What changed in this filing

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Item 1. Financial Statements

2024-07-25 compared with 2024-04-26 · 481 added, 321 removed, 1073 unchanged (43% of the section changed)

4 unchanged sentences

(in millions of dollars, except per share data)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Net revenues 1 & 2 (Notes 7 & 12)

2 unchanged sentences

Gross profit 11,721 10,720

Marketing, administration and research costs (Note 15)

Marketing, administration and research costs 3 (Notes 4, 7 & 15)

Impairment of goodwill (Note 4) — 665

Operating income 6,489 5,297

10 unchanged sentences

Diluted earnings per share $ 2.92 $ 2.29

(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

(1) Includes net revenues from related parties of $ 1,821 million and $ 1,774 million for the six months ended June 30, 2024 and 2023, respectively.

(2) Net of excise tax on products of $ 24,762 million and $ 24,048 million for the six months ended June 30, 2024 and 2023, respectively.

(3) Includes the South Korea indirect tax charge of $ 204 million for the six months ended June 30, 2023.

For further details, see Note 7.

Segment Reporting.

See notes to condensed consolidated financial statements.

1 unchanged sentence

and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of dollars, except per share data)

For the Three Months Ended June 30,

Net revenues 1 & 2 (Note 12)

$ 9,468 $ 8,967

Cost of sales 3,345 3,228

Gross profit 6,123 5,739

Marketing, administration and research costs 3 (Notes 4 & 7)

Impairment of goodwill (Note 4) — 665

Operating income 3,444 2,566

Interest expense, net 329 297

Pension and other employee benefit costs (Note 3) 14 6

Earnings before income taxes 3,101 2,263

Provision for income taxes 734 560

Equity investments and securities (income)/loss, net ( 161 ) 21

Net earnings 2,528 1,682

Net earnings attributable to noncontrolling interests 122 114

Net earnings attributable to PMI $ 2,406 $ 1,568

Per share data (Note 6):

Basic earnings per share $ 1.54 $ 1.01

Diluted earnings per share $ 1.54 $ 1.01

(1) Includes net revenues from related parties of $ 961 million and $ 901 million for the three months ended June 30, 2024 and 2023, respectively.

(2) Net of excise taxes of $ 12,923 million and $ 12,749 million for the three months ended June 30, 2024 and 2023, respectively.

(3) Includes the South Korea indirect tax charge of $ 204 million for the three months ended June 30, 2023.

For further details, see Note 7.

Segment Reporting.

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Net earnings $ 4,774 $ 3,784

18 unchanged sentences

and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

For the Three Months Ended June 30,

Net earnings $ 2,528 $ 1,682

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

Change in currency translation adjustments:

Unrealized gains (losses), net of income taxes of $( 28 ) in 2024 and $ 31 in 2023

( 123 ) ( 572 )

(Gains)/losses transferred to earnings, net of income taxes of $ 0 in 2024 and 2023 (Note 18)

Change in net loss and prior service cost:

Net gains (losses) and prior service costs, net of income taxes of $ 0 in 2024 and $ 1 in 2023

Amortization of net losses, prior service costs and net transition costs, net of income taxes of $( 9 ) in 2024 and $( 7 ) in 2023

Change in fair value of derivatives accounted for as hedges:

Gains (losses) recognized, net of income taxes of $( 16 ) in 2024 and $( 32 ) in 2023

(Gains) losses transferred to earnings, net of income taxes of $ 7 in 2024 and $ 16 in 2023

( 48 ) ( 75 )

Total other comprehensive earnings (losses) 83 ( 444 )

Total comprehensive earnings

Less comprehensive earnings (losses) attributable to:

Noncontrolling interests 70 101

Comprehensive earnings attributable to PMI $ 2,541 $ 1,137

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Balance Sheets

17 unchanged sentences

TOTAL ASSETS $ 65,782 $ 65,304

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

(1) Includes trade receivables from related parties of $ 834 million and $ 710 million as of June 30, 2024, and December 31, 2023, respectively.

For further details, see Note 12.

42 unchanged sentences

(in millions of dollars)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

2 unchanged sentences

Depreciation and amortization expense 812 600

Impairment of other intangibles (Note 4) 27 —

Impairment of goodwill and other intangibles (Note 4) 27 680

Deferred income tax (benefit) provision 59 ( 211 )

2 unchanged sentences

Receivables, net (1)

( 978 ) ( 292 )

Inventories 1,047 ( 74 )

7 unchanged sentences

Capital expenditures ( 787 ) ( 639 )

Acquisitions, net of acquired cash (Note 18) 44 —

Equity investments ( 113 ) ( 91 )

2 unchanged sentences

Net cash provided by (used in) investing activities ( 530 ) ( 1,074 )

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

(1) Includes amounts from related parties of $( 142 ) million and $( 134 ) million for June 30, 2024 and 2023, respectively

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in millions of dollars)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

10 unchanged sentences

Noncontrolling interests activity and Other (Note 18)

( 269 ) ( 144 )

Net cash provided by (used in) financing activities ( 2,397 ) ( 920 )

4 unchanged sentences

Balance at end of period $ 4,876 $ 3,512

(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.

