What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-06 compared with 2024-02-08 · 610 added, 706 removed, 1848 unchanged (42% of the section changed)

21 unchanged sentences

3,017 2,339 2,244

Impairment related to the RBH equity investment (Note 6)

Equity investments and securities (income)/loss, net

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(1) Includes net revenues from related parties of $ 3,876 million, $ 3,553 million and $ 3,658 million for the years ended December 31, 2024, 2023 and 2022, respectively

(2) Net of excise tax on products of $ 49,404 million, $ 48,958 million and $ 50,818 million for the years ended December 31, 2023, 2022 and 2021, respectively

(3) Includes an impairment charge for other intangibles of $ 112 million for the year ended December 31, 2022.

For further details, see Note 5.

Goodwill and Other Intangible Assets, net

(4) Includes an impairment charge for other intangibles of $ 15 million and a charge of $ 204 million for the South Korea indirect tax charge for the year ended December 31, 2023.

For further details, see Note 5.

Goodwill and Other Intangible Assets, net and Note 18.

Contingencies

(2) Net revenues are shown net of excise tax on products.

For the years ended December 31, 2024, 2023 and 2022, excise tax on products was $ 51,563 million, $ 49,404 million and $ 48,958 million, respectively

See notes to consolidated financial statements.

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( 122 ) ( 1,643 ) ( 1,268 )

(Gains)/losses transferred to earnings, net of income taxes of $ 0 in 2023, 2022 and 2021

(Gains)/losses transferred to earnings, net of income taxes of $ 7 in 2024, $ 0 in 2023 and 2022 (Notes 3, 17 & 20)

Change in net loss and prior service cost:

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Finished product

Other current assets (Note 3)

Other current assets

Total current assets

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Machinery and equipment

10,632 10,713

Construction in progress

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Impairment of goodwill and other intangibles (Note 5) 27 680 112

Loss on sale of Vectura Group (Note 3)

Impairment related to the RBH equity investment (Note 6) 2,316 — —

Deferred income tax (benefit) provision

( 123 ) ( 330 ) ( 234 )

Asset impairment and exit costs, net of cash paid (Note 20)

Restructuring charges, net of cash paid (Note 20)

122 30 ( 93 )

Cash effects of changes, net of the effects from acquired companies:

Cash effects of changes, net of the effects from acquired and divested companies:

Receivables, net

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( 110 ) ( 21 ) 3

Net cash provided by operating activities

( 188 ) 479 249

Net cash provided (used in) by operating activities

12,217 9,204 10,803

CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

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agreement (Note 3) — ( 1,775 ) ( 1,002 )

Proceeds from sale of business, net of cash disposed (Note 3) 136 191 —

Equity investments

( 124 ) ( 111 ) ( 20 )

Net investment hedges and other derivatives (Note 16)

Collateral posted/settlements for derivatives, (paid)/returned (Note 16) 351 ( 660 ) 284

( 54 ) 78 112

Net cash used in investing activities

Net cash provided by (used in) investing activities

( 1,092 ) ( 3,598 ) ( 15,679 )

(1) Includes amounts from related parties of $( 154 ) million, $( 166 ) million and $( 149 ) million in 2023, 2022 and 2021, respectively

See notes to consolidated financial statements.

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Dividends paid ( 8,197 ) ( 7,964 ) ( 7,812 )

Collateral received/settlements for derivatives, received/(returned) 828 ( 62 ) 27

Payments to acquire Swedish Match AB noncontrolling interests (Note 3) — ( 883 ) ( 1,495 )

Payments to noncontrolling interests and Other (Note 3)

Noncontrolling interests activity and Other (Note 3)

( 489 ) ( 375 ) ( 881 )

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Common stock repurchased ( 199 ) ( 199 )

Acquisitions (Note 3) 2,379 2,379

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

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

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Dividends paid to noncontrolling interests ( 497 ) ( 497 )

Common stock repurchased ( 199 ) ( 199 )

Acquisitions (Note 3) 2,379 2,379

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

Sale (purchases) of subsidiary shares to/(from) noncontrolling interests (Note 3) ( 6 ) 180 ( 831 ) ( 657 )

Balances, December 31, 2023 — 2,285 34,090 ( 11,815 ) ( 35,785 ) 1,779 ( 9,446 )

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Dividends paid to noncontrolling interests ( 494 ) ( 494 )

Sale (purchases) of subsidiary shares to/(from) noncontrolling interests (Note 3) ( 6 ) 180 ( 831 ) ( 657 )

Acquisitions (Note 3) 160 160

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests 90 90

Balances, December 31, 2024 $ — $ 2,335 $ 32,869 $ ( 11,314 ) $ ( 35,640 ) $ 1,880 $ ( 9,870 )

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and its subsidiaries.

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

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

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

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

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

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

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

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

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

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

On September 17, 2024, PMI announced the execution of a definitive agreement pursuant to which PMI’s direct, wholly-owned subsidiary, Vectura Fertin Pharma Inc., agreed to sell Vectura Group Ltd.

(formerly, Vectura Group plc, and hereinafter referred to as “Vectura” or "Vectura Group") to Molex Asia Holdings Ltd.

The transaction was completed on December 31, 2024.

For further details, see Note 3.

Acquisitions and Divestitures.

Basis of presentation

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All intercompany transactions and balances have been eliminated.

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

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

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

and OtiTopic, Inc.

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

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

For further details on these acquisitions, see Note 3.

Acquisitions and Note 13.

Segment Reporting .

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

The four geographical segments are as follows:

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

The four existing geographical segments are as follows:

Europe Region;

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and Americas Region.

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

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

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

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

For further details, see Note 5.

Goodwill and Other Intangible Assets, net.

Goodwill and Other Intangible Assets, net , Note 13.

Segment Reporting and Note 20.

Restructuring Activities.

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

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

For further details, see Note 6.

Related Parties - Equity Investments and Other .

Impairment of equity method investments

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The shipping and handling costs that have not been incurred at the time revenue is recognized are accrued.

PMI is a principal for majority of its arrangements and recognizes revenue at the transaction price, with the associated costs recorded in cost of sales.

The transaction price is typically based on the amount billed to the customer and includes estimated variable consideration, where applicable.

Such variable consideration is typically not constrained and is estimated based on the most likely amount that PMI expects to be entitled to under the terms of the contracts with customers, historical experience of discount or rebate redemption, where relevant, and the terms of any underlying discount or rebate programs, which may change from time to time as the business and product categories evolve.

For arrangements where PMI acts as an agent, the net commission earned is recognized as revenue.

PMI has elected to exclude excise taxes collected from customers from the measurement of the transaction price, thereby presenting revenues net of excise taxes.

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Stock Plans .

Acquisitions:

Transactions With Noncontrolling Interests

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

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

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

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

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

In January 2023, PMI sold the acquired stakes of its holdings in PMTM and PMPS to Pioneers Tutun Yatirim Anonim Sirketi (“Pioneers”) for a consideration of approximately $ 258 million, including transaction costs and dividend entitlements.

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

Acquisitions and Divestitures:

Sale of Vectura Group Ltd.

On September 17, 2024, PMI announced the execution of a definitive agreement pursuant to which PMI’s direct, wholly-owned subsidiary, Vectura Fertin Pharma Inc., agreed to sell Vectura Group Ltd.

(formerly, Vectura Group plc, and hereinafter referred to as “Vectura” or "Vectura Group") to Molex Asia Holdings Ltd.

("Molex"), subject to customary regulatory approval and other completion conditions.

On December 31, 2024, PMI completed the sale of Vectura for an upfront cash consideration of GBP 152 million (approximately $ 191 million) and a short-term receivable of GBP 24 million (approximately $ 30 million), reflecting certain customary completion account adjustments, with additional deferred payments of up to GBP 148 million (approximately $ 186 million), contingent on achievement of certain milestones over periods up to and through 2039.

In addition, PMI agreed to indemnify Molex for certain claims related to the pre-completion period.

For the year ended December 31, 2024, no liability has been recorded in relation to the indemnity.

As of September 17, 2024, and through the completion date, Vectura's net assets and liabilities were classified as held-for-sale in PMI’s consolidated balance sheet.

The sale resulted in a pre-tax loss of $ 199 million ($ 206 million including the tax costs), of which $ 198 million of loss related to the impairment charge recognized in the third quarter of 2024, to record the net assets held-for-sale at the lower of their carrying value or fair value less costs to sell.

This amount also included reclassification of currency translation losses from other comprehensive losses of $ 16 million.

The loss on sale of Vectura has been recorded in marketing, administration and research costs under the Wellness and Healthcare segment in PMI’s consolidated statement of earnings for the year ended December 31, 2024.

Altria Group, Inc.

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

("Altria") to end the companies' relationship regarding the IQOS commercialization rights in the U.S.

as of April 30, 2024.

As a result of PMI reacquiring these rights, effective May 1, 2024 ("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 $ 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 consolidated balance sheets as of December 31, 2023.

On the acquisition date and as of December 31, 2024, the reacquired rights were classified as Other intangible assets, net in PMI's consolidated balance sheets, and will be amortized over their useful life of 5 years.

Business Combinations

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 $ 316 million included cash consideration of $ 31 million, contingent consideration of $ 22 million and $ 263 million of assumed bank loan liabilities.

During the third quarter of 2024, PMI paid the contingent consideration of $ 22 million and $ 240 million of assumed bank loans.

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 ( 160 )

Acquisition fair value $ 656

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 December 31, 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.

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

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

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

The acquisition is accelerating PMI’s transformation to become a smoke-free company with a comprehensive global smoke-free portfolio with leadership positions in heat-not-burn and the fastest growing category of oral nicotine.

In November 2023, PMI finalized all measurement period adjustments related to the Swedish Match acquisition.

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

(in millions) Preliminary Purchase Price Allocation Recognized as of the acquisition date Measurement Period Adjustments during 2023 Final Purchase Price Allocation Recognized as of

(in millions) Final Purchase Price Allocation Recognized as of

the acquisition date

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

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

The operating results of Swedish Match are included in the Europe and Americas segments.

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

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

The unaudited pro forma financial information is as follows:

For the Years Ended December 31,

The unaudited pro forma financial information for the year ended December 31, 2022 is as follows:

(in millions) 2022

1 unchanged sentence

Net earnings attributable to PMI $ 8,779

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

snus) and modern oral (i.e.

nicotine pouches) product categories.

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

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

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

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

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

The acquisition was funded with existing cash.

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

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

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

The goodwill is not deductible for income tax purposes.

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

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

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

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

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

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

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

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

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

The goodwill is not deductible for income tax purposes.

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

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

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

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

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

Altria Group, Inc.

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

("Altria") to end the companies' relationship regarding the IQOS commercialization rights in the U.S.

as of April 30, 2024.

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

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

The cash consideration paid at the inception of the agreement of $ 1.0 billion has been accounted for within other assets in PMI’s consolidated balance sheets as of December 31, 2023 and 2022.

The remaining consideration of $ 1.7 billion plus interest was paid to Altria on July 14, 2023 and has been accounted for within other assets in PMI's consolidated balance sheets as of December 31, 2023.

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

For further details on PMI's agreement with Altria, see Note 18.

Contingencies .

Asset Acquisition

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

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

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

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

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

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

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

As previously discussed in Note 1.

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

into one operating segment.

Transactions With Noncontrolling Interests

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

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

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

War in Ukraine:

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

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

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

Production at the factory in Kharkiv remains suspended.

