred to earnings, net of income taxes of $ 0 in 2023 and 2022

Change in net loss and prior service cost:

Net gains (losses) and prior service costs, net of income taxes of $ 0 in 2023 and $ 29 in 2022

Amortization of net losses, prior service costs and net transition costs, net of income taxes of $( 20 ) in 2023 and $( 37 ) in 2022

Change in fair value of derivatives accounted for as hedges:

Gains (losses) recognized, net of income taxes of $( 56 ) in 2023 and $( 106 ) in 2022

(Gains) losses transferred to earnings, net of income taxes of $ 30 in 2023 and $ 18 in 2022

( 155 ) ( 106 )

Total other comprehensive earnings (losses) ( 457 ) 292

Total comprehensive earnings 5,498 7,325

Less comprehensive earnings (losses) attributable to:

Noncontrolling interests 139 385

Comprehensive earnings attributable to PMI $ 5,359 $ 6,940

(1) Includes net revenues from related parties of $ 860 million and $ 873 million for the three months ended March 31, 2024 and 2023, respectively

(2) Net of excise taxes of $ 11,839 million and $ 11,299 million for the three months ended March 31, 2024 and 2023, respectively

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in millions of dollars)

For the Three Months Ended September 30,

For the Three Months Ended March 31,

Net earnings $ 2,246 $ 2,102

2 unchanged sentences

Unrealized gains (losses), net of income taxes of $( 102 ) in 2024 and $ 52 in 2023

(Gains)/losses transferred to earnings, net of income taxes of $ 0 in 2023 and 2022

(Gains)/losses transferred to earnings, net of income taxes of $ 0 in 2024 and 2023 (Notes 11 &15)

Change in net loss and prior service cost:

15 unchanged sentences

(in millions of dollars)

September 30,

2024 December 31,

15 unchanged sentences

TOTAL ASSETS $ 65,315 $ 65,304

(1) Includes trade receivables from related parties of $ 655 million and $ 688 million as of September 30, 2023, and December 31, 2022, respectively (less allowances of $ 43 million as of September 30, 2023 and $ 7 million as of December 31, 2022).

(1) Includes trade receivables from related parties of $ 702 million and $ 710 million as of March 31, 2024, and December 31, 2023, respectively.

For further details, see Note 12.

5 unchanged sentences

(in millions of dollars, except share data)

September 30,

2024 December 31,

35 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

1 unchanged sentence

Adjustments to reconcile net earnings to operating cash flows:

Depreciation, amortization and impairment of goodwill and other intangibles 1,709 898

Depreciation and amortization expense 367 299

Impairment of other intangibles (Note 4) 27 —

Deferred income tax (benefit) provision 76 ( 96 )

2 unchanged sentences

Receivables, net (1)

( 267 ) ( 963 )

Inventories 527 ( 783 )

2 unchanged sentences

Income taxes ( 79 ) ( 88 )

Pension plan contributions, net of refunds (Note 5) ( 96 ) 38

Pension plan contributions (Note 3) ( 34 ) ( 45 )

Other ( 169 ) 159

Net cash provided by operating activities 5,902 7,710

Net cash provided by (used in) operating activities 241 ( 955 )

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

Capital expenditures ( 417 ) ( 279 )

Altria Group, Inc.

agreement (Note 2) ( 1,775 ) —

Equity investments ( 20 ) ( 8 )

Net investment hedges and other derivatives (Note 7) ( 110 ) 634

Collateral posted/settlements for derivatives, (paid)/returned (Note 5) 310 ( 164 )

Other ( 66 ) ( 140 )

Net cash used in investing activities ( 3,030 ) ( 151 )

(1) Includes amounts from related parties of $( 130 ) million and $( 226 ) million for September 30, 2023 and 2022, respectively

Net cash provided by (used in) investing activities ( 193 ) ( 591 )

(1) Includes amounts from related parties of $( 45 ) million and $( 76 ) million for March 31, 2024 and 2023, 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

6 unchanged sentences

Long-term debt repaid — ( 682 )

Repurchases of common stock — ( 209 )

Dividends paid ( 2,037 ) ( 1,987 )

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

Collateral received/settlements for derivatives, received/(returned) 260 ( 2 )

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

Noncontrolling interests activity and Other (Note 18)

( 267 ) ( 663 )

Net cash used in financing activities ( 2,685 ) ( 6,071 )

Net cash provided by (used in) financing activities 1,135 864

Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 230 ) ( 89 )

3 unchanged sentences

Balance at end of period $ 4,099 $ 2,446

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $ 17 million and $ 6 million as of September 30, 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.

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $ 131 million and $ 18 million as of March 31, 2024 and 2023, respectively, and $ 86 million and $ 10 million as of December 31, 2023 and 2022, 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, 2023 and 2022

For the Three Months Ended March 31, 2024 and 2023

(in millions of dollars, except per share amounts)

14 unchanged sentences

Dividends paid to noncontrolling interests ( 93 ) ( 93 )

Common stock repurchased ( 199 ) ( 199 )

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

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

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

Net earnings 5,617 338 5,955

Other comprehensive earnings (losses), net of income taxes ( 438 ) ( 19 ) ( 457 )

Issuance of stock awards 29 129 158

Dividends declared ($ 3.84 per share)

( 5,987 ) ( 5,987 )

Dividends paid to noncontrolling interests ( 407 ) ( 407 )

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests (Note 18) 21 179 ( 825 ) ( 625 )

Balances, September 30, 2023 $ — $ 2,253 $ 33,919 $ ( 9,817 ) $ ( 35,788 ) $ 1,727 $ ( 7,706 )

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, 2023 and 2022

(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, 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 )

Dividends paid to noncontrolling interests ( 111 ) ( 111 )

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

Balances, July 1, 2023 $ — $ 2,240 $ 33,893 $ ( 10,045 ) $ ( 35,791 ) $ 1,743 $ ( 7,960 )

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

Balances, January 1, 2024 $ — $ 2,285 $ 34,090 $ ( 11,815 ) $ ( 35,785 ) $ 1,779 $ ( 9,446 )

Net earnings 2,148 98 2,246

5 unchanged sentences

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests — — ( 1 ) ( 1 )

Balances, September 30, 2023 $ — $ 2,253 $ 33,919 $ ( 9,817 ) $ ( 35,788 ) $ 1,727 $ ( 7,706 )

Balances, March 31, 2024 $ — $ 2,205 $ 34,208 $ ( 11,065 ) $ ( 35,657 ) $ 1,746 $ ( 8,563 )

See notes to condensed consolidated financial statements.

8 unchanged sentences

and its subsidiaries.

Smoke-free products (also referred to herein as "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.

Smoke-Free Business ("SFB”) is the term PMI uses to refer to all of its smoke-free products.

SFB also includes wellness and healthcare products, as well as consumer accessories, such as lighters and matches.

Smoke-free products (also referred to herein as "SFPs") is the term PMI uses to refer to all of its products that provide nicotine without combusting tobacco, such as heat-not-burn, e-vapor, and oral smokeless, and that therefore generate far lower levels of harmful chemicals.

As such, these products have the potential to present less risk of harm versus continued smoking.

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

Basis of Presentation

6 unchanged sentences

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 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.

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:

Following the combination and the progress in 2023 toward the integration of the Swedish Match business into PMI's existing regional structure, PMI updated in January 2024 its segment reporting by including the former Swedish Match segment results into the four existing geographical segments.

The four existing geographical segments are as follows:

Europe Region;

2 unchanged sentences

and Americas Region.

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

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.

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.

The Wellness and Healthcare ("W&H") segment remained unchanged.

Certain prior years' amounts have been reclassified to conform with the current year's presentation as a result of the new segment structure discussed above.

Goodwill and Other Intangible Assets, net, Note 7.

Segment Reporting and Note 15.

Asset Impairment and Exit Costs for further details.

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, 2023.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Acquisitions:

Transactions With Noncontrolling Interests

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

("PMTM") (formerly Philsa Philip Morris 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

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 initiate arbitral proceedings 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 nine months ended September 30, 2023.

While PMI has paid the referenced amounts and has 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.

On September 12, 2023, the arbitral tribunal determined the final redemption price to be Swedish krona (SEK) 115.07 , which is unchanged from the SEK 115.07 that PMI paid per share in connection with obtaining legal title to the shares.

This final redemption price is subject to appeal by the remaining minority shareholders within 60 days.

Pending appeal, PMI expects this process to be completed in the fourth quarter of 2023 and believes that the likelihood of additional payments to be made is 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

The table below summarizes the preliminary purchase price allocation for the fair value of assets acquired and liabilities assumed as of the acquisition date, including the measurement period adjustments made for the first nine months of 2023.

PMI is still assessing information received as of the acquisition date and expects to complete the allocation by the end of the measurement period in November 2023.

(in millions)

Recognized as of the acquisition date Measurement Period Adjustments Recognized as of September 30, 2023

Cash and cash equivalents $ 484 $ — $ 484

Trade receivables 135 — 135

Other receivables 53 — 53

Inventories 444 ( 7 ) 437

Other current assets 524 ( 109 ) 415

Property, plant and equipment 627 50 677

Other intangible assets 4,512 3,289 7,801

Other non-current assets 214 4 218

Current portion of long-term debt 224 — 224

Accounts payable 120 — 120

Other current liabilities 531 1 532

Income taxes 14 — 14

Long-term debt 1,126 ( 5 ) 1,121

Deferred income taxes 1,253 836 2,089

Other non-current liabilities 187 9 196

Identifiable net assets acquired 3,538 2,386 5,924

Noncontrolling interest 2,379 — 2,379

Goodwill 13,301 ( 2,386 ) 10,915

Total consideration transferred $ 14,460 $ — $ 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 primarily determined using readily available market prices as of the acquisition date and the total purchase price adjustment of $( 107 ) million is being amortized as an increase to interest expense, net over the lives of the related debt.

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

and intangible assets that did not qualify for separate recognition.

The goodwill is not deductible for income tax purposes.

Identifiable intangible assets of Swedish Match consist of:

Type Useful Life Estimated Fair Value (in millions)

Trademarks Non-amortizable $ 3,133

Trademarks Amortizable 20 - 30 years

Developed technology, including patents 10 years 113

Customer relationships 6 - 15 years

Total identifiable intangible assets $ 7,801

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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 rates and discount rates.

Trademarks primarily relate to $ 3,133 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 U.S.

All other trademarks have been determined to have a useful life ranging between 20 - 30 years.

The trademarks have been valued using the relief from royalty method supported by revenue growth rate assumptions and royalty rates disaggregated at the individual trademark level.

Developed technology, including patents, relates to the nicotine pouch technology of $ 113 million.

These patents have been assigned a useful life of 10 years, which is in line with their protection period and have been valued using the comparable transactions and income methods.

Customer relationships have been valued by categories of customers and geographic locations, namely the U.S.

market, Scandinavia, and other markets using the multiple periods excess earnings method.

The significant assumptions included customer attrition rates disaggregated at the customer category level, the revenue growth rates, as well as profit margins.

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.

Under the EU Merger Regulation, approval by the European Commission of PMI's acquisition of Swedish Match was conditional on PMHH's divestiture of Swedish Match's subsidiary, SMD Logistics AB ("SMDL"), following the completion of the offer to tender all shares in Swedish Match to PMHH.