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $ 69 million and $ 20 million as of June 30, 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 Three Months Ended March 31, 2024 and 2023

For the Six Months Ended June 30, 2024 and 2023

(in millions of dollars, except per share amounts)

15 unchanged sentences

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests (Note 18) 21 179 ( 829 ) ( 629 )

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

Balances, June 30, 2023 $ — $ 2,240 $ 33,893 $ ( 10,045 ) $ ( 35,791 ) $ 1,743 $ ( 7,960 )

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

5 unchanged sentences

Dividends paid to noncontrolling interests ( 262 ) ( 262 )

Acquisitions (Note 18)

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests 12 12

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

Balances, June 30, 2024 $ — $ 2,249 $ 34,582 $ ( 10,930 ) $ ( 35,645 ) $ 1,802 $ ( 7,942 )

See notes to condensed consolidated financial statements.

1 unchanged sentence

and Subsidiaries

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Three Months Ended June 30, 2024 and 2023

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

Net earnings 1,568 114 1,682

Other comprehensive earnings (losses), net of income taxes ( 431 ) ( 13 ) ( 444 )

Issuance of stock awards 52 10 62

Dividends declared ($ 1.27 per share)

( 1,978 ) ( 1,978 )

Dividends paid to noncontrolling interests ( 225 ) ( 225 )

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests ( 4 ) ( 4 )

Balances, June 30, 2023 $ — $ 2,240 $ 33,893 $ ( 10,045 ) $ ( 35,791 ) $ 1,743 $ ( 7,960 )

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

Net earnings 2,406 122 2,528

Other comprehensive earnings (losses), net of income taxes 135 ( 52 ) 83

Issuance of stock awards 44 12 56

Dividends declared ($ 1.30 per share)

( 2,032 ) ( 2,032 )

Dividends paid to noncontrolling interests ( 186 ) ( 186 )

Acquisitions (Note 18) 159 159

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests 13 13

Balances, June 30, 2024 $ — $ 2,249 $ 34,582 $ ( 10,930 ) $ ( 35,645 ) $ 1,802 $ ( 7,942 )

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

35 unchanged sentences

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

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

At June 30, 2024, shares available for grant under the 2022 Plan were 19,161,366 .

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

6 unchanged sentences

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 .

At June 30, 2024, shares available for grant under the plan were 855,920 .

Restricted share unit (RSU) awards

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)

During the six months ended June 30, 2024 and 2023, 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

2024 1,976,920 $ 89.05

2023 1,752,050 $ 101.98

As of March 31, 2024, PMI had $ 274 million of total unrecognized compensation cost related to non-vested RSU awards.

Compensation expense related to RSU awards was as follows:

Compensation Expense Related to RSU Awards

(in millions) For the Six Months Ended June 30, For the Three Months Ended June 30,

2024 $ 84 $ 37

2023 $ 86 $ 36

As of June 30, 2024, PMI had $ 228 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 three months ended March 31, 2024, 1,546,406 RSU awards vested.

During the six months ended June 30, 2024, 1,741,966 RSU awards vested.

The grant date fair value of all the vested awards was approximately $ 148 million.

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

The total fair value of RSU awards that vested during the six months ended June 30, 2024 was approximately $ 159 million.

Performance share unit (PSU) awards

During the three months ended March 31, 2024 and 2023, PMI granted PSU awards to certain executives.

During the six months ended June 30, 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 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:

The performance metrics for such PSU's granted during the six months ended June 30, 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 performance metrics, targets and relative weights for the PSU’s granted during the six months ended June 30, 2024 were the same as the PSU’s granted during the six months ended June 30, 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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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.

3 unchanged sentences

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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:

During the six months ended June 30, 2024 and 2023, shares granted to eligible employees and the grant date fair value per share related to PSU awards were as follows:

Number of Shares Granted Weighted-

2 unchanged sentences

Average PSU Grant Date

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

Fair Value Subject to TSR Performance Factors

(Per Share) (Per Share)

10 unchanged sentences

(b) Determined using the observed historical volatility.

As of March 31, 2024, PMI had $ 62 million of total unrecognized compensation cost related to non-vested PSU awards.

Compensation Expense Related to PSU Awards

(in millions) For the Six Months Ended June 30, For the Three Months Ended June 30,

2024 $ 49 $ 18

2023 $ 45 $ 18

As of June 30, 2024, PMI had $ 55 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 three months ended March 31, 2024, 909,262 PSU awards vested.

During the six months ended June 30, 2024, 916,452 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 three months ended March 31, 2024 was approximately $ 82 million.

The total fair value of PSU awards that vested during the six months ended June 30, 2024 was approximately $ 83 million.