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In the fourth quarter of 2023, as a result of the completion of certain preparatory work for this new production facility, PMI recorded impairment of certain long-lived assets.

The new production facility was completed at the end of the first quarter of 2024 and local production commenced in April 2024.

As of December 31, 2024, PMI’s Ukrainian operations had approximately $ 562 million in total assets, excluding intercompany balances.

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

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

As a result of PMI continuing operations within Russia as of December 31, 2023, it has not recorded an impairment of long-lived and other assets.

PMI is continuously assessing the evolving situation in Russia.

This includes regulatory constraints in the market entailing very complex terms and conditions that must be met for any divestment transaction to be granted approval by the authorities, and restrictions resulting from international regulations.

In the event of a divestment, PMI's ability to fully realize the value of the business would likely be subject to material impairment.

As a result of PMI continuing operations within Russia in 2023 and 2024, it has not recorded an impairment of long-lived and other assets.

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

PMI’s Russian operations as of December 31, 2024 had approximately $ 2.7 billion in total assets, excluding intercompany balances.

These total assets included $ 773

million, $ 494 million, $ 948 million, $ 261 million and $ 167 million in cash (primarily held in local currency), receivables, inventories, property, plant and equipment and goodwill, respectively.

These total assets included $ 1,038 million, $ 426 million, $ 789 million, $ 219 million and $ 154 million in cash (primarily held in local currency), receivables, inventories, property, plant and equipment and goodwill, respectively.

In addition, there was approximately $ 1,585 million of cumulative foreign currency translation losses reflected in accumulated other comprehensive losses in the consolidated statement of stockholders’ equity as of December 31, 2024.

Additionally, we hold a 23 % equity interest in JSC TK Megapolis, PMI's distributor in Russia.

For further details, see Note 6.

Related Parties – Equity Investments and Other .

For the year ended December 31, 2024, PMI did not incur charges related to circumstances driven by the war.

For the years ended December 31, 2023 and 2022, PMI recorded in its consolidated statements of earnings pre-tax charges related to circumstances driven by the war as follows:

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Goodwill and Other Intangible Assets, net:

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

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

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

Consequently, PMI recorded a goodwill impairment charge of $ 665 million in the consolidated statements of earnings for the year ended December 31, 2023, reflecting the impact of reduced estimated future cash flows, which were primarily attributable to clinical trial results that became available in June 2023 for an inhalable aspirin product being developed by the Wellness and Healthcare business.

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

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

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

Food and Drug Administration later this year.

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

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

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

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 year ended December 31, 2023.

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

PMI will continue to monitor this reporting unit as any changes in assumptions and estimates, unfavorable clinical trial results, failure to obtain regulatory approvals or other market factors could result in additional future goodwill and other intangible asset impairments.

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

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

While PMI’s remaining reporting units have fair values substantially in excess of their carrying values, there are still risks related to PMI’s Russian reporting unit’s assets as the fair value of these assets is difficult to predict due to the volatility in foreign currency and commodity markets, supply chain, and current economic, political and social conditions.

For more information see Note 4.

War in Ukraine .

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

As the purchase price allocation for the acquisition of Swedish Match was preliminary at

that time of the annual review, PMI performed a qualitative impairment assessment and concluded that it was not more likely than not that the fair value of the Swedish Match reporting units and its non-amortizable intangible assets were less than the respective carrying amounts.

The movements in goodwill were as follows:

1 unchanged sentence

EA, AU & PMI DF

Americas Swedish Match Wellness & Healthcare Total

Americas Wellness & Healthcare Total

Balances at January 1, 2023 $ 4,774 $ 2,869 $ 493 $ 10,507 $ 1,012 $ 19,655

Changes due to:

Acquisitions — — — — 13,301 — 13,301

Impairment — — — — ( 665 ) ( 665 )

Currency 220 8 ( 1 ) 89 43 359

Other — — — — — 190 190

Measurement period adjustments ( 821 ) — — ( 1,749 ) — ( 2,570 )

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

Changes due to:

Impairment — — — — — ( 665 ) ( 665 )

Acquisitions and divestitures — 512 — — ( 65 ) 447

Currency ( 360 ) ( 138 ) ( 22 ) ( 98 ) ( 8 ) ( 626 )

Measurement period adjustments — — — — ( 2,570 ) — ( 2,570 )

Balances, December 31, 2024 $ 3,813 $ 3,251 $ 470 $ 8,749 $ 317 $ 16,600

As discussed in Note 1.

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

As a result, the January 1, 2022 and December 31, 2022 goodwill balances in the table above included the reclassifications from the former six geographical segments to the four geographical segments under the new structure.

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

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

Acquisitions .

The decrease in goodwill in 2023 was primarily due to the measurement period adjustments to the Swedish Match final purchase price allocation (see Note 3, Acquisitions ), coupled with the impairment discussed above and partially offset by currency movements.

At December 31, 2023, 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.

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

As a result, the January 1, 2023 and December 31, 2023 goodwill balances in the table above included the reclassifications of the former Swedish Match segment to the Europe and Americas segments.

The decrease in goodwill in 2023 was primarily due to the measurement period adjustments to the Swedish Match final purchase price allocation (see Note 3, Acquisitions and Divestitures ), coupled with the impairment discussed below and partially offset by currency movements.

The decrease in goodwill in 2024 was due to currency movements and goodwill allocated to disposal group in relation to Vectura Group' sale, partially offset by the preliminary purchase price allocation of PMI's acquisition in Egypt of United Tobacco Company in the second quarter of 2024.

For further details on the acquisition in Egypt and Vectura Group's sale, see Note 3.

Acquisitions and Divestitures .

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

Other Intangible Assets

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Trademarks 15 years 2,134 $ 850 1,284 2,267 $ 784 1,483

Reacquired commercialization rights for IQOS in the U.S.

4 years 2,777 370 2,407 — — —

Developed technology, including patents 7 years 320 121 199 774 329 445

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Total other intangible assets $ 13,389 $ 2,062 $ 11,327 $ 11,427 $ 1,563 $ 9,864

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

The increase since December 31, 2022 was due to the measurement period adjustments to the Swedish Match final purchase price allocation in the amount of $ 1,056 million (see Note 3, Acquisitions ), coupled with currency movements of $ 156 million, partially offset by an impairment for an in-process research and development project related to one of PMI's 2021 acquisitions discussed above.

The increase in the gross carrying amount of amortizable intangible assets from December 31, 2022, was mainly due to the measurement period adjustments to the Swedish Match final purchase price allocation in the amount of $ 2,300 million (see Note 3, Acquisitions ), coupled with currency movements of $ 161 million.

The change in the accumulated amortization from December 31, 2022, was mainly due to the 2023 amortization of $ 497 million, coupled with currency movements of $ 37 million.

The amortization of intangibles for the years ended December 31, 2023 was recorded in cost of sales of $ 58 million and in marketing, administration and research costs of $ 439 million on PMI's consolidated statements of earnings.

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 3.

Acquisitions and Divestitures for further details).

The decrease since December 31, 2023, was mainly due to currency movements of $ 276 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.

The pre-tax impairment charge of $ 27 million was recorded in marketing, administration and research costs on PMI's consolidated statements of earnings for the year ended December 31, 2024.

The decrease was partially offset by the recognition of the Egyptian tobacco manufacturing license.

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 3.

Acquisitions and Divestitures ), partially offset by developed technology assets of $ 454 million allocated to disposal group in relation to Vectura Group's sale (see Note 3.

Acquisitions and Divestitures ) and currency movements of $ 269 million.

The change in the accumulated amortization from December 31, 2023, was mainly due to the 2024 amortization of $ 835 million, partially offset by accumulated amortization of developed technology assets of $ 267 million allocated to disposal group in relation to Vectura Group's sale and currency movements of $ 69 million.

The amortization of intangibles for the year ended December 31, 2024 was recorded in cost of sales ($ 51 million) and in marketing, administration and research costs ($ 784 million) on PMI's consolidated statements of earnings.

Amortization expense on a pre-tax basis for each of the next five years is estimated to be approximately $ 991 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 3, Acquisitions ), the accounting for which will depend on the facts and circumstances effective May 1, 2024, when PMI will hold the full rights.

2022 Impairment of Other Intangibles

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

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

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

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

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

(see Note 3, Acquisitions and Divestitures ).

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.

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 foreign currency volatility.

As of December 31, 2024, our Russian operations had approximately $ 2.7 billion in total assets, excluding intercompany balances, of which approximately $ 1.0 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles).

Additionally, we hold a 23 % equity interest in JSC TK Megapolis, PMI's distributor in Russia.

For further details, see Note 4.

War in Ukraine , Note 6.

Related Parties – Equity Investments and Other , and Note 18.

Contingencies .

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 year ended December 31, 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.

This pre-tax impairment charge of $ 15 million was recorded within marketing, administration and research costs in the consolidated statements of earnings for the year ended December 31, 2023.

Related Parties - Equity Investments and Other:

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At December 31, 2024 and 2023, PMI received year-to-date dividends from equity method investees of $ 151 million and $ 57 million, respectively.

PMI holds a 23 % equity interest in Megapolis Distribution BV, the holding company of CJSC TK Megapolis, PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of December 31, 2023 had a carrying value of $ 385 million.

While as of December 31, 2023, there have been no impairment indicators based on the business’ performance, there are still risks related to this investment as the fair value of these assets is difficult to predict due to the volatility in foreign currency and commodity markets, supply chain, and current economic, political and social conditions.

For more information, see Note 4.

War in Ukraine .

Additionally, there was approximately $ 561 million of cumulative foreign currency translation losses associated with Megapolis Distribution BV reflected in accumulated other comprehensive losses in the consolidated statement of stockholders’ equity as of December 31, 2023.

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

("MDBV"), which was the holding company of JSC TK Megapolis (formerly CJSC TK Megapolis), pursuant to Dutch law, PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of December 31, 2024 had a carrying value of $ 264 million.

Additionally, there was approximately $ 633 million of cumulative foreign currency translation losses associated with MDBV reflected in accumulated other comprehensive losses in the consolidated statement of stockholders’ equity as of December 31, 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.

On August 8, 2024, the Arbitrazh Court of the Moscow Region granted the forced localization of MDBV as requested by the Ministry of Industry and Trade on July 18, 2024.

As a result, MDBV’s shares in JSC TK Megapolis were transferred to JSC TK Megapolis and subsequently transferred to the Russian subsidiary of its indirect shareholders during the fourth quarter of 2024.

As a result of the transfer of shares, PMI recorded a tax charge of $ 77 million, primarily reflecting additional deferred withholding taxes related to the JSC TK Megapolis pre-localization earnings and other adjustments of accumulated earnings of the Russian subsidiary.

As of December 31, 2024, there are risks related to this investment 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 foreign currency volatility.

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 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.

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 3.

Acquisitions and Divestitures .

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.

In relation to the acquisition, PMI subsequently entered into an agreement in August 2024 to guarantee certain credit facilities and repayment of certain bank loan liabilities.

The maximum amount of these guarantee obligations is $ 385 million and they will be in effect until 2034.

As of December 31, 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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As a result, PMI determined that it no longer had a controlling financial interest over RBH as defined in ASC 810 (Consolidation), and deconsolidated RBH as of the date of the CCAA filing.

For further details, see Note 18, Contingencies .

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

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

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

On October 17, 2024, the court-appointed mediator and monitor in the CCAA proceedings filed a proposed plan of compromise and arrangement (“Proposed Plan”) setting forth, among other things, certain terms of a proposed comprehensive resolution of Canadian tobacco claims and related litigation.