As a result, these assets were 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.

PMI subsequently sold SMDL on June 30, 2023 and the transaction did not have a material impact on the condensed consolidated statements of earnings for the nine months ended September 30, 2023.

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 $ 33,579 $ 33,488

Net earnings attributable to PMI $ 8,788 $ 8,495

Altria Group, Inc.

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

("Altria") 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 hold 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 September 30, 2023 and December 31, 2022.

The remaining consideration of $ 1.7 billion plus interest was paid to Altria on July 14, 2023 and has been accounted for within other assets in PMI's condensed consolidated balance sheets as of September 30, 2023.

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

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 employees and their families in the country.

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

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

Production at the factory in Kharkiv remains suspended.

While the effects of the war are unpredictable and could trigger impairment reviews for long-lived assets, as of September 30, 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, 2023, PMI’s Ukrainian operations had approximately $ 500 million in total assets, excluding intercompany balances.

These total assets included $ 82 million, $ 350 million and $ 28 million in receivables, inventories and property, plant and equipment, respectively.

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

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

PMI is continuously assessing the evolving situation in Russia, including recent regulatory constraints in the market that entail very complex terms and conditions that must be met for any divestment transaction to be granted approval by the authorities, and restrictions resulting from international regulations.

As a result of PMI continuing operations within Russia as of September 30, 2023, it has not recorded an impairment of long-lived and other assets.

However, PMI recorded specific asset write downs in 2022 as referred to in the table below.

PMI’s Russian operations as of September 30, 2023 had approximately $ 2.4 billion in total assets, excluding

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

intercompany balances.

These total assets included $ 677 million, $ 411 million, $ 838 million, $ 242 million and $ 158 million in cash (primarily held in local currency), receivables, inventories, property, plant and equipment and goodwill, respectively.

In addition, there was approximately $ 1,343 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, 2023.

During the nine months and three months ended September 30, 2023 and 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, 2023 For the Nine Months Ended September 30, 2022

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

$ 11 $ 8 $ 19 $ 28 $ 31 $ 59

— — — 18 51 69

Total $ 11 $ 8 $ 19 $ 46 $ 82 $ 128

1 The 2023 pre-tax charges were primarily due to the cost of PMI’s humanitarian efforts, which includes salary continuation for its employees.

The 2022 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 machinery and inventory write downs related to the commercial decisions noted above.

(in millions) For the Three Months Ended September 30, 2023 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

$ 11 $ 8 $ 19 $ 3 $ 5 $ 8

Russia — — — ( 3 ) 1 ( 2 )

Total $ 11 $ 8 $ 19 $ — $ 6 $ 6

1 The pre-tax charges were primarily due to PMI’s humanitarian efforts, which includes salary continuation for its employees.

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

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

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

At September 30, 2023, shares available for grant under the 2022 Plan were 22,165,030 .

At March 31, 2024, shares available for grant under the 2022 Plan were 19,114,716 .

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

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

A non-employee director is defined as a member of the PMI Board of Directors who is not a full-time employee of PMI or of any corporation in which PMI owns, directly or indirectly, stock possessing at least 50 % of the total combined voting power of all classes of stock entitled to vote in the election of directors in such corporation.

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

At September 30, 2023, shares available for grant under the plan were 876,226 .

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

directors in such corporation.

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

At March 31, 2024, shares available for grant under the plan were 876,226 .

Restricted share unit (RSU) awards

During the nine months ended September 30, 2023 and 2022, 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

2023 1,756,750 $ 101.96

2022 1,579,680 $ 104.96

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, 2024 and 2023, 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)

2024 1,975,480 $ 89.04 $ 47

2023 1,732,910 $ 102.01 $ 50

As of September 30, 2023, PMI had $ 199 million of total unrecognized compensation cost related to non-vested RSU awards.

As of March 31, 2024, PMI had $ 274 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, 2023, 1,421,086 RSU awards vested.

During the three months ended March 31, 2024, 1,546,406 RSU awards vested.

The grant date fair value of all the vested awards was approximately $ 128 million.

The total fair value of RSU awards that vested during the nine months ended September 30, 2023 was approximately $ 143 million.

The total fair value of RSU awards that vested during the three months ended March 31, 2024 was approximately $ 139 million.

Performance share unit (PSU) awards

During the nine months ended September 30, 2023 and 2022, PMI granted PSU awards to certain executives.

During the three months ended March 31, 2024 and 2023, 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, 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;

The performance metrics for such PSU's granted during the three months ended March 31, 2023 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 primarily on PMI's efforts to maximize the benefits of smoke-free products, purposefully phase out cigarettes, 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, targets and relative weights for the PSU’s granted during the three months ended March 31, 2024 were the same as the PSU’s granted during the three months ended March 31, 2023, with the exception of adjustments made to certain components of the Sustainability Index intended to address PMI's developing sustainability strategy and reporting.

The PSU performance metrics may be adjusted if appropriate to reflect the impact of unusual or infrequently occurring events, including, to the extent significant, corporate transactions, accounting or tax law changes, asset write-downs, litigation or claim adjustments, foreign exchange gains and losses, unbudgeted capital expenditures and other such events.

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

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Notes to Condensed Consolidated Financial Statements

During the nine months ended September 30, 2023 and 2022, shares granted to eligible employees and the grant date fair value per share related to PSU awards were as follows:

During the three months ended March 31, 2024 and 2023, 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-

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Average PSU Grant Date

Fair Value Subject to TSR Performance Factors

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

(Per Share) (Per Share)

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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,

2023 $ 51 $ 6

2022 $ 44 $ 13

As of September 30, 2023, PMI had $ 49 million of total unrecognized compensation cost related to non-vested PSU awards.

As of March 31, 2024, 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, 2023, 902,232 PSU awards vested.

During the three months ended March 31, 2024, 909,262 PSU awards vested.

The grant date fair value of all the vested awards was approximately $ 86 million.

The total fair value of PSU awards that vested during the nine months ended September 30, 2023 was approximately $ 91 million.

The total fair value of PSU awards that vested during the three months ended March 31, 2024 was approximately $ 82 million.

Benefit Plans:

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retired employees are covered through local government plans.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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) 2024 2023

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Total pension and other employee benefit costs $ 15 $ 22

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Pension Plans

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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) 2024 2023

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Net loss 23 12

Prior service cost (credit) ( 2 ) ( 1 ) ( 1 ) —

Net periodic pension cost $ 36 $ 31

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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 $ 96 million were made to the pension plans during the nine months ended September 30, 2023.

Employer contributions of $ 34 million were made to the pension plans during the three months ended March 31, 2024.

Currently, PMI anticipates making additional contributions during the remainder of 2024 of approximately $ 88 million to its pension plans, based on current tax and benefit laws.

However, this estimate is subject to change as a result of changes in tax and other benefit laws, as well as asset performance significantly above or below the assumed long-term rate of return on pension assets, or changes in interest and currency rates.

Employer contributions of $ 85 million 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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Goodwill and Other Intangible Assets, net:

Annual impairment review of goodwill and non-amortizable intangible assets

During the second quarter of 2023, PMI completed its annual review of goodwill and non-amortizable intangible assets for potential impairment.

Based on this review, it was determined that the estimated fair value of the Wellness and Healthcare reporting unit was lower than its carrying value.

Consequently, PMI recorded a goodwill impairment charge of $ 665 million, reflecting the impact of reduced estimated future cash flows, which were primarily attributable to clinical trial results that became available in June 2023 for an inhalable aspirin product being developed by the Wellness and Healthcare business.

While it was observed that the experimental product had a rapid onset of effect, which is the key medical advantage sought, there was significant variability in inhaled dose among subjects.

The study was therefore deemed unsuccessful and, as a result, product design improvements are required.

PMI had planned to file a new drug application for this product with the U.S.

Food and Drug Administration later this year.

However, additional time is now required to evaluate design improvements and the corresponding less certain outcome.

The cash flow estimates were also adversely impacted by slower-than-anticipated development of the contract development and manufacturing organization ("CDMO") business, including challenges associated with increased cost related to certain key products.

Additionally, as a result of the impairment test of non-amortizable intangible assets, PMI recorded a pre-tax impairment charge of $ 15 million for an in-process research and development project related to one of PMI's 2021 acquisitions.

These impairment charges were recorded within marketing, administration and research costs in the consolidated statements of earnings for the nine months ended September 30, 2023.

The goodwill impairment charge is not deductible for income tax purposes.

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 and estimates, unfavorable clinical trial results, failure to obtain regulatory approvals or other market factors could result in additional future goodwill and other intangible asset impairments.

Certain Wellness and Healthcare products include components or gases which may be subject to enhanced climate change regulations that could impact the related product development and market strategies.

This may also lead to supply disruptions that could result in additional future impairments.

While PMI’s remaining reporting units have fair values substantially in excess of their carrying values, 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 .

PMI has performed a quantitative impairment assessment for all of its reporting units and non-amortizable intangible assets with the exception of the Swedish Match segment.

As the purchase price allocation for the acquisition of Swedish Match is preliminary, PMI has performed a qualitative impairment assessment and concluded that it was not more likely than not that the fair value of the Swedish Match reporting units and its non-amortizable intangible assets were less than the respective carrying amounts.

The movements in goodwill were as follows:

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EA, AU & PMI DF

Americas Swedish Match Wellness & Healthcare Total

Americas Wellness & Healthcare Total

Balances at December 31, 2023 $ 4,173 $ 2,877 $ 492 $ 8,847 $ 390 $ 16,779

Changes due to:

Impairment — — — — — ( 665 ) ( 665 )

Currency ( 247 ) ( 61 ) ( 12 ) 6 ( 7 ) ( 321 )

Measurement period adjustments — — — — ( 2,386 ) — ( 2,386 )

Balances, September 30, 2023 $ 1,357 $ 2,835 $ 484 $ 672 $ 10,789 $ 372 $ 16,509

Balances, March 31, 2024 $ 3,926 $ 2,816 $ 480 $ 8,853 $ 383 $ 16,458

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.

Background and Basis of Presentation , PMI updated in January 2024 its segment reporting by including the former Swedish Match segment results into its geographical segments.

As a result, the December 31, 2023 goodwill balance in the table above included the reclassification of the former Swedish Match segment to the Europe and Americas segments.

At March 31, 2024, goodwill primarily reflects PMI’s acquisitions of Swedish Match AB, Fertin Pharma A/S and Vectura Group plc., as well as acquisitions in Greece, Indonesia, Mexico, the Philippines and Serbia.

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

The decrease in goodwill was primarily due to the measurement period adjustments to the Swedish Match preliminary purchase price allocation (see Note 2, Acquisitions ), coupled with the impairment discussed above and currency movements.

At September 30, 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.

Other Intangible Assets

Details of other intangible assets were as follows:

September 30, 2023 December 31, 2022

March 31, 2024 December 31, 2023

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

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Total other intangible assets $ 11,077 $ 1,629 $ 9,448 $ 11,427 $ 1,563 $ 9,864

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 the measurement period adjustments to the Swedish Match preliminary purchase price allocation in the amount of $ 1,056 million (see Note 2, Acquisitions ), coupled with currency movements of $ 29 million, partially offset by an impairment for an in-process research and development project related to one of PMI's 2021 acquisitions discussed above.

