What changed in this filing

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Item 1. Financial Statements

2025-04-24 compared with 2024-10-24 · 489 added, 694 removed, 920 unchanged (56% of the section changed)

4 unchanged sentences

(in millions of dollars, except per share data)

For the Nine Months Ended September 30,

Net revenues 1 & 2 (Notes 7 & 12)

$ 28,172 $ 26,127

Cost of sales 9,906 9,431

Gross profit 18,266 16,696

Marketing, administration and research costs (Notes 4, 7, 15 & 18) 8,123 7,364

Impairment of goodwill (Note 4) — 665

Operating income 10,143 8,667

Interest expense, net 817 788

Pension and other employee benefit costs (Note 3) 44 36

Earnings before income taxes 9,282 7,843

Provision for income taxes 2,145 2,019

Equity investments and securities (income)/loss, net ( 852 ) ( 131 )

Net earnings $ 7,989 $ 5,955

Net earnings attributable to noncontrolling interests 353 338

Net earnings attributable to PMI $ 7,636 $ 5,617

Per share data (Note 6):

Basic earnings per share $ 4.90 $ 3.61

Diluted earnings per share $ 4.89 $ 3.61

(1) Includes net revenues from related parties of $ 2,866 million and $ 2,631 million for the nine months ended September 30, 2024 and 2023, respectively.

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

For the nine months ended September 30, 2024 and 2023, excise tax on products was $ 38,535 million and $ 37,140 million, respectively.

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of dollars, except per share data)

For the Three Months Ended September 30,

For the Three Months Ended March 31,

Net revenues 1 & 2 (Note 13)

2 unchanged sentences

Gross profit 6,261 5,598

Marketing, administration and research costs (Notes 7 & 18)

Marketing, administration and research costs (Note 16)

Operating income 3,544 3,045

10 unchanged sentences

Diluted earnings per share $ 1.72 $ 1.38

(1) Includes net revenues from related parties of $ 1,045 million and $ 857 million for the three months ended September 30, 2024 and 2023, respectively.

(1) Includes net revenues from related parties of $ 937 million and $ 860 million for the three months ended March 31, 2025 and 2024, respectively.

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

For the three months ended September 30, 2024 and 2023, excise tax on products was $ 13,773 million and $ 13,092 million, respectively.

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

For the Nine Months Ended September 30,

Net earnings $ 7,989 $ 5,955

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

Change in currency translation adjustments:

Unrealized gains (losses), net of income taxes of $ 14 in 2024 and $( 12 ) in 2023

( 365 ) ( 669 )

(Gains)/losses transferred to earnings, net of income taxes of $ 0 in 2024 and 2023 (Notes 11, 15 & 18)

Change in net loss and prior service cost:

Amortization of net losses, prior service costs and net transition costs, net of income taxes of $( 26 ) in 2024 and $( 20 ) in 2023

Change in fair value of derivatives accounted for as hedges:

Gains (losses) recognized, net of income taxes of $( 28 ) in 2024 and $( 56 ) in 2023

(Gains) losses transferred to earnings, net of income taxes of $ 30 in 2024 and $ 30 in 2023

( 137 ) ( 155 )

Total other comprehensive earnings (losses) ( 118 ) ( 457 )

Total comprehensive earnings 7,871 5,498

Less comprehensive earnings (losses) attributable to:

Noncontrolling interests 312 139

Comprehensive earnings attributable to PMI $ 7,559 $ 5,359

For the three months ended March 31, 2025 and 2024, excise tax on products was $ 12,002 million and $ 11,839 million, respectively.

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in millions of dollars)

For the Three Months Ended September 30,

For the Three Months Ended March 31,

Net earnings $ 2,837 $ 2,246

2 unchanged sentences

Unrealized gains (losses), net of income taxes of $ 94 in 2025 and $( 102 ) in 2024

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

(Gains)/losses transferred to earnings, net of income taxes of $ 0 in 2025 and 2024 (Note 16)

Change in net loss and prior service cost:

14 unchanged sentences

(in millions of dollars)

September 30,

2025 December 31,

13 unchanged sentences

Deferred income taxes 1,287 940

Other assets (less allowances of $ 26 in 2024 and $ 25 in 2023) (Note 18)

Other assets (less allowances of $ 27 in 2025 and $ 26 in 2024)

TOTAL ASSETS $ 65,079 $ 61,784

(1) Includes trade receivables from related parties of $ 768 million and $ 710 million as of September 30, 2024, and December 31, 2023, respectively.

(1) Includes trade receivables from related parties of $ 891 million and $ 691 million as of March 31, 2025, and December 31, 2024, respectively.

For further details, see Note 13.

5 unchanged sentences

(in millions of dollars, except share data)

September 30,

2025 December 31,

13 unchanged sentences

Employment costs 2,991 2,940

Income taxes and other liabilities 1,498 1,743

Other liabilities 1,329 1,116

Total liabilities 74,005 71,654

19 unchanged sentences

(in millions of dollars)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

2 unchanged sentences

Depreciation and amortization expense 480 367

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

Impairment related to Vectura Group's expected sale (Note 18)

Impairment of other intangibles (Note 5) — 27

Deferred income tax (benefit) provision ( 67 ) 76

Asset impairment and exit costs, net of cash paid (Note 15) 134 35

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

Restructuring charges, net of cash paid (Note 16) ( 1 ) 148

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

Receivables, net ( 882 ) ( 890 )

( 987 ) ( 267 )

Inventories ( 325 ) 527

7 unchanged sentences

Capital expenditures ( 404 ) ( 417 )

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

Altria Group, Inc.

agreement (Note 18) — ( 1,775 )

Equity investments ( 10 ) ( 20 )

2 unchanged sentences

Net cash provided by (used in) investing activities ( 434 ) ( 193 )

(1) Includes amounts from related parties of $( 111 ) million and $( 130 ) million for September 30, 2024 and 2023, respectively

See notes to condensed consolidated financial statements.

3 unchanged sentences

(in millions of dollars)

For the Nine Months Ended September 30,

For the Three Months Ended March 31,

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

3 unchanged sentences

Repayments - maturities longer than 90 days — ( 284 )

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

Long-term debt proceeds — 4,659

2 unchanged sentences

Collateral received/settlements for derivatives, received/(returned) ( 606 ) 260

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

Noncontrolling interests activity and Other (Note 18)

( 337 ) ( 269 )

Noncontrolling interests activity and Other ( 86 ) ( 88 )

Net cash provided by (used in) financing activities 671 1,135

4 unchanged sentences

Balance at end of period $ 4,476 $ 4,099

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $ 43 million and $ 17 million as of September 30, 2024 and 2023, respectively, and $ 86 million and $ 10 million as of December 31, 2023 and 2022, respectively, which were included in other current assets in the condensed consolidated balance sheets.

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $ 33 million and $ 131 million as of March 31, 2025 and 2024, respectively, and $ 38 million and $ 86 million as of December 31, 2024 and 2023, respectively, which were included in other current assets in the condensed consolidated balance sheets.

See notes to condensed consolidated financial statements.