Benefit Plans:

5 unchanged sentences

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 Three Months Ended March 31,

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2024 2023 2024 2023

3 unchanged sentences

Total pension and other employee benefit costs $ 29 $ 28 $ 14 $ 6

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Pension Plans

1 unchanged sentence

Net periodic pension cost consisted of the following:

For the Three Months Ended March 31,

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2024 2023 2024 2023

4 unchanged sentences

Net loss 46 16 23 4

Prior service cost (credit) ( 1 ) ( 1 ) ( 1 ) ( 1 )

Net periodic pension cost $ 70 $ 48 $ 34 $ 17

3 unchanged sentences

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

Employer contributions of $ 55 million were made to the pension plans during the six months ended June 30, 2024.

Currently, PMI anticipates making additional contributions during the remainder of 2024 of approximately $ 66 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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Goodwill and Other Intangible Assets, net:

2024 Annual impairment review of goodwill and non-amortizable intangible assets

During the second quarter of 2024, PMI completed its annual review of goodwill and non-amortizable intangible assets for potential impairment using a quantitative assessment for all of its reporting units and non-amortizable intangible assets.

As a result of this review, no impairment charges were required.

Each of PMI's reporting units had fair values substantially in excess of their carrying values with the exception of the Wellness & Healthcare reporting unit, which had less than 20 % excess of fair value over its carrying value.

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.

In addition, 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 current economic, political, regulatory and social conditions as well as the volatility in foreign currency and commodity markets.

As of June 30, 2024, our Russian operations had approximately $ 2.8 billion in total assets, excluding intercompany balances, of which approximately $ 0.7 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles).

Additionally, we hold a 23 % equity interest in Megapolis Distribution B.V., the holding company of JSC TK Megapolis, PMI's distributor in Russia.

For further details, see Note 8.

Contingencies and Note 12.

Related Parties – Equity Investments and Other .

The movements in goodwill were as follows:

4 unchanged sentences

Changes due to:

Acquisitions — 510 — — — 510

Currency ( 228 ) ( 159 ) ( 27 ) ( 49 ) ( 7 ) ( 470 )

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

Balances, June 30, 2024 $ 3,945 $ 3,228 $ 465 $ 8,798 $ 383 $ 16,819

As discussed in Note 1.

1 unchanged sentence

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.

The increase in goodwill was due to the preliminary purchase price allocation of PMI's acquisition in Egypt of United Tobacco Company in the second quarter of 2024, partially offset by currency movements.

For further details on the acquisition in Egypt, see Note 18.

Acquisitions .

At June 30, 2024, goodwill primarily reflects PMI’s acquisitions of Swedish Match AB, Fertin Pharma A/S and Vectura Group plc., as well as acquisitions in Egypt, Greece, Indonesia, Mexico, the Philippines and Serbia.

Philip Morris International Inc.

3 unchanged sentences

Details of other intangible assets were as follows:

March 31, 2024 December 31, 2023

June 30, 2024 December 31, 2023

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

2 unchanged sentences

Trademarks 16 years 2,179 $ 812 1,367 2,267 $ 784 1,483

Reacquired commercialization rights for IQOS in the U.S.

5 years 2,777 93 2,684 — — —

Developed technology, including patents 6 years 750 349 401 774 329 445

1 unchanged sentence

Total other intangible assets $ 14,004 $ 1,833 $ 12,171 $ 11,427 $ 1,563 $ 9,864

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.

Non-amortizable intangible assets substantially consist of the ZYN trademarks and other trademarks related to acquisitions in Indonesia and Mexico, as well as the tobacco manufacturing license associated with the preliminary purchase price allocation of PMI's acquisition in Egypt in the second quarter of 2024 (see Note 18.

Acquisitions for further details).

The decrease since December 31, 2023 was mainly due to currency movements of $ 181 million and a pre-tax impairment charge in the first quarter of 2024 of $ 27 million primarily for an in-process research and development project in the Wellness and Healthcare segment, partially offset by the recognition of the Egyptian tobacco manufacturing license.

The pre-tax impairment charge of $ 27 million was recorded in marketing, administration and research costs on PMI's condensed consolidated statements of earnings during the six months ended June 30, 2024.

The increase in the gross carrying amount of amortizable intangible assets from December 31, 2023, was primarily due to the classification of the IQOS commercialization rights in the U.S.

on the acquisition date (May 1, 2024) as Other intangible assets, net (see Note 18.

Acquisitions ), partially offset by currency movements of $ 203 million.

The change in the accumulated amortization from December 31, 2023, was mainly due to the 2024 amortization of $ 332 million, partially offset by currency movements of $ 62 million.

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.

The amortization of intangibles for the six months ended June 30, 2024 was recorded in cost of sales ($ 32 million) and in marketing, administration and research costs ($ 300 million) on PMI's condensed consolidated statements of earnings.

Amortization expense for each of the next five years is estimated to be approximately $ 1,031 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

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.

This amount includes amortization of IQOS commercialization rights in the U.S.

(see Note 18, Acquisitions ).

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

2023 Annual impairment review of goodwill and non-amortizable intangible assets

During the second quarter of 2023, as a result of the completion of PMI's annual review of goodwill and non-amortizable intangible assets for potential impairment, 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 in the consolidated statements of earnings for the six months and three months ended June 30, 2023, reflecting the impact of reduced estimated future cash flows, which were primarily attributable to unfavorable clinical trial results that became available in June 2023 for an inhalable aspirin product being developed by the Wellness and Healthcare business.