The increase in the gross carrying amount of amortizable intangible assets from December 31, 2022, was due to the measurement period adjustments to the Swedish Match preliminary purchase price allocation in the amount of $ 2,233 million (see Note 2, Acquisitions ), partially offset by currency movements of $ 105 million.

Non-amortizable intangible assets substantially consist of the ZYN trademarks and other trademarks related to acquisitions in Indonesia and Mexico.

The decrease since December 31, 2023 was mainly due to currency movements of $ 119 million and a pre-tax impairment charge of $ 27 million primarily for an in-process research and development project in the Wellness and Healthcare segment.

The pre-tax impairment charge during the three months ended March 31, 2024 was recorded in marketing, administration and research costs on PMI's condensed consolidated statements of earnings.

The decrease in the gross carrying amount of amortizable intangible assets from December 31, 2023, was primarily due to currency movements of $ 204 million.

The change in the accumulated amortization from December 31, 2023, was mainly due to the 2024 amortization of $ 120 million, partially offset by currency movements of $ 54 million.

The amortization of intangibles for the nine months ended September 30, 2023 was recorded in cost of sales ($ 43 million) and in marketing, administration and research costs ($ 325 million) on PMI's condensed consolidated statements of earnings.

The amortization of intangibles for the three months ended March 31, 2024 was recorded in cost of sales ($ 16 million) and in marketing, administration and research costs ($ 104 million) on PMI's condensed consolidated statements of earnings.

Amortization expense for each of the next five years is estimated to be approximately $ 479 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

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

Additionally, the estimated future amortization expense could significantly increase following the reacquisition of IQOS commercialization rights in the U.S.

from Altria Group, Inc., (see Note 18, Acquisitions) the accounting for which will depend on the facts and circumstances effective May 1, 2024, when PMI will hold the full rights.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

2022 Impairment of Other Intangibles

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

The impairment reduced the carrying values of developed technology definite-lived intangible assets in the Wellness and Healthcare segment to $ 308 million as of September 30, 2022.

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 primarily outside of the United States of America, with manufacturing and sales facilities in various locations around the world and is exposed to risks such as changes in foreign currency exchange rates and interest rates.

PMI operates globally with manufacturing and sales facilities in various locations around the world and is exposed to risks such as changes in foreign currency exchange rates and interest rates.

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

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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Additionally, certain materials that PMI uses in the manufacturing of its products are exposed to market price risks.

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Substantially all of PMI's derivative financial instruments are subject to master netting arrangements, whereby the right to offset occurs in the event of default by a participating party.

While these contracts contain the enforceable right to offset through close-out netting rights, PMI elects to present them on a gross basis in the consolidated balance sheets.

While these contracts contain the enforceable right to offset through close-out netting rights, PMI elects to present them on a gross basis in the condensed consolidated balance sheets.

Collateral associated with these arrangements is in the form of cash and is unrestricted.

Changes in collateral posted are included in cash flows from investing activities and changes in collateral received are included in cash flows from financing activities.

Financial instruments qualifying for hedge accounting must maintain a specified level of effectiveness between the hedging instrument and the item being hedged, both at inception and throughout the hedged period.

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The gross notional amounts for outstanding derivatives at the end of each period were as follows:

(in millions) At September 30, 2023 At December 31, 2022

(in millions) At March 31, 2024 At December 31, 2023

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, 2023 and December 31, 2022, were as follows:

The fair value of PMI’s derivative contracts included in the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023, were as follows:

Derivative Assets Derivative Liabilities

Fair Value Fair Value

(in millions) Balance Sheet Classification September 30, 2023 December 31, 2022 Balance Sheet Classification September 30, 2023 December 31, 2022

(in millions) Balance Sheet Classification March 31, 2024 December 31, 2023 Balance Sheet Classification March 31, 2024 December 31, 2023

Derivative contracts designated as hedging instruments:

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Commodity contracts Other current assets — — Other accrued liabilities 8 5

Other assets — — Income taxes and other liabilities 2 1

Derivative contracts not designated as hedging instruments:

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The fair value of PMI’s commodity contracts is determined by using the prevailing market spot and futures prices and the respective maturity dates of the instruments.

PMI’s derivative contracts have been classified within Level 2 at September 30, 2023 and December 31, 2022.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

For the nine months ended September 30, 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 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

2023 2022 2023 2022 2023 2022

Derivative contracts designated as hedging instruments:

Cash flow hedges:

Foreign exchange contracts $ 290 $ 325 Net revenues $ 112 $ 151

Cost of sales — —

Marketing, administration and research costs 52 ( 17 )

Interest expense, net ( 13 ) ( 5 )

Interest rate contracts 72 304 Interest expense, net 34 ( 5 )

Commodity contracts ( 2 ) — Cost of sales — —

Fair value hedges:

Interest rate contracts Interest expense, net (a)

$ ( 24 ) $ ( 81 )

Net investment hedges (b) :

Foreign exchange contracts 14 1,088 Interest expense, net (c)

Derivative contracts not designated as hedging instruments:

Foreign exchange contracts Interest expense, net 212 56

Marketing, administration and research costs (d)

Total $ 374 $ 1,717 $ 185 $ 124 $ 542 $ ( 69 )

(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, 2024 and December 31, 2023.

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

For the three months ended September 30, 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 September 30,

For the three months ended March 31, 2024 and 2023, 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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Interest rate contracts Interest expense, net (a)

$ ( 10 ) $ ( 24 )

Net investment hedges (b) :

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(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.

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

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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, 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.

As of March 31, 2024, PMI has hedged forecasted transactions with derivative contracts expiring at various dates through May 2028.

Premiums paid for, and settlements of, the derivative contracts designated as cash flow hedges are included primarily in cash flows from operating activities on PMI’s condensed consolidated statements of cash flows.

Philip Morris International Inc.

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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, 2023 was $ 906 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 $ 90 million as of September 30, 2023.

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of March 31, 2024 was $ 926 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 $ 71 million as of March 31, 2024.

Hedges of Net Investments in Foreign Operations

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 nine months ended September 30, 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 $ 51 million and $ 525 million, respectively.

For the three months ended September 30, 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 $ 27 million and $ 267 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.

For the three months ended March 31, 2024 and 2023, 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 $ 5 million and $ 1 million, respectively.

Settlements of the derivative contracts designated as net investment hedges are included in cash flows from investing activities 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 acquisition related transactions.

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

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

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

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

Settlements of other derivative contracts are included primarily in cash flows from investing activities on PMI's condensed consolidated statements of cash flows.

Qualifying Hedging Activities Reported in Accumulated Other Comprehensive Losses

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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,

2023 2022 2023 2022

Gain/(loss) as of beginning of period, $ 266 $ 4 $ 408 $ 250

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

Gain/(loss) as of January 1, $ 241 $ 266

Derivative (gains)/losses transferred to earnings ( 46 ) ( 29 )

Change in fair value 178 59

Gain/(loss) as of September 30, $ 415 $ 421 $ 415 $ 421

At September 30, 2023, PMI expects $ 176 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, $ 373 $ 296

At March 31, 2024, PMI expects $ 157 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 certain PMI investment, which is comprised primarily of money market funds, has been classified within Level 1 and had a fair value of $ 216 million at September 30, 2023.

For the nine months and three months ended September 30, 2023, the unrealized pre-tax gains (losses) 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 $ 117 million at March 31, 2024.

For the three months ended March 31, 2024, the unrealized pre-tax gains (losses) 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,

2023 2022 2023 2022

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

Net earnings attributable to PMI $ 2,148 $ 1,995

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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:

Excluding the Wellness and Healthcare segment, 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.

As discussed in Note 1.

Background and Basis of Presentation , PMI updated in January 2024 its segment reporting by including the former Swedish Match segment results into the four existing geographical segments.

The four existing geographical segments are as follows:

Europe Region;

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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, excluding Swedish Match and Wellness and Healthcare products.

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.

The Wellness and Healthcare segment remained unchanged.

Business operations in 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.

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

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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,

2023 2022 2023 2022

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

Net revenues:

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SSEA, CIS & MEA

7,922 7,781 2,777 2,822

EA, AU & PMI DF

4,771 4,458 1,571 1,407

Americas 996 868

Swedish Match 1,814 — 568 —

Wellness and Healthcare 90 86

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SSEA, CIS & MEA

2,371 3,009 801 1,086

EA, AU & PMI DF

1,920 1,746 753 533

Americas 99 183

Swedish Match 597 — 140 —

Wellness and Healthcare ( 45 ) ( 38 )

Operating income $ 3,045 $ 2,731

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Notes to Condensed Consolidated Financial Statements

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,

2023 2022 2023 2022

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

Net revenues:

Combustible tobacco products:

Combustible tobacco:

Europe $ 1,931 $ 1,815

SSEA, CIS & MEA

6,988 6,852 2,485 2,454

EA, AU & PMI DF

2,091 2,214 678 692

Americas 534 566

Swedish Match 333 — 49 —

Total combustible tobacco products 16,845 16,358 5,832 5,591

Smoke-free products:

Smoke-free products excluding Wellness and Healthcare:

Total combustible tobacco 5,407 5,223

Smoke-free excluding Wellness and Healthcare:

Europe 1,434 1,253

SSEA, CIS & MEA

934 929 292 368

EA, AU & PMI DF

2,680 2,244 893 715

Americas 462 302

Swedish Match 1,481 — 519 —

Total smoke-free products excluding Wellness and Healthcare 9,045 7,053 3,234 2,384

Total Smoke-free excluding Wellness and Healthcare 3,296 2,710

Wellness and Healthcare 90 86

Total smoke-free products 9,282 7,252 3,309 2,441

Total Smoke-free 3,386 2,796

Total PMI net revenues $ 8,793 $ 8,019

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

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

• Impairment of goodwill and other intangibles – See Note 6.

Goodwill and Other Intangible Assets, net for the details of the $ 680 million goodwill and non-amortizable intangible assets impairment charges included in the Wellness and Healthcare segment for the nine months ended September 30, 2023.

For the nine months and three months ended September 30, 2022, PMI recorded an impairment charge related to definite-lived intangible assets of $ 112 million.

This charge was included in the Wellness and Healthcare segment.

For further details, see Note 6.

Goodwill and Other Intangible Assets, net .

• South Korea indirect tax charge – See Note 10.

Contingencies for details of the $ 204 million pre-tax charge included in the EA, AU & PMI DF segment results for the nine months ended September 30, 2023.

• 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 nine months ended September 30, 2023.

• Charges related to the war in Ukraine – In the third quarter of 2023, PMI recorded a pre-tax charge of $ 19 million related to the war in Ukraine.

This charge was included in the condensed consolidated statements of earnings and was included in the Europe segment for the nine months and three months ended September 30, 2023.

For the nine months and three months ended September 30, 2022, PMI recorded a pre-tax charge of $ 128 million and $ 6 million, respectively.

These charges were included in the condensed consolidated statements of earnings and were included in the Europe segment for the nine months and three months ended September 30, 2022.

For further details, see Note 3.

War in Ukraine.

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Notes to Condensed Consolidated Financial Statements

• 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 nine months ended September 30, 2023.

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

• Asset impairment and exit costs – See Note 15.

Asset Impairment and Exit Costs for details of the $ 109 million pre-tax charge for the nine months ended September 30, 2023, as well as a breakdown of these costs by segment.