2 unchanged sentences

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Nine Months Ended September 30, 2024 and 2023

For the Three Months Ended March 31, 2025 and 2024

(in millions of dollars, except per share amounts)

14 unchanged sentences

Dividends paid to noncontrolling interests ( 76 ) ( 76 )

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests (Note 18) ( 6 ) 180 ( 831 ) ( 657 )

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

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

Net earnings 7,636 353 7,989

Other comprehensive earnings (losses), net of income taxes ( 77 ) ( 41 ) ( 118 )

Issuance of stock awards ( 2 ) 144 142

Dividends declared ($ 3.95 per share)

( 6,170 ) ( 6,170 )

Dividends paid to noncontrolling interests ( 360 ) ( 360 )

Acquisitions (Note 18)

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

Balances, September 30, 2024 $ — $ 2,283 $ 35,556 $ ( 11,892 ) $ ( 35,641 ) $ 1,981 $ ( 7,713 )

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Three Months Ended September 30, 2024 and 2023

(in millions of dollars, except per share amounts)

PMI Stockholders’ (Deficit) Equity

Stock Additional

Capital Earnings

Reinvested in

Business Accumulated

Comprehensive Losses Cost of

Stock Noncontrolling

Interests Total

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

Net earnings 2,054 117 2,171

Other comprehensive earnings (losses), net of income taxes 227 ( 42 ) 185

Issuance of stock awards 40 3 43

Dividends declared ($ 1.30 per share)

( 2,028 ) ( 2,028 )

Dividends paid to noncontrolling interests ( 89 ) ( 89 )

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests ( 27 ) 1 ( 2 ) ( 28 )

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

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

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

Balances, January 1, 2025 $ — $ 2,335 $ 32,869 $ ( 11,314 ) $ ( 35,640 ) $ 1,880 $ ( 9,870 )

Net earnings 2,690 147 2,837

4 unchanged sentences

Dividends paid to noncontrolling interests ( 54 ) ( 54 )

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests 79 79

Balances, September 30, 2024 $ — $ 2,283 $ 35,556 $ ( 11,892 ) $ ( 35,641 ) $ 1,981 $ ( 7,713 )

Balances, March 31, 2025 $ — $ 2,326 $ 33,447 $ ( 11,117 ) $ ( 35,557 ) $ 1,975 $ ( 8,926 )

See notes to condensed consolidated financial statements.

12 unchanged sentences

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

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

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 is expected to close by the end of 2024, subject to regulatory approval, which may impact the timing, and other customary closing conditions.

For further details, see Note 18.

Acquisitions and Divestitures .

Basis of Presentation

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

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;

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

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

and Americas Region.

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

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

Goodwill and Other Intangible Assets, net, Note 7.

Segment Reporting and Note 15.

Asset Impairment and Exit Costs for further details.

Following the sale of Vectura Group Ltd.

on December 31, 2024, PMI updated in January 2025 its segment reporting by including the ongoing Wellness & Healthcare results in the Europe segment.

For further details on the sale of Vectura Group Ltd., see Note 2.

Acquisitions and Divestitures .

In addition, PMI renamed its “PMI Duty Free” business to “PMI Global Travel Retail” effective in the first quarter of 2025.

As a result of this change, PMI's segment that includes its duty free business was renamed East Asia, Australia & PMI Global Travel Retail (“EA, AU & PMI GTR”).

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

Goodwill and Other Intangible Assets, net and Note 8.

Segment Reporting for further details.

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

These statements should be read in conjunction with the audited consolidated financial statements and related notes, which appear in PMI’s Annual Report on Form 10-K for the year ended December 31, 2024.

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 at exchange rate on sale completion date) and a short-term receivable of GBP 24 million (approximately $ 30 million at exchange rate on sale completion date), reflecting certain customary completion account adjustments, with additional deferred payments of up to GBP 148 million (approximately $ 186 million at exchange rate on sale completion date), 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.

As of March 31, 2025 and December 31, 2024, the liability related to the indemnity was not material.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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.

For the year ended December 31, 2024, 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.

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 March 31, 2025, 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.

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

Prior to the acquisition date, the cash consideration paid was accounted for within Other assets in PMI's condensed consolidated balance sheets.

On the acquisition date and as of December 31, 2024 and March 31, 2025, the reacquired rights were classified as Other intangible assets, net in PMI's condensed consolidated balance sheets, and are being amortized over their useful life of 5 years.

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

2 unchanged sentences

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

At September 30, 2024, shares available for grant under the 2022 Plan were 19,188,146 .

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

At March 31, 2025, shares available for grant under the 2022 Plan were 16,903,895 .

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

2 unchanged sentences

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

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

At March 31, 2025, shares available for grant under the plan were 855,920 .

Restricted share unit (RSU) awards

During the nine months ended September 30, 2024 and 2023, shares granted to eligible employees and the weighted-average grant date fair value per share related to RSU awards were as follows:

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

2024 2,005,920 $ 89.58

2023 1,756,750 $ 101.96

Compensation expense related to RSU awards was as follows:

Compensation Expense Related to RSU Awards

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

During the three months ended March 31, 2025 and 2024, shares granted to eligible employees, the weighted-average grant date fair value per share and the recorded compensation expense related to RSU awards were as follows:

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

(in millions)

2025 1,502,150 $ 145.16 $ 63

2024 1,975,480 $ 89.04 $ 47

As of September 30, 2024, PMI had $ 190 million of total unrecognized compensation cost related to non-vested RSU awards.

As of March 31, 2025, PMI had $ 303 million of total unrecognized compensation cost related to non-vested RSU awards.

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

During the nine months ended September 30, 2024, 1,826,668 RSU awards vested.

During the three months ended March 31, 2025, 1,227,693 RSU awards vested.

The grant date fair value of all the vested awards was approximately $ 129 million.

The total fair value of RSU awards that vested during the nine months ended September 30, 2024 was approximately $ 168 million.

The total fair value of RSU awards that vested during the three months ended March 31, 2025 was approximately $ 182 million.

Performance share unit (PSU) awards

During the nine months ended September 30, 2024 and 2023, PMI granted PSU awards to certain executives.

During the three months ended March 31, 2025 and 2024, PMI granted PSU awards to certain executives.

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

The performance metrics for such PSU's granted during the nine months ended September 30, 2023 consisted of PMI's Total Shareholder Return ("TSR") relative to a predetermined peer group and on an absolute basis ( 40 % weight), PMI’s currency-neutral compound annual adjusted diluted earnings per share growth rate ( 30 % weight), and a Sustainability Index, which consists of two drivers:

• Product Sustainability ( 20 % weight) measuring progress primarily on PMI's efforts to maximize the benefits of smoke-free products, purposefully phase out cigarettes, and reduce post-consumer waste;

• Operational Sustainability ( 10 % weight) measuring progress on PMI's efforts to 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 for such PSU's granted during the three months ended March 31, 2025 consisted of PMI's Total Shareholder Return ("TSR") relative to a predetermined peer group and on an absolute basis ( 40 % weight), PMI’s currency-neutral compound annual adjusted diluted earnings per share growth rate ( 30 % weight), and a Sustainability Index, which consists of two drivers:

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

The performance metrics, targets and relative weights for the PSU’s granted during the nine months ended September 30, 2024 were the same as the PSU’s granted during the nine months ended September 30, 2023, with the exception of adjustments made to certain components of the Sustainability Index intended to address PMI's developing sustainability strategy and reporting.

• Product Sustainability ( 20 % weight):

aggregates key performance indicators pertaining to social and environmental impacts generated by PMI's products;

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):

aggregates key performance indicators pertaining to social and environmental impacts generated by PMI's business activities;

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 the three months ended March 31, 2025 were the same as the PSU’s granted during the three months ended March 31, 2024, with the exception of the annual growth rate of adjusted diluted EPS metric goals, which was increased, and for changes to certain components of the Sustainability Index.

In the Sustainability Index, certain KPIs were adjusted to reflect PMI’s developing sustainability strategy and the number of individual KPIs was reduced, both in acknowledgment of the maturity of certain programs measured by removed KPIs and to further focus management performance on the remaining Sustainability Index metrics.

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.

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

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

During the three months ended March 31, 2025 and 2024, shares granted to eligible employees, the grant date fair value per share and the recorded compensation expense related to PSU awards were as follows:

Number of Shares Granted Weighted-

2 unchanged sentences

Average PSU Grant Date

Fair Value Subject to TSR Performance Factors

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

(Per Share) (Per Share)

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(b) Determined using the observed historical volatility.

Compensation Expense Related to PSU Awards

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

2024 $ 58 $ 9

2023 $ 51 $ 6

As of September 30, 2024, PMI had $ 42 million of total unrecognized compensation cost related to non-vested PSU awards.

As of March 31, 2025, PMI had $ 71 million of total unrecognized compensation cost related to non-vested PSU awards.

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

During the nine months ended September 30, 2024, 916,452 PSU awards vested.