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.

This pre-tax impairment charge of $ 15 million was recorded within marketing, administration and research costs in the consolidated statements of earnings for the six months and three months ended June 30, 2023.

Financial Instruments:

2 unchanged sentences

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.

10 unchanged sentences

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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

(in millions) At June 30, 2024 At December 31, 2023

Derivative contracts designated as hedging instruments:

8 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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:

The fair value of PMI’s derivative contracts included in the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023, were as follows:

Derivative Assets Derivative Liabilities

Fair Value Fair Value

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

(in millions) Balance Sheet Classification June 30, 2024 December 31, 2023 Balance Sheet Classification June 30, 2024 December 31, 2023

Derivative contracts designated as hedging instruments:

18 unchanged sentences

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 March 31, 2024 and December 31, 2023.

PMI’s derivative contracts have been classified within Level 2 at June 30, 2024 and December 31, 2023.

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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,

For the six months ended June 30, 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 Six Months Ended June 30,

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

12 unchanged sentences

Interest rate contracts Interest expense, net (a)

$ ( 17 ) $ ( 14 )

Net investment hedges (b) :

8 unchanged sentences

(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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

For the three months ended June 30, 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 June 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

2024 2023 2024 2023 2024 2023

Derivative contracts designated as hedging instruments:

Cash flow hedges:

Foreign exchange contracts $ 122 $ 213 Net revenues $ 61 $ 27

Cost of sales — —

Marketing, administration and research costs ( 17 ) 55

Interest expense, net ( 2 ) ( 3 )

Interest rate contracts — 7 Interest expense, net 13 12

Commodity contracts 2 ( 1 ) Cost of sales — —

Fair value hedges:

Interest rate contracts Interest expense, net (a)

$ ( 6 ) $ ( 17 )

Net investment hedges (b) :

Foreign exchange contracts 125 ( 181 ) Interest expense, net (c)

Derivative contracts not designated as hedging instruments:

Foreign exchange contracts Interest expense, net 55 62

Marketing, administration and research costs (d)

( 80 ) ( 88 )

Total $ 249 $ 38 $ 55 $ 91 $ 44 $ 21

(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 foreign currency exchange and interest rates between the Euro and U.S.

Cash Flow Hedges

PMI has entered into derivative contracts to hedge the foreign currency exchange, interest rate and commodity price risks related to certain forecasted transactions.

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

As of June 30, 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.

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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 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.

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of June 30, 2024 was $ 941 million, of which $ 336 million was recorded in current portion of long-term debt and $ 605 million was 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 $ 57 million as of June 30, 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 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.

For the six months ended June 30, 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 $ 24 million, respectively.

For the three months ended June 30, 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 nil and $ 23 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.

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

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

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

(in millions) For the Six Months Ended June 30, For the Three Months Ended June 30,

2024 2023 2024 2023

Gain/(loss) as of beginning of period, $ 241 $ 266 $ 373 $ 296

Derivative (gains)/losses transferred to earnings ( 94 ) ( 104 ) ( 48 ) ( 75 )

Change in fair value 286 246 108 187

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.

Gain/(loss) as of June 30, $ 433 $ 408 $ 433 $ 408

At June 30, 2024, PMI expects $ 197 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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PMI’s derivative instruments do not contain contingent features.

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Credit Exposure and Credit Risk

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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.

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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 $ 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.

A certain PMI investment, which is comprised primarily of money market funds, has been classified within Level 1 and had a fair value of $ 144 million at June 30, 2024.

For the six months and three months ended June 30, 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 Three Months Ended March 31,

(in millions) For the Six Months Ended June 30, For the Three Months Ended June 30,

2024 2023 2024 2023

Net earnings attributable to PMI $ 4,554 $ 3,563 $ 2,406 $ 1,568

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Segment data were as follows:

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

(in millions) For the Six Months Ended June 30, For the Three Months Ended June 30,

2024 2023 2024 2023

Net revenues:

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SSEA, CIS & MEA

5,429 5,145 2,771 2,668

EA, AU & PMI DF

3,357 3,200 1,673 1,680

Americas 2,125 1,837 1,129 969

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SSEA, CIS & MEA

1,663 1,614 891 880

EA, AU & PMI DF

1,516 1,194 753 557

Americas 282 426 183 243

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

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

(in millions) For the Six Months Ended June 30, For the Three Months Ended June 30,

2024 2023 2024 2023

Net revenues:

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SSEA, CIS & MEA

4,778 4,504 2,432 2,350

EA, AU & PMI DF

1,217 1,412 620 724

Americas 1,126 1,173 592 608

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SSEA, CIS & MEA

651 641 339 318

EA, AU & PMI DF

2,140 1,788 1,053 956

Americas 999 664 537 361

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• Asset impairment and exit costs – See Note 15.

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

Asset Impairment and Exit Costs for a breakdown of these costs by segment for the six months ended June 30, 2024 and 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 three months ended March 31, 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.

• Impairment of goodwill and other intangibles – For the six months and three months ended June 30, 2023, PMI recorded $ 680 million of goodwill and non-amortizable intangible assets impairment charges that was included in the Wellness and Healthcare segment.

For further details, see Note 4.

Goodwill and Other Intangible Assets, net .

• South Korea indirect tax charge – On July 13, 2023, PMI's South Korean subsidiary, PM Korea, received an adverse ruling from the Supreme Court of South Korea related to cases alleging underpayment of excise taxes in connection with a 2015 excise tax increase and subsequent audit by the South Korean Board of Audit and Inspection.

The Supreme Court ruling reversed previous decisions that were in PM Korea’s favor at the trial and appellate levels.

As a result of the ruling, we concluded that an adverse outcome was probable.

Consequently, we recorded a non-cash pre-tax charge of $ 204 million in marketing, administration and research costs in the condensed consolidated statements of earning, reflecting the full amount previously paid by PM Korea, which was included in the EA, AU & PMI DF segment for the six months and three months ended June 30, 2023.

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.

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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 or nicotine-related litigation could encourage the commencement of additional litigation.

An unfavorable

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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.

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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

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stated otherwise in this Note 8.

At the present time, except as stated otherwise in this Note 8.

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

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

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Stayed Litigation — Canada

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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

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paid in installments through March 2017.

In October 2015, the Court of Appeal ordered RBH to furnish security totaling CAD 226 million (approximately $ 164 million) to cover both the Létourneau and Blais cases, which RBH has paid in installments through March 2017.

The Court of Appeal ordered Imperial Tobacco Canada Ltd.

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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 would have smoked regardless of what warnings were given;

(ii) defendants cannot be liable to class members who

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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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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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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

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Notes to Condensed Consolidated Financial Statements

based on legislation enacted in the province.

The claim was filed by the government of the province of Ontario 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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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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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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and the balance of 75 remains pending.

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, 552 of those cases have been terminated in our favor, and the balance of 70 remains pending.

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

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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 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.

As of June 30, 2024, there were a number of smoking and health cases pending against us, our subsidiaries or indemnitees, as follows:

• 39 cases brought by individual plaintiffs in Argentina ( 27 ), Canada ( 2 ), Chile ( 9 ), and Turkey ( 1 ), compared with 50 such cases on June 30, 2023;

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

As of June 30, 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 June 30, 2023.

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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,

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

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.

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

The plaintiff's appeal remains pending.

Label-Related Cases:

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

Plaintiffs seek various forms of relief including restitution, injunctive relief, and compensatory and other damages.

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

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.

As of June 30, 2024, there were 4 label-related cases brought by individual plaintiffs in Italy ( 1 ) and Chile ( 3 ) pending against our subsidiaries, compared with 5 such cases on June 30, 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 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.

As of June 30, 2024, there was 1 public civil action pending against our subsidiary in Venezuela ( 1 ), compared with 1 such case on June 30, 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

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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.

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.

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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.

On April 30, 2024, the transaction contemplated by the Altria Agreement was effectuated without the U.S.

government having pursued the matter or having sought relief from the court.

Smoke-Free Products-Related Litigation

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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.

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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.

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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.

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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.

On May 6, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice.

The District Court has scheduled a hearing on the motions for August 19, 2024.

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.

In the third case, a putative class action, Bates-Ferreira v.

Philip Morris International Inc., et al.

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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.

On June 7, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice, and Swedish Match North America LLC also filed a motion to stay the proceedings pending resolution of the Kelly class action.

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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.

On June 3, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice.

The District Court has scheduled a hearing on the motions for August 19, 2024.

District of Columbia Attorney General Investigation :

On June 11, 2024, Swedish Match North America LLC ("SMNA") received a subpoena from the office of the Attorney General of the District of Columbia (“D.C.”).

The subpoena requests, among other things, information concerning SMNA’s compliance with D.C.’s licensing regulations, age-verification requirements, and prohibition on the sale of flavored tobacco products, including with respect to ZYN nicotine pouches.

SMNA is cooperating with the investigation.

It is too early to assess the timeline on which such investigation will conclude or its outcome.

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Other Litigation

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The government is seeking a fine of approximately THB 19.8 billion (approximately $ 545 million).

In May 2017, Thailand enacted a new customs

Philip Morris International Inc.

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In May 2017, Thailand enacted a new customs act.

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

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

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, 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.

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

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

on July 27, 2021, the ITC granted each of the petitions in part, deciding to review certain issues in the ID/RD.

Plaintiffs and Defendants also submitted brief statements of the public interest factors in issue to the ITC on June 15, 2021.

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

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

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

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

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

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

Following the Presidential Review period, the orders became effective and Defendants filed a petition for review of the FD with the U.S.

Court of Appeals for the Federal Circuit.

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

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

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

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.

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

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

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

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

e-vapor products.

On May 1, 2023, the court entered partial final judgment under Rule 54(b) on PMPSA's claim against BAT's affiliate.

That same day, BAT's affiliate filed a notice of appeal to the U.S.

Court of Appeals for the Federal Circuit.

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.

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

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

Court of Appeals for the Federal Circuit.

Oral argument was held on July 13, 2023.

On July 17, 2023, the Federal Circuit issued a decision summarily affirming PTAB’s decision to invalidate all challenged claims in one of the two patents underlying the ITC’s FD.

The Federal Circuit issued the mandate notifying the USPTO to record the invalidity of the challenged claims on August 23, 2023.

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 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;

PTAB denied the Request on October 13, 2022.

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

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

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

Philip Morris Romania SRL, et al.

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

and Philip Morris Trading

In July 2020, the Public Prosecutor’s office of Rome, Italy, notified our Italian subsidiary, Philip Morris Italia S.r.l.

(“PM Italia”), as well as three former or current employees and a former external consultant of PM Italia in July and March 2020, respectively, that it concluded a preliminary investigation against them for alleged contravention of anti-corruption laws and related disruption of trade freedom.

The Public Prosecutor alleges that the individuals involved promised certain personal favors to government officials from January to July of 2018 in exchange for favorable treatment for PM Italia, and that PM

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

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 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 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;

Plaintiffs filed an appeal of this decision.

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.

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.

Italia lacked appropriate organizational controls to prevent the alleged actions by the individuals.

In September 21, 2020, the Public Prosecutor issued his indictment and referred the matter to the court.

At the preliminary hearing held on May 11, 2021, the judge decided to refer all charges/defendants (including our affiliate) to trial.

The first trial hearing took place on September 22, 2021.

BAT has filed a civil claim against PM Italia claiming vicarious liability for the alleged wrongdoings of its former or current employees and seeking EUR 50 million (approximately $ 54.3 million) in damages.

After various postponements, trial started on September 25, 2023, and will continue through a series of hearings until 2025 (the court set the calendar only through January 20, 2025, although other hearings will have to be scheduled thereafter for the examination of the remaining witnesses).

PM Italia believes the charges are without merit and will defend them vigorously.

The Ministry of Industry and Trade of the Russian Federation filed a petition before the Arbitrazh Court of the Moscow Region seeking the suspension of corporate rights that Megapolis Distribution B.V.

(“MDBV”), a legal entity incorporated in the Netherlands, holds in JSC TK Megapolis (formerly CJSC TK Megapolis), distributor of PMI’s products in Russia.

Our affiliate holds a 23 % equity interest in MDBV.

On July 18, 2024, the court admitted the petition and scheduled a hearing for August 8, 2024.

MDBV is named as respondent.

For additional information, see Part I, Item 1.

Financial Statements – Note 12.

Related Parties – Equity Investments and Other.

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.

FTKK sought an order stopping the importation of TEREA consumables.

FTKK did not in its application seek any monetary damages or costs.

PMJL 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 was held on May 28, 2024.

On June 27, 2024 expert advisors to Customs provided their opinion that the patent at issue was not infringed.

On June 28, 2024, FTKK withdrew its Customs application.

The proceeding is now concluded.

On January 26, 2024, PMJL filed a declaratory judgment action in Tokyo District Court seeking a declaration that JP7299432 is invalid and/or not infringed.

The declaratory judgment action has now concluded following FTKK's waiver of its right to seek relief from PMJL for infringement of JP7299432, which effectively resolved PMJL's request for a declaration of no liability for infringement of that patent.

Other patent challenges are pending in various jurisdictions.

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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.

PMI’s effective tax rates for the six months and three months ended June 30, 2024 were 24.2 % and 23.7 %, respectively.

PMI’s effective tax rates for the six months and three months ended June 30, 2023 were 20.8 % and 24.7 %, respectively.

The effective tax rate for the six months ended June 30, 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 ($ 142 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 ($ 77 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.

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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.

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.

The effective tax rate for the six months ended June 30, 2023, was unfavorably impacted by the non-deductible Wellness and Healthcare goodwill impairment charge, partially offset 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 ($ 96 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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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.

These income tax receivables are included in other assets in PMI’s condensed consolidated balance sheets at June 30, 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 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

At June 30, 2024 and December 31, 2023, PMI’s short-term borrowings and related average interest rates consisted of the following:

June 30, 2024 December 31, 2023

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

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Long-term Debt:

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

At June 30, 2024 and December 31, 2023, PMI’s long-term debt consisted of the following:

(in millions) June 30, 2024 December 31, 2023

dollar notes, 0.875 % to 6.375 % (average interest rate 4.572 %), due through 2044

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$ 44,647 $ 41,243

(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.

(a) Includes long-term bank loans at subsidiaries, as well as $ 43 million and $ 53 million in finance leases at June 30, 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 March 31, 2024, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:

At June 30, 2024, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:

(in millions)

March 31, 2024

June 30, 2024

Level 1 $ 40,607

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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

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.

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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.

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.

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.

As of June 30, 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 three months of 2024 were as follows:

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

(in millions)

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$ 1,750 5.250 % February 2024 February 2034

Euro notes (b) (c) € 500 (approximately $ 543 )

3.750 % June 2024 January 2031

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

(b) Interest is payable annually, commencing in January 2025

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

At June 30, 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.

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Notes to Condensed Consolidated Financial Statements

At June 30, 2024, 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 $ 2.1 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.