Under the resolution contemplated by the Proposed Plan, RBH, Imperial Tobacco Canada Limited ("ITL") and JTI Macdonald Corp ("JTIM") would pay an aggregate global settlement amount of CAD 32.5 billion (approximately $ 22.3 billion).

A significant determinative factor in the analysis of impairment indicators was the issue of allocation of CAD 32.5 billion aggregate settlement amount among RBH, ITL, and JTIM which remained unresolved at the time of filing.

There has been no agreed allocation under the Proposed Plan and there has been no ruling from the CCAA court on the matter.

On January 24, 2025, RBH filed an objection to approval of the Proposed Plan with the CCAA court (for further details, see Note 18.

Contingencies ).

Developments, including the positions taken by RBH in this objection and the positions taken by other parties in related filings narrowed the range of possible outcomes with respect to the allocation of the aggregate settlement amount of CAD 32.5 billion among RBH, ITL, and JTIM, which was determined to be an indicator that PMI’s investment in RBH may be impaired.

Although there remains some uncertainty as to the final terms of the Proposed plan, PMI evaluated its investment in RBH for potential impairment and concluded that the estimated fair value of its investment in RBH was lower than its carrying value.

As a result, PMI performed a quantitative valuation of its investment in RBH as of December 31, 2024, and recorded a non-cash impairment charge of $ 2,316 million in the consolidated statement of earnings for the year ended December 31, 2024, as a recognized subsequent event.

The fair value of PMI’s continuing investment in RBH of $ 714 million represented the estimated fair value of the underlying business, net of PMI’s best estimate of the share of the aggregate global settlement amount that could be allocated to RBH, and was determined based on an income approach using a discounted cash flow analysis.

In determining the fair value of PMI’s investment in RBH, PMI made various judgements, estimates and assumptions, the most significant of which were the discount rate, sales volumes and operating margins related to the fair value of the combustible tobacco product business in Canada.

In addition, significant estimates were made with respect to the allocation amount of the aggregate global

settlement amount among RBH, ITL and JTIM, as well as the deductibility of the settlement amount payment for income tax purposes in Canada.

All significant inputs used in the valuation are classified in Level 3 of fair value hierarchy.

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

53 unchanged sentences

137 8.6 283 8.9

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

$ 137 $ 1,968

23 unchanged sentences

Summary of Significant Accounting Policies .

Credit Facilities related to the Financing of the Swedish Match Acquisition

In connection with PMI's all-cash recommended public offer to the shareholders of Swedish Match, on May 11, 2022, PMI entered into a credit agreement relating to a 364 -day senior unsecured bridge facility.

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

Term Loan Facility related to the Financing of the Swedish Match Acquisition

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

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

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

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

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

On November 21, 2022 and February 17, 2023, PMI repaid $ 4.0 billion and $ 4.4 billion, respectively, under the bridge facility.

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

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 December 31, 2023 and 2022, the € 5.5 billion (approximately $ 6 billion) term loan facility was fully drawn and remained outstanding.

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

For further details on this acquisition, see Note 3.

Acquisitions .

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

On November 21, 2024, PMI prepaid approximately € 3 billion (approximately $ 3.2 billion), including outstanding principal and accrued interest, representing all borrowings outstanding under the 3 -year tranche of the senior unsecured term loan facility.

As of December 31, 2024, borrowings in the amount of € 2.5 billion (approximately $ 2.6 billion) under the 5 -year tranche of the term loan facility remained outstanding.

Notes Outstanding:

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$ 750 1.500 % May 2020 May 2025

$ 750 3.250 % November 2014 November 2024

$ 1,000 5.125 % November 2022 November 2024

$ 750 1.500 % May 2020 May 2025

$ 750 3.375 % August 2015 August 2025

4 unchanged sentences

$ 750 0.875 % November 2020 May 2026

$ 750 4.750 % February 2024 February 2027

$ 500 3.125 % August 2017 August 2027

$ 750 4.375 % November 2024 November 2027

$ 1,500 5.125 % November 2022 November 2027

$ 1,000 4.875 % February 2023 February 2028

3 unchanged sentences

$ 650 5.250 % September 2023 September 2028

$ 1,000 4.875 % February 2024 February 2029

$ 750 3.375 % May 2019 August 2029

$ 750 4.625 % November 2024 November 2029

$ 1,250 5.625 % November 2022 November 2029

$ 1,500 5.125 % February 2023 February 2030

4 unchanged sentences

$ 750 4.750 % November 2024 November 2031

$ 1,500 5.750 % November 2022 November 2032

$ 1,250 5.125 % February 2024 February 2031

$ 1,500 5.375 % February 2023 February 2033

(e) $ 750 5.375 % May 2023 February 2033

$ 1,000 5.625 % September 2023 September 2033

$ 1,750 5.250 % February 2024 February 2034

$ 750 4.900 % November 2024 November 2034

$ 1,500 6.375 % May 2008 May 2038

6 unchanged sentences

$ 500 4.250 % May 2016 November 2044

€ 600 (approximately $ 761 )

2.875 % May 2012 May 2024

€ 300 (approximately $ 308 )

0.875 % September 2016 September 2024

€ 500 (approximately $ 582 )

0.625 % November 2017 November 2024

(in millions)

Face Value Interest

Rate Issuance Maturity

€ 750 (approximately $ 972 )

6 unchanged sentences

1.200 % June 2021 November 2025

(in millions)

Face Value Interest

Rate Issuance Maturity

€ 1,000 (approximately $ 1,372 )

6 unchanged sentences

2.875 % May 2014 May 2029

EURO notes (g) € 500 (approximately $ 543 )

3.750 % June 2024 January 2031

€ 750 (approximately $ 835 )

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1.450 % August 2019 August 2039

Swiss franc notes

CHF 250 (approximately $ 283 )

1.625 % May 2014 May 2024

Swedish krona notes (c)

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

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

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

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

For further details on PMI's agreement with Altria, see Note 3.

Acquisitions .

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

The net proceeds from the sale of the securities listed in the table above were primarily used for general corporate purposes, including working capital requirements, repayment of commercial paper, and to refinance certain of our outstanding notes.

On November 21, 2024, PMI financed the prepayment of the 3 -year tranche of the senior unsecured term loan facility with the proceeds of the November 2024 bond issuances and cash on hand.

Aggregate maturities:

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Total facilities

(1) On January 24, 2024, PMI entered into an agreement to extend the term of its 364 -day committed revolving credit facility in the amount of $ 1.7 billion from January 30, 2024, to January 28, 2025.

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

2 unchanged sentences

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

On December 17, 2024, PMI entered into a credit agreement, effective January 29, 2025, relating to a senior unsecured revolving credit facility with borrowings up to an aggregate principal amount of € 1.5 billion, (approximately $ 1.6 billion) expiring on January 29, 2028.

Concurrently, PMI did not request an extension of the maturity date of the existing 364 -day revolving credit facility and the facility matured on January 28, 2025.

At December 31, 2024, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.

11 unchanged sentences

Balances, December 31, 2022 2,109,316,331 ( 559,098,620 ) 1,550,217,711

Repurchase of shares ( 1,966,730 ) ( 1,966,730 )

Issuance of stock awards 2,206,820 2,206,820

Balances, December 31, 2023 2,109,316,331 ( 556,891,800 ) 1,552,424,531

Repurchase of shares — —

Issuance of stock awards 2,421,069 2,421,069

Balances, December 31, 2024 2,109,316,331 ( 554,470,731 ) 1,554,845,600

On June 11, 2021, PMI's Board of Directors authorized a new share repurchase program of up to $ 7 billion, with target spending of $ 5 billion to $ 7 billion over a three-year period.

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

On June 11, 2021, PMI's Board of Directors authorized a share repurchase program of up to $ 7 billion, with target spending of $ 5 billion to $ 7 billion over a three-year period that commenced in July 2021.

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

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

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

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

For further details, see Note 3.

Acquisitions .

Acquisitions and Divestitures.

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

The three-year share repurchase program expired on July 21, 2024.

At December 31, 2024, 27,288,770 shares of common stock were reserved for stock awards under PMI’s stock plans, and 250 million shares of preferred stock, without par value, were authorized but unissued.

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

• Operational Sustainability ( 10 % weight) measuring progress on PMI's efforts to benefit PMI and its stakeholders by tackling climate change, preserving nature, improving the quality of life of people in its supply chain, and fostering an empowered, and inclusive workplace.

The performance metrics, targets and relative weights for the PSU’s granted during 2024 were the same as the PSU’s granted during 2023 and 2022, with the exception of adjustments made to certain components of the Sustainability Index intended to address PMI's developing sustainability strategy and reporting.

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

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

80 unchanged sentences

$ 3,017 $ 2,339 $ 2,244

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

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

As of December 31, 2023, PMI has determined that the Act had no tax impacts on its consolidated financial statements.

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

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

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

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

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 did not have a material impact on its 2024 consolidated financial statements.

At December 31, 2017, PMI recorded a one-time transition tax liability on its accumulated foreign earnings, which is payable over an eight-year period beginning in 2018.

At December 31, 2023 and December 31, 2022, $ 0.3 billion and $ 0.7 billion of PMI's remaining long-term portion of transition tax liability, respectively, was recorded in "income taxes and other liabilities" on PMI's consolidated balance sheets.

At December 31, 2023, applicable U.S.

federal income taxes have not been provided on approximately $ 0.6 billion of accumulated earnings of Swedish Match subsidiaries that are expected to be permanently reinvested.

At December 31, 2023, $ 0.3 billion of PMI's remaining long-term portion of transition tax liability was recorded in "income taxes and other liabilities" on PMI's consolidated balance sheets.

At December 31, 2024, PMI had no remaining long-term portion of transition tax liability as the final transition tax payment is anticipated to be made in the second quarter of 2025.

At December 31, 2024 and 2023, applicable U.S.

federal income taxes have not been provided on approximately $ 1.6 billion and $ 0.6 billion, respectively, of accumulated earnings of Swedish Match U.S.

subsidiaries that are expected to be permanently reinvested.

PMI does not foresee a need to repatriate these earnings since its U.S.

cash requirements are supported by distributions of earnings from PMI foreign entities that have not been designated as permanently reinvested and existing credit facilities.

At December 31, 2023, PMI has determined the amount of deferred tax liabilities related to these unremitted Swedish Match earnings is approximately $ 71 million.

At December 31, 2024 and 2023, PMI has determined the amount of deferred tax liabilities related to these unremitted Swedish Match U.S.

earnings was approximately $ 192 million and $ 71 million, respectively.

At December 31, 2024 and 2023, U.S.

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Years still open to examination by foreign tax authorities in major jurisdictions include Germany (2018 onward), Indonesia (2019 onward), Italy (2019 onward), Russia (2021 onward) and Switzerland (2020 onward).

At December 31, 2023, subsidiaries of PMI in Indonesia, principally PT Hanjaya Mandala Sampoerna Tbk ("HMS"), have recorded income tax receivables in the amount of 4.0 trillion Indonesian rupiah (approximately $ 255 million) relating to corporate income tax assessments paid to avoid potential penalties, primarily for domestic and other intercompany transactions for the years 2014 to 2020.