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

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

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

During the three months ended March 31, 2025, 686,052 PSU awards vested.

The grant date fair value of all the vested awards was approximately $ 84 million.

The total fair value of PSU awards that vested during the three months ended March 31, 2025 was approximately $ 102 million.

Benefit Plans:

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

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

For the Three Months Ended March 31,

(in millions) 2025 2024

6 unchanged sentences

Net periodic pension cost consisted of the following:

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

For the Three Months Ended March 31,

(in millions) 2025 2024

8 unchanged sentences

based defined benefit retirement plans.

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

Employer Contributions

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

Employer contributions of $ 81 million were made to the pension plans during the nine months ended September 30, 2024.

Employer contributions of $ 37 million were made to the pension plans during the three months ended March 31, 2025.

Currently, PMI anticipates making additional contributions during the remainder of 2025 of approximately $ 121 million to its pension plans, based on current tax and benefit laws.

4 unchanged sentences

Goodwill and Other Intangible Assets, net:

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

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

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

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

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

In addition, there are still risks related to PMI’s Russian reporting unit’s assets as the fair value of these assets is difficult to predict due to the current economic, political, regulatory and social conditions as well as the foreign currency volatility.

As of September 30, 2024, our Russian operations had approximately $ 2.9 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 Megapolis Distribution B.V., the holding company of JSC TK Megapolis, pursuant to Dutch law, PMI's distributor in Russia.

For further details, see Note 8.

Contingencies and Note 12.

Related Parties – Equity Investments and Other .

The movements in goodwill were as follows:

(in millions) Europe SSEA, CIS & MEA

EA, AU & PMI DF

Americas Wellness & Healthcare Total

EA, AU & PMI GTR

Americas Total

Balances at December 31, 2024 $ 4,130 $ 3,251 $ 470 $ 8,749 $ 16,600

Changes due to:

Acquisitions and divestitures — 510 — — ( 65 ) 445

Currency 290 ( 32 ) ( 3 ) 9 264

Balances, September 30, 2024 $ 4,121 $ 3,416 $ 497 $ 8,773 $ 337 $ 17,144

Balances, March 31, 2025 $ 4,420 $ 3,219 $ 467 $ 8,758 $ 16,864

As discussed in Note 1.

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

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

The increase in goodwill was due primarily to the preliminary purchase price allocation of PMI's acquisition in Egypt of United Tobacco Company in the second quarter of 2024.

In the third quarter of 2024, the foregoing increase was partially offset by goodwill allocated to the disposal group in relation to Vectura Group's expected sale and currency movements.

For further details on the acquisition in Egypt and Vectura Group's expected sale, see Note 18.

Acquisitions and Divestitures .

At September 30, 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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Background and Basis of Presentation , following the sale of Vectura Group Ltd.

on December 31, 2024, we updated our segment reporting in January 2025 by including the Wellness & Healthcare balance in the Europe segment.

As a result, the December 31, 2024 goodwill balance for the Europe segment in the table above includes the reclassification of the former Wellness & Healthcare segment.

At March 31, 2025, goodwill primarily reflects PMI’s acquisitions of Swedish Match AB and Fertin Pharma A/S, as well as acquisitions in Indonesia, the Philippines, Egypt, Greece, Mexico, and Serbia.

Other Intangible Assets

Details of other intangible assets were as follows:

September 30, 2024 December 31, 2023

March 31, 2025 December 31, 2024

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

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Acquisitions and Divestitures for further details).

The increase since December 31, 2023, was mainly due to the recognition of the Egyptian tobacco manufacturing license, partially offset by currency movements of $ 92 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 condensed consolidated statements of earnings during the nine months ended September 30, 2024.

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

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

Acquisitions and Divestitures ), partially offset by developed technology assets of $ 454 million reclassified as held for sale in relation to Vectura Group's expected sale (see Note 18.

Acquisitions and Divestitures ) and currency movements of $ 62 million.

The change in the accumulated amortization from December 31, 2023, was mainly due to the 2024 amortization of $ 588 million, partially offset by accumulated amortization of developed technology assets of $ 267 million reclassified as held for sale in relation to Vectura Group's expected sale and currency movements of $ 20 million.

The amortization of intangibles for the nine months ended September 30, 2024 was recorded in cost of sales ($ 46 million) and in marketing, administration and research costs ($ 542 million) on PMI's condensed consolidated statements of earnings.

Amortization expense for each of the next five years is estimated to be approximately $ 993 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

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

(see Note 18, Acquisitions and Divestitures ).

The increase since December 31, 2024, was mainly due to currency movements of $ 117 million.

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

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

During the second quarter of 2023, as a result of the completion of PMI's annual review of goodwill and non-amortizable intangible assets for potential impairment, it was determined that the estimated fair value of the Wellness and Healthcare reporting unit was lower than its carrying value.

Consequently, PMI recorded a goodwill impairment charge of $ 665 million in the consolidated statements of earnings for the nine months ended September 30, 2023, reflecting the impact of reduced estimated future cash flows, which were primarily attributable to unfavorable clinical trial results that became available in June 2023 for an inhalable aspirin product being developed by the Wellness and Healthcare business.

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

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

The increase in the gross carrying amount of amortizable intangible assets from December 31, 2024, was primarily due to currency movements of $ 186 million.

The change in the accumulated amortization from December 31, 2024, was mainly due to the 2025 amortization of $ 246 million, combined with currency movements of $ 39 million.

The amortization of intangibles for the three months ended March 31, 2025 was recorded in cost of sales ($ 5 million) and in marketing, administration and research costs ($ 241 million) on PMI's condensed consolidated statements of earnings.

Amortization expense for each of the next five years is estimated to be approximately $ 994 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

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

Acquisitions and Divestitures ).

Financial Instruments:

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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

(in millions) At March 31, 2025 At December 31, 2024

Derivative contracts designated as hedging instruments:

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Notes to Condensed Consolidated Financial Statements

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

The fair value of PMI’s derivative contracts included in the condensed consolidated balance sheets as of March 31, 2025 and December 31, 2024, were as follows:

Derivative Assets Derivative Liabilities

Fair Value Fair Value

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

(in millions) Balance Sheet Classification March 31, 2025 December 31, 2024 Balance Sheet Classification March 31, 2025 December 31, 2024

Derivative contracts designated as hedging instruments:

Foreign exchange contracts Other current assets $ 413 $ 772 Other accrued liabilities $ 58 $ 7

Other assets 177 153 Income taxes and other liabilities 427 449

Other assets 161 299 Other liabilities 247 60

Interest rate contracts Other current assets — — Other accrued liabilities 54 50

Other assets — — Income taxes and other liabilities 6 18

Other assets 52 4 Other liabilities — 3

Commodity contracts Other current assets 1 — Other accrued liabilities 1 —

Other assets — — Income taxes and other liabilities — 1

Other assets — — Other liabilities — —

Derivative contracts not designated as hedging instruments:

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228 331 Other accrued liabilities 91 69

Other assets — — Income taxes and other liabilities 149 143

Other assets — 12 Other liabilities 107 58

Total gross amount derivatives contracts presented in the condensed consolidated balance sheets $ 855 $ 1,418 $ 558 $ 247

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

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

PMI’s derivative contracts have been classified within Level 2 at March 31, 2025 and December 31, 2024.