• Termination of agreement with Foundation for a Smoke-Free World – On September 29, 2023, PMI and the Foundation for a Smoke-Free World (the "Foundation") entered into the Final Grant Agreement and Termination of the Second Amended and Restated Pledge Agreement ("Agreement").

Under the terms of the agreement, PMI paid $ 140 million in the third quarter of 2023 in return for the termination of the pledge agreement between the parties.

As a result, in the third quarter of 2023, PMI recorded a pre-tax charge of $ 140 million commensurate with the early termination of the pledge agreement.

The pre-tax charge was recorded in marketing, administration and research costs in the condensed consolidated statements of earnings during the nine months and three months ended September 30, 2023 and was included in the operating results of the following segments for both of these periods:

Europe ($ 62 million);

SSEA, CIS & MEA ($ 44 million);

EA, AU & PMI DF ($ 27 million);

and Americas ($ 7 million).

The third quarter 2023 results of PMI's Swedish Match segment include the impact of financial statement presentation reclassifications recorded on a year-to-date basis primarily associated with the alignment of accounting policies related to the company's post-acquisition evaluation of sales incentives, excise taxes and acquired contracts.

Net revenues were unfavorably impacted by these reclassifications, some of which are associated with the first and second quarter of 2023.

These reclassifications were not material to the condensed consolidated results of the current period or the period in which they relate.

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

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

Asset Impairment and Exit Costs for a breakdown of these costs by segment for the three months ended March 31, 2024 and 2023.

• Swedish Match AB acquisition accounting related items – In the first quarter of 2023, PMI recorded $ 18 million pre-tax purchase accounting adjustments related to the sale of acquired inventories stepped up to fair value included in the Americas segment.

Net revenues related to combustible tobacco 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.

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Notes to Condensed Consolidated Financial Statements

Net revenues related to smoke-free, excluding wellness and healthcare, 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 PMI's products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral products, as well as consumer accessories.

Net revenues related to wellness and healthcare 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:

Tobacco-Related Litigation

Tobacco and/or Nicotine-Related Litigation

Legal proceedings covering a wide range of matters are pending or threatened against us, and/or our subsidiaries, and/or our indemnitees in various jurisdictions.

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It is possible that there could be adverse developments in pending cases against us and our subsidiaries.

An unfavorable outcome or settlement of pending tobacco-related litigation could encourage the commencement of additional litigation.

Damages claimed in some of the tobacco-related litigation are significant and, in certain cases in Brazil, Canada and Nigeria, range into the billions of U.S.

An unfavorable outcome or settlement of pending tobacco or nicotine-related litigation could encourage the commencement of additional litigation.

Damages claimed in some of the tobacco-related litigation are significant and, in certain cases in Canada and Nigeria, range into the billions of U.S.

The variability in pleadings in multiple jurisdictions, together with the actual experience of management in litigating claims, demonstrate that the monetary relief that may be specified in a lawsuit bears little relevance to the ultimate outcome.

Much of the tobacco-related litigation is in its early stages, and litigation is subject to uncertainty.

However, as discussed below, we have to date been largely successful in defending tobacco-related litigation.

While, as discussed below, we have to date been largely successful in defending tobacco-related litigation, litigation is subject to uncertainty.

Additionally, as reported further below, beginning in March 2024, litigation related to oral nicotine products was filed against us and our subsidiary before certain courts in the United States.

We and our subsidiaries record provisions in the consolidated financial statements for pending litigation when we determine that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.

At the present time, except as stated otherwise in this Note 10.

Contingencies , while it is reasonably possible that an unfavorable outcome in a case may occur, after assessing the information available to it (i) management has not concluded that it is probable that a loss has been incurred in any of the pending tobacco-related cases;

(ii) management is unable to estimate the possible loss or range of loss for any of the pending tobacco-related cases;

and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any.

At the present time, except as

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Notes to Condensed Consolidated Financial Statements

stated otherwise in this Note 8.

Contingencies, it is reasonably possible that an unfavorable outcome in a case may occur.

Legal defense costs are expensed as incurred.

It is possible that our consolidated results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation.

It is possible that our consolidated financial statements, including our results of operations, cash flows or financial position could be materially affected in a particular fiscal quarter or fiscal year by an unfavorable outcome or settlement of certain pending litigation.

Nevertheless, although litigation is subject to uncertainty, we and each of our subsidiaries named as a defendant believe, and each has been so advised by counsel handling the respective cases, that we have valid defenses to the litigation pending against us, as well as valid bases for appeal of adverse verdicts.

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However, we and our subsidiaries may enter into settlement discussions in particular cases if we believe it is in our best interests to do so.

CCAA Proceedings and Stay of Tobacco-Related Cases Pending in Canada

After assessing the information available to it, except as stated otherwise in this Note 8.

Contingencies , (i) management has not concluded that it is probable that a loss has been incurred in any of the pending combustible tobacco product-related cases;

(ii) management is unable to estimate the possible loss or range of loss for any of the pending combustible tobacco product-related cases;

and (iii) accordingly, no estimated loss has been accrued in the consolidated financial statements for unfavorable outcomes in these cases, if any.

CCAA Proceedings and Stay of Combustible Tobacco Product-Related Cases Pending in Canada

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.

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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 29, 2024 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.

As part of the CCAA proceedings, there is currently a comprehensive stay up to and including September 30, 2024 of all combustible tobacco product-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 accordance with the CCAA process, as the parties work towards a plan of arrangement or compromise in a confidential mediation, it is anticipated that the court will set additional hearings and further extend the stay of proceedings.

On April 17, 2019, the Ontario Superior Court ruled that RBH and the other defendants will not be allowed to file an application to the Supreme Court of Canada for leave to appeal the Court of Appeal’s decision in the Létourneau and the Blais cases so long as the comprehensive stay of all tobacco-related litigation in Canada remains in effect and that the time period to file the application would be extended by the stay period.

While RBH believes that the findings of liability and damages in both Létourneau and the Blais cases were incorrect, the CCAA proceedings will provide a forum for RBH to seek resolution through a plan of arrangement or compromise of all tobacco-related litigation pending in Canada.

On April 17, 2019, the Ontario Superior Court ruled that RBH and the other defendants will not be allowed to file an application to the Supreme Court of Canada for leave to appeal the Court of Appeal’s decision in the Létourneau and the Blais cases so long as the comprehensive stay of all combustible tobacco product-related litigation in Canada remains in effect and that the time period to file the application would be extended by the stay period.

It is not possible to predict the resolution of the underlying legal proceedings or the length of the CCAA process.

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Notes to Condensed Consolidated Financial Statements

Stayed Litigation — Canada

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

and JTI-Macdonald Corp.) are defendants.

and JTI-Macdonald Corp.) are defendants (the " Blais Class Action").

The plaintiffs, an anti-smoking organization and an individual smoker, sought compensatory and punitive damages for each member of the class who suffers allegedly from certain smoking-related diseases.

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RBH appealed to the Court of Appeal of Quebec.

In October 2015, the Court of Appeal ordered RBH to furnish security totaling CAD 226 million (approximately $ 165 million) to cover both the Létourneau and Blais cases, which RBH has paid in installments through March 2017.

In October 2015, the Court of Appeal ordered RBH to furnish security totaling CAD 226 million (approximately $ 165 million) to cover both the Létourneau and Blais cases, which RBH has

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Notes to Condensed Consolidated Financial Statements

paid in installments through March 2017.

The Court of Appeal ordered Imperial Tobacco Canada Ltd.

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

and JTI-Macdonald Corp.) are defendants.

and JTI-Macdonald Corp.) are defendants (the " Létourneau Class Action").

The plaintiff, an individual smoker, sought compensatory and punitive damages for each member of the class who is deemed addicted to smoking.

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(i) defendants had no obligation to warn class members who knew, or should have known, of the risks of smoking;

(ii) defendants cannot be liable to class members who

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Notes to Condensed Consolidated Financial Statements

would have smoked regardless of what warnings were given;

(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 among class members.

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She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, emphysema, heart disease, or cancer, as well as restitution of profits.

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Notes to Condensed Consolidated Financial Statements

In the fifth class action pending in Canada, Semple v.

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She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who have smoked a minimum of 25,000 cigarettes and have allegedly suffered, or suffer, from COPD, heart disease, or cancer, as well as restitution of profits.

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Notes to Condensed Consolidated Financial Statements

Health Care Cost Recovery Litigation — Canada

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Rothmans Inc., et al., Ontario Superior Court of Justice, Toronto, Canada , filed September 29, 2009, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants.

The claim was filed by the government of the province of Ontario based on legislation enacted in the province.

The claim was filed by the government of the province of Ontario

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Notes to Condensed Consolidated Financial Statements

based on legislation enacted in the province.

This legislation is similar to the laws introduced in British Columbia and New Brunswick that authorize 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.”

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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.”

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Notes to Condensed Consolidated Financial Statements

In the ninth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Prince Edward Island v.

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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, 2023, and September 30, 2022:

Type of Case 1

Number of Cases Pending as of September 30, 2023 Number of Cases Pending as of September 30, 2022

Individual Smoking and Health Cases 48 38

Smoking and Health Class Actions 9 9

Health Care Cost Recovery Actions 17 17

Label-Related Class Actions — —

Individual Label-Related Cases 5 6

Public Civil Actions 1 1

¹ Includes cases pending in Canada.

Since 1995, when the first tobacco-related litigation was filed against a PMI entity, 538 Smoking and Health, Label-Related, Health Care Cost Recovery, and Public Civil Actions in which we and/or one of our subsidiaries and/or indemnitees were a defendant have been terminated in our favor.

Fifteen cases have had decisions in favor of plaintiffs.

Ten of these cases have subsequently reached final resolution in our favor and five remain on appeal, or are subject to an appeal, or our subsidiary may file an appeal.

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The table below lists the verdict and significant post-trial developments in the five pending cases where a verdict was returned in favor of the plaintiff:

Date Location of

Court/Name of

Plaintiff Type of

Case Verdict Post-Trial

May 27, 2015 Canada/Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais

Class Action On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Blais class on liability and found the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $ 11.3 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 including pre-judgment interest (approximately $ 2.26 billion)).

The trial court awarded CAD 90,000 (approximately $ 66,000 ) in punitive damages, allocating CAD 30,000 (approximately $ 22,000 ) to our subsidiary.

The trial court ordered defendants to pay CAD 1 billion (approximately $ 729 million) of the compensatory damage award, CAD 200 million (approximately $ 146 million) of which is our subsidiary’s portion, into a trust within 60 days.

In June 2015, RBH commenced the appellate process with the Court of Appeal of Quebec.

On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court's decision.

(See “ Stayed Litigation — Canada ” for further detail.)

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Notes to Condensed Consolidated Financial Statements

Date Location of

Court/Name of

Plaintiff Type of

Case Verdict Post-Trial

May 27, 2015 Canada/Cecilia Létourneau

Class Action On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Létourneau class on liability and awarded a total of CAD 131 million (approximately $ 96 million) in punitive damages, allocating CAD 46 million (approximately $ 34 million) to RBH.

The trial court ordered defendants to pay the full punitive damage award into a trust within 60 days.

The court did not order the payment of compensatory damages.

In June 2015, RBH commenced the appellate process with the Court of Appeal of Quebec.

On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court's decision.

(See “ Stayed Litigation — Canada ” for further detail.)

Date Location of

Court/Name of

Plaintiff Type of

Case Verdict Post-Trial

August 5, 2016 Argentina/Hugo Lespada Individual Action On August 5, 2016, the Civil Court No.

14 - Mar del Plata, issued a verdict in favor of plaintiff, an individual smoker, and awarded him ARS 110,000 (approximately $ 314 ), plus interest, in compensatory and moral damages.

The trial court found that our subsidiary failed to warn plaintiff of the risk of becoming addicted to cigarettes.

On August 23, 2016, our subsidiary filed its notice of appeal.

On October 31, 2017, the Civil and Commercial Court of Appeals of Mar del Plata ruled that plaintiff's claim was barred by the statute of limitations and it reversed the trial court's decision.

On May 17, 2021, plaintiff filed a federal extraordinary appeal.

On November 1, 2021, the Supreme Court of the Province of Buenos Aires dismissed plaintiff's federal extraordinary appeal.

On November 10, 2021, plaintiff filed a direct appeal before the Federal Supreme Court.

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Notes to Condensed Consolidated Financial Statements

Date Location of

Court/Name of

Plaintiff Type of

Case Verdict Post-Trial

June 17, 2021 Argentina/Claudia Milano Individual Action On June 17, 2021, the Civil Court No.

9 - Mar del Plata, issued a verdict in favor of plaintiff, an individual smoker, and awarded her smoking cessation treatments, ARS 150,000 (approximately $ 429 ), in compensatory and moral damages, and ARS 4,000,000 (approximately $ 11,435 ) in punitive damages, plus interest and costs.

The trial court found that our subsidiary failed to warn plaintiff of the risk of becoming addicted to cigarettes.

On July 2, 2021, our subsidiary filed its notice of appeal.

In addition, plaintiff filed an appeal challenging the dismissal of the claim for psychological damages.

As required by local law, our subsidiary deposited the damages awarded, plus interest and costs, in total ARS 6,114,428 (approximately $ 17,479 ), into a court escrow account.

Our subsidiary challenged the amount determined by the court.

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

As a result, on December 16, 2021, ARS 893,428 (approximately $ 2,554 ) was returned to our subsidiary.

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

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

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

Date Location of

Court/Name of

Plaintiff Type of

Case Verdict Post-Trial

June 23, 2023 Turkey/ Senem Yilmazel Individual Action On June 23, 2023, the Ankara Consumer Court published its decision in favor of plaintiff, the daughter of an individual smoker, against our subsidiary and a BAT subsidiary, awarding her TRY 10,000 (approximately $ 357 ) in damages.

The trial court found that the plaintiff’s father died as a result of lung cancer and COPD caused by his cigarette consumption.

On September 8, 2023, our subsidiary filed its appeal.

On September 25, 2023, the plaintiff filed an appeal challenging the damages amount determined by the court.

Combustible tobacco products litigation

Since 1995, 622 combustible tobacco product-related cases, including Smoking and Health, Label-Related, Health Care Cost Recovery, and Public Civil Actions, have been filed against a PMI entity, 547 of those cases have been terminated in our favor,

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Notes to Condensed Consolidated Financial Statements

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

and the balance of 75 remains pending.

Of those pending cases, four were initially decided in favor of plaintiffs and remain on appeal, or are subject to an appeal.

These four cases include the Blais Class Action and the Létourneau Class Action, described above under the caption " Smoking and Health Litigation — Canada, " and two individual cases where final resolution in the amount of the verdict would not have a material adverse effect on our consolidated financial statements, including our results of operations, cash flows, or financial position.

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

Smoking and Health Litigation:

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

• 48 cases brought by individual plaintiffs in Argentina ( 32 ), Australia ( 1 ), Canada ( 2 ), Chile ( 10 ), the Philippines ( 1 ), Turkey ( 1 ) and Scotland ( 1 ), compared with 38 such cases on September 30, 2022;

• 9 cases brought on behalf of classes of individual plaintiffs, compared with 9 such cases on September 30, 2022.

As of March 31, 2024, there were a number of smoking and health cases pending against us, our subsidiaries or indemnitees, as follows:

• 44 cases brought by individual plaintiffs in Argentina ( 29 ), Canada ( 2 ), Chile ( 12 ), and Turkey ( 1 ), compared with 46 such cases on March 31, 2023;

• 9 cases brought on behalf of classes of individual plaintiffs, compared with 9 such cases on March 31, 2023.

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, 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 September 30, 2022.

As of March 31, 2024, 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, 2023.

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 Kano State, Kano, Nigeria, filed May 9, 2007, 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 years, payment of anticipated costs of treating alleged smoking-related diseases for the next 20 years, various forms of injunctive relief, plus punitive damages.

We are in the process of challenging the court's jurisdiction.

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

In the third health care cost recovery case in Nigeria, The Attorney General of Gombe State v.

British American Tobacco (Nigeria) Limited, et al., High Court of Gombe State, Gombe, Nigeria, filed October 17, 2008, we and other members of the

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

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industry are defendants .

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

We are in the process of challenging the court's jurisdiction.

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

In the third health care cost recovery case in Nigeria, The Attorney General of Gombe State v.

British American Tobacco (Nigeria) Limited, et al., High Court of Gombe State, Gombe, Nigeria, filed October 17, 2008, we and other members of the industry are defendants .

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al., filed April 14, 2014, our subsidiary and other Korean manufacturers are defendants.

Plaintiff alleges that defendants concealed the health hazards of smoking, marketed to youth, added ingredients to make their products more harmful and addictive, and misled consumers into believing that Lights cigarettes are safer than regular cigarettes.

Plaintiff alleges, among other things, that defendants concealed the health hazards of smoking, marketed to youth, added ingredients to make their products more harmful and addictive, and misled consumers into believing that Lights cigarettes are safer than regular cigarettes.

The National Health Insurance Service seeks to recover damages allegedly incurred in treating 3,484 patients with small cell lung cancer, squamous cell lung cancer, and squamous cell laryngeal cancer from 2003 to 2012.

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Label-Related Cases:

These cases, now brought only by individual plaintiffs, allege that the use of the descriptor “Lights” or other alleged misrepresentations or omissions of labeling information constitute fraudulent and misleading conduct.

These cases, brought only by individual plaintiffs, allege that the use of the descriptor “Lights” or other alleged misrepresentations or omissions of labeling information constitute fraudulent and misleading conduct.

Plaintiffs' allegations of liability in these cases are based on various theories of recovery including misrepresentation, deception, and breach of consumer protection laws.

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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, 2023, there were 5 label-related cases brought by individual plaintiffs in Italy ( 1 ) and Chile ( 4 ) pending against our subsidiaries, compared with 6 such cases on September 30, 2022.

As of March 31, 2024, there were 4 label-related cases brought by individual plaintiffs in Italy ( 1 ) and Chile ( 3 ) pending against our subsidiaries, compared with 6 such cases on March 31, 2023.

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, 2023, there was 1 public civil action pending against our subsidiary in Venezuela ( 1 ), compared with 1 such case on September 30, 2022.

As of March 31, 2024, there was 1 public civil action pending against our subsidiary in Venezuela ( 1 ), compared with 1 such case on March 31, 2023.

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

National Assembly of Venezuela and the Venezuelan Ministry of Health, Constitutional Chamber of the Venezuelan Supreme Court , filed April 29, 2008, we were not named as a defendant, but the plaintiffs published a notice pursuant to court order, notifying all interested parties to appear in the case.

In January 2009, our subsidiary appeared in the case in response to this notice.

The plaintiffs purport to represent the right to health of the citizens of Venezuela and claim that the government failed to protect adequately its citizens' right to health.

The claim asks the court to order the government to enact stricter regulations on the manufacture and sale of tobacco products.

In addition, the plaintiffs ask the court to order companies involved in the tobacco

National Assembly of Venezuela and the Venezuelan Ministry of Health, Constitutional Chamber of the Venezuelan Supreme Court , filed

Philip Morris International Inc.

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industry to allocate a percentage of their “sales or benefits” to establish a fund to pay for the health care costs of treating smoking-related diseases.

April 29, 2008, we were not named as a defendant, but the plaintiffs published a notice pursuant to court order, notifying all interested parties to appear in the case.

In January 2009, our subsidiary appeared in the case in response to this notice.

The plaintiffs purport to represent the right to health of the citizens of Venezuela and claim that the government failed to protect adequately its citizens' right to health.

The claim asks the court to order the government to enact stricter regulations on the manufacture and sale of tobacco products.

In addition, the plaintiffs ask the court to order companies involved in the tobacco industry to allocate a percentage of their “sales or benefits” to establish a fund to pay for the health care costs of treating smoking-related diseases.

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

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In February 2013, our subsidiary answered the complaint.

On February 27, 2024, the Attorney General of Venezuela filed, on behalf of defendants, a motion to dismiss the case for lack of prosecution.

Government Matter:

government contacted Altria and PM USA in connection with an agreement between PMI and Altria to end their commercial relationship with respect to Platform 1 in the U.S.

as of April 30, 2024 (“Altria Agreement").

Altria and PM USA are parties to a 2006 order in the United States District Court for the District of Columbia holding that they violated the Racketeer Influenced and Corrupt Organizations Act (“2006 Order”).

PMI was not a defendant in that proceeding.

The 2006 Order imposed injunctive relief on defendants including, but not limited to, enjoining false, misleading, or deceptive statements concerning cigarettes;

prohibiting express or implied health statements for any cigarette brand;

and requiring defendants to make certain corrective statements at point-of sale and on websites.

The 2006 Order also imposed restrictions on defendants from selling or transferring their cigarette brands, brand names, cigarette product formulas or cigarette businesses without the transferee submitting to the jurisdiction of the court and subjecting itself to the 2006 Order as of the date of sale or transfer.

government informed Altria that it believed the transaction contemplated by the Altria Agreement falls within the scope of this provision and that, before it can be effectuated, PMI must submit to the 2006 Order.

To date, the U.S.

government has not pursued the matter with or sought any relief from the court, and we believe that there are strong arguments as to why the provision cited by the U.S.

government is inapplicable to the Altria Agreement.

Smoke-Free Products-Related Litigation

Claims have been filed against PMI and a subsidiary related to ZYN nicotine pouches.

These cases were filed either on behalf of an individual plaintiff, or on behalf of a purported class of individuals.

Plaintiffs assert a variety of common law and statutory claims, and seek various forms of relief, including monetary and equitable relief.

In the first case, a putative class action, Wolters v.

Swedish Match North America LLC, et al.

, filed March 1, 2024, before United States District Court for the Southern District of California, plaintiff alleged, among other things, addiction to nicotine and dental harm resulting from the use of ZYN nicotine pouches.

The named defendants were PMI and Swedish Match North America LLC.

Plaintiff purported to represent classes comprised of (i) all persons who purchased ZYN products in the United States, (ii) all residents of California who purchased ZYN products, and (iii) all residents of California who, at the time of their use of ZYN products, were under the age of 18, and who procured and used ZYN products.

He alleged, among other things, that defendants defectively designed ZYN products and sold them in an unreasonably unsafe and dangerous condition, marketed ZYN products to minors, and misrepresented or failed to warn consumers about information related to ZYN products, including information about health risks associated with these products.

Plaintiff asserted strict liability design defect and failure to warn claims, as well as negligence and fraud claims and sought compensatory and punitive damages, attorney’s fees and costs, interest, and medical monitoring.

On April 9, 2024, plaintiff voluntarily dismissed this lawsuit without prejudice.

In the second case, a putative class action, Kelly v.

Philip Morris International Inc., et al.

, filed March 19, 2024, before United States District Court for the Southern District of Florida, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches.

The named defendants are PMI and Swedish Match North America LLC.

Plaintiff purports to represent classes comprised of (i) all persons who purchased ZYN products in the United States, (ii) all residents of Florida who purchased ZYN products, and (iii) all residents of Florida who, at the time of their use of ZYN products, were under the age of 21, and who procured and used ZYN products.

He alleges, among other things, that defendants defectively designed ZYN products and sold them in an unreasonably unsafe and dangerous condition, marketed ZYN products to minors, and misrepresented or failed to warn consumers about information related to ZYN products, including information about health risks associated with these products.

Plaintiff asserts strict liability design defect and failure to warn claims, as well as negligence and fraud claims and is seeking compensatory and punitive damages, attorney’s fees and costs, interest, and medical monitoring.

At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.

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In the third case, a putative class action, Doe v.

Philip Morris International Inc., et al.

, filed March 29, 2024, before United States District Court for the Eastern District of California, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches.

The named defendants are PMI and Swedish Match North America LLC.

Plaintiff purports to represent classes comprised of (i) all persons who used ZYN products in the United States, (ii) all persons who used ZYN products in the United States while under the age of 18, (iii) all residents of California who used ZYN products, and (iv) all residents of California who used ZYN products while under the age of 18.

Plaintiff alleges, among other things, that defendants made misrepresentations about ZYN products in their advertising and marketing, marketed ZYN products to minors, and misrepresented or failed to disclose to consumers information about ZYN products, including information about health risks associated with these products.

Plaintiff asserts fraud, unjust enrichment, breach of implied warranty, and breach of consumer protection, unfair competition and advertising statutes claims and is seeking compensatory and punitive damages, disgorgement of profits, attorney’s fees and expenses, interest and other applicable injunctive relief.

In the fourth case, an individual complaint, Palmer v.

Philip Morris International Inc., et al.

, filed April 3, 2024, before United States District Court for the Southern District of Florida, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches.

The named defendants are PMI and Swedish Match North America LLC.

Plaintiff asserts strict liability design defect and failure to warn claims, as well as negligence and fraud claims, and is seeking compensatory and punitive damages, attorney’s fees and costs, interest, and medical monitoring.

Other Litigation

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The government is seeking a fine of approximately THB 19.8 billion (approximately $ 535 million).

In May 2017, Thailand enacted a new customs act.

In May 2017, Thailand enacted a new customs

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

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

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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 $ 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.

These paid amounts 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 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.

In September 2020, the appellate court upheld the trial court's decision.

The tax authorities have appealed to the Supreme Court of South Korea.

On July 13, 2023, the Supreme Court reversed the appellate court's decision and remanded the appeals back to the appellate court.

Based on the decision issued by the Supreme Court of South Korea on July 13, 2023, management has concluded that an adverse outcome is probable.

In June 2020, another trial court ruled that PM Korea did not underpay approximately KRW 54 billion (approximately $ 40 million) of alleged underpayments.

The government agencies appealed this decision.

In January 2021, the appellate court upheld the trial court's decision.

The government agencies appealed to the Supreme Court of South Korea.

Based on the decision issued by the Supreme Court of South Korea on July 13, 2023, management has concluded that an adverse outcome is probable.

Consequently, in the second quarter of 2023, PMI recorded a non-cash pre-tax charge of $ 204 million in marketing, administration and research costs, reflecting the full amount previously paid by PM Korea.

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

Securities Litigation , is pending in the United States District Court for the Southern District of New York, purportedly on behalf of purchasers of Philip Morris International Inc.

stock between July 26, 2016 and April 18, 2018.

The lawsuit names Philip Morris International Inc.

and certain officers and employees as defendants and includes allegations that the defendants made false and/or misleading statements and/or failed to disclose information about PMI’s business, operations, financial condition, and prospects, related to product sales of, and alleged irregularities in clinical studies of, PMI’s Platform 1 product.

The lawsuit seeks various forms of relief, including damages.

In November 2018, the court consolidated three putative shareholder class action lawsuits with similar allegations previously filed in the Southern District of New York (namely, City of Westland Police and Fire Retirement System v.

Philip Morris International Inc., et al., Greater Pennsylvania Carpenters’ Pension Fund v.

Philip Morris International Inc., et al., and Gilchrist v.

Philip Morris International Inc., et al.

) into these proceedings.

A putative shareholder class action lawsuit, Rubenstahl v.

Philip Morris International Inc., et al.

, that had been previously filed in December 2017 in the United States District Court for the District of New Jersey, was voluntarily dismissed by the plaintiff due to similar allegations in these proceedings.

On February 4, 2020, the court granted defendants’ motion in its entirety, dismissing all but one of the plaintiffs’ claims with prejudice.

The court noted that one of plaintiffs’ claims (allegations relating to four non-clinical studies of PMI’s Platform 1 product) did not state a viable claim but allowed plaintiffs to replead that claim by March 3, 2020.

On February 18, 2020, the plaintiffs filed a motion for reconsideration of the court's February 4th decision;

this motion was denied on September 21, 2020.

On September 28, 2020, plaintiffs filed an amended complaint seeking to replead allegations relating to four non-clinical studies of PMI's Platform 1 product.

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

Plaintiffs have filed an appeal with the U.S.

Court of Appeal for the Second Circuit.

We believe that this lawsuit is without merit and will continue to defend it vigorously.

In April 2020, affiliates of British American Tobacco plc (“BAT”) commenced patent infringement proceedings, RAI Strategic Holdings, Inc., et al.

On February 1, 2024, Philip Morris Products S.A.

("PMPSA") entered into a settlement agreement (the “Settlement Agreement”) with Nicoventures Trading Limited (“NTV”), an affiliate of British American Tobacco p.l.c.

Under the Settlement Agreement, PMPSA, NTV and their respective affiliates (the “Parties”) have agreed, among other things, to:

(i) dismiss with prejudice, subject to certain limited exceptions, and without admission of liability certain pending legal proceedings (the “Proceedings”) between them and concerning certain of their respective products;

(ii) request rescission of the limited exclusion order and the cease-and-desist order issued by the International Trade Commission (“ITC”) on September 29, 2021, and (iii) fully and finally discharge without admission of liability any injunctions granted to the Parties in the Proceedings.

In April 2020, affiliates of BAT commenced patent infringement proceedings, RAI Strategic Holdings, Inc., et al.

Altria Client Services LLC, et al.

, in the federal court in the Eastern District of Virginia, where PMI's subsidiary, Philip Morris Products S.A.

("PMPSA"), as well as Altria Group, Inc.'s subsidiaries, are defendants.

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

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

Plaintiffs seek an order to prevent the importation of Platform 1 products into the United States.

, in the federal court in the Eastern District of Virginia, where PMI's subsidiary, PMPSA, as well as Altria Group, Inc.'s subsidiaries, were defendants.

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

In April 2020, BAT affiliates filed a complaint against PMI, PMPSA, Altria Group, Inc., and its subsidiaries before the ITC.

Plaintiffs sought an order to prevent the importation of Platform 1 products into the United States.

The ITC evidentiary hearing closed on February 1, 2021.

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Tariff Act and issued (a) a limited exclusion order against PMPSA, prohibiting, inter alia, the importation of Platform 1 product and infringing components;

and (b) a cease-and-desist order

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against Altria Client Services, LLC and its affiliate prohibiting, inter alia, sales of imported Platform 1 products.

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

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

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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.

This adverse ruling impacts our ability to import the products and components impacted by the ITC's FD but has an immaterial financial impact.

The Eastern District of Virginia proceeding and related Federal Circuit appeals were dismissed pursuant to the Settlement Agreement.

Also pursuant to the Settlement Agreement, the parties filed a joint motion to rescind the limited exclusion order and the cease-and-desist order issued by the ITC on September 29, 2021, which was granted on March 11, 2024.

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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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On May 10, 2023, PMPSA filed a notice of cross-appeal.

As noted above, these appeals were dismissed pursuant to the Settlement Agreement.

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

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

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

Court of Appeals for the Federal Circuit.

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On September 14, 2023, the Federal Circuit issued a decision affirming the PTAB's decision finding certain claims in the second of the two patents underlying the ITC’s FD patentable.

PMPSA’s counterclaim in the Eastern District of Virginia challenging the validity of the remaining claims in the second of the two patents underlying the ITC’s FD is currently stayed.

PMPSA’s counterclaim in the Eastern District of Virginia challenging the validity of the remaining claims in the second of the two patents underlying the ITC’s FD was stayed pending resolution of a related PTAB appeal.

As noted above, the Eastern District of Virginia proceeding was dismissed pursuant to the Settlement Agreement.

On July 21, 2022, PMPSA filed a Request for Rehearing of PTAB's November 2020 decision not to institute review of certain claims in the second of the two patents underlying the ITC's FD;

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

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

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

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

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

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

the stayed action based on the second patent was stayed pending final resolution of the revocation action.

The remaining case was dismissed pursuant to the Settlement Agreement.

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

Philip Morris Products S.A., et al.

, against PMPSA.

and PMI’s Italian subsidiaries, Philip Morris Manufacturing & Technology Bologna S.p.A.

, against PMPSA and PMI’s Italian subsidiaries, Philip Morris Manufacturing & Technology Bologna S.p.A.

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

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

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

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

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

The merits proceeding remains pending;

the next hearing is currently scheduled to occur in the first quarter of 2024.

The case was dismissed pursuant to the Settlement Agreement.

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

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

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

On December 23, 2022, the Court dismissed BAT’s claims with respect to one of the two patents that it

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asserted, finding no infringement;

Plaintiffs sought 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.

On September 21, 2023, the court issued its judgment dismissing BAT's appeal regarding the Beard patent.

BAT's claim with respect to the second patent remains pending;

the final procedural hearing was held on September 6, 2023, during which the Court closed the proceedings and announced that the judgment would be rendered in the fourth quarter of 2023.

On September 21, 2023, the IP High Court issued its judgment dismissing BAT's appeal regarding the first patent.

BAT appealed this decision to the Supreme Court on November 2, 2023.

On November 29, 2023, the Tokyo District Court issued a first instance decision favorable to PMI, finding no infringement of the second patent BAT asserted and dismissing BAT's claim.

BAT appealed this decision to the IP High Court on January 12, 2024.

These cases were dismissed pursuant to the Settlement Agreement.

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

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, against PMI’s Romanian subsidiaries, Philip Morris Romania S.R.L.

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

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

and Philip Morris Trading

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

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

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

In April 2021, the appellate court denied plaintiffs' appeal, confirming the dismissal of plaintiffs' request for preliminary injunction.

Plaintiffs' proceeding requesting damages and a permanent injunction remains pending before the Court of Law of Bucharest, Civil Registry.

Plaintiffs' proceeding requesting damages and a permanent injunction remained pending before the Court of Law of Bucharest, Civil Registry.

In an October 14, 2021 hearing, the court stayed the proceeding.

This case was dismissed pursuant to the Settlement Agreement.

On February 2, 2024, the parties filed a request that the Court revoke the stayed status of the file.

Simultaneously, BAT filed a request to renounce claims in full.

As per applicable procedural rules, the Court took notice of the requests and closed the file in a hearing held on April 18, 2024.

In March 2021, BAT’s affiliates commenced patent infringement proceedings, RAI Strategic Holdings, Inc., et al.

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

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

Plaintiffs sought 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;

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Following BAT’s unsuccessful correction action at the Korean Patent Office, the court held the first hearing in the appeal of the infringement proceeding on September 12, 2023.

An additional hearing in the appeal is currently scheduled to occur in the fourth quarter of 2024.

In July, 2021, PMPSA filed a claim at the High Court of Justice of England and Wales against BAT affiliates Nicoventures Trading Limited and British American Tobacco (Investments) Limited seeking revocation of the UK parts of two BAT European patents.

In March, the BAT affiliates stated that they would consent to revocation of one of the patents and filed a counterclaim against PMPSA and Philip Morris Limited seeking from the court a declaration that the remaining BAT affiliate patent is infringed by Platform 1 induction products, as well as damages and injunctive relief against the commercialization of the Platform 1 induction products in the U.K.

The trial took place from September 21-28, 2022.

On October 25, 2023, the Court issued its decision finding that the remaining BAT patent was invalid and not infringed.

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

We believe that the foregoing proceedings by the affiliates of BAT are without merit and will defend them vigorously.

A hearing was held by the IP High Court on December 21, 2023, for BAT's appeal of the decisions in the invalidation proceeding and claim correction proceeding.

On February 7, 2024, the IP High Court issued a decision dismissing BAT's appeal for both the invalidation action and the claim correction action.

BAT elected not to appeal either the invalidation or claim correction decisions, so the IP High Court's decision is now final.

The infringement proceeding was dismissed pursuant to the Settlement Agreement.

On December 21, 2023, we were informed that Future Technology K.K.

(“FTKK”) filed an application with Tokyo Customs against Sojitz Corporation (“Sojitz”), Philip Morris Japan Limited’s (“PMJL”) importer and distributor, due to alleged infringement of JP7299432.

FTKK is seeking an order stopping the importation of TEREA consumables.

At this time, FTKK is not seeking any monetary damages or costs.

PMJL has entered an appearance in the proceeding as an interested party and filed its response to FTKK's application on January 31, 2024.

The Customs hearing is currently scheduled for May 28, 2024.

We believe that this lawsuit is without merit and will defend it vigorously.

On January 26, 2024, PMJL filed a declaratory judgment action in Tokyo District Court seeking a declaration that JP7299432 is invalid and/or infringed.

The declaratory judgment action is ongoing.

Other patent challenges are pending in various jurisdictions.

We are also involved in additional litigation arising in the ordinary course of our business.

While the outcomes of these proceedings are uncertain, management does not expect that the ultimate outcomes of other litigation, including any reasonably possible losses in excess of current accruals, will have a material adverse effect on our consolidated results of operations, cash flows or financial position.

Third-Party Guarantees

Until November 1, 2022, Medicago Inc.

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

(“PMIBV”), a PMI subsidiary.

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

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

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

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

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

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.

PMI’s effective tax rates for the three months ended March 31, 2024 and 2023 were 24.8 % and 17.3 %, respectively.

The effective tax rate for the three months ended March 31, 2024, was unfavorably impacted by a deferred tax charge for unrealized foreign currency gains on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 111 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 and an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($ 43 million), partially offset by a U.S.

tax benefit for a worthless stock deduction under section 165(g) of the Internal Revenue Code related to PMI's investment in C.A.

Tabacalera Nacional, a wholly owned foreign corporation incorporated in Venezuela ($ 47 million).

For further details on PMI's ceased operations in Venezuela, see Note 15.

Asset Impairment and Exit Costs .

Changes in the tax laws of foreign jurisdictions could arise as a result of the Base Erosion and Profit Shifting project undertaken by the Organisation for Economic Co-operation and Development (“OECD”), which recommended changes to numerous long-

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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.

Prior to the release of PMIBV from its obligations as guarantor described below, it was reasonably possible that PMI could have been responsible for a portion of those costs and obligations.

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 had been taken to cease all operations at Medicago and to proceed with an orderly wind up of Medicago’s business and operations.

On September 27, 2023, the Canadian government released PMIBV from all its obligations as guarantor under the Contribution Agreement and the Contribution Agreement Amendment.

Income Taxes:

PMI’s effective tax rates for the nine months and three months ended September 30, 2023 were 25.7 % and 33.2 %, respectively.

The effective tax rate for the nine months ended September 30, 2023, was unfavorably impacted by:

(i) an increase in deferred tax liabilities related to the unremitted earnings of PMI's Russian subsidiaries ($ 173 million) due to the unilateral suspension of certain Russian double tax treaties by the Russian authorities on August 8, 2023, with respect to certain payments including dividends;

(ii) the non-deductible Wellness and Healthcare goodwill impairment charge and (iii) a deferred tax cost for unrealized foreign currency gains on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 41 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 September 30, 2023 was unfavorably impacted by an increase in deferred tax liabilities related to the unremitted earnings of PMI's Russian subsidiaries ($ 173 million) and a deferred tax cost for unrealized foreign currency gains on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 138 million).

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

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

For further details, see Note 14.

Related Parties - Equity Investments and Other .

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

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.

standing tax principles.

As of March 31, 2024, many countries have enacted the OECD’s framework on a global minimum tax (referred to as “Pillar Two”), effective for taxable years beginning after December 31, 2023.

PMI has determined that Pillar Two should not have a material impact on its 2024 consolidated financial statements.

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.

PMI is regularly examined by tax authorities around the world and is currently under examination in a number of jurisdictions.

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Foreign and U.S.

state jurisdictions have statutes of limitations generally ranging from 3 to 5 years.

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

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

The amount paid was included in other assets in

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

PMI’s condensed consolidated balance sheets at September 30, 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.

state jurisdictions have statutes of limitations generally ranging from 3 to 5 years after the filing of a return.

Subsidiaries of PMI in Indonesia, principally PT Hanjaya Mandala Sampoerna Tbk ("HMS"), have recorded income tax receivables in the amount of 3.9 trillion Indonesian rupiah (approximately $ 245 million) relating to corporate income tax assessments paid to avoid potential penalties, primarily for domestic and other intercompany transactions for the years 2015 to 2020.

Objection letters have been filed with the Tax Office and these assessments are being challenged at various levels in court.

These income tax receivables are included in other assets in PMI’s condensed consolidated balance sheets at March 31, 2024 and December 31, 2023.

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:

At September 30, 2023 and December 31, 2022, PMI’s short-term borrowings and related average interest rates consisted of the following:

September 30, 2023 December 31, 2022

At March 31, 2024 and December 31, 2023, PMI’s short-term borrowings and related average interest rates consisted of the following:

March 31, 2024 December 31, 2023

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

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130 10.7 283 8.9

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

$ 279 $ 1,968

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Long-term Debt:

At September 30, 2023 and December 31, 2022, PMI’s long-term debt consisted of the following:

(in millions) September 30, 2023 December 31, 2022

At March 31, 2024 and December 31, 2023, PMI’s long-term debt consisted of the following:

(in millions) March 31, 2024 December 31, 2023

dollar notes, 0.875 % to 6.375 % (average interest rate 4.529 %), due through 2044

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$ 44,683 $ 41,243

(a) Includes long-term bank loans at subsidiaries, as well as $ 40 million and $ 54 million in finance leases at September 30, 2023 and December 31, 2022, respectively.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(a) Includes long-term bank loans at subsidiaries, as well as $ 45 million and $ 53 million in finance leases at March 31, 2024 and December 31, 2023, 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, 2023, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:

At March 31, 2024, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:

(in millions)

September 30, 2023

March 31, 2024

Level 1 $ 42,335

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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 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 September 30, 2023 and December 31, 2022, the € 5.5 billion (approximately $ 6 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 .

Effective February 20, 2023, the remaining outstanding

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Notes to Condensed Consolidated Financial Statements

commitments under the bridge facility were fully canceled and the bridge facility agreement was terminated in accordance with its terms.

As of March 31, 2024 and December 31, 2023, the € 5.5 billion (approximately $ 6 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.

Debt Issuances

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

PMI's debt issuances in the first three months of 2024 were as follows:

(in millions)

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$ 1,750 5.250 % February 2024 February 2034

dollar notes (a) (b) $ 450 4.875 % May 2023 February 2026

dollar notes (a) (c) $ 550 4.875 % May 2023 February 2028

dollar notes (a) (d) $ 700 5.125 % May 2023 February 2030

dollar notes (a) (e) $ 750 5.375 % May 2023 February 2033

dollar notes (f) $ 650 5.250 % September 2023 September 2028

dollar notes (f) $ 700 5.500 % September 2023 September 2030

dollar notes (f) $ 1,000 5.625 % September 2023 September 2033

(a) Interest is payable semi-annually, commencing in August 2024

(b) These notes are a further issuance of the 4.875 % notes issued in February 2023

(d) These notes are a further issuance of the 5.125 % notes issued in February 2023

(e) These notes are a further issuance of the 5.375 % notes issued in February 2023

(f) Interest is payable semi-annually, commencing in March 2024

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.

PMI used a portion of the May 2023 net proceeds to pay the remaining cash consideration due in accordance with the terms of its agreement with Altria.

For further details on PMI's agreement with Altria, see Note 2.

Acquisitions .

The remaining net proceeds of the February and May 2023 offerings, as well as the September 2023 offering have been or will be used for general corporate purposes.

The net proceeds from the sale of the securities listed in the table above have been or will be used for general corporate purposes, including working capital requirements, repayment of commercial paper and to refinance certain of our outstanding notes due in 2024.

Revolving Credit Facilities:

At September 30, 2023, PMI's total committed revolving credit facilities were as follows:

At March 31, 2024, PMI's total committed revolving credit facilities were as follows:

(in billions)

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On September 20, 2023, PMI entered into an agreement, effective September 29, 2023, to amend and further extend the term to September 29, 2028.

At March 31, 2024, 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

At September 30, 2023, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.

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 $ 2.6 billion at September 30, 2023, and approximately $ 1.9 billion at December 31, 2022.

Borrowings under these arrangements and other bank loans amounted to $ 221 million at September 30, 2023, and $ 295 million at December 31, 2022.

These credit arrangements amounted to approximately $ 2.1 billion at March 31, 2024, and approximately $ 2.7 billion at December 31, 2023.

Borrowings under these arrangements and other bank loans amounted to $ 130 million at March 31, 2024, and $ 283 million at December 31, 2023.

Accumulated Other Comprehensive Losses:

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(Losses) Earnings At At At

(in millions) September 30, 2023 December 31, 2022 September 30, 2022

(in millions) March 31, 2024 December 31, 2023 March 31, 2023

Currency translation adjustments $ ( 8,883 ) $ ( 9,467 ) $ ( 8,120 )

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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, 2023 and 2022.

For additional information, see Note 3.

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.

Financial Instruments for disclosures related to derivative financial instruments.

Benefit Plans for disclosures related to PMI's pension and other benefits, Note 5.

Financial Instruments for disclosures related to derivative financial instruments, Note 15.

Asset Impairment and Exit Costs for disclosures related to the reclassification of accumulated foreign currency translation losses from other comprehensive losses and Note 18.

Acquisitions (Transactions With Noncontrolling Interests) for disclosures related to currency translation adjustments

Related Parties - Equity Investments and Other:

Equity Method Investments:

At September 30, 2023 and December 31, 2022, PMI had total equity method investments of $ 1,238 million and $ 1,000 million, respectively.

At March 31, 2024 and December 31, 2023, PMI had total equity method investments of $ 1,227 million and $ 1,309 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, 2023 and December 31, 2022, exceeded our share of the investees' book value by $ 881 million and $ 750 million, respectively.

The carrying value of our equity method investments at March 31, 2024 and December 31, 2023, exceeded our share of the investees' book value by $ 853 million and $ 907 million, respectively.

The difference between the investment carrying value and the amount of underlying equity in net assets is mainly attributable to equity method goodwill, convertible debt instruments, and definite-lived intangible assets and other assets.

The difference related to the definite-lived intangibles and other assets at September 30, 2023 and December 31, 2022 of $ 33 million and $ 35 million, respectively, is amortized on a straight-line basis and is included in Equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings.

At September 30, 2023 and December 31, 2022, PMI received year-to-date dividends from equity method investees of $ 57 million and $ 9 million, respectively.

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 September 30, 2023 had a carrying value of $ 351 million.

While as of September 30, 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 $ 588 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, 2023.

The difference related to the definite-lived intangibles and other assets at March 31, 2024 and December 31, 2023 of $ 22 million and $ 31 million, respectively, is amortized on a straight-line basis and is included in Equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings.

At March 31, 2024, PMI received no year-to-date dividends from equity method investees.

At December 31, 2023, PMI received year-to-date dividends from equity method investees of $ 57 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, 2024 had a carrying value of $ 389 million.

While as of March 31, 2024, 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.

Additionally, there was approximately $ 570 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, 2024.

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

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

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 (SSEA, CIS & MEA segment).

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

In April 2023, PMI increased its equity ownership and acquired 66.73 % of Egyptian Investment Holding (“EIH”), a United Arab Emirates based company and as a result, acquired an approximate economic interest of 25 % in United Tobacco Company ("UTC").

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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.

On March 22, 2019, PMI’s wholly owned subsidiary in Canada, Rothmans, Benson & Hedges Inc.

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

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

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

For further details, see Note 8.

Contingencies .

Since the deconsolidation of RBH on March 22, 2019, PMI has accounted for its continuing investment in RBH in accordance with ASC 321 (Investments-Equity Securities) as an equity security, without readily determinable fair value, and recorded its continuing investment in RBH at fair value of $ 3,280 million at the date of deconsolidation, within equity investments.

Developments in the CCAA process, including resolution through a plan of arrangement or compromise of some or all tobacco-related litigation pending in Canada may have a material adverse impact on the fair value of PMI’s continuing investment in RBH and may result in impairment charges.

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 $ 378 million at September 30, 2023.

Unrealized pre-tax gain (loss) of $ 52 million ($ 41 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, 2023.

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $ 544 million at March 31, 2024.

Unrealized pre-tax gain (loss) of $ 169 million ($ 126 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, 2024.

Other related parties:

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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) 2024 2023

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Net revenues (a)

$ 2,631 $ 2,634 $ 857 $ 1,087

Other $ 40 $ 50

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

(in millions) At September 30, 2023 At December 31, 2022

(in millions) At March 31, 2024 At December 31, 2023

Megapolis Group $ 467 $ 474

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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, 2023 and September 30, 2022.

The amounts associated with the servicing liability were no t material as of March 31, 2024 and March 31, 2023.

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, 2023 and 2022, were $ 9.4 billion and $ 8.4 billion, respectively.

Cumulative trade receivables sold, including excise taxes, for the three months ended March 31, 2024 and 2023, were $ 2.7 billion and $ 2.9 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, 2023 and September 30, 2022, were $ 670 million, and $ 512 million, respectively.

The trade receivables sold that remained outstanding under these arrangements as of March 31, 2024 and March 31, 2023, were $ 701 million, and $ 970 million, respectively.

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

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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.

The loss on sale of trade receivables was as follows:

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

2023 $ 37 $ 13

2022 $ 15 $ 7

For the three months ended March 31, 2024 and 2023, the loss on sale of trade receivables was $ 12 million and $ 10 million, respectively.

Product Warranty:

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PMI accounts for its product warranties within other accrued liabilities.

At September 30, 2023 and December 31, 2022, these amounts were as follows:

(in millions) As of and For the Nine Months Ended September 30, 2023 As of and For the Year Ended December 31, 2022

At March 31, 2024 and December 31, 2023, these amounts were as follows:

(in millions) As of and For the Three Months Ended March 31, 2024 As of and For the Year Ended December 31, 2023

Balance at beginning of period $ 80 $ 104

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Asset Impairment and Exit Costs:

For the nine months ended September 30, 2023, PMI recorded total pre-tax asset impairment and exit costs of $ 109 million related to restructuring activities.

These pre-tax charges were included in marketing, administration and research costs in the condensed consolidated statements of earnings for the nine months ended September 30, 2023.

For the three months ended September 30, 2023, PMI did no t record such charges related to restructuring activities.

For the nine months and three months ended September 30, 2022, PMI did no t record any charges for asset impairment and exit costs related to restructuring activities.

For the nine months ended September 30, 2023, PMI recorded a pre-tax impairment charge on goodwill and other intangibles of $ 680 million within the Wellness and Healthcare segment.

For the nine months and three months ended September 30, 2022, PMI recorded a pre-tax impairment charge on other intangibles of $ 112 million within the Wellness and Healthcare segment.

For further details, see Note 6.

Goodwill and Other Intangible Assets, net .

For the three months ended March 31, 2024 and 2023, PMI recorded total pre-tax asset impairment and exit costs of $ 168 million and $ 109 million, respectively, related to restructuring activities.

These 2024 and 2023 pre-tax charges were included in marketing, administration and research costs in the condensed consolidated statements of earnings.

Platform 1 (IQOS) products sourcing for the U.S.

On February 1, 2024 a subsidiary of PMI entered into a settlement agreement (the “Settlement Agreement”) with Nicoventures Trading Limited (“NTV”), an affiliate of British American Tobacco p.l.c.

In accordance with its terms, the parties to the Settlement Agreement filed a joint motion to rescind the limited exclusion order and the cease-and-desist order issued by the International Trade Commission (“ITC”) on September 29, 2021, which was granted on March 11, 2024.

Prior to their rescission, the orders prohibited the importation and sales of imported Platform 1 products to the United States of America (for further details of the Settlement Agreement, ITC order and its rescission, see Note 8.

Contingencies ).

As a result, PMI has initiated a project in the first quarter of 2024 to restructure the sourcing of Platform 1 products to commercialize IQOS in the United States.

For further details on IQOS commercialization in the U.S.

and the related agreement with Altria Group, Inc (“Altria”), see Note 8.

Contingencies and Note 18.

Acquisitions .

During the first quarter of 2024, PMI recorded pre-tax asset impairment and exit costs of $ 121 million related to this restructuring activity.

This amount included contract termination costs with suppliers of $ 61 million, including prepaid commitments of $ 20 million.

The amount also included asset impairment costs of $ 60 million, primarily related to machinery and equipment and other assets, which were non-cash charges.

In the first quarter of 2024, PMI ceased its operations in Venezuela and as a result, recorded pre-tax asset impairment and exit costs of $ 47 million.

The amount primarily included non-cash charges related to the reclassification of accumulated foreign currency translation losses from other comprehensive losses of $ 38 million and asset impairment charge of $ 5 million related to

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and Subsidiaries

Notes to Condensed Consolidated Financial Statements

land and buildings.

This amount also included contract termination, severance and other related costs of $ 4 million, which were paid in cash.

For details on the income tax impact of the transaction, see Note 9.

Income Taxes .

e-Vapor Products Manufacturing Optimization

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

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and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Asset Impairment and Exit Costs by Segment

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

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

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

Reclassification of accumulated foreign currency translation losses from other comprehensive losses:

Americas $ 38 $ —

Total reclassification of accumulated foreign currency translation losses from other comprehensive losses 38 —

Contract termination charges:

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EA, AU & PMI DF — 14

Americas 65 7

Total contract termination charges 65 78

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EA, AU & PMI DF — 5

Americas 65 4

Total asset impairment charges 65 31

Asset impairment and exit costs $ 168 $ 109

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and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Movement in Exit Cost Liabilities

The movement in exit cost liabilities for the nine months ended September 30, 2023 was as follows:

The movement in exit cost liabilities for the three months ended March 31, 2024 was as follows:

(in millions)

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Cash spent ( 20 )

Prepaid commitments ( 20 )

Currency/other ( 1 )

Liability balance, September 30, 2023 $ 36

Liability balance, March 31, 2024 $ 53

Future cash payments for exit costs incurred to date are anticipated to be substantially paid by the end of 2025, with approximately $ 45 million expected to be paid in the remainder of 2024.

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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, 2023 and 2022:

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, 2024 and 2023:

For the Three Months Ended March 31,

(in millions) 2024 2023

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Amortization of right-of-use assets 25 14

Interest on lease liabilities

Short-term lease cost 16 14

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

As of September 30, 2023 and December 31, 2022, the total amount due to suppliers participating in the SCF program was approximately $ 0.8 billion and $ 1.1 billion, respectively.

As of March 31, 2024 and December 31, 2023, the total amount due to suppliers participating in the SCF program was approximately $ 0.8 billion and $ 0.9 billion, respectively.

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Notes to Condensed Consolidated Financial Statements

Acquisitions:

Transactions With Noncontrolling Interests

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

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

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

Altria Group, Inc.

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

("Altria") 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 hold 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, of which $ 1.0 billion was 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 %)), was paid on July 14, 2023.

The cash consideration paid has been accounted for within other assets in PMI's condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023.

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

For further details on PMI's agreement with Altria, see Note 8.

Contingencies .

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Notes to Condensed Consolidated Financial Statements

New Accounting Standards:

Improvements to Reportable Segment Disclosures

On November 27, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ASU 2023-07, “Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

ASU 2023-07 improves reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses regularly provided to the chief operating decision maker that impact segment profit or loss.

The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024, on a retrospective basis, with early adoption permitted.

PMI is currently evaluating the impact of ASU 2023-07 on its disclosures.

Improvements to Income Tax Disclosures

On December 14, 2023, the FASB issued Accounting Standards Update ASU 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”).

ASU 2023-09 enhances the transparency of income tax disclosures, primarily by requiring public business entities to disclose specific categories in the rate reconciliation tabular presentation, as well as by providing additional information for reconciling items that meet a quantitative threshold.

The ASU also requires disaggregated disclosures of federal, state and foreign income taxes paid.

ASU 2023-09 is effective for annual periods beginning after December 15, 2024, and early adoption is permitted.

The amendments are applicable on a prospective basis, although retrospective basis is also permitted.

PMI is currently evaluating the impact of ASU 2023-09 on its disclosures.

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