Subsidiaries of PMI in Indonesia, principally PT Hanjaya Mandala Sampoerna Tbk ("HMS"), have recorded income tax receivables in the amount of 4.0 trillion Indonesian rupiah (approximately $ 249 million) relating to corporate income tax assessments paid to avoid potential penalties, primarily for domestic and other intercompany transactions for the years 2015 to 2021.

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 consolidated balance sheets at December 31, 2023.

These income tax receivables are included in other assets in PMI’s consolidated balance sheets at December 31, 2024 and 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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Unremitted earnings of Russian subsidiaries 0.6 1.7 —

Fair value adjustment of equity securities 1.1 0.1 0.1

Other ( 0.3 ) ( 0.8 ) ( 0.5 )

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The change in the effective tax rate for 2024, as compared to 2023, was unfavorably impacted by:

(i) an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI;

and (iii) a deferred tax charge for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the consolidated statements of earnings, while the underlying pre-tax foreign currency movements fully offset in the consolidated statements of earnings and were reflected as currency translation adjustments in its consolidated statements of stockholders' (deficit) equity, partially offset by:

(i) a lower deferred tax charge in 2024 related to the unremitted earnings of PMI's Russian subsidiaries as compared to the 2023 charge following the suspension of certain double tax treaties;

(ii) the non-deductible Wellness and Healthcare goodwill impairment charge recorded in 2023;

and (iii) a U.S.

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

Tabacalera Nacional, a wholly owned foreign corporation incorporated in Venezuela.

For further details on PMI's ceased operations in Venezuela and the impairment loss related to the sale of Vectura Group, see Note 20.

Restructuring Activities and Note 3.

Acquisitions and Divestitures , respectively.

The 2023 effective tax rate increased 3.1 percentage points to 22.4 %.

The change in the effective tax rate for 2023, as compared to 2022, was unfavorably impacted by:

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

(ii) the non-deductible Wellness and Healthcare goodwill impairment charge and (iii) an increase in foreign tax credit limitation related to GILTI, partially offset by changes in earnings mix by taxing jurisdiction.

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

The change in the effective tax rate for 2022, as compared to 2021, was favorably impacted by changes in income tax reserves, a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the consolidated statements of earnings ($ 203 million), while the underlying pre-tax foreign currency movements fully offset in the consolidated statements of earnings and were reflected as currency translation adjustments in its consolidated statements of stockholders' (deficit) equity, and by a reduction in deferred tax liabilities related to pension plan assets ($ 40 million), partially offset by an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($ 10 million).

For further details, see Note 6.

Related Parties - Equity Investments and Other .

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

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Net operating loss, tax credit, and other carryforwards 912 501

Investments in equity interests 507 80

Foreign exchange — 149

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Foreign exchange ( 264 ) —

Other — ( 32 )

Total deferred income tax liabilities

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

Excluding the Wellness and Healthcare segment and the 2022 acquisition of Swedish Match, PMI's segments are generally organized by geographic region and managed by segment managers who are responsible for the operating and financial results of the regions inclusive of combustible tobacco and smoke-free product categories sold in the region.

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

The four geographical segments are as

Excluding the Wellness and Healthcare segment, PMI's segments are generally organized by geographic region and managed by segment managers who are responsible for the operating and financial results of the regions inclusive of combustible tobacco and smoke-free product categories sold in the region.

As discussed in Note 1.

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

The four geographical segments are as follows:

Europe Region;

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and Americas Region.

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

The Wellness and Healthcare segment reflects the operating results of Vectura Fertin Pharma.

For further details on these acquisitions, see Note 3.

Acquisitions .

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

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

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

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

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

The Wellness and Healthcare segment remains unchanged.

PMI’s Chief Executive Officer, who is the chief operating decision maker ("CODM") evaluates geographical segment performance based on the regional operating income, which includes results from all product categories sold in each region, excluding Wellness and Healthcare products.

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

The CODM reviews short-term and long-term trends, forecasts, and budget-to-actual variances to assess geographical segment performance and to allocate resources.

Interest expense, net, and provision for income taxes are centrally managed and, accordingly, such items are not presented

by segment since they are excluded from the measure of segment profitability reviewed by management.

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

Segment goodwill and other intangible assets, net, are disclosed in Note 5.

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Summary of Significant Accounting Policies .

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

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

PMI disaggregates its net revenues from contracts with customers by product category for each of PMI's four geographical segments, except the Wellness and Healthcare business.

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

Net revenues by segment were as follows:

For the Years Ended December 31,

(in millions) 2023 2022 2021

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

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

For further details, see Note 23.

New Accounting Standards .

Net revenues, significant expenses, and operating income (loss) by segment were as follows:

(in millions) Europe SSEA, CIS & MEA EA, AU & PMI DF Americas Wellness & Healthcare Total

For the Year Ended December 31, 2024

Net revenues $ 15,357 $ 11,261 $ 6,393 $ 4,534 $ 333 $ 37,878

Europe $ 13,598 $ 12,869 $ 13,155

SSEA, CIS & MEA

10,629 10,467 9,858

EA, AU & PMI DF

6,201 5,936 6,448

Americas 1,944 1,903 1,843

Swedish Match 2,496 316 —

Wellness and Healthcare 306 271 101

Cost of sales 4,206 5,313 2,011 1,531 268 13,329

Marketing, administration and research costs 4,213 2,519 1,504 2,455 456 11,147

Operating income (loss) $ 6,938 $ 3,429 $ 2,878 $ 548 $ ( 391 ) $ 13,402

For the Year Ended December 31, 2023

Net revenues $ 14,231 $ 10,629 $ 6,201 $ 3,807 $ 306 $ 35,174

Cost of sales 4,045 5,109 1,978 1,485 276 12,893

Marketing, administration and research costs 4,017 2,384 1,684 1,740 235 10,060

Impairment of goodwill — — — — 665 665

Operating income (loss) $ 6,169 $ 3,136 $ 2,539 $ 582 $ ( 870 ) $ 11,556

For the Year Ended December 31, 2022

Net revenues $ 12,972 $ 10,467 $ 5,936 $ 2,116 $ 271 $ 31,762

Cost of sales 3,656 4,343 2,026 1,036 341 11,402

Marketing, administration and research costs 3,540 2,260 1,486 640 188 8,114

Operating income (loss) $ 5,776 $ 3,864 $ 2,424 $ 440 $ ( 258 ) $ 12,246

Total net revenues attributable to customers located in Japan, PMI's largest market in terms of net revenues, were $ 4.1 billion, $ 3.9 billion and $ 3.9 billion in 2024, 2023 and 2022, respectively.

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(in millions) 2024 2023 2022

Combustible tobacco products:

Combustible tobacco:

Europe $ 8,599 $ 8,037 $ 7,694

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Americas 2,255 2,299 1,874

Swedish Match 431 70 —

Total combustible tobacco products 22,334 21,572 22,067

Smoke-free products:

Smoke-free products excluding Wellness and Healthcare:

Total combustible tobacco 23,218 22,334 21,572

Smoke-free excluding Wellness and Healthcare:

Europe 6,758 6,194 5,278

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Americas 2,279 1,508 242

Swedish Match 2,065 246 —

Total smoke-free products excluding Wellness and Healthcare 12,534 9,919 9,237

Total Smoke-free excluding Wellness and Healthcare 14,327 12,534 9,919

Wellness and Healthcare 333 306 271

Total smoke-free products 12,840 10,190 9,338

Total Smoke-free 14,660 12,840 10,190

Total PMI net revenues $ 37,878 $ 35,174 $ 31,762

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

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

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

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

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

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

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

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

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

Operating income (loss) by segment were as follows:

For the Years Ended December 31,

(in millions)

2023 2022 2021

Operating income (loss):

Europe $ 6,012 $ 5,802 $ 6,409

SSEA, CIS & MEA

3,047 3,864 3,295

EA, AU & PMI DF

2,481 2,424 2,836

Americas 62 436 487

Swedish Match 824 ( 22 ) —

Wellness and Healthcare ( 870 ) ( 258 ) ( 52 )

Operating income

$ 11,556 $ 12,246 $ 12,975

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

These net revenue amounts consist of the sale of PMI's products that are not combustible tobacco products, such as heat-not-burn, e-vapor, and oral products, as well as consumer accessories.

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

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

• Egypt sales tax charge – In the third quarter of 2024, following a ruling issued by the Higher Administrative Court in Egypt and subsequent evaluation of available remedies, PMI concluded that an adverse outcome was probable and recorded a pre-tax charge of $ 45 million in relation to tax assessments for general sales tax deducted on imported cutfiller for the years 2014 to 2016.

This pre-tax charge was recorded in marketing, administration and research costs in the consolidated statement of earnings for the year ended December 31, 2024, and was included in the SSEA, CIS & MEA segment results.

• Loss on sale of Vectura Group – In September 2024, PMI announced the execution of a definitive agreement to sell Vectura to Molex Asia Holdings Ltd.

On December 31, 2024, we completed the sale.

The sale resulted in a pre-tax loss of $ 199 million.

This pre-tax loss was recorded in marketing, administration and research costs in the consolidated statement of earnings for the year ended December 31, 2024, and was included in the Wellness and Healthcare segment results.

For further details, see Note 3.

Acquisitions and Divestitures .

• Restructuring charges - See Note 20.

Restructuring Activities for details of the $ 180 million and $ 109 million pre-tax charges for the year ended December 31, 2024 and 2023, respectively, as well as a breakdown of these costs by segment.

• 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 consolidated statements of earnings, and was included in the SSEA, CIS & MEA segment results for the year ended December 31, 2023.

• Impairment of goodwill and other intangibles – For the year ended December 31, 2023, PMI recorded $ 680 million of goodwill and non-amortizable intangible assets impairment charges that was included in the Wellness and Healthcare segment.

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Goodwill and Other Intangible Assets, net .

• South Korea indirect tax charge – See Note 18.

Contingencies for details of the $ 204 million pre-tax charge included in the EA, AU & PMI DF segment results for the year ended December 31, 2023.

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

War in Ukraine for details of the $ 53 million and $ 151 million pre-tax charges in the Europe segment for the years ended December 31, 2023 and 2022, respectively.

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

Acquisitions for details of the $ 18 million and $ 125 million pre-tax purchase accounting adjustments related to the sale of acquired inventories stepped up to fair value included in the Swedish Match segment for the years ended December 31, 2023 and 2022, respectively.

• Asset impairment and exit costs - See Note 20.

Asset Impairment and Exit Costs for details of the $ 109 million and $ 216 million pre-tax charges for the year ended December 31, 2023 and 2021, respectively, as well as a breakdown of these costs by segment.

• 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 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 year ended December 31, 2023.

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

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and Americas ($ 15 million).

• Saudi Arabia customs assessments - In June 2021, PMI recorded a pre-tax charge of $ 246 million in relation to additional customs duties in Saudi Arabia assessed for the periods of 2014 through 2020 in line with existing and contemplated arrangements with our distributors.

In accordance with U.S.

GAAP, the charge was recorded as a reduction in net revenues of combustible tobacco products included in the SSEA, CIS & MEA segment for the year ended December 31, 2021.

• Asset acquisition cost - See Note 3.

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

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

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

War in Ukraine for details of the $ 53 million and $ 151 million pre-tax charges in the Europe segment for the years ended December 31, 2023 and 2022, respectively.

• Swedish Match AB acquisition accounting related items – See Note 3.

Acquisitions and Divestitures for details of the $ 18 million and $ 125 million pre-tax purchase accounting adjustments related to the sale of acquired inventories stepped up to fair value.

These pre-tax purchase accounting adjustments were included in the Americas segment ($ 18 million in 2023 and $ 77 million in 2022) and the Europe segment ($ 48 million in 2022).

Other segment data were as follows:

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Americas 748 387 97

Swedish Match 447 34 —

Wellness and Healthcare 84 85 34

Wellness & Healthcare 70 84 85

Total depreciation and amortization expense

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Americas 280 57 92

Swedish Match 127 15 —

Wellness and Healthcare 34 45 28

Wellness & Healthcare 53 34 45

Total capital expenditures

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other intangible assets, net;

deferred tax assets, equity investments, financial instruments and payment under the agreement with Altria Group, Inc., see Note 3, Acquisitions and Note 18, Contingencies .

deferred tax assets, equity investments, financial instruments and payment under the agreement with Altria Group, Inc., see Note 3, Acquisitions and Divestitures and Note 18, Contingencies .

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

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Interest cost

234 258 13 12

Benefits paid

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( 708 ) 763 5 ( 4 )

Acquisition of Swedish Match — 316 — 85

( 26 ) ( 51 ) ( 6 ) ( 6 )

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Actual return on plan assets

643 ( 1,061 ) — —

Employer contributions, net of refunds

21 ( 3 ) 13 9

Employee contributions

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( 600 ) 639 1 —

Acquisition of Swedish Match — 303 — 3

Other ( 17 ) 1 — —

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based defined benefit retirement plans.

At December 31, 2023 , actuarial losses (gains) consisted primarily of losses for assumption changes related to lower discount rates year-over-year for Swiss, German and Dutch plans.

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

At December 31, 2024, actuarial losses (gains) consisted primarily of losses for assumption changes related to lower discount rates year-over-year for the Swiss plan.

At December 31, 2023, actuarial losses (gains) consisted primarily of losses for assumption changes related to lower discount rates year-over-year for the Swiss, German and Dutch plans.

At December 31, 2024 and 2023, the Swiss pension plan represented 69 % and 67 % of the benefit obligation, respectively, and approximately 63 % and 62 % of the fair value of plan assets at December 31, 2024 and 2023, respectively.

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Settlement and curtailment charges were due primarily to employee severance and early retirement programs.

All of the amounts in the table above, other than service cost, are recognized in pension and other employee benefit costs in the consolidated statement of earnings.

The following weighted-average assumptions were used to determine PMI’s net pension and postretirement health care costs:

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Investment funds measured at net asset value (b)

(a) Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan, Emerging Markets for equities, and FTSE EMU, FTSE Non-EGBI EuroBIG, SBI AAA-BBB and JP Morgan EMBI for bonds), primarily consist of mutual funds, common trust funds and commingled funds.

(a) Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan, Emerging Markets and Small Cap for equities / FTSE EMU, FTSE Non-EGBI EuroBIG, SBI AAA-BBB and JP Morgan EMBI for bonds / SXI Real Estate and KGAST for real estate) , primarily consist of mutual funds, common trust funds and commingled funds.

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

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Investment funds measured at net asset value (b)

(a) Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI — Europe, Switzerland, North America, Asia Pacific, Japan;

Russell 3000, S&P 500 for equities and Citigroup EMU, Citigroup Non-EGBI EuroBIG, SBI AAA-BBB and JP Morgan EMBI for bonds), primarily consist of mutual funds, common trust funds and commingled funds.

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

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Prior service cost (credit)

( 6 ) — — ( 6 )

Net transition obligation (asset)

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( 24 ) 2 30 8

94 — ( 101 ) ( 7 )

Total movements in other comprehensive earnings (losses)

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Prior service cost (credit)

( 4 ) — — ( 4 )

Net transition obligation (asset)

Other income/expense:

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Prior service cost (credit)

( 4 ) — — ( 4 )

Other income/expense:

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Financial Instruments:

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

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

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

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

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

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

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

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

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

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PMI assesses the fair value of its derivative contracts using standard valuation models that use, as their basis, readily observable market inputs.

The fair value of PMI’s foreign exchange forward contracts, foreign currency swaps and interest rate contracts is determined by using the prevailing foreign exchange spot rates and interest rate differentials, and the respective maturity dates of the

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

The fair value of PMI’s currency options is determined by using a Black-Scholes methodology based on foreign

exchange spot rates and interest rate differentials, currency volatilities and maturity dates.

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.

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Foreign exchange contracts 867 ( 788 ) 300 Interest expense, net (c)

Marketing, administration and research costs 35 — —

Derivative contracts not designated as hedging instruments:

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

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

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

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

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

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 consolidated statements of cash flows.

Fair Value Hedges

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

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of December 31, 2023 was $ 937 million, and is recorded in long-term debt in the consolidated balance sheets.

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of December 31, 2024 was $ 2,941 million, of which $ 346 million was recorded in current portion of long-term debt and $ 2,595 million was recorded in long-term debt in the consolidated balance sheets.

The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $ 42 million as of December 31, 2024.

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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 $ 99 million , $ 48 million and $ 521 million, for the years ended December 31, 2024, 2023 and 2022, respectively.

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

Settlements of the derivative contracts designated as net investment hedges are included in cash flows from investing activities on PMI’s consolidated statements of cash flows.

Other Derivatives

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

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

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

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

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

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

Qualifying Hedging Activities Reported in Accumulated Other Comprehensive Losses

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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.

Other Investments

Certain PMI investments, which are comprised of held-to-maturity U.S.

dollar denominated bonds in Argentina, have been classified within Level 1 and had a fair value of $ 125 million at December 31, 2024.

For the year ended December 31, 2024, the gross unrecognized holding losses on these investments were $ 7 million.

Accumulated Other Comprehensive Losses:

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For additional information, see Note 3.

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

Acquisitions and Divestitures and Note 20 Restructuring Activities for disclosures related to the reclassification of accumulated foreign currency translation losses from other comprehensive losses, Note 14.

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

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Contingencies:

Tobacco-Related Litigation

Tobacco and/or Nicotine-Related Litigation

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

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

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

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

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

Damages claimed in some of the tobacco-related litigation are significant and, in the case of the "Health Care Cost Recovery

Litigation" described below, could range into the billions of U.S.

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

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

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

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

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

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

At the present time, except as stated otherwise in this Note 18.

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

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

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

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

Legal defense costs are expensed as incurred.

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

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

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

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

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

After assessing the information available to it, except as stated otherwise in this Note 18.

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

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

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

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

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

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

(“RBH”), and the other defendants, JTI Macdonald Corp.

("JTIM"), and Imperial Tobacco Canada Limited ("ITL"), sought protection in the Ontario Superior Court of Justice under the Companies’ Creditors Arrangement Act (“CCAA”) on March 22, March 8, and March 12, 2019, respectively.

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

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

As part of the CCAA proceedings, there is currently a comprehensive stay up to and including March 29, 2024 of all tobacco-related litigation pending in Canada against RBH and the other defendants, including PMI and our indemnitees (PM USA and Altria), namely, the smoking and health class actions filed in various Canadian provinces and health care cost recovery actions.

As part of the CCAA proceedings, there is currently a comprehensive stay up to and including March 3, 2025 or the date on which the CCAA court issues an order on the Sanction Motion (discussed below) of all combustible tobacco product-related litigation pending in Canada against RBH and the other defendants, including PMI and our indemnitees (PM USA and Altria), namely, the smoking and health class actions filed in various Canadian provinces and health care cost recovery actions.

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

has been appointed as monitor of RBH in the CCAA proceedings.

In accordance with the CCAA process, as the parties work towards a plan of arrangement or compromise in a confidential mediation, it is anticipated that the court will set additional hearings and further extend the stay of proceedings.

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

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

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

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

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

The court-appointed mediator and monitors also filed substantially similar proposed plans for ITL and JTIM.

Under the resolution contemplated by the Proposed Plan, RBH, ITL and JTIM (together, the “Companies”) would pay an aggregate global settlement amount of CAD 32.5 billion (approximately $ 22.3 billion).

This amount would be funded by an upfront payment equal to the companies’ cash and cash equivalents on hand plus court deposits (subject to an aggregate withholding of CAD 750 million (approximately $ 514 million) of working capital) and annual payments based on a percentage of the Companies’ aggregate net income after taxes (excluding that generated by alternative products such as heat-not-burn, nicotine pouches, and e-vapor) until the global settlement amount is paid in full.

As stated in the Proposed Plan, the issue of allocation of the CAD 32.5 billion aggregate settlement amount among RBH, ITL, and JTIM ("Allocation Issue") remains unresolved.

RBH and its affiliates, including PMI and its indemnitees, would obtain a release of claims relating to the manufacture, marketing, sale, or use of or exposure

to, RBH’s combustible and traditional smokeless tobacco products based on conduct prior to the effective date of the Proposed Plan;

related litigation would also be dismissed—including those actions described in the section below entitled “ Stayed Litigation – Canada .” Alternative product businesses (including heat-not-burn, e-vapor, and nicotine pouches) would be transferred to an RBH affiliate or otherwise maintained separately from RBH's combustible business.

The Proposed Plan also contains a number of operating covenants that would govern RBH’s business going forward until the settlement amount has been paid.

On January 15, 2025, RBH’s court-appointed monitor filed a motion seeking an order by the CCAA court approving and sanctioning the Proposed Plan and authorizing and directing the monitor, among others, to take all steps and actions necessary and appropriate to implement the Proposed Plan (“Sanction Motion” and the requested order, the “Proposed Sanction Order”).

On January 24, 2025, RBH filed an objection to the Sanction Motion (“RBH Objection”).

The RBH Objection argues that the Proposed Plan cannot be approved because it fails to resolve the Allocation Issue.

The RBH Objection also states that, without an appropriate, fair and reasonable resolution of the Allocation Issue, RBH cannot presently consent to implementation of the Proposed Plan.

To address the Allocation Issue, the RBH Objection seeks to amend the Proposed Sanction Order to include provisions (the “Proposed Allocation Provisions”) requiring that ITL and JTIM make payments to RBH from their retained working capital and net income after taxes over a period of years.

ITL, JTIM, and certain claimant groups have opposed the Proposed Allocation Provisions set forth in the RBH Objection.

A judicial hearing to consider approval of the Proposed Plan, including the Sanction Motion, the RBH Objection and the Proposed Allocation Provisions, was held from January 29 through January 31, 2025.

Further hearing dates may be scheduled.

A decision from the CCAA court on whether and what form to sanction the Proposed Plan is expected in the first quarter.

If ultimately approved by the CCAA court and, among other things, not subject to appeal, implementation of the Proposed Plan is expected in 2025.

For additional information concerning the fair value of PMI’s continuing investment in RBH and the impairment charge recorded in the Company’s consolidated statement of earnings for the year ended December 31, 2024, as a recognized subsequent event, see Item 8, Note 6.

Related Parties – Equity Investments and Other .

Stayed Litigation — Canada

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

and JTI-Macdonald Corp.) are defendants.

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

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

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The Court of Appeal further held that the plaintiffs either need not prove, or had adequately proven, that these faults were a cause of the class members’ injuries.

In accordance with the judgment, defendants were required to deposit their respective portions of the damages awarded in

both the Létourneau case described below and the Blais case, approximately CAD 1.1 billion (approximately $ 813 million), into trust accounts within 60 days.

In accordance with the judgment, defendants were required to deposit their respective portions of the damages awarded in both the Létourneau case described below and the Blais case, approximately CAD 1.1 billion (approximately $ 754 million), into trust accounts within 60 days.

RBH’s share of the deposit was approximately CAD 257 million (approximately $ 194 million).

PMI recorded a pre-tax charge of $ 194 million in its consolidated results, representing $ 142 million net of tax, as tobacco litigation-related expense, in the first quarter of 2019.

PMI recorded a pre-tax charge of $ 194 million in its consolidated results, representing $ 142 million net of tax, as tobacco litigation-related

expense, in the first quarter of 2019.

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

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

and JTI-Macdonald Corp.) are defendants.

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

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

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Rothmans, Benson & Hedges, Inc., et al., The Queen's Bench, Winnipeg Judicial Centre, Canada , filed May 31, 2012, 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 Manitoba based on legislation enacted in the province that is similar to the laws enacted in several other Canadian

The claim was filed by the government of the province of Manitoba based on legislation enacted in the province that is similar to the laws enacted in several other Canadian provinces.

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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The table below lists the number of tobacco-related cases pertaining to combustible products pending against us and/or our subsidiaries or indemnitees as of December 31, 2023, December 31, 2022 and December 31, 2021:

Type of Case 1

Number of Cases Pending as of December 31, 2023 Number of Cases Pending as of December 31, 2022 Number of Cases Pending as of December 31, 2021

Individual Smoking and Health Cases 45 40 40

Smoking and Health Class Actions 9 9 9

Health Care Cost Recovery Actions 17 17 17

Label-Related Class Actions — — —

Individual Label-Related Cases 4 6 3

Public Civil Actions 1 1 1

¹ Includes cases pending in Canada.

Since 1995, when the first tobacco-related litigation was filed against a PMI entity, 544 Smoking and Health, Label-Related, Health Care Cost Recovery, and Public Civil Actions in which we and/or one of our subsidiaries and/or indemnitees were a defendant have been terminated in our favor.

Fifteen cases have had decisions in favor of plaintiffs.

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

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

Date Location of

Court/Name of

Plaintiff Type of

Case Verdict Post-Trial

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

Class Action On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Blais class on liability and found the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $ 11.5 billion), including pre-judgment interest.

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

The trial court awarded CAD 90,000 (approximately $ 67,000 ) in punitive damages, allocating CAD 30,000 (approximately $ 22,000 ) to our subsidiary.

The trial court ordered defendants to pay CAD 1 billion (approximately $ 740 million) of the compensatory damage award, CAD 200 million (approximately $ 148 million) of which is our subsidiary’s portion, into a trust within 60 days.

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

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

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

Date Location of

Court/Name of

Plaintiff Type of

Case Verdict Post-Trial

May 27, 2015 Canada/Cecilia Létourneau

Class Action On May 27, 2015, the Superior Court of the District of Montreal, Province of Quebec ruled in favor of the Létourneau class on liability and awarded a total of CAD 131 million (approximately $ 97 million) in punitive damages, allocating CAD 46 million (approximately $ 34 million) to RBH.

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

The court did not order the payment of compensatory damages.

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

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

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

Date Location of

Court/Name of

Plaintiff Type of

Case Verdict Post-Trial

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

14 - Mar del Plata, issued a verdict in favor of plaintiff, an individual smoker, and awarded him ARS 110,000 (approximately $ 133 ), plus interest, in compensatory and moral damages.

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

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

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

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

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

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

Date Location of

Court/Name of

Plaintiff Type of

Case Verdict Post-Trial

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

9 - Mar del Plata, issued a verdict in favor of plaintiff, an individual smoker, and awarded her smoking cessation treatments, ARS 150,000 (approximately $ 181 ), in compensatory and moral damages, and ARS 4,000,000 (approximately $ 4,825 ) in punitive damages, plus interest and costs.

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

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

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

As required by local law, our subsidiary deposited the damages awarded, plus interest and costs, in total ARS 6,114,428 (approximately $ 7,375 ), into a court escrow account.

Our subsidiary challenged the amount determined by the court.

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

As a result, on December 16, 2021, ARS 893,428 (approximately $ 1,078 ) was returned to our subsidiary.

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

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

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

Date Location of

Court/Name of

Plaintiff Type of

Case Verdict Post-Trial

June 23, 2023 Turkey/ Senem Yilmazel Individual Action On June 23, 2023, the Ankara Consumer Court published its decision in favor of plaintiff, the daughter of an individual smoker, against our subsidiary and a BAT subsidiary, awarding her TRY 10,000 (approximately $ 327 ) in damages.

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

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

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

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

Smoking and Health Litigation:

These cases primarily allege personal injury and are brought by individual plaintiffs or on behalf of a class or purported class of individual plaintiffs.

Combustible tobacco products litigation

Since 1995, more than 600 combustible tobacco product-related cases, including smoking and health, label-related, health care cost recovery, and public civil actions, have been filed by governmental entities or individual plaintiffs, or on behalf of a class or purported class of individual plaintiffs against a PMI entity.

All resolved cases have been terminated in our favor and only a small number of cases remain pending.

The pending cases include nine proposed class actions, 17 health care cost recovery cases, one public civil action, and individual cases.

The amounts at issue in the pending individual cases would not have a material adverse effect on our consolidated financial statements, including our results of operations, cash flows, or financial position.

Of the pending combustible tobacco product-related cases, four were initially decided in favor of plaintiffs and remain on appeal, or are subject to an appeal.

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

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

Smoking and Health Proposed Class Actions:

These cases primarily allege personal injury and are brought by individual plaintiffs on behalf of a class or purported class of individual plaintiffs.

Plaintiffs' allegations of liability in these cases are based on various theories of recovery, including negligence, gross negligence, strict liability, fraud, misrepresentation, design defect, failure to warn, breach of express and implied warranties, violations of deceptive trade practice laws and consumer protection statutes.

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

• 45 cases brought by individual plaintiffs in Argentina ( 31 ), Canada ( 2 ), Chile ( 11 ) , and Turkey ( 1 ), compared with 40 such cases on December 31, 2022, and 40 cases on December 31, 2021;

• 9 cases brought on behalf of classes of individual plaintiffs, compared with 9 such cases on December 31, 2022 and 9 such cases on December 31, 2021.

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

As of December 31, 2024, there were nine cases brought on behalf of classes of individual plaintiffs pending against us, our subsidiaries or indemnitees, compared with nine such cases on December 31, 2023, and nine such cases on December 31, 2022, and such cases are described above under the caption “ Smoking and Health Litigation — Canada.

Health Care Cost Recovery Litigation:

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

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

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

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

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

Label-Related Cases:

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

Plaintiffs' 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 December 31, 2023, 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 December 31, 2022, and 3 such cases on December 31, 2021.

The plaintiff's appeal remains pending.

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 December 31, 2023, there was 1 public civil action pending against our subsidiary in Venezuela ( 1 ), compared with 1 such case on December 31, 2022, and 1 such case on December 31, 2021.

As of December 31, 2024, there was one public civil action pending against our subsidiary in Venezuela ( 1 ), compared with one such case on December 31, 2023, and one such case on December 31, 2022.

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

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In February 2013, our subsidiary answered the complaint.

Government Matter:

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

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

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

PMI was not a defendant in that proceeding.

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

prohibiting express or implied health statements for any cigarette brand;

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

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

government has informed Altria that it believes 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.

While we do not know the specific relief the U.S.

government may seek from the court, 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 February 27, 2024, the Attorney General of Venezuela filed, on behalf of defendants, a motion to dismiss the case for lack of prosecution.

Smoke-Free Products-Related Litigation

Claims have been filed against PMI and one or more subsidiaries related to ZYN nicotine pouches.

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

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

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

Philip Morris International Inc., et al.

, filed on 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 " Kelly class action").

The complaint named PMI and Swedish Match North America LLC as defendants.

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

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

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

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

On August 20, 2024, the court granted Swedish Match North America LLC’s motion to dismiss the fraud claim and plaintiff’s request for medical monitoring, but denied the motion to dismiss other claims, denied PMI’s motion to dismiss without prejudice, and granted plaintiff’s request to conduct jurisdictional discovery.

On December 4, 2024, plaintiff filed an amended complaint against PMI and Swedish Match North America LLC and added three additional entities as named defendants:

Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc.

On December 18, 2024, PMI, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc., filed motions to dismiss the amended complaint with prejudice, and Swedish Match North America LLC filed a motion to dismiss the fraud claim.

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.

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

Philip Morris International Inc., et al.

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

The complaint named PMI and Swedish Match North America LLC as defendants.

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

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

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

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.

On August 5, 2024, plaintiff voluntarily dismissed his claim against PMI without prejudice.

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

Philip Morris International Inc., et al.

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

The complaint named PMI and Swedish Match North America LLC as defendants.

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

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

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

On December 4, 2024, plaintiff filed an amended complaint against PMI and Swedish Match North America LLC and added three additional entities as named defendants:

Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc.

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

Philip Morris International Inc., et al ., filed July 30, 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 complaint named PMI and Swedish Match North America LLC as defendants.

On September 19, 2024, the court granted the parties’ joint motion to apply its decisions on the motions to dismiss in Palmer to the Lendinara matter, including granting plaintiff’s request to conduct jurisdictional discovery and setting the same timeline for plaintiff to amend his complaint.

On December 4, 2024, plaintiff filed an amended complaint against PMI and Swedish Match North America LLC and added three additional entities as named defendants:

Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc.

In the fifth case, a putative class action, Norris v.

Philip Morris International Inc., et al ., filed July 30, 2024, before United States District Court for the District of Connecticut, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches.

The complaint named PMI and Swedish Match North America LLC as defendants.

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

Plaintiff asserts unjust enrichment, and breach of consumer protection, unfair trade 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 September 24, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice, and a motion to stay discovery.

On October 2, 2024, Plaintiff filed a notice of voluntary dismissal without prejudice as to Swedish Match, which the Court ordered on October 3, 2024.

District of Columbia Attorney General Investigation :

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

The subpoena requested, among other things, information concerning Swedish Match North America LLC’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.

Swedish Match North America LLC cooperated with the investigation, and on December 12, 2024, it executed an assurance of voluntary compliance with the office of the Attorney General to resolve the Attorney General's investigation, without admitting liability or

Pursuant to the assurance of voluntary compliance, Swedish Match North America LLC paid $ 1,200,000 to D.C.

and agreed to undertake certain limited conduct obligations moving forward.

Other Litigation

The Department of Special Investigations of the government of Thailand ("DSI") conducted an investigation into alleged underpayment by our subsidiary, Philip Morris (Thailand) Limited ("PM Thailand"), of customs duties and excise taxes relating to imports from the Philippines covering the period 2003-2007.

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

The government sought a fine of approximately THB 80.8 billion (approximately $ 2.3 billion).

In May 2017, Thailand enacted a new customs act.

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

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

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

In November 2019, the trial court found our subsidiary guilty of under-declaration of the prices and imposed a fine of approximately THB 1.2 billion (approximately $ 33.5 million).

The trial court dismissed all charges against the individual defendants.

In December 2019, as required by the Thai law, our subsidiary paid the fine.

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

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

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

The appellate court affirmed the findings of under-declaration of import prices of cigarettes but reduced the fine to approximately THB 122 million (approximately $ 3.4 million) finding the trial court erred in its calculation of the under-declaration and fine.

The appellate court affirmed the acquittals of the individual defendants.

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

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

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

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

On November 18, 2024, a putative class action, Neumark v.

Swedish Match North America LLC , was filed before United States District Court for the Eastern District of Virginia.

The complaint named Swedish Match North America LLC as the defendant.

Plaintiff alleges that Swedish Match North America LLC violated federal and state antitrust laws by, among other things, driving a competitor from the market through purportedly baseless litigation and entering into an allegedly anticompetitive agreement with PMI whereby PMI, through an indirect subsidiary, acquired Swedish Match North America LLC and eliminated itself as a competitor in the U.S.

nicotine pouch market.

Plaintiff asserts claims under the Sherman Antitrust Act, the Clayton Antitrust Act, state antitrust law, and for unjust enrichment.

Plaintiff seeks to represent (i) all natural persons, businesses, entities, and corporations in the United States who purchased ZYN at retail during the class period;

and (ii) all natural persons, businesses, entities, and corporations in the United States who live in states that have certain antitrust statutes who purchase ZYN at retail during the class period.

Plaintiff is seeking damages (including treble damages as available under antitrust laws), costs, attorneys’ fees, disgorgement of profit, pre- and post-judgment interest, and declaratory and injunctive relief (including a declaration that the acquisition of Swedish Match North America LLC by PMI is unlawful and must result in divestiture or be enjoined).

On January 15, 2025, Swedish Match North America LLC filed a motion to dismiss the complaint with prejudice.

Subsequently thereto, Plaintiff informed Swedish Match North America LLC that he will file an amended complaint, which is due on February 10, 2025 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.

The Department of Special Investigations of the government of Thailand ("DSI") conducted an investigation into alleged underpayment by Philip Morris (Thailand) Limited ("PM Thailand") of customs duties and excise taxes relating to imports from Indonesia covering the period 2000-2003.

On January 26, 2017, the Public Prosecutor filed charges against PM Thailand and its former Thai employee in the Bangkok Criminal Court alleging that PM Thailand and its former employee jointly and with the intention to defraud the Thai government under-declared import prices of cigarettes to avoid full payment of taxes and duties in connection with import entries during the period from January 2002 to July 2003.

The government is seeking a fine of approximately THB 19.8 billion (approximately $ 553 million).

The government sought a fine of approximately THB 19.8 billion (approximately $ 584 million).

In May 2017, Thailand enacted a new customs act.

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

The Public Prosecutor has filed an appeal to the Supreme Court of

Thailand challenging the dismissal of charges against the individual defendant and the amount of the fine.

The Public Prosecutor has filed an appeal to the Supreme Court of Thailand challenging the dismissal of charges against the individual defendant and the amount of the fine.

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

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

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

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

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

These paid amounts negatively impacted net cash provided by operating activities in the consolidated statements of cash flows in the period of payment.

PM Korea appealed the assessments.

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

The tax authorities appealed this decision to the appellate court.

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

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

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

Two separate panels at the appellate court were assigned to implement the Supreme Court decision, one related to the local level tobacco consumption tax (“TCT”) and the other related to the national level individual consumption tax (“ICT”).

The first two hearings for the TCT case took place on October 18, 2023, and December 6, 2023, and the next hearing is scheduled on March 20, 2024.

The first hearing for the ICT case took place on November 17, 2023, and the next hearing is put on hold until all issues are cleared in the TCT case hearings.

PM Korea made factual and legal arguments which were not previously reviewed and factored in the Supreme Court decision.

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

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

The government agencies appealed this decision.

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

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

This funds case is still pending review at the Supreme Court without a specific decision date.

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

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

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

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

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

The lawsuit names Philip Morris International Inc.

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

The lawsuit seeks various forms of relief, including damages.

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

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

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

Philip Morris International Inc., et al.

) into these proceedings.

A putative shareholder class action lawsuit, Rubenstahl v.

Philip Morris International Inc., et al.

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

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

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

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

this motion was denied on September 21, 2020.

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

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

On December 26, 2023, the U.S.

Court of Appeals for the Second Circuit upheld the dismissal of plaintiffs' claims.

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, are defendants.

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

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

subsidiaries before the 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 and ITC cases filed by BAT are among the Proceedings to be dismissed pursuant to the Settlement Agreement including through the Parties’ request for rescission of the limited exclusion order and the cease-and-desist order issued by the ITC on September 29, 2021.

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.

This case is among the Proceedings to be 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 have 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 is currently stayed.

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

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

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

the stayed action based on the second patent remains pending and is stayed pending final resolution of the revocation action.

This case is among the Proceedings to be 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 seek damages, as well as injunctive relief against the manufacture in Italy of the Platform 1 blade heated tobacco units allegedly infringing the asserted patents and the commercialization of the Platform 1 blade products in Italy.

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

In July 2022, the court dismissed plaintiffs’ request for preliminary injunction in its entirety

and plaintiffs did not appeal this ruling.

The merits proceeding remains pending;

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

This case is among the Proceedings to be dismissed pursuant to the Settlement Agreement.

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

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

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

On December 23, 2022, the Court dismissed BAT’s claims with respect to one of the two patents that it 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 are among the Proceedings to be 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 S.R.L., and a third-party distributor in the Court of Law of Bucharest, Civil Registry.

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

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

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

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

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

This case is among the Proceedings to be dismissed pursuant to the Settlement Agreement.

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

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

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

This case is among the Proceedings to be dismissed pursuant to the Settlement Agreement.

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.

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

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

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

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

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

BAT has elected not to appeal this decision.

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

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

On 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 $ 51 million) in damages.

After various postponements, the trial started on September 25, 2023, and is expected to continue in 2025 through a series of evidentiary hearings.

PM Italia believes it has strong defenses to the charges against it 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, held, pursuant to Dutch law, in JSC TK Megapolis (formerly CJSC TK Megapolis), which is the distributor of PMI’s products in Russia.

On July 18, 2024, the court admitted the petition.

On August 8, 2024, the Arbitrazh Court of the Moscow Region granted the forced localization, as requested by the Ministry of Industry and Trade.

As a result, MDBV's interest and corporate rights in JSC TK Megapolis were transferred to JSC TK Megapolis.

On December 5, 2024, JSC TK Megapolis registered the subsequent transfer of such interest and corporate rights to a PMI affiliate, ZAO Philip Morris Izhora.

For additional information, see Note 6.

Related Parties – Equity Investments and Other.

Following an October 2020 final decision by the highest court in Brazil in tax litigation pertaining to overpayments of certain indirect taxes, our affiliate modified the methodology for calculation of the deduction applicable to the indirect taxes at issue.

The Brazilian Tax Authority objected to such methodology and, on December 3, 2024, served our affiliate with notice of an assessment alleging underpayments of these indirect taxes during the 2020 fiscal year, for approximately BRL 137 million ($ 24 million).

Our affiliate believes it is probable that the Brazilian Tax Authority will issue assessments alleging underpayment of indirect taxes for subsequent fiscal years.

We disagree with the position of the Brazilian Tax Authority, and will defend vigorously.

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.

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.

In July and August 2024, respectively, FTKK filed two patent infringement actions against Sojitz, PMJL’s importer and distributor, for alleged infringement of two patents by TEREA consumables.

FTKK asserts a claim for damages.

PMJL is obligated to indemnify Sojitz for damages and intervened in the matters.

Merits briefing in the matters commenced in December 2024.

In November and December 2024, FTKK filed seven additional patent infringement actions against Sojitz for alleged infringement of seven new FTKK patents by TEREA and SENTIA consumables.

FTKK asserts a claim for damages in these actions.

PMJL is obligated to indemnify Sojitz for damages and intervened in the matters.

Merits briefing in these matters is expected to commence in the first half of 2025.

On November 27, 2024, we were informed that FTKK filed a new application with Tokyo Customs against Sojitz, PMJL’s importer and distributor, on the basis of alleged infringement of another FTKK patent.

FTKK is seeking an order stopping the importation of TEREA and SENTIA 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.

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.

PMJL has entered an appearance in the proceeding as an interested party and filed its opposition to FTKK’s application on January 9, 2025.

On January 9, 2025, PMJL and Sojitz filed a declaratory judgment action against FTKK in Tokyo District Court with respect to the patent at issue in the pending Tokyo Customs matter on the basis that the relevant patent is not infringed or is invalid.

PMJL intends to vigorously defend the matters commenced by FTKK and take steps to mitigate disruption, if any, that could result from FTKK’s claims.

Other patent challenges are pending in various jurisdictions.

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

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

Third-Party Guarantees

Until November 1, 2022, Medicago Inc.

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

(“PMIBV”), a PMI subsidiary.

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

On March 31, 2022, the Contribution Agreement was amended (the “Contribution Agreement Amendment”) to reflect an additional

contribution from the Canadian government up to CAD 27 million (approximately $ 22 million on the date of signing) to Medicago for the Second Stage.

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

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

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

The guarantees are in effect through March 31, 2026.

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

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

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

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

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

Sale of Accounts Receivable:

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

The amounts associated with the servicing liability were not material for the years ended December 31, 2023 and 2022.

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

years ended December 31, 2024 and 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.

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For the years ended December 31, 2024, 2023 and 2022 the loss on sale of trade receivables was $ 42 million, $ 49 million and $ 26 million, respectively.

Asset Impairment and Exit Costs:

For the years ended December 31, 2023 and 2021, PMI recorded total pre-tax asset impairment and exit costs of $ 109 million and $ 216 million, respectively, related to restructuring activities.

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

For the year ended December 31, 2022, PMI did no t record any charges for asset impairment and exit costs related to restructuring activities.

For the year ended December 31, 2023, PMI recorded a pre-tax impairment charge on goodwill and other intangibles of $ 680 million within the Wellness and Healthcare segment.

For the year ended December 31, 2022, PMI recorded a pre-tax impairment charge on

other intangibles of $ 112 million within the Wellness and Healthcare segment.

For further details, see Note 5.

Goodwill and Other Intangible Assets, net .

For the year ended December 31, 2023, PMI recorded an impairment of certain long-lived assets in Ukraine.

War in Ukraine for the impact of the war on PMI.

Restructuring Activities:

For the years ended December 31, 2024 and 2023, PMI recorded total pre-tax restructuring charges of $ 180 million and $ 109 million, respectively.

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

For the year ended December 31, 2022, PMI did no t record any charges related to restructuring activities.

IQOS products sourcing for the U.S.

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

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

Prior to their rescission, the orders prohibited the importation and sales of imported IQOS products to the United States of America (for further details of the Settlement Agreement, ITC order and its rescission, see Note 18.

Contingencies ).

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

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

and the related agreement with Altria Group, Inc (“Altria”), see Note 3.

Acquisitions and Divestitures .

In 2024, PMI recorded pre-tax restructuring charges of $ 133 million related to this restructuring activity.

This amount included contract termination costs with suppliers of $ 73 million, including prepaid commitments of $ 20 million.

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

In the first quarter of 2024, PMI ceased its operations in Venezuela and as a result, recorded pre-tax restructuring charges 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 land and buildings.

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

For details on the income tax impact of the transaction, see Note 12.

Income Taxes .

Manufacturing Footprint Optimization - Germany

As a result of declining demand for cigarettes and other tobacco products in Europe, two of PMI’s German subsidiaries, Philip Morris Manufacturing GmbH and F6 Cigarettenfabrik GmbH & Co.

KG, initiated consultations with employee representatives on October 29, 2024, on a proposal to end production in the factories located in Berlin and in Dresden by the end of the second quarter of 2025, and to seek to agree on fair solutions for any impacted employees.

Until the consultation process is concluded, the closure is not considered probable, and the total potential costs associated with this contemplated proposal cannot be determined and, as a result, no related costs were recorded in the fourth quarter of 2024.

E-Vapor Products Manufacturing Optimization

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

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

As a result, PMI recorded pre-tax restructuring charges of $ 109 million.

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

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

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

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

Organizational Design Optimization

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

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

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

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

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

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

For the year ended December 31, 2021, PMI recorded pre-tax charges of $ 159 million related to the organizational design optimization.

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

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

Asset Impairment and Exit Costs by Segment

During 2023 and 2021, PMI recorded the following pre-tax asset impairment and exit costs by segment related to restructuring activities:

Restructuring charges by Segment

During 2024 and 2023, PMI recorded the following pre-tax restructuring charges by segment:

(in millions)

Separation programs:

Europe $ — $ 72

SSEA, CIS & MEA — 45

EA, AU & PMI DF — 34

Swedish Match — —

Wellness and Healthcare — —

Total separation programs — 159

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

Americas $ 38 $ —

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

Contract termination charges:

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EA, AU & PMI DF — 14

Swedish Match — —

Wellness and Healthcare — —

Americas 77 7

Total contract termination charges 77 78

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EA, AU & PMI DF — 5

Swedish Match — —

Wellness and Healthcare — —

Americas 65 4

Total asset impairment charges 65 31

Asset impairment and exit costs $ 109 216

(1) Organizational design optimization pre-tax charges in 2021 and e-vapor products manufacturing optimization charges in 2023 were allocated across all geographical segments.

Movement in Exit Cost Liabilities

The movement in exit cost liabilities for the year ended December 31, 2023 was as follows:

Restructuring charges $ 180 109

(1) E-vapor products manufacturing optimization charges in 2023 were allocated across all geographical segments.

Movement in Restructuring Related Liabilities

The movement in restructuring related liabilities for the year ended December 31, 2024 was as follows:

(in millions)

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Cash spent ( 58 )

Prepaid commitments ( 20 )

Currency/other —

Liability balance, December 31, 2024 $ 28

Future cash payments for exit costs incurred to date are anticipated to be substantially paid by the end of 2024.

Future cash payments for restructuring activities incurred to date are anticipated to be substantially paid by the end of 2025.

PMI has operating and finance leases that are principally for real estate (office space, warehouses and retail store space), machinery and equipment, and vehicles.

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

As of December 31, 2023 and 2022, the total amount due to suppliers participating in the SCF program was approximately $ 0.9 billion and $ 1.1 billion, respectively.

The rollforward of PMI's outstanding obligations under its SCF program for the year ended December 31, 2024 were as follows:

(in millions) 2024

Amount due to suppliers participating in the SCF program as of January 1, 2024 $ 864

Invoices added during the year 3,405

Invoices paid during the year ( 3,207 )

Currency/Other ( 48 )

Amount due to suppliers participating in the SCF program as of December 31, 2024 $ 1,014

New Accounting Standards:

Improvements to Reportable Segment Disclosures

Recently adopted

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

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

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

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

Improvements to Income Tax Disclosures

PMI adopted the additional disclosure requirements on the specified effective date within its annual reporting for the year ended December 31, 2024, and its interim reporting starting for the quarter ending March 31, 2025.

Recently issued

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

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

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

ASU 2023-09 also requires disaggregated disclosures of federal, state and foreign income tax taxes paid.

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

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

On November 4, 2024, the FASB issued Accounting Standards Update ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses” (“ASU 2024-03”).

ASU 2024-03 requires disclosure of more detailed information about certain costs and expenses in the notes to the financial statements at interim and annual reporting periods.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and for interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted.

PMI is currently evaluating the impact of ASU 2024-03 on its disclosures.

Report of Independent Registered Public Accounting Firm

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The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Tobacco-Related Litigation for Smoking and Health Class Actions and Health Care Cost Recovery Actions

As desc ribed in Note 18 to the consolidated financial statements, the Company has 9 smoking and health class actions and 17 health care cost recovery actions pending.

Tobacco-Related Litigation for Smoking and Health Class Actions and Health Care Cost Recovery Cases

As desc ribed in Note 18 to the consolidated financial statements, the Company has nine smoking and health class actions and 17 health care cost recovery cases pending.

The Company records provisions in the consolidated financial statements for pending litigation when management determines that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.

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

The principal considerations for our determination that performing procedures relating to tobacco-related litigation for smoking and health class actions and health care cost recovery actions is a critical audit matter are that there was significant judgment by management when determining the probability of a loss being incurred and an estimate of the amount or range of the potential loss for each case, which in turn led to a high degree of auditor subjectivity, judgment and effort in evaluating management’s assessment related to the loss contingencies associated with smoking and health class actions and health care cost recovery actions related claims.

The principal considerations for our determination that performing procedures relating to tobacco-related litigation for smoking and health class actions and health care cost recovery actions is a critical audit matter are (i) the significant judgment by management when assessing the probability of a loss being incurred and determining whether the amount or range of the potential loss for each case can be reasonably estimated and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s assessment of the loss contingencies associated with smoking and health class actions and health care cost recovery actions.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s evaluation of smoking and health class actions and health care cost recovery actions, including controls over determining the probability and range of loss as well as controls over financial statement disclosures.

These procedures also included, among others, obtaining and evaluating the letters of audit inquiry with external and internal legal counsel, evaluating the reasonableness of management’s assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably estimable, and evaluating the sufficiency of the Company’s smoking and health class actions and health care cost recovery actions contingencies disclosures.

Acquisition of Swedish Match AB - Valuation of Trademarks and Customer Relationships

As described in Note 3 to the consolidated financial statements, the Company acquired a controlling interest in Swedish Match AB for consideration of $14.5 billion in 2022, which resulted in $7.9 billion of intangible assets being recorded, of which $7.8 billion relate to trademarks and customer relationships.

Management applied significant judgment in estimating the fair value of intangible assets acquired, which involved the use of significant estimates and assumptions with respect to the revenue growth rates, royalty rates, and discount rates for trademarks, and revenue growth rates, profit margins, customer attrition rates, and discount rates for customer relationships.

The principal considerations for our determination that performing procedures relating to the valuation of trademarks and customer relationships acquired in the acquisition of Swedish Match AB is a critical audit matter are the significant judgment by management when developing the fair value estimate of the trademarks and customer relationships acquired, which in turn led to a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions of revenue growth rates, royalty rates, and discount rates for trademarks, and revenue growth rates, profit margins, customer attrition rates, and discount rates for customer relationships.

In addition, the audit effort involved the use of professionals with specialized skill and knowledge.

These procedures included testing the effectiveness of controls relating to management’s assessment of smoking and health class actions and health care cost recovery cases, including controls over determining whether the probability and range of loss can be reasonably estimated, as well as controls over financial statement disclosures.

These procedures also included, among others (i) confirming with external and internal legal counsel the possibility or probability of an unfavorable outcome and the extent to which the loss or range of loss is reasonably estimable;

(ii) evaluating the reasonableness of management’s assessment regarding whether an unfavorable outcome is reasonably possible or probable and reasonably estimable;

and (iii) evaluating the sufficiency of the Company’s smoking and health class actions and health care cost recovery cases contingencies disclosures.

Impairment Related to the Rothmans, Benson & Hedges Equity Investment

As described in Note 6 to the consolidated financial statements, since the 2019 deconsolidation of Rothmans, Benson and Hedges Inc.

(RBH), the Company has accounted for its continuing investment in the business as an equity security, without readily determinable fair value.

On January 24, 2025, RBH filed an objection to approval of the proposed plan of compromise and arrangement (Proposed Plan) with the CCAA court.

Developments, including the positions taken by RBH in this objection and the positions taken by other parties in related filings narrowed the range of possible outcomes with respect to the allocation of the aggregate settlement, which was determined to be an indicator that the Company’s investment in RBH may be impaired.

Although there remains some uncertainty as to the final terms of the Proposed Plan, management evaluated its investment in RBH for potential impairment and concluded that the estimated fair value of its investment in RBH was lower than its carrying value.

As a result, management performed a quantitative valuation of its investment in RBH as of December 31, 2024, and recorded a non-cash impairment charge of $2,316 million.

The fair value of the continuing investment in RBH of $714 million represented the estimated fair value of the underlying business, net of management’s best estimate of the share of the aggregate global settlement amount that could be allocated to RBH, and was determined based on an income approach using a discounted cash flow analysis.

In determining the fair value of the investment in RBH, management made various judgments, estimates and assumptions, the most significant of which were discount rate, sales volumes and operating margins related to the fair value of the combustible tobacco product business in Canada.

In addition, significant estimates were made with respect to the allocation amount of the aggregate global settlement amount, as well as the deductibility of the settlement amount payment for income tax purposes in Canada.

The principal considerations for our determination that performing procedures relating to the impairment of the equity investment in RBH is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Company’s investment in RBH;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the discount rate, sales volumes and operating margins related to the fair value of the combustible tobacco product business in Canada and the estimate of the allocation amount of the aggregate global settlement amount as well as the deductibility of the settlement amount payment for income tax purposes in Canada;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to the acquisition accounting, including controls over management’s valuation of the trademarks and customer relationships acquired and controls over

the development of significant assumptions related to revenue growth rates, profit margins, customer attrition rates, royalty rates, and discount rates.

These procedures also included, among others, testing management’s process for estimating the fair value of trademarks and customer relationships.

Testing management’s process included evaluating the appropriateness of the valuation methods, testing the completeness and accuracy of data provided by management, and evaluating the reasonableness of significant assumptions related to revenue growth rates, profit margins, customer attrition rates, royalty rates, and discount rates.

Evaluating the reasonableness of the revenue growth rates and profit margins involved considering the past performance of the acquired business, as well as economic and industry forecasts.

Professionals with specialized skill and knowledge were used to assist in the evaluation of management’s valuation methods, and the reasonableness of the customer attrition rate, royalty rate, and discount rate assumptions.

These procedures included testing the effectiveness of controls relating to management’s equity investment impairment assessment, including controls over the valuation of the Company’s investment in RBH.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the investment in RBH;

(ii) evaluating the appropriateness of the discounted cash flow analysis;

(iii) testing completeness and accuracy of underlying data used in the discounted cash flow analysis;

(iv) evaluating the reasonableness of significant assumptions used by management related to the discount rate, sales volumes and operating margins related to the valuation of the combustible cigarette business and the estimate of the allocation amount of the aggregate global settlement amount;

and (v) evaluating the deductibility of the settlement amount payment for income tax purposes in Canada.

Evaluating management’s assumptions related to sales volumes and operating margins related to the valuation of the combustible tobacco product business in Canada and the estimate of the allocation amount of the aggregate global settlement amount involved evaluating whether the assumptions used by management were reasonable considering (i) the current economic conditions and recent operating results of RBH;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow analysis;

(ii) the reasonableness of the discount rate assumption related to the valuation of the combustible tobacco product business in Canada;

and (iii) the deductibility of the settlement amount payment for income tax purposes in Canada.

/S/ PRICEWATERHOUSECOOPERS SA

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Management’s assessment included an evaluation of the design of PMI’s internal control over financial reporting and testing of the operational effectiveness of its internal control over financial reporting.

Management reviewed the results of its assessment with the Audit Committee of our Board of Directors.

Management reviewed the results of its assessment with the Audit & Risk Committee of our Board of Directors.

Based on this assessment, management determined that, as of December 31, 2024, PMI maintained effective internal control over financial reporting.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data