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

For the nine months ended September 30, 2024 and 2023, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

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

For the three months ended March 31, 2025 and 2024, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

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

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

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Notes to Condensed Consolidated Financial Statements

For the three months ended September 30, 2024 and 2023, PMI's derivative contracts impacted the condensed consolidated statements of earnings and comprehensive earnings as follows:

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

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

Classification of Gain/(Loss)

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

2024 2023 2024 2023 2024 2023

Derivative contracts designated as hedging instruments:

Cash Flow Hedges

Foreign exchange contracts $ ( 184 ) $ 67 Net revenues $ 43 $ 73

Cost of sales — —

Marketing, administration and research costs ( 3 ) ( 19 )

Interest expense, net ( 2 ) ( 7 )

Interest rate contracts ( 3 ) — Interest expense, net 12 12

Commodity contracts — ( 1 ) Cost of sales — —

Fair value hedges:

Interest rate contracts Interest expense, net (a)

$ 10 $ ( 10 )

Net investment hedges (b) :

Foreign exchange contracts ( 630 ) 453 Interest expense, net (c)

Derivative contracts not designated as hedging instruments:

Foreign exchange contracts Interest expense, net 115 60

Marketing, administration and research costs (d)

Total $ ( 817 ) $ 519 $ 50 $ 59 $ ( 220 ) $ 381

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

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

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

Cash Flow Hedges

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

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

As of September 30, 2024, PMI has hedged forecasted transactions with derivative contracts expiring at various dates through May 2028.

As of March 31, 2025, PMI has hedged forecasted transactions with derivative contracts expiring at various dates through May 2028.

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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 September 30, 2024 was $ 952 million, of which $ 337 million was recorded in current portion of long-term debt and $ 615 million was recorded in long-term debt in the condensed consolidated balance sheets.

The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $ 46 million as of September 30, 2024.

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of March 31, 2025 was $ 4,436 million, of which $ 349 million was recorded in current portion of long-term debt and $ 4,087 million was recorded in long-term debt in the condensed consolidated balance sheets.

The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $( 16 ) million as of March 31, 2025.

Hedges of Net Investments in Foreign Operations

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

For the nine months ended September 30, 2024 and 2023, the amount of pre-tax gain/(loss) related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was $( 18 ) million and $ 51 million, respectively.

For the three months ended September 30, 2024 and 2023, the amount of pre-tax gain/(loss) related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was $( 23 ) million and $ 27 million, respectively.

For the three months ended March 31, 2025 and 2024, the amount of pre-tax gain/(loss) related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was nil and $ 5 million, respectively.

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

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

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

2024 2023 2024 2023

Gain/(loss) as of beginning of period, $ 241 $ 266 $ 433 $ 408

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

Gain/(loss) as of January 1, $ 467 $ 241

Derivative (gains)/losses transferred to earnings ( 21 ) ( 46 )

Change in fair value ( 122 ) 178

Gain/(loss) as of September 30, $ 230 $ 415 $ 230 $ 415

At September 30, 2024, PMI expects $ 67 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed consolidated statement of earnings within the next 12 months.

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

Contingent Features

PMI’s derivative instruments do not contain contingent features.

Gain/(loss) as of March 31, $ 324 $ 373

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

At March 31, 2025, PMI expects $ 134 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed consolidated statement of earnings within the next 12 months.

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

Contingent Features

PMI’s derivative instruments do not contain contingent features.

Credit Exposure and Credit Risk

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Other Investments

Certain PMI investments, which are comprised primarily of money market funds, have been classified within Level 1 and had a fair value of $ 128 million at September 30, 2024.

For the nine months and three months ended September 30, 2024, the unrealized pre-tax gains (losses) on these investments were immaterial.

Certain PMI investments, which are comprised primarily of U.S.

dollar denominated bonds in Argentina, have been classified within Level 1 and had a fair value of $ 193 million at March 31, 2025.

For the three months ended March 31, 2025, the gross unrealized pre-tax gains (losses) on these investments were immaterial.

Earnings Per Share:

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

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

2024 2023 2024 2023

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

Net earnings attributable to PMI $ 2,690 $ 2,148

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

PMI's segments are 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 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 existing geographical segments are as follows:

Background and Basis of Presentation , in January 2025, PMI updated its segment reporting by including the former Wellness & Healthcare segment results in the Europe segment.

The four geographical segments are as follows:

Europe Region;

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

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

East Asia, Australia & PMI Global Travel Retail (“EA, AU & PMI GTR”);

and Americas Region.

The Wellness and Healthcare segment remained unchanged.

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 Wellness and Healthcare products.

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

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

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

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

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

Segment data were as follows:

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

2024 2023 2024 2023

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.

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.

Goodwill and Other Intangible Assets, net .

The accounting policies of the segments are the same as those described in Item 8, Note 2.

Summary of Significant Accounting Policies of PMI's Annual Report on Form 10-K for the year ended December 31, 2024.

PMI disaggregates its net revenues from contracts with customers by product category for each of PMI's geographical segments.

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, significant expenses, and operating income by segment were as follows:

(in millions) Europe SSEA, CIS & MEA EA, AU & PMI GTR Americas Total

For the Three Months Ended March 31, 2025

Net revenues $ 3,560 $ 2,743 $ 1,731 $ 1,267 $ 9,301

Europe $ 11,301 $ 10,465 $ 4,121 $ 3,823

SSEA, CIS & MEA

8,393 7,922 2,964 2,777

EA, AU & PMI DF

4,959 4,771 1,602 1,571

Americas 3,273 2,732 1,148 895

Wellness and Healthcare 246 237 76 75

Cost of sales 982 1,200 488 370 3,040

Marketing, administration and research costs 1,141 623 330 623 2,717

Operating income $ 1,437 $ 920 $ 913 $ 274 $ 3,544

For the Three Months Ended March 31, 2024

Net revenues $ 3,455 $ 2,658 $ 1,684 $ 996 $ 8,793

Operating income (loss):

Europe $ 5,136 $ 4,551 $ 2,020 $ 1,717

SSEA, CIS & MEA

2,623 2,437 960 823

EA, AU & PMI DF

2,304 1,963 788 769

Americas 419 524 137 98

Wellness and Healthcare ( 339 ) ( 808 ) ( 251 ) ( 37 )

Cost of sales 1,027 1,237 577 354 3,195

Marketing, administration and research costs 1,017 649 344 543 2,553

Operating income $ 1,411 $ 772 $ 763 $ 99 $ 3,045

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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

2024 2023 2024 2023

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

Net revenues:

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SSEA, CIS & MEA

7,390 6,988 2,612 2,485

EA, AU & PMI DF

1,889 2,091 673 678

EA, AU & PMI GTR

Americas 484 534

Total Combustible tobacco 5,406 5,407

Smoke-free excluding Wellness and Healthcare:

Europe 1,653 1,524

of which, Wellness & Healthcare 51 90

SSEA, CIS & MEA

1,003 934 352 292

EA, AU & PMI DF

3,070 2,680 929 893

EA, AU & PMI GTR

Americas 783 462

Total Smoke-free excluding Wellness and Healthcare 10,527 9,045 3,701 3,234

Wellness and Healthcare 246 237 76 75

Total Smoke-free 3,895 3,386

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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 condensed consolidated statement of earnings for the nine months and three months ended September 30, 2024, and was included in the SSEA, CIS & MEA segment results.

• Impairment related to Vectura Group's expected sale – In September 2024, PMI announced the execution of a definitive agreement to sell Vectura to Molex Asia Holdings Ltd.

As a result, PMI recorded in the third quarter of 2024 an impairment charge of $ 198 million related to Vectura's classification as held for sale.

For further details, see Note 18.

Acquisitions and Divestitures .

• Asset impairment and exit costs – See Note 15.

Asset Impairment and Exit Costs for a breakdown of these costs by segment for the nine months ended September 30, 2024 and 2023.

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

This pre-tax charge was recorded as a reduction of net revenues in the condensed consolidated statements of earnings, and was included in the SSEA, CIS & MEA segment results for the nine months ended September 30, 2023.

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

For further details, see Note 4.

Goodwill and Other Intangible Assets, net .

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

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

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

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

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

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

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

Europe ($ 60 million);

SSEA, CIS & MEA ($ 41 million);

EA, AU & PMI DF ($ 24 million);

and Americas ($ 15 million).

• Restructuring charges - See Note 16.

Restructuring Activities for a breakdown of these costs by segment for the three months ended March 31, 2024.

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

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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, 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

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 refer to the operating revenues generated from the sale of product, primarily associated with inhaled therapeutics, and oral and intra-oral delivery systems.

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

excise taxes, if applicable.

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

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

Other segment data were as follows:

(in millions)

For the Three Months Ended March 31,

Depreciation and amortization expense:

Europe $ 124 $ 146

SSEA, CIS & MEA 68 76

EA, AU & PMI GTR 51 47

Americas 237 98

Total depreciation and amortization expense

(in millions)

For the Three Months Ended March 31,

Capital expenditures:

Europe $ 229 $ 280

SSEA, CIS & MEA 64 90

EA, AU & PMI GTR 6 6

Americas 105 41

Total capital expenditures

Contingencies:

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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.

Additionally, as reported further below, beginning in March 2024, litigation related to oral nicotine products was filed against us and our subsidiaries 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.

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Legal defense costs are expensed as incurred.

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.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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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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

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

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

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

The initial CCAA

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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

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 October 31, 2024 of all combustible tobacco product-related litigation pending in Canada against RBH and the other defendants, including PMI and our indemnitees (PM USA and Altria), namely, the smoking and health class actions filed in various Canadian provinces and health care cost recovery actions.

As part of the CCAA proceedings, there is currently a comprehensive stay up to and including the Effective Date (defined 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, 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 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.

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

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 against RBH, its affiliates, and its affiliates’ indemnitees.

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 $ 23.5 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 $ 543 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 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.

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.

The Proposed Plan, including the terms described above, remains subject to further negotiation by the parties, voting by claimants, and approval by the CCAA court.

According to a schedule proposed by the court-appointed mediator and monitor (if ordered by the CCAA court), voting on the Proposed Plan would occur in December 2024.

If accepted by claimants, a hearing to consider whether the Proposed Plan should be approved would then be expected in the first half of 2025.

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

On January 15, 2025, RBH’s court-appointed mediator and 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 argued that the Proposed Plan could not be approved because it failed to resolve the Allocation Issue.

The RBH Objection also stated that, without an appropriate, fair and reasonable resolution of the Allocation Issue, RBH could not consent to implementation of the Proposed Plan.

To address the Allocation Issue, the RBH Objection sought 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 opposed the Proposed Allocation Provisions set forth in the RBH Objection.

Following a judicial hearing on the Sanction Motion, RBH, JTIM and ITL reached a consensual resolution of all outstanding objections to the Proposed Plan filed by RBH, JTIM and ITL, including the RBH Objection, that resulted in amendments to the Proposed Plan that, among other things, would permit RBH to retain CAD 750 million (approximately $ 544 million) in accumulated cash.

On March 6, 2025, the CCAA court issued a decision approving the Proposed Plan as amended (the "Plan").

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Under the resolution contemplated by the Plan, as approved by the CCAA Court, RBH, JTIM, and ITL will pay an aggregate global settlement amount of CAD 32.5 billion (approximately $ 23.6 billion).

This amount will be funded by an upfront payment equal to the companies’ cash and cash equivalents on hand plus court deposits, less the CAD 750 million that RBH will be permitted to retain, as well as 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.

Annual contributions start at 85 % of net after-tax income ("NATI"), with a five -percentage point reduction in NATI every five years until reaching 70 %.

Annual contributions are contingent on positive NATI of RBH.

Such payment obligations concern only RBH and not PMI.

RBH and its affiliates, including PMI and its indemnitees, will 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 Plan;

related litigation will 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) will be transferred to an RBH affiliate or otherwise maintained separately from RBH's combustible business.

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

Implementation of the Plan is subject to certain conditions precedent, including execution and delivery of definitive documentation, such as execution of contractual releases.

Subject to satisfaction of the conditions precedent, it is expected that the Plan will be implemented and become effective sometime in 2025 ("Effective Date").

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 Note 13.

Related Parties – Equity Investments and Other .

Stayed Litigation — Canada

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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 $ 796 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,

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approximately CAD 1.1 billion (approximately $ 797 million), into trust accounts within 60 days.

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

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

(ii) defendants cannot be liable to class members who

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would have smoked regardless of what warnings were given;

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

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

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In the seventh class action pending in Canada, McDermid v.

Imperial Tobacco Canada Limited, et al., Supreme Court, British Columbia, Canada , filed June 25, 2010, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants.

Imperial Tobacco Canada Limited, et al., Supreme Court, British Columbia, Canada , filed June 25, 2010, we, RBH, and our indemnitees (PM USA and Altria), and other members of the

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industry are defendants.

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

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

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Health Care Cost Recovery Litigation — Canada

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

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In the sixth health care cost recovery case filed in Canada, Her Majesty in Right of Alberta v.

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

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

The pending cases include 9 proposed class actions, 17 health care cost recovery cases, 1 public civil action, and individual cases.

The pending cases include nine proposed class actions, seventeen 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.

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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.

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

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

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equitable relief.

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

As of September 30, 2024, there were 9 cases brought on behalf of classes of individual plaintiffs pending against us, our subsidiaries or indemnitees, compared with 9 such cases on September 30, 2023, and such cases are described above under the caption “ Smoking and Health Litigation — Canada.

As of March 31, 2025, 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 March 31, 2024, and such cases are described above under the caption “ Smoking and Health Litigation — Canada.

Health Care Cost Recovery Litigation:

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

As of September 30, 2024, there were 17 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Brazil ( 1 ), Canada ( 10 ), Korea ( 1 ) and Nigeria ( 5 ), compared with 17 such cases on September 30, 2023.

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As of March 31, 2025, there were 17 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Brazil ( 1 ), Canada ( 10 ), Korea ( 1 ) and Nigeria ( 5 ), compared with 17 such cases on March 31, 2024.

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

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

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

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

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

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We have not yet been re-served.

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

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Plaintiffs' allegations of liability in these cases are based on various theories of recovery including product defect, concealment, and misrepresentation.

Plaintiffs in

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

As of September 30, 2024, there was 1 public civil action pending against our subsidiary in Venezuela ( 1 ), compared with 1 such case on September 30, 2023.

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

As of March 31, 2025, there was one public civil action pending against our subsidiary in Venezuela ( 1 ), compared with one such case on March 31, 2024.

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

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Smoke-Free Products-Related Litigation

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

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.

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Philip Morris International Inc., et al.

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

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

, 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.

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.

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,

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interest, and medical monitoring.

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

The court gave plaintiff the opportunity to amend his complaint by November 4, 2024.

On August 20, 2024, the court also denied PMI’s motion to dismiss without prejudice, granted plaintiff’s request to conduct jurisdictional discovery, and gave PMI the opportunity to refile its motion to dismiss by November 18, 2024.

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

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.

On March 19, 2025, the Court granted defendants’ motion to dismiss the plaintiffs’ fraud claim with prejudice but denied the motion to dismiss Swedish Match USA Inc.

The Court also denied the motion to dismiss the three PMI defendants for lack of personal jurisdiction.

The case will now move to the discovery phase.

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

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

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

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.

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

On June 7, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice, and Swedish Match North America

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LLC also filed a motion to stay the proceedings pending resolution of the Kelly class action.

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.

On March 28, 2025, the Court granted Swedish Match North America LLC’s motion to stay the case, ordering that the case be stayed until the court in the Kelly case, described above, issues a ruling on any motion that the plaintiffs in that case might make to certify a class.

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

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

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

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

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

The court gave plaintiff the opportunity to amend his complaint by November 4, 2024.

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 March 19, 2025, the Court granted defendants’ motion to dismiss the fraud claim with prejudice but denied the motion to dismiss Swedish Match USA Inc.

The Court also denied the motion to dismiss the three PMI defendants for lack of personal jurisdiction.

The case will now move to the discovery phase.

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 named defendants are PMI and Swedish Match North America LLC.

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 and for PMI to refile its motion to dismiss.

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

Plaintiff asserts strict liability design defect and failure to warn claims, as well as negligence and fraud claims, and is seeking

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compensatory and punitive damages, attorney’s fees and costs, interest, and medical monitoring.

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 March 19, 2025, the Court granted defendants’ motion to dismiss the plaintiffs’ fraud claim with prejudice but denied the motion to dismiss Swedish Match USA Inc.

The Court also denied the motion to dismiss the three PMI defendants for lack of personal jurisdiction.

The case will now move to the discovery phase.

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 named defendants are PMI and Swedish Match North America LLC.

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.

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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.

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 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.

District of Columbia Attorney General Investigation :

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

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

SMNA is cooperating with the investigation.

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

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 North America LLC, which the Court ordered on October 3, 2024.

On April 11, 2025, PMI filed a motion to stay the proceedings until the court in the Kelly case, described above, issues a ruling on any motion for class certification that the plaintiff in that case might bring.

In the sixth case, an individual complaint, Friedman v.

Philip Morris International Inc., et al.

, filed April 2, 2025, 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, Swedish Match North America LLC, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc.

as defendants.

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

Defendants have not yet answered or otherwise responded to the complaint.

Other Litigation

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 alleged 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.

Rather than respond to the motion, Plaintiff filed an amended complaint ("Amended Complaint") on February 10, 2025.

The Amended Complaint dropped Plaintiff's baseless litigation theory and named PMI as a defendant in its merger challenge claim.

Swedish Match North America and PMI filed a motion to dismiss on March 3, 2025.

Briefing is completed

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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 $ 2.4 billion).

In May 2017, Thailand enacted a new customs act.

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

PM Thailand believes that its declared import prices are in compliance with the Customs Valuation Agreement of the World Trade Organization and Thai law and that the allegations of the Public Prosecutor are inconsistent with several decisions 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 $ 35.8 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 was included in other assets on the condensed consolidated balance sheets and negatively impacted net cash provided by operating activities in the condensed consolidated statements of cash flows in the period of payment.

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

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

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

The appellate court affirmed the acquittals of the individual defendants.

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

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

On September 5, 2024, the Supreme Court of Thailand issued its decision.

The Supreme Court affirmed the findings of under-declaration of import prices of cigarettes but further reduced the fine imposed to THB 50 million (approximately $ 1.5 million), which PMI recorded as a pre-tax charge in the condensed consolidated statements of earnings for the nine months ended September 30, 2024.

The Supreme Court also affirmed the acquittals of the individual defendants.

Thailand is required to refund the payment made by our subsidiary in 2019 in excess of the THB 50 million (approximately $ 1.5 million) fine ultimately assessed by the Supreme Court.

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.

and we are awaiting a decision from the court.

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.

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

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

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

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

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

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

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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.

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

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 $ 54 million) in damages.

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

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

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

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

Our affiliate holds a 23 % equity interest in MDBV.

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

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.

We currently expect such interest and corporate rights will be subsequently transferred to JSC TK Megapolis' indirect shareholders, or their designees, during the fourth quarter of 2024.

For additional information, see Part I, Item 1.

Financial Statements – Note 12.

Related Parties – Equity Investments and Other.

British American Tobacco Italia S.p.a.

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 $ 57 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.

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).

On March 31, 2025, the Brazilian Tax Authority served our affiliate with notice of a similar assessment alleging underpayments of indirect taxes during the 2021 fiscal year, for approximately BRL 211 million ($ 38 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 sought an order stopping the importation of TEREA consumables.

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

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

FTKK sought an order to stop the importation of TEREA consumables.

FTKK did not seek in its application 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 27, 2024 expert

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

advisors to Customs provided their opinion that the patent at issue was not infringed.

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

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PMJL is obligated to indemnify Sojitz for damages and intervened in the matters.

Merits briefing in the matters is expected to commence in late 2024.

PMJL intends to vigorously defend these matters.

Merits briefing in the matters commenced in December 2024.

Between November 2024 and March 2025, FTKK filed nine additional patent infringement actions against Sojitz for alleged infringement of nine new FTKK patents by TEREA and SENTIA consumables.

FTKK asserts a claim for damages in these actions.

Between February 2025 and March 2025, FTKK filed four patent infringement actions against Sojitz seeking a preliminary injunction.

The patents FTKK has asserted in each of these actions were previously asserted by FTKK in earlier filed (and still pending) actions seeking monetary damages.

PMJL is obligated to indemnify Sojitz for damages and has intervened, or will intervene, in all of these matters.

Merits briefing in these matters either has commenced or 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 to stop 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 opposition to FTKK’s application on January 9, 2025.

A hearing before Customs officials was held on March 31, 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 seeking a declaration that FTKK is not entitled to damages on the basis that the relevant patent is not infringed or is invalid.

On April 16, 2025, expert advisors to Tokyo Customs provided their opinion that the patent at issue in the Customs matter is not infringed.

Tokyo Customs is expected to issue a formal ruling on the matter in late April or May 2025.

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.

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

PMI’s effective tax rates for the nine months and three months ended September 30, 2024 were 23.1 % and 21.3 %, respectively.

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

PMI’s effective tax rates for the three months ended March 31, 2025 and 2024 were 20.0 % and 24.8 %, respectively.

The effective tax rate for the three months ended March 31, 2025 was favorably impacted by a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 93 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity;

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

The effective tax rate for the three months ended March 31, 2024 was unfavorably impacted by:

(i) a deferred tax charge for unrealized foreign currency gains on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 111 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity;

and (ii) an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($ 43 million);

partially offset by a U.S.

tax benefit for a worthless stock

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

The effective tax rate for the nine months ended September 30, 2024, was unfavorably impacted by:

(i) an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($ 185 million);

and (ii) an impairment loss related to the sale of Vectura Group, partially offset by:

(i) a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 9 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity;

and (ii) 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.

deduction under section 165(g) of the Internal Revenue Code related to PMI's investment in C.A.

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

For further details on PMI's ceased operations in Venezuela and the impairment loss related to the sale of Vectura Group, see Note 15.

Asset Impairment and Exit Costs and Note 18.

Acquisitions and Divestitures , respectively.

For further details on PMI's ceased operations in Venezuela, see Note 16.

Restructuring Activities .

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

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

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

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

and (iii) a deferred tax costs for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 41 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity.

The effective tax rate for the three months ended September 30, 2023 was unfavorably impacted by an increase in deferred tax liabilities related to the unremitted earnings of PMI's Russian subsidiaries ($ 173 million) and a deferred tax cost for unrealized foreign currency gains on intercompany loans related to the Swedish Match acquisition financing reflected in the condensed consolidated statements of earnings ($ 138 million).

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

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

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

These income tax receivables are included in other assets in PMI’s condensed consolidated balance sheets at September 30, 2024 and December 31, 2023.

These income tax receivables are included in other assets in PMI’s condensed consolidated balance sheets at March 31, 2025 and December 31, 2024.

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.

An estimate of any possible change cannot be made at this time.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Indebtedness:

Short-term Borrowings:

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

September 30, 2024 December 31, 2023

At March 31, 2025 and December 31, 2024, PMI’s short-term borrowings and related average interest rates consisted of the following:

March 31, 2025 December 31, 2024

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

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Long-term Debt:

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

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

At March 31, 2025 and December 31, 2024, PMI’s long-term debt consisted of the following:

(in millions) March 31, 2025 December 31, 2024

dollar notes, 0.875 % to 6.375 % (average interest rate 4.592 %), due through 2044

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Euro notes, 0.125 % to 3.750 % (average interest rate 1.977 %), due through 2039

Swiss franc note, 1.625 %, due 2024

Euro credit facility borrowings related to Swedish Match AB acquisition, (average interest rate 4.009 %), due through 2027

Euro credit facility borrowings related to Swedish Match AB acquisition, (average interest rate 3.023 %), due 2027

Swedish krona notes, 1.395 % to 2.710 % (average interest rate 2.016 %), due through 2029

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$ 38,781 $ 42,166

(a) Includes long-term bank loans at subsidiaries, as well as $ 41 million and $ 53 million in finance leases at September 30, 2024 and December 31, 2023, respectively.

(a) Includes long-term bank loans at subsidiaries, as well as $ 64 million and $ 67 million in finance leases at March 31, 2025 and December 31, 2024, respectively.

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

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

At March 31, 2025, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:

(in millions)

September 30, 2024

March 31, 2025

Level 1 $ 41,294

Level 2 3,094

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

Summary of Significant Accounting Policies of PMI's Annual Report on Form 10-K for the year ended December 31, 2024.

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 September 30, 2024 and December 31, 2023, the € 5.5 billion (approximately $ 6 billion) term loan facility was fully drawn and remained outstanding.

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

Debt Issuances

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

(in millions)

Type Face Value Interest Rate Issuance Maturity

dollar notes (a)

$ 750 4.750 % February 2024 February 2027

dollar notes (a)

$ 1,000 4.875 % February 2024 February 2029

dollar notes (a)

$ 1,250 5.125 % February 2024 February 2031

dollar notes (a)

$ 1,750 5.250 % February 2024 February 2034

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

3.750 % June 2024 January 2031

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

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

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

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 March 31, 2025, borrowings in the amount of € 2.5 billion (approximately $ 2.7 billion) under the 5 -year tranche of the term loan facility remained outstanding.

Philip Morris International Inc.

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Revolving Credit Facilities:

At September 30, 2024, PMI's total committed revolving credit facilities were as follows:

At March 31, 2025, PMI's total committed revolving credit facilities were as follows:

(in billions)

Revolving Credit

364 -day revolving credit, expiring January 28, 2025

Multi-year revolving credit, expiring February 10, 2026 (1)

Multi-year revolving credit, expiring September 29, 2026 (2) (3)

Multi-year $ 2.0 billion revolving credit, expiring February 10, 2026 (1)

Multi-year $ 2.5 billion revolving credit, expiring September 29, 2026 (2) (3)

Multi-year € 1.5 billion revolving credit, expiring January 29, 2028

Total facilities

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

At September 30, 2024, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.

At March 31, 2025, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.

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

These credit arrangements amounted to approximately $ 2.2 billion at September 30, 2024, and approximately $ 2.7 billion at December 31, 2023.

Borrowings under these arrangements and other bank loans amounted to $ 152 million at September 30, 2024, and $ 283 million at December 31, 2023.

These credit arrangements amounted to approximately $ 3.4 billion at March 31, 2025, and approximately $ 2.1 billion at December 31, 2024.

Borrowings under these arrangements and other bank loans amounted to $ 269 million at March 31, 2025, and $ 137 million at December 31, 2024.

Accumulated Other Comprehensive Losses:

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(Losses) Earnings At At At

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

(in millions) March 31, 2025 December 31, 2024 March 31, 2024

Currency translation adjustments $ ( 9,026 ) $ ( 9,320 ) $ ( 8,883 )

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Reclassifications from Other Comprehensive Earnings

The movements in accumulated other comprehensive losses and the related tax impact, for each of the components above, that are due to current period activity and reclassifications to the income statement, are shown on the condensed consolidated statements of comprehensive earnings for the nine months and three months ended September 30, 2024 and 2023.

For additional information, see Note 2.

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

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

Asset Impairment and Exit Costs and

Acquisitions and Divestitures and Note 16.

Restructuring Activities for disclosures related to the reclassification of accumulated foreign currency translation losses from other comprehensive losses, Note 4.

Benefit Plans for disclosures related

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

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

to PMI's pension and other benefits and Note 6.

Financial Instruments for disclosures related to derivative financial instruments.

Related Parties - Equity Investments and Other:

Equity Method Investments:

At September 30, 2024 and December 31, 2023, PMI had total equity method investments of $ 1,203 million and $ 1,309 million, respectively.

At March 31, 2025 and December 31, 2024, PMI had total equity method investments of $ 1,117 million and $ 1,005 million, respectively.

Equity method investments are initially recorded at cost.

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

The carrying value of our equity method investments at September 30, 2024 and December 31, 2023, exceeded our share of the investees' book value by $ 1,121 million and $ 907 million, respectively.

The carrying value of our equity method investments at March 31, 2025 and December 31, 2024, exceeded our share of the investees' book value by $ 1,149 million and $ 1,060 million, respectively.

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

The difference related to the definite-lived intangibles and other assets at September 30, 2024 and December 31, 2023 of $ 152 million and $ 31 million, respectively, is amortized on a straight-line basis and is included in Equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings.

At September 30, 2024, PMI received no year-to-date dividends from equity method investees.

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

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

("MDBV"), 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 September 30, 2024 had a carrying value of $ 408 million.

Additionally, there was approximately $ 573 million of cumulative foreign currency translation losses associated with MDBV reflected in accumulated other comprehensive losses in the condensed consolidated statement of stockholders’ equity as of September 30, 2024.

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

The difference related to the definite-lived intangibles and other assets at March 31, 2025 and December 31, 2024 of $ 151 million and $ 152 million, respectively, is amortized on a straight-line basis and is included in Equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings.

At March 31, 2025 and December 31, 2024, PMI received year-to-date dividends from equity method investees of $ 15 million and $ 151 million, respectively.

PMI holds a 23 % equity interest in JSC TK Megapolis ("TKM"), PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of March 31, 2025 had a carrying value of $ 353 million.

Additionally, there was approximately $ 543 million of cumulative foreign currency translation losses associated with TKM reflected in accumulated other comprehensive losses in the condensed consolidated statement of stockholders’ equity as of March 31, 2025.

Previously TKM was a subsidiary of Megapolis Distribution B.V.

("MDBV"), Dutch holding company in which PMI holds 23 % equity interest.

In June 2024, the Russian government included TKM in the list of economically significant organizations that may be subject to forced localization under applicable Russian law, which referred 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 we currently expect they will be subsequently transferred to its indirect shareholders or their designees during the fourth quarter of 2024.

While as of September 30, 2024, there was no other-than-temporary impairment identified, there are still risks related to this investment and our associated economic and ownership rights as the fair value of these assets with their associated rights is difficult to predict due to the current economic, political, regulatory, legal and social conditions as well as the foreign currency volatility.

As a result, MDBV’s shares in TKM were transferred to TKM and subsequently transferred to the Russian subsidiaries 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 in the fourth quarter of 2024, primarily reflecting additional deferred withholding taxes related to the TKM pre-localization earnings and other adjustments of accumulated earnings of the Russian subsidiary.

As of March 31, 2025, 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”).

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

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

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

As of March 31, 2025, PMI has not finalized the basis difference allocation resulting from the investment.

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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

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

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

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

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Under the resolution contemplated by the Proposed Plan, RBH, ITL and JTIM would pay an aggregate global settlement amount of CAD 32.5 billion (approximately $ 23.5 billion).

Further developments in the CCAA process, including with respect to the issue of allocation of CAD 32.5 billion aggregate settlement amount among RBH, ITL, and JTIM may have a material adverse impact on the fair value of PMI’s continuing investment in RBH and may result in impairment charges.

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 $ 23.6 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.

On January 24, 2025, RBH filed an objection to approval of the Proposed Plan with the CCAA court (for further details, see Note 9.

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 remained 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 in the fourth quarter and 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.

For further details, see Note 8.

On March 6, 2025, the CCAA court issued a decision approving the Proposed Plan as amended (the "Plan"), for further details, see Note 9.

Contingencies .

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $ 1,174 million at September 30, 2024.

Unrealized pre-tax gain (loss) of $ 799 million ($ 614 million net of tax) on these equity securities was recorded in equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings for the nine months ended September 30, 2024.

PMI evaluated the terms of the Plan, and no indicators of further impairment were identified as a result of this evaluation.

PMI records its continuing investment in RBH at its fair value determined as of December 31, 2024, adjusted for currency translation adjustments.

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $ 1,104 million at March 31, 2025.

Unrealized pre-tax gain (loss) of $ 183 million ($ 143 million net of tax) on these equity securities was recorded in equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings for the three months ended

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Notes to Condensed Consolidated Financial Statements

March 31, 2025.

Other related parties:

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

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Notes to Condensed Consolidated Financial Statements

Financial activity with the above related parties:

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

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

For the Three Months Ended March 31,

(in millions) 2025 2024

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Net revenues (a)

$ 2,866 $ 2,631 $ 1,045 $ 857

Other $ 37 $ 40

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

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

(in millions) At March 31, 2025 At December 31, 2024

Megapolis Group $ 562 $ 405

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PMI sells trade receivables under two types of arrangements, servicing and non-servicing.

For servicing arrangements, PMI continues to service the sold trade receivables on an administrative basis and does not act on behalf of the unaffiliated financial institutions.

For servicing arrangements, PMI continues to

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Notes to Condensed Consolidated Financial Statements

service the sold trade receivables on an administrative basis and does not act on behalf of the unaffiliated financial institutions.

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 as of September 30, 2024 and September 30, 2023.

The amounts associated with the servicing liability were not material as of March 31, 2025 and March 31, 2024.

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

Cumulative trade receivables sold, including excise taxes, for the nine months ended September 30, 2024 and 2023, were $ 8.8 billion and $ 9.4 billion, respectively.

Cumulative trade receivables sold, including excise taxes, for the three months ended March 31, 2025 and 2024, were $ 2.4 billion and $ 2.7 billion, respectively.

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

The trade receivables sold that remained outstanding under these arrangements as of September 30, 2024 and September 30, 2023, were $ 0.6 billion and $ 0.7 billion, respectively.

The trade receivables sold that remained outstanding under these arrangements as of March 31, 2025 and March 31, 2024, were $ 0.6 billion and $ 0.7 billion, respectively.

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

The difference

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

The loss on sale of trade receivables was as follows:

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

2024 $ 33 $ 11

2023 $ 37 $ 13

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

For the three months ended March 31, 2025 and 2024, the loss on sale of trade receivables was $ 8 million and $ 12 million, respectively.

Product Warranty:

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PMI accounts for its product warranties within other accrued liabilities.

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

(in millions) As of and For the Nine Months Ended September 30, 2024 As of and For the Year Ended December 31, 2023

At March 31, 2025 and December 31, 2024, these amounts were as follows:

(in millions) As of and For the Three Months Ended March 31, 2025 As of and For the Year Ended December 31, 2024

Balance at beginning of period $ 76 $ 80

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Balance at end of period $ 79 $ 76

Asset Impairment and Exit Costs:

For the nine months ended September 30, 2024 and 2023, PMI recorded total pre-tax asset impairment and exit costs of $ 168 million and $ 109 million, respectively, related to restructuring activities.

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

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

For the nine months ended September 30, 2024, PMI recorded a pre-tax impairment charge of other intangibles of $ 27 million within the Wellness and Healthcare segment.

For the nine months and the three months ended September 30, 2024, PMI recorded an impairment charge of $ 198 million related to Vectura's classification as held for sale.

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

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

Goodwill and Other Intangible Assets, net and Note 18.

Acquisitions and Divestitures .

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Notes to Condensed Consolidated Financial Statements

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

Restructuring Activities:

For the three months ended March 31, 2025, PMI did not record any charges for restructuring activities.

For the three months ended March 31, 2024, PMI recorded total pre-tax restructuring charges of $ 168 million.

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

Manufacturing Footprint Optimization - Germany

As a result of declining demand for cigarettes and other combustible 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.

The consultation processes for both of these factories were concluded in April 2025, and PMI estimated that it will incur future pre-tax charges of at least approximately EUR 200 million (approximately $ 230 million) (primarily in the second quarter of 2025) as a result of the closure, including employee severance, contract termination and asset impairment costs.

The final amount of the charges, as well as the timing of payments, will depend on the separation options selected by impacted employees under the agreement and the evaluation of the potential future use of assets.

IQOS products sourcing for the U.S.

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

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

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

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 9.

Contingencies ).

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

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.

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Acquisitions and Divestitures .

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

In the first quarter of 2024, PMI recorded pre-tax restructuring charges of $ 121 million related to this restructuring activity.

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

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

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

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.

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Notes to Condensed Consolidated Financial Statements

e-Vapor Products Manufacturing Optimization

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

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

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

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

Asset Impairment and Exit Costs by Segment

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

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

Restructuring Charges by Segment

PMI recorded the following pre-tax restructuring charges by segment:

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

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

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Contract termination charges:

SSEA, CIS & MEA — 23

EA, AU & PMI DF — 14

Americas 65 7

Total contract termination charges 65

Asset impairment charges:

SSEA, CIS & MEA — 9

EA, AU & PMI DF — 5

Americas 65 4

Total asset impairment charges 65

Asset impairment and exit costs $ 168 $ 109

Movement in Exit Cost Liabilities

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

Restructuring charges $ 168

Movement in Restructuring Related Liabilities

The movement in restructuring related liabilities for the three months ended March 31, 2025 was as follows:

(in millions)

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Currency/other ( 1 )

Liability balance, September 30, 2024 $ 42

Future cash payments for exit costs incurred to date are anticipated to be substantially paid by the end of 2025, with approximately $ 31 million expected to be paid in the remainder of 2024.

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

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

Liability balance, March 31, 2025 $ 26

Future cash payments for restructuring activities incurred to date are anticipated to be substantially paid by the end of 2025.

The components of PMI’s lease cost were as follows for the three months ended March 31, 2025 and 2024:

For the Three Months Ended March 31,

(in millions) 2025 2024

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Amortization of right-of-use assets 15 25

Interest on lease liabilities

Short-term lease cost 14 16

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Total lease cost $ 108 $ 114

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Supply Chain Financing:

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

As of September 30, 2024 and December 31, 2023, the total amount due to suppliers participating in the SCF program was approximately $ 0.9 billion.

Acquisitions and Divestitures:

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.

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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 approximately $ 2.8 billion, including interest, of which $ 1.0 billion was paid at the inception of the agreement and the remaining $ 1.8 billion was paid on July 14, 2023.

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

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

United Tobacco Company

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.

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

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

(in millions)

Cash and cash equivalent $ 74

Current assets, including receivables and inventories 11

Other intangible assets - Tobacco manufacturing license 211

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

Current liabilities ( 8 )

Identifiable net assets acquired 304

Noncontrolling interest ( 159 )

Acquisition fair value $ 655

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

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

The 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 September 30, 2024, were included

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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.

Agreement to sell 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.

to Molex Asia Holdings Ltd.

Vectura's results are included in the Wellness and Healthcare segment.

The transaction price is GBP 150 million (approximately $ 201 million), with additional deferred payments of up to GBP 148 million (approximately $ 198 million), contingent on achievement of certain milestones over periods up to and through 2039.

The transaction is expected to close during the fourth quarter of 2024, subject to customary regulatory approvals and other closing conditions.

In connection with the expected transaction, Vectura’s net assets including $ 333 million of assets and $ 191 million of liabilities have been classified as held-for-sale and included within other current assets and other accrued liabilities, respectively, in PMI’s condensed consolidated balance sheet as of September 30, 2024.

Carrying value of Vectura’s net assets held for sale exceeded their fair value less costs to sell, resulting in an impairment charge of $ 198 million, which has been recorded in marketing, administration and research costs in PMI’s condensed consolidated statements of earnings during the nine months and the three months ended September 30, 2024.

The estimated fair value of the disposal group less costs to sell was determined using a market approach, based upon the expected net sales proceeds of the disposal group.

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Notes to Condensed Consolidated Financial Statements

As of March 31, 2025 and December 31, 2024, the total amount due to suppliers participating in the SCF program was $ 0.9 billion and $ 1.0 billion, respectively.

New Accounting Standards:

Improvements to Reportable Segment Disclosures

On November 27, 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update ASU 2023-07, “Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which improves reportable segment disclosures, primarily through enhanced disclosures about significant segment expenses that impact segment profit and loss, regularly provided to the chief operating decision maker.

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 will adopt the additional disclosure requirements on the specified effective date within its annual reporting for the year ending December 31, 2024, and its interim reporting starting for the quarter ending March 31, 2025.

Improvements to Income Tax Disclosures

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

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

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

ASU 2023-09 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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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements