What changed in this filing

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Item 1. Financial Statements

2025-07-25 compared with 2025-04-24 · 473 added, 222 removed, 1187 unchanged (37% of the section changed)

4 unchanged sentences

(in millions of dollars, except per share data)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

Net revenues 1 & 2 (Note 13)

3 unchanged sentences

Marketing, administration and research costs (Note 16) 5,825 5,232

Impairment of goodwill (Note 5) 41 —

Operating income 7,256 6,489

10 unchanged sentences

Diluted earnings per share $ 3.67 $ 2.92

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

(1) Includes net revenues from related parties of $ 2,080 million and $ 1,821 million for the six months ended June 30, 2025 and 2024, respectively.

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

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

For the six months ended June 30, 2025 and 2024, excise tax on products was $ 25,274 million and $ 24,762 million, respectively.

See notes to condensed consolidated financial statements.

1 unchanged sentence

and Subsidiaries

Condensed Consolidated Statements of Earnings

(in millions of dollars, except per share data)

For the Three Months Ended June 30,

Net revenues 1 & 2 (Note 13)

$ 10,140 $ 9,468

Cost of sales 3,279 3,345

Gross profit 6,861 6,123

Marketing, administration and research costs (Note 16)

Impairment of goodwill (Note 5) 41 —

Operating income 3,712 3,444

Interest expense, net 277 329

Pension and other employee benefit costs (Note 4) 11 14

Earnings before income taxes 3,424 3,101

Provision for income taxes 652 734

Equity investments and securities (income)/loss, net ( 376 ) ( 161 )

Net earnings 3,148 2,528

Net earnings attributable to noncontrolling interests 109 122

Net earnings attributable to PMI $ 3,039 $ 2,406

Per share data (Note 7):

Basic earnings per share $ 1.95 $ 1.54

Diluted earnings per share $ 1.95 $ 1.54

(1) Includes net revenues from related parties of $ 1,143 million and $ 961 million for the three months ended June 30, 2025 and 2024, respectively.

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

For the three months ended June 30, 2025 and 2024, excise tax on products was $ 13,272 million and $ 12,923 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 Three Months Ended March 31,

For the Six Months Ended June 30,

Net earnings $ 5,985 $ 4,774

2 unchanged sentences

Unrealized gains (losses), net of income taxes of $ 433 in 2025 and $( 130 ) in 2024

( 1,626 ) 365

(Gains)/losses transferred to earnings, net of income taxes of $ 0 in 2025 and 2024 (Note 2 and 16)

Change in net loss and prior service cost:

Net gains (losses) and prior service costs, net of income taxes of $( 7 ) in 2025 and $ 0 in 2024

Amortization of net losses, prior service costs and net transition costs, net of income taxes of $( 25 ) in 2025 and $( 18 ) in 2024

Change in fair value of derivatives accounted for as hedges:

Gains (losses) recognized, net of income taxes of $ 43 in 2025 and $( 55 ) in 2024

(Gains) losses transferred to earnings, net of income taxes of $ 9 in 2025 and $ 23 in 2024

( 50 ) ( 94 )

Total other comprehensive earnings (losses) ( 1,806 ) 779

Total comprehensive earnings 4,179 5,553

Less comprehensive earnings (losses) attributable to:

Noncontrolling interests 289 114

Comprehensive earnings attributable to PMI $ 3,890 $ 5,439

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Condensed Consolidated Statements of Comprehensive Earnings

(in millions of dollars)

For the Three Months Ended June 30,

Net earnings $ 3,148 $ 2,528

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

Change in currency translation adjustments:

Unrealized gains (losses), net of income taxes of $ 339 in 2025 and $( 28 ) in 2024

( 1,922 ) ( 123 )

(Gains)/losses transferred to earnings, net of income taxes of $ 0 in 2025 and 2024 (Note 2)

Change in net loss and prior service cost:

Net gains (losses) and prior service costs, net of income taxes of $( 7 ) in 2025 and $ 0 in 2024

Amortization of net losses, prior service costs and net transition costs, net of income taxes of $( 11 ) in 2025 and $( 9 ) in 2024

30 unchanged sentences

TOTAL ASSETS $ 68,506 $ 61,784

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

(1) Includes trade receivables from related parties of $ 1,026 million and $ 691 million as of June 30, 2025, and December 31, 2024, respectively.

For further details, see Note 13.

42 unchanged sentences

(in millions of dollars)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES

2 unchanged sentences

Depreciation and amortization expense 970 812

Impairment of other intangibles (Note 5) — 27

Impairment of goodwill and other intangibles (Note 5) 41 27

Deferred income tax (benefit) provision ( 274 ) 59

11 unchanged sentences

Capital expenditures ( 760 ) ( 787 )

Proceeds from sale of business, net of cash disposed (Note 2) 32 —

Acquisitions, net of acquired cash (Note 2) — 44

Equity investments ( 35 ) ( 113 )

7 unchanged sentences

(in millions of dollars)

For the Three Months Ended March 31,

For the Six Months Ended June 30,

CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

14 unchanged sentences

Balance at end of period $ 4,176 $ 4,876

(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.

(1) The amounts for cash, cash equivalents and restricted cash shown above include restricted cash of $ 38 million and $ 69 million as of June 30, 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 Three Months Ended March 31, 2025 and 2024

For the Six Months Ended June 30, 2025 and 2024

(in millions of dollars, except per share amounts)

14 unchanged sentences

Dividends paid to noncontrolling interests ( 262 ) ( 262 )

Acquisitions (Note 2) 159 159

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

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

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

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

5 unchanged sentences

Dividends paid to noncontrolling interests ( 215 ) ( 215 )

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

Balances, June 30, 2025 $ — $ 2,364 $ 34,376 $ ( 13,153 ) $ ( 35,553 ) $ 1,954 $ ( 10,012 )

See notes to condensed consolidated financial statements.

1 unchanged sentence

and Subsidiaries

Condensed Consolidated Statements of Stockholders’ (Deficit) Equity

For the Three Months Ended June 30, 2025 and 2024

(in millions of dollars, except per share amounts)

PMI Stockholders’ (Deficit) Equity

Stock Additional

Capital Earnings

Reinvested in

Business Accumulated

Comprehensive Losses Cost of

Stock Noncontrolling

Interests Total

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

Net earnings 2,406 122 2,528

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

Issuance of stock awards 44 12 56

Dividends declared ($ 1.30 per share)

( 2,032 ) ( 2,032 )

Dividends paid to noncontrolling interests ( 186 ) ( 186 )

Acquisitions (Note 2) 159 159

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

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

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

Net earnings 3,039 109 3,148

Other comprehensive earnings (losses), net of income taxes ( 2,036 ) 31 ( 2,005 )

Issuance of stock awards 38 4 42

Dividends declared ($ 1.35 per share)

( 2,110 ) ( 2,110 )

Dividends paid to noncontrolling interests ( 161 ) ( 161 )

Balances, June 30, 2025 $ — $ 2,364 $ 34,376 $ ( 13,153 ) $ ( 35,553 ) $ 1,954 $ ( 10,012 )

See notes to condensed consolidated financial statements.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

32 unchanged sentences

(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.

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) which was collected in the second quarter of 2025, 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.

As of June 30, 2025 and December 31, 2024, the liability related to the indemnity was not material.

Philip Morris International Inc.

13 unchanged sentences

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)

In May 2025, PMI finalized all measurement period adjustments related to the UTC acquisition.

The following table summarizes the final 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) Preliminary Purchase Price Allocation Recognized in the second quarter 2024 Measurement Period Adjustments Final Purchase Price Allocation

Cash and cash equivalent $ 74 $ — $ 74

3 unchanged sentences

Current liabilities ( 8 ) — ( 8 )

Non-Current liabilities — ( 18 ) ( 18 )

Identifiable net assets acquired 304 7 311

Noncontrolling interest ( 159 ) ( 1 ) ( 160 )

Goodwill 510 ( 5 ) 505

Acquisition fair value $ 655 $ 1 $ 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 goodwill is not deductible for income tax purposes.

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.

UTC's results of operations from May 16, 2024, through December 31, 2024, were included in PMI's consolidated statements of earnings and were not material.

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Altria Group, Inc.

3 unchanged sentences

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.

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.

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

On the acquisition date and as of December 31, 2024 and June 30, 2025, the reacquired rights were classified as Other intangible assets, net in PMI's 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 March 31, 2025, shares available for grant under the 2022 Plan were 16,903,895 .

At June 30, 2025, shares available for grant under the 2022 Plan were 16,942,225 .

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

At June 30, 2025, shares available for grant under the plan were 865,940 .

Restricted share unit (RSU) awards

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)

During the six months ended June 30, 2025 and 2024, 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

2025 1,506,180 $ 145.19

2024 1,976,920 $ 89.05

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

Compensation expense related to RSU awards was as follows:

Compensation Expense Related to RSU Awards

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

2025 $ 97 $ 34

2024 $ 84 $ 37

As of June 30, 2025, PMI had $ 259 million of total unrecognized compensation cost related to non-vested RSU awards.

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

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

During the six months ended June 30, 2025, 1,320,538 RSU awards vested.

The grant date fair value of all the vested awards was approximately $ 139 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 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 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:

The total fair value of RSU awards that vested during the six months ended June 30, 2025 was approximately $ 198 million.

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

Performance share unit (PSU) awards

During the six months ended June 30, 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 six months ended June 30, 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:

• Product Sustainability ( 20 % weight):

4 unchanged sentences

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.

The performance metrics, targets and relative weights for the PSU’s granted during the six months ended June 30, 2025 were the same as the PSU’s granted during the six months ended June 30, 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.

5 unchanged sentences

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

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:

During the six months ended June 30, 2025 and 2024, shares granted to eligible employees and the grant date fair value per share related to PSU awards were as follows:

Number of Shares Granted Weighted-

2 unchanged sentences

Average PSU Grant Date

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

Fair Value Subject to TSR Performance Factors

(Per Share) (Per Share)

4 unchanged sentences

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Average risk-free interest rate (a)

4 unchanged sentences

(b) Determined using the observed historical volatility.

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

Compensation Expense Related to PSU Awards

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

2025 $ 60 $ 9

2024 $ 49 $ 18

As of June 30, 2025, PMI had $ 60 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 .

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

During the six months ended June 30, 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.

The total fair value of PSU awards that vested during the six months ended June 30, 2025 was approximately $ 102 million.

Benefit Plans:

6 unchanged sentences

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

For the Three Months Ended March 31,

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

(in millions) 2025 2024 2025 2024

3 unchanged sentences

Total pension and other employee benefit costs $ 23 $ 29 $ 11 $ 14

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Pension Plans

1 unchanged sentence

Net periodic pension cost consisted of the following:

For the Three Months Ended March 31,

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

(in millions) 2025 2024 2025 2024

11 unchanged sentences

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

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

Employer contributions of $ 62 million were made to the pension plans during the six months ended June 30, 2025.

Currently, PMI anticipates making additional contributions during the remainder of 2025 of approximately $ 102 million to its pension plans, based on current tax and benefit laws.

4 unchanged sentences

Goodwill and Other Intangible Assets, net:

2025 Annual impairment review of goodwill and non-amortizable intangible assets

During the second quarter of 2025, PMI completed its annual review of goodwill and non-amortizable intangible assets for potential impairment.

As a result of updated financial projections, it was determined that the estimated fair value of a reporting unit included within the Europe segment was lower than its carrying value.

Consequently, PMI recorded a goodwill impairment charge of $ 41 million, which represented the entirety of the goodwill recorded in the reporting unit.

Each of PMI's reporting units had fair values substantially in excess of their carrying values.

PMI continues to monitor the Wellness and Healthcare reporting unit as any changes in assumptions and estimates, unfavorable clinical trial results, failure to obtain regulatory approvals and authorizations, and other market factors could result in future goodwill and other intangible asset impairments.

In addition, there are 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 June 30, 2025, our Russian operations had approximately $ 4.3 billion in total assets, excluding intercompany balances, of which approximately $ 1.8 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles).

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

For further details, see Note 13.

Related Parties – Equity Investments and Other .

The movements in goodwill were as follows:

4 unchanged sentences

Changes due to:

Impairment ( 41 ) — — — ( 41 )

Measurement period adjustments — ( 7 ) — — ( 7 )

Currency 592 34 5 42 673

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

Balances, June 30, 2025 $ 4,681 $ 3,278 $ 475 $ 8,791 $ 17,225

As discussed in Note 1.

2 unchanged sentences

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.

At June 30, 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.

In the second quarter of 2025, PMI finalized the measurement period adjustments related to its acquisition in Egypt of United Tobacco Company (UTC).

For further details, see Note 2.

Acquisitions and Divestitures.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Other Intangible Assets

Details of other intangible assets were as follows:

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

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

7 unchanged sentences

Total other intangible assets $ 14,023 $ 2,641 $ 11,382 $ 13,389 $ 2,062 $ 11,327

Non-amortizable intangible assets substantially consist of the ZYN trademarks and other trademarks related to acquisitions in Indonesia and Mexico, as well as the tobacco manufacturing license associated with the preliminary purchase price allocation of PMI's acquisition in Egypt in the second quarter of 2024 (see Note 2.

Non-amortizable intangible assets substantially consist of the ZYN trademarks and other trademarks related to acquisitions in Indonesia and Mexico, as well as the tobacco manufacturing license associated with the final purchase price allocation of PMI's acquisition in Egypt in the second quarter of 2024 (see Note 2.

Acquisitions and Divestitures for further details).

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

The increase since December 31, 2024, was mainly due to currency movements of $ 257 million and measurement period adjustments related to the final purchase price allocation of UTC acquisition in Egypt of $ 25 million.

The increase in the gross carrying amount of amortizable intangible assets from December 31, 2024, was primarily due to currency movements of $ 352 million.

The change in the accumulated amortization from December 31, 2024, was mainly due to the 2025 amortization of $ 496 million, combined with currency movements of $ 83 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.

The amortization of intangibles for the six months ended June 30, 2025 was recorded in cost of sales ($ 11 million) and in marketing, administration and research costs ($ 485 million) on PMI's condensed consolidated statements of earnings.

Amortization expense for each of the next five years is estimated to be approximately $ 997 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

3 unchanged sentences

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

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

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

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, as well as third-party and intercompany actual and forecasted transactions.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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.

11 unchanged sentences

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

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

(in millions) At June 30, 2025 At December 31, 2024

Derivative contracts designated as hedging instruments:

8 unchanged sentences

Notes to Condensed Consolidated Financial Statements

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

The fair value of PMI’s derivative contracts included in the condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024, were as follows:

Derivative Assets Derivative Liabilities

Fair Value Fair Value

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

(in millions) Balance Sheet Classification June 30, 2025 December 31, 2024 Balance Sheet Classification June 30, 2025 December 31, 2024

Derivative contracts designated as hedging instruments:

18 unchanged sentences

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

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

PMI’s derivative contracts have been classified within Level 2 at June 30, 2025 and December 31, 2024.

Philip Morris International Inc.

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

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,

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

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

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Marketing, administration and research costs (d)

( 1,350 ) 432

Total $ ( 2,270 ) $ 919 $ 59 $ 117 $ ( 960 ) $ 661

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(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

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

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

For the three months ended June 30, 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 June 30,

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

Classification of Gain/(Loss)

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

2025 2024 2025 2024 2025 2024

Derivative contracts designated as hedging instruments:

Cash flow hedges:

Foreign exchange contracts $ ( 133 ) $ 122 Net revenues $ 11 $ 61

Cost of sales — —

Marketing, administration and research costs 14 ( 17 )

Interest expense, net ( 1 ) ( 2 )

Interest rate contracts 2 — Interest expense, net 14 13

Commodity contracts ( 1 ) 2 Cost of sales ( 2 ) —

Fair value hedges:

Interest rate contracts Interest expense, net (a)

Net investment hedges (b) :

Foreign exchange contracts ( 1,555 ) 125 Interest expense, net (c)

Derivative contracts not designated as hedging instruments:

Foreign exchange contracts Interest expense, net 90 55

Marketing, administration and research costs (d)

( 1,108 ) ( 80 )

Total $ ( 1,687 ) $ 249 $ 36 $ 55 $ ( 928 ) $ 44

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

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

Cash Flow Hedges

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

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

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

As of June 30, 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 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.

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of June 30, 2025 was $ 4,116 million, of which $ 635 million was recorded in current portion of long-term debt and $ 3,481 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 $( 44 ) million as of June 30, 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 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.

For the six months ended June 30, 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.

For the three months ended June 30, 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 for both periods.

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

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

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

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

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

2025 2024 2025 2024

Gain/(loss) as of beginning of period, $ 467 $ 241 $ 324 $ 373

Derivative (gains)/losses transferred to earnings ( 50 ) ( 94 ) ( 29 ) ( 48 )

Change in fair value ( 235 ) 286 ( 113 ) 108

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

Philip Morris International Inc.

and Subsidiaries

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.

Gain/(loss) as of June 30, $ 182 $ 433 $ 182 $ 433

At June 30, 2025, PMI expects $ 22 million of derivative gains that are included in accumulated other comprehensive losses to be reclassified to the condensed consolidated statement of earnings within the next 12 months.

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

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PMI’s derivative instruments do not contain contingent features.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

Credit Exposure and Credit Risk

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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.

dollar denominated bonds in Argentina, have been classified within Level 1 and had a fair value of $ 241 million at June 30, 2025.

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

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

2025 2024 2025 2024

Net earnings attributable to PMI $ 5,729 $ 4,554 $ 3,039 $ 2,406

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and Americas Region.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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.

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

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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

For the Three Months Ended March 31, 2025

For the Six Months Ended June 30, 2025

Net revenues $ 7,794 $ 5,669 $ 3,439 $ 2,539 $ 19,441

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Marketing, administration and research costs 2,537 1,308 696 1,284 5,825

Impairment of goodwill 41 — — — 41

Operating income $ 3,105 $ 1,920 $ 1,766 $ 465 $ 7,256

For the Three Months Ended March 31, 2024

For the Six Months Ended June 30, 2024

Net revenues $ 7,350 $ 5,429 $ 3,357 $ 2,125 $ 18,261

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Operating income $ 3,028 $ 1,663 $ 1,516 $ 282 $ 6,489

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

For the Three Months Ended June 30, 2025

Net revenues $ 4,234 $ 2,926 $ 1,708 $ 1,272 $ 10,140

Cost of sales 1,129 1,241 489 420 3,279

Marketing, administration and research costs 1,396 685 366 661 3,108

Impairment of goodwill 41 — — — 41

Operating income $ 1,668 $ 1,000 $ 853 $ 191 $ 3,712

For the Three Months Ended June 30, 2024

Net revenues $ 3,895 $ 2,771 $ 1,673 $ 1,129 $ 9,468

Cost of sales 1,126 1,311 528 380 3,345

Marketing, administration and research costs 1,152 569 392 566 2,679

Operating income $ 1,617 $ 891 $ 753 $ 183 $ 3,444

Philip Morris International Inc.

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

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

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

2025 2024 2025 2024

Net revenues:

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SSEA, CIS & MEA

4,917 4,778 2,504 2,432

EA, AU & PMI GTR

1,202 1,217 600 620

Americas 1,031 1,126 547 592

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SSEA, CIS & MEA

752 651 422 339

EA, AU & PMI GTR

2,237 2,140 1,108 1,053

Americas 1,508 999 725 537

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• Restructuring charges - See Note 16.

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

Restructuring Activities for a breakdown of these costs by segment for the six months and three months ended June 30, 2025 and 2024.

• Impairment of goodwill – See Note 5.

Goodwill and Other Intangible Assets, net for details of the $ 41 million of goodwill impairment charge recorded in the Europe segment for the six months and three months ended June 30, 2025.

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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(in millions)

For the Three Months Ended March 31,

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

2025 2024 2025 2024

Depreciation and amortization expense:

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Total depreciation and amortization expense

$ 970 $ 812 $ 490 $ 445

(in millions)

For the Three Months Ended March 31,

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

2025 2024 2025 2024

Capital expenditures:

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Total capital expenditures

$ 760 $ 787 $ 356 $ 370

Contingencies:

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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").

Subject to satisfaction of the conditions precedent, it is expected that the Plan will be implemented and become effective sometime in the second half of 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.

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

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

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

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

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

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

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

As of March 31, 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.

As of June 30, 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 June 30, 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 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.

As of June 30, 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 ), unchanged from 17 such cases on June 30, 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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The trial court dismissed the case in its entirety on November 20, 2020.

The Appellate court granted the Plaintiff a de novo appeal in 2021 and determined that the appellate proceedings will take place in stages:

The appellate court granted the Plaintiff a de novo appeal in 2021 and determined that the appellate proceedings would take place in stages:

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

The plaintiff's appeal remains pending.

The plaintiff's appeal remains pending, with final submissions due in August 2025.

Public Civil Actions:

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

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

As of June 30, 2025, there was one public civil action pending against our subsidiary in Venezuela ( 1 ), compared with one such case on June 30, 2024.

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

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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.

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

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

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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.

On March 19, 2025, the Court granted defendants’ motion to dismiss the plaintiff’s 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.

The defendants filed their answers to plaintiff's amended complaint on April 2, 2025, and the case has moved to the discovery phase and will be consolidated with the other Florida cases ( Palmer, Lendinara, and Friedman ) for purposes of pre-trial discovery.

The Court has set a deadline of June 26, 2026 for the completion of all fact and expert discovery and December 7, 2026 for the start of trial.

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

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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.

The defendants filed their answers to plaintiff’s amended complaint on April 2, 2025, and the case has moved to the discovery phase and will be consolidated with the other Florida cases ( Kelly, Lendinara, and Friedman ) for purposes of pre-trial discovery.

The Court has set a deadline of June 26, 2026 for the completion of all fact and expert discovery and December 7, 2026 for the start of trial.

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

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

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

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

The complaint named PMI and Swedish Match North America LLC as

Philip Morris International Inc.

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Notes to Condensed Consolidated Financial Statements

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

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 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.

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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.

The defendants filed their answers to plaintiff’s amended complaint on April 2, 2025, and the case has moved to the discovery phase and will be consolidated with the other Florida cases ( Kelly, Palmer, and Friedman ) for purposes of pre-trial discovery.

The Court has set a deadline of June 26, 2026 for the completion of all fact and expert discovery and December 7, 2026 for the start of trial.

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

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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.

On June 13, 2025, the Court granted PMI's motion to stay until the court in the Kelly case issues a ruling on class certification.

In light of the ruling on the motion to stay, the Court denied PMI's motion to dismiss without prejudice.

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

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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.

The defendants filed their answers to Plaintiffs’ complaint on May 5, 2025, and the case has moved to the discovery phase and will be consolidated with the other Florida cases ( Kelly, Palmer, Lendinara, and Friedman ) for purposes of pre-trial discovery.

The Court has set a deadline of June 26, 2026 for the completion of all fact and expert discovery and December 7, 2026 for the start of trial.

In the seventh case, Mayor and City Council of Baltimore v.

Philip Morris International Inc.

et al , filed May 7, 2025, before the Circuit Court for Baltimore City, Maryland, the City of Baltimore alleges that the defendants have violated the City of Baltimore’s Consumer Protection Ordinance by, among other things, marketing ZYN products in a deceptive manner.

The complaint names PMI, Swedish Match North America LLC, and Swedish Match USA Inc.

as defendants.

Plaintiff alleges, among other things, that defendants 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 that defendants’ actions violate the prohibition on “unfair, abusive, or deceptive trade practices” in the Consumer Protection Ordinance and seeks monetary and injunctive relief.

The Complaint was served on Defendants on June 9, 2025.

On July 7, 2025, Defendants removed the case to the United States District Court for the District of Maryland.

Defendants have not yet

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

answered or otherwise responded to the complaint.

Other Litigation

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

Briefing is completed

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

and we are awaiting a decision from the court.

Briefing is completed and we are awaiting a decision from the court.

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

The Public Prosecutor alleges that the individuals involved promised certain personal favors to government officials from January to July of 2018 in exchange for favorable treatment for PM Italia, and that PM Italia lacked appropriate organizational controls to prevent the alleged actions by the individuals.

Philip Morris International Inc.

and Subsidiaries

Notes to Condensed Consolidated Financial Statements

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

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

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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 $ 58 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.

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

PM Italia believes it has strong defenses to the charges against it and will defend them vigorously.

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

On August 2, 2024, the German Main Custom Office (“MCO”) notified Philip Morris (Germany) GmbH (“PM Germany”) of its decision to classify TEREA consumables as a cigarette for excise tax purposes.

On August 7, 2024, PM Germany formally objected to the classification of TEREA as a cigarette.

On October 17, 2024, PM Germany filed a suit with the Fiscal Court in Düsseldorf (“FC Düsseldorf”) against the tax classification as cigarettes.

The associated tax assessment was received by PM Germany on December 9, 2024 indicating a payment amount of EUR 141 million, subsequently increased to EUR 151 million (approximately $ 176 million) for the withdrawal of TEREA heat-not-burn tax stamps since the launch of TEREA in Germany, covering the period of February 15, 2023 through August 1, 2024.

An appeal including suspension of proceedings and execution was submitted on January 9, 2025.

In April 2025 PM Germany paid the amount outstanding which is recorded in Other assets in the consolidated balance sheets and negatively impacted cash provided by operating activities in the consolidated statements of cash flows in the period of payment.

An oral hearing was held before the FC Düsseldorf on July 15, 2025.

Following the hearing, on July 22, 2025, PM Germany was notified of the Fiscal Court Düsseldorf’s decision to refer two questions to the European General Court:

(1) whether, based on EU tax laws, heated tobacco products fall under the conventional cigarette definition;

and (2) if so, whether EU tax laws preclude the application to heated tobacco of a tax rate lower than that applicable to cigarettes.

An unfavorable outcome in the appeal could result in a loss corresponding to the amount of the tax assessment.

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

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The Customs hearing was held on May 28, 2024.

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

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

The proceeding is now concluded.

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

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

In July and August 2024, respectively, FTKK filed two patent infringement actions against Sojitz, PMJL’s importer and distributor, for alleged infringement of two patents by TEREA consumables.

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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.

Between February 2025 and July 2025, FTKK filed seven 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.

Merits proceedings in these matters are at various stages.

On November 27, 2024, we were informed that FTKK filed another application with Tokyo Customs against Sojitz, PMJL’s importer and distributor, on the basis of alleged infringement of another FTKK patent.

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

FTKK did not seek 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.

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Notes to Condensed Consolidated Financial Statements

hearing before Customs officials was held on March 31, 2025.

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.

On April 28, 2025, Tokyo Customs issued a formal notification rejecting FTKK's request for an import injunction on the basis that the accused products do not infringe FTKK's patent.

On June 5, 2025, 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 July 9, 2025.

A hearing before Customs officials has not yet been scheduled.

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.

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

PMI’s effective tax rates for the three months ended March 31, 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:

On July 4, 2025, the One Big Beautiful Bill Act ("the Act") was signed into law in the U.S.

The Act contains several provisions related to corporate income taxes, including the extension of many expiring provisions from the Tax Cuts and Jobs Act of 2017, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions.

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

PMI’s effective tax rates for the six months and three months ended June 30, 2025 were 19.5 % and 19.0 %, respectively.

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

The effective tax rate for the six months ended June 30, 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 ($ 373 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 ($ 115 million), as well as the recognition of current tax expense related to the potential disallowance of intercompany transactions in Indonesia ($ 46 million).

The effective tax rate for the six months ended June 30, 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 ($ 142 million), while the underlying pre-tax foreign currency movements fully offset in the condensed consolidated statements of earnings and were reflected as currency translation adjustments in its condensed consolidated statements of stockholders' (deficit) equity;

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partially offset by a U.S.

tax benefit for a worthless stock

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

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

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

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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.

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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.

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

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

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

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Short-term Borrowings:

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

At June 30, 2025 and December 31, 2024, PMI’s short-term borrowings and related average interest rates consisted of the following:

June 30, 2025 December 31, 2024

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

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Long-term Debt:

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

At June 30, 2025 and December 31, 2024, PMI’s long-term debt consisted of the following:

(in millions) June 30, 2025 December 31, 2024

dollar notes, 0.875 % to 6.375 % (average interest rate 4.651 %), due through 2044

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$ 42,431 $ 42,166

(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.

(a) Includes long-term bank loans at subsidiaries, as well as $ 93 million and $ 67 million in finance leases at June 30, 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 March 31, 2025, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:

At June 30, 2025, the fair value of PMI's outstanding long-term debt, excluding the aforementioned finance leases, was as follows:

(in millions)

March 31, 2025

June 30, 2025

Level 1 $ 45,044

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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.

As of June 30, 2025, borrowings in the amount of € 2.5 billion (approximately $ 2.9 billion) under the 5 -year tranche of the term loan facility remained outstanding.

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Notes to Condensed Consolidated Financial Statements

Debt Issuances

PMI's debt issuances in the first six months of 2025 were as follows:

(in millions)

Type Face Value Interest Rate Issuance Maturity

dollar notes (a)

$ 400 Floating April 2025 April 2028

dollar notes (b)

$ 750 4.125 % April 2025 April 2028

dollar notes (b)

$ 750 4.375 % April 2025 April 2030

dollar notes (b)

$ 600 4.875 % April 2025 April 2035

Euro notes (c) (d) € 500 (approximately $ 569 )

2.750 % June 2025 June 2029

Euro notes (c) (d) € 500 (approximately $ 569 )

3.250 % June 2025 June 2032

(a) Interest is payable quarterly, commencing in July 2025

(b) Interest is payable semi-annually, commencing in October 2025

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

The net proceeds from the sale of the securities listed in the table above 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 2025.

Revolving Credit Facilities:

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

At June 30, 2025, PMI's total committed revolving credit facilities were as follows:

(in billions)

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

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

At June 30, 2025, there were no borrowings under these committed revolving credit facilities, and the entire committed amounts were available for borrowing.

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

These credit arrangements amounted to approximately $ 3.4 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.

These credit arrangements amounted to approximately $ 3.8 billion at June 30, 2025, and approximately $ 2.1 billion at December 31, 2024.

Borrowings under these arrangements and other bank loans amounted to $ 230 million at June 30, 2025, and $ 137 million at December 31, 2024.

Accumulated Other Comprehensive Losses:

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(Losses) Earnings At At At

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

(in millions) June 30, 2025 December 31, 2024 June 30, 2024

Currency translation adjustments $ ( 10,979 ) $ ( 9,320 ) $ ( 8,841 )

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Reclassifications from Other Comprehensive Earnings

The movements in accumulated other comprehensive losses and the related tax impact, for each of the components above, that are due to current period activity and reclassifications to the income statement, are shown on the condensed consolidated statements of comprehensive earnings for the three months ended March 31, 2025 and 2024.

For additional information, see Note 2.

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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

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

Benefit Plans for disclosures related to PMI's pension and other benefits and Note 6.

Financial Instruments for disclosures related to derivative financial instruments.

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Equity Method Investments:

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

At June 30, 2025 and December 31, 2024, PMI had total equity method investments of $ 1,093 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 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 carrying value of our equity method investments at June 30, 2025 and December 31, 2024, exceeded our share of the investees' book value by $ 1,160 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 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.

The difference related to the definite-lived intangibles and other assets at June 30, 2025 and December 31, 2024 of $ 178 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 June 30, 2025 and December 31, 2024, PMI received year-to-date dividends from equity method investees of $ 139 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 June 30, 2025 had a carrying value of $ 319 million.

Additionally, there was approximately $ 521 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 June 30, 2025.

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

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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.

As a result of

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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 June 30, 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 March 31, 2025, 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 condensed consolidated

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balance sheets.

Additionally, as part of its Wellness and Healthcare business strategy, PMI holds non-controlling equity interests in certain companies, which as of June 30, 2025 had a carrying value of $ 152 million.

There are risks associated with these investments as changes in assumptions and estimates, unfavorable regulatory developments, failure to obtain regulatory approvals and authorizations, and other factors could have an adverse impact on the fair value of these investments and may result in impairment charges.

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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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 23.7 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.

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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.

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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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March 31, 2025.

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $ 1,446 million at June 30, 2025.

Unrealized pre-tax gain (loss) of $ 525 million ($ 410 million net of tax) on these equity securities was recorded in equity investments and securities (income)/loss, net on the condensed consolidated statements of earnings for the six months ended June 30, 2025.

Other related parties:

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

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Financial activity with the above related parties:

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

For the Three Months Ended March 31,

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

(in millions) 2025 2024 2025 2024

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Net revenues (a)

$ 2,080 $ 1,821 $ 1,143 $ 961

Other $ 103 $ 73 $ 66 $ 33

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

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

(in millions) At June 30, 2025 At December 31, 2024

Megapolis Group $ 641 $ 405

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

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.

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.

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 March 31, 2025 and March 31, 2024.

The amounts associated with the servicing liability were not material as of June 30, 2025 and June 30, 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 three months ended March 31, 2025 and 2024, were $ 2.4 billion and $ 2.7 billion, respectively.

Cumulative trade receivables sold, including excise taxes, for the six months ended June 30, 2025 and 2024, were $ 5.6 billion for both periods.

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

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

The trade receivables sold that remained outstanding under these arrangements as of June 30, 2025 and June 30, 2024, were $ 0.7 billion for both periods.

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

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

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

The difference between the carrying amount of the trade receivables sold and

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

The loss on sale of trade receivables was as follows:

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

2025 $ 17 $ 9

2024 $ 22 $ 10

Product Warranty:

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PMI accounts for its product warranties within other accrued liabilities.

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

At June 30, 2025 and December 31, 2024, these amounts were as follows:

(in millions) As of and For the Six Months Ended June 30, 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 $ 83 $ 76

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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.

For the six months and three months ended June 30, 2025, PMI recorded total pre-tax restructuring charges of $ 243 million.

For the six months ended June 30, 2024, PMI recorded total pre-tax restructuring charges of $ 168 million.

For the three months ended June 30, 2024, PMI did not record any charges related to restructuring activities.

The 2025 and 2024 pre-tax charges were included in marketing, administration and research costs in the condensed consolidated statements of earnings.

Manufacturing Footprint Optimization - Germany

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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 consultation processes for both of these factories were concluded in April 2025, and as a result of the closure PMI recorded pre-tax restructuring charges of $ 243 million in the second quarter of 2025.

This amount included pension and employee separation costs of $ 127 million and contract termination and other costs of $ 24 million, which will be paid in cash, as well as asset impairment costs of $ 92 million, primarily related to property lease, and machinery and equipment, which are non-cash charges.

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.

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IQOS products sourcing for the U.S.

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

Prior to their rescission, the orders prohibited the importation and sales of imported IQOS products to the United States of America (for further details of the Settlement Agreement, ITC order and its rescission, see Note 9.

Contingencies ).

Prior to their rescission, the orders prohibited the importation and sales of imported IQOS products to the United States of America.

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.

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Acquisitions and Divestitures .

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

In the first quarter of 2024, PMI recorded pre-tax 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.

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Income Taxes .

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Restructuring Charges by Segment

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

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

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

2025 2024 2025 2024

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

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

Contract termination charges:

Total contract termination charges 65

Separation programs:

Europe 127 — 127 —

Total separation programs 127 — 127 —

Contract termination and other charges:

Europe 24 — 24 —

Americas — 65 — —

Total contract termination and other charges 24 65 24 —

Asset impairment charges:

Europe 92 — 92 —

Americas — 65 — —

Total asset impairment charges 92 65 92 —

Restructuring charges $ 243 $ 168 $ 243 $ —

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Movement in Restructuring Related Liabilities

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

The movement in restructuring related liabilities for the six months ended June 30, 2025 was as follows:

(in millions)

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Cash spent ( 4 )

Prepaid commitments —

Currency/other ( 14 )

Liability balance, March 31, 2025 $ 26

Liability balance, June 30, 2025 $ 161

Future cash payments for restructuring activities incurred to date are anticipated to be substantially paid by the end of 2026.

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,

The components of PMI’s lease cost were as follows for the six months and three months ended June 30, 2025 and 2024:

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

(in millions) 2025 2024 2025 2024

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Amortization of right-of-use assets 26 37 11 12

Interest on lease liabilities

Short-term lease cost 29 32 15 16

1 unchanged sentence

Total lease cost $ 222 $ 221 $ 114 $ 107

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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 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.

As of June 30, 2025 and December 31, 2024, the total amount due to suppliers participating in the SCF program was $ 0.8 billion and $ 1.0 billion, respectively.

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Notes to Condensed Consolidated Financial Statements

New Accounting Standards:

6 unchanged sentences

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