These credit arrangements amounted to approximately $ 2.1 billion at June 30, 2024, and approximately $ 2.7 billion at December 31, 2023.

Borrowings under these arrangements and other bank loans amounted to $ 139 million at June 30, 2024, and $ 283 million at December 31, 2023.

Accumulated Other Comprehensive Losses:

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(Losses) Earnings At At At

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

(in millions) June 30, 2024 December 31, 2023 June 30, 2023

Currency translation adjustments $ ( 8,841 ) $ ( 9,467 ) $ ( 8,678 )

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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 three months ended March 31, 2024 and 2023.

For additional information, see Note 3.

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

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

Asset Impairment and Exit Costs and Note 18.

Acquisitions for disclosures related to the reclassification of accumulated foreign currency translation losses from other comprehensive losses.

Related Parties - Equity Investments and Other:

Equity Method Investments:

At March 31, 2024 and December 31, 2023, PMI had total equity method investments of $ 1,227 million and $ 1,309 million, respectively.

At June 30, 2024 and December 31, 2023, PMI had total equity method investments of $ 1,145 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 March 31, 2024 and December 31, 2023, exceeded our share of the investees' book value by $ 853 million and $ 907 million, respectively.

The carrying value of our equity method investments at June 30, 2024 and December 31, 2023, exceeded our share of the investees' book value by $ 1,075 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 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.

The difference related to the definite-lived intangibles and other assets at June 30, 2024 and December 31, 2023 of $ 153 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 June 30, 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”).

PMI holds a 23 % equity interest in Megapolis Distribution B.V.

("MDBV"), the holding company of JSC TK Megapolis (formerly CJSC TK Megapolis), PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of June 30, 2024 had a carrying value of $ 431 million.

Additionally, there was approximately $ 540 million of cumulative foreign currency translation losses associated with MDBV reflected in accumulated other comprehensive losses in the condensed consolidated statement of stockholders’ equity as of June 30, 2024.

In June 2024, the Russian government included JSC TK Megapolis in the list of economically significant organizations that may be subject to forced localization under applicable Russian law, which refers to the mandatory removal of a foreign holding company from the shareholding structure.

If a forced localization were to occur, MDBV’s shares in JSC TK Megapolis will be transferred to JSC TK Megapolis and may subsequently be transferred to its indirect shareholders.

On July 18, 2024, the Ministry of Industry and Trade (given standing to initiate the claim under the law)

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

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

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").

UTC is an entity incorporated in Egypt, which is 38 % owned by EIH and manufactures products under license for Philip Morris Misr LCC (“PMM”), an entity incorporated in Egypt which is consolidated in PMI’s financial statements in the SSEA, CIS & MEA segment.

The initial investments in Megapolis Distribution BV, EITA and UTC have been recorded at cost and are included in equity investments on the consolidated balance sheets.

filed a petition before the Arbitrazh Court of Moscow seeking the forced localization of JSC TK Megapolis.

The court scheduled a hearing on August 8, 2024.

While as of June 30, 2024, there have been no impairment indicators based on the business’ performance or legal status, there are still risks related to this investment and our associated economic and control rights as the fair value of these assets with their associated rights is difficult to predict due to the current economic, political, regulatory, legal and social conditions as well as the volatility in foreign currency and commodity markets.

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).

In April 2023, PMI acquired an approximate economic interest of 25 % in United Tobacco Company ("UTC").

UTC is an entity incorporated in Egypt which manufactures products under license for PMI’s Egyptian subsidiary.

On May 16, 2024, PMI acquired a controlling interest in UTC.

For further details, see Note 18.

Acquisitions .

In May 2024, PMI acquired an indirect economic interest of 14.7 % in Eastern Company (“Eastern"), Egypt’s largest cigarette manufacturer which also includes cigars and pipe tobacco, among others, in its portfolio.

PMI accounted for its investment in Eastern under the equity method of accounting as it has the indirect ability to participate in Eastern's policy making processes.

As of June 30, 2024, PMI has not finalized the basis difference allocation resulting from the investment.

The initial investments in Megapolis Distribution BV, EITA, Eastern and UTC (up to the acquisition of controlling interest in UTC on May 16, 2024) have been recorded at cost and are included in equity investments on the consolidated balance sheets.

Transactions between these equity method investees and PMI subsidiaries are considered to be related-party transactions and are included in the tables below.

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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 $ 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.

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $ 694 million at June 30, 2024.

Unrealized pre-tax gain (loss) of $ 319 million ($ 242 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 six months ended June 30, 2024.

Other related parties:

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

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

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

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

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

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

Financial activity with the above related parties:

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

For the Three Months Ended March 31,

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2024 2023 2024 2023

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Net revenues (a)

$ 1,821 $ 1,774 $ 961 $ 901

Other $ 73 $ 113 $ 33 $ 63

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

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

(in millions) At June 30, 2024 At December 31, 2023

Megapolis Group $ 535 $ 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 March 31, 2024 and March 31, 2023.

The amounts associated with the servicing liability were not material as of June 30, 2024 and June 30, 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 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 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.

The difference

Cumulative trade receivables sold, including excise taxes, for the six months ended June 30, 2024 and 2023, were $ 5.6 billion and $ 6.1 billion, respectively.

PMI’s operating cash flows were positively impacted by the amount of the trade receivables sold

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

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

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

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 June 30, 2024 and 2023 were $ 0.7 billion.

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

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

The loss on sale of trade receivables was as follows:

(in millions) For the Six Months Ended June 30, For the Three Months Ended June 30,

2024 $ 22 $ 10

2023 $ 24 $ 14

Product Warranty:

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PMI accounts for its product warranties within other accrued liabilities.

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

At June 30, 2024 and December 31, 2023, these amounts were as follows:

(in millions) As of and For the Six Months Ended June 30, 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 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.

For the six months ended June 30, 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.

For the three months ended June 30, 2024 and 2023, PMI did not record any charges for asset impairment and exit costs related to restructuring activities.

During the six months ended June 30, 2024, PMI recorded a pre-tax impairment charge on other intangibles of $ 27 million within the Wellness and Healthcare segment.

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

For further details on these impairment charges, see Note 4.

Goodwill and Other Intangible Assets, net .

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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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

Philip Morris International Inc.

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.

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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.

Philip Morris International Inc.

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 Three Months Ended March 31,

(in millions) For the Six Months Ended June 30,

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

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Asset impairment and exit costs $ 168 $ 109

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Movement in Exit Cost Liabilities

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

The movement in exit cost liabilities for the six months ended June 30, 2024 was as follows:

(in millions)

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Currency/other 1

Liability balance, March 31, 2024 $ 53

Liability balance, June 30, 2024 $ 43

Future cash payments for exit costs incurred to date are anticipated to be substantially paid by the end of 2025, with approximately $ 32 million expected to be paid in the remainder of 2024.

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,

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

The components of PMI’s lease cost were as follows for the six months and three months ended June 30, 2024 and 2023:

For the Six Months Ended June 30, For the Three Months Ended June 30,

(in millions) 2024 2023 2024 2023

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Amortization of right-of-use assets 37 28 12 14

Interest on lease liabilities

Short-term lease cost 32 29 16 15

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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 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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of June 30, 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.

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.

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.

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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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Altria Group, Inc.

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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.

As a result of PMI reacquiring these rights, effective May 1, 2024 ("acquisition date"), PMI holds the full rights to commercialize IQOS in the U.S.

As part of the agreement, PMI agreed to pay a total cash consideration of approximately $ 2.8 billion, including interest, of which $ 1.0 billion was paid at the inception of the agreement and the remaining $ 1.8 billion was paid on July 14, 2023.

The cash consideration paid was accounted for within Other assets in PMI's condensed consolidated balance sheets as of December 31, 2023.

On the acquisition date and as of June 30, 2024, the reacquired rights were classified as Other intangible assets, net in PMI's condensed consolidated balance sheets, and will be amortized over their useful life of 5 years.

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

Contingencies .

United Tobacco Company

In April 2023, PMI 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"), which was accounted for using the equity method of accounting.

In May 2024, PMI increased its indirect economic interest and acquired a controlling interest of 54.25 % in UTC.

UTC is an entity incorporated in Egypt and manufactures products under license for Philip Morris Misr LLC (“PMM”), PMI’s Egyptian subsidiary.

The acquisition builds on PMI’s existing investments in Egypt and increases the manufacturing synergies between PMM and UTC.

As a result of PMI obtaining control over UTC, PMI’s previously held 25 % economic interest in UTC was remeasured to its fair value by applying the guideline transaction method adjusted for a discount for lack of control.

The difference between the book value of $ 312 million, including related cumulative translation losses balance of $ 112 million, which was reclassified from accumulated other comprehensive losses and the fair value of PMI’s previously held interest in UTC was not material.

The total purchase price for the incremental equity interest of $ 315 million included cash consideration of $ 30 million, contingent consideration of $ 22 million and $ 263 million of assumed bank loan liabilities.

The following table summarizes the preliminary purchase price allocation for the fair value of assets acquired and liabilities assumed as of the date of the acquisition, which includes previously held interest:

(in millions)

Cash and cash equivalent $ 74

Current assets, including receivables and inventories 11

Other intangible assets - Tobacco manufacturing license 211

Other non-current assets, including property, plant and equipment 16

Current liabilities ( 8 )

Identifiable net assets acquired 304

Noncontrolling interest ( 159 )

Acquisition fair value $ 655

Goodwill is primarily attributable to future growth opportunities, anticipated synergies in the manufacturing processes and intangible assets that did not qualify for separate recognition.

The fair value of the noncontrolling interest was estimated based on the enterprise value of UTC, adjusted for a discount for lack of control.

The manufacturing license, which relates to the manufacturing of both smoke-free and combustible tobacco products, was valued using the multi-period excess earnings method and has been determined to have an indefinite life.

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

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

UTC's results of operations from May 16, 2024, through June 30, 2024, were included in PMI's consolidated statements of earnings and were not material.

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

Philip Morris International Inc.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements