What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-02-06 compared with 2025-02-06 · 590 added, 786 removed, 1672 unchanged (45% of the section changed)

6 unchanged sentences

$ 40,648 $ 37,878 $ 35,174

Cost of sales (Notes 4 & 5)

Cost of sales

13,366 13,329 12,893

36 unchanged sentences

( 1,864 ) ( 122 ) ( 1,643 )

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

(Gains)/losses transferred to earnings, net of income taxes of $ 0 in 2025, $ 7 in 2024 and $ 0 in 2023 (Notes 3, 15 & 18)

Change in net loss and prior service cost:

1 unchanged sentence

884 ( 10 ) ( 861 )

Amortization of net losses, prior service costs and net transition costs, net of income taxes of $( 36 ) in 2024, $( 28 ) in 2023

and $( 49 ) in 2022

Amortization of net losses, prior service costs and net transition costs, net of income taxes of $( 46 ) in 2025, $( 36 ) in 2024 and $( 28 ) in 2023

Change in fair value of derivatives accounted for as hedges:

1 unchanged sentence

$( 88 ) in 2024 and $( 30 ) in 2023

( 89 ) 439 195

(Gains) losses transferred to earnings, net of income taxes of

31 unchanged sentences

Other intangible assets, net (Note 4)

10,884 11,327

Equity investments (Note 5)

Deferred income taxes

Other assets (less allowances of $ 26 in 2024 and $ 25 in 2023) (Note 3)

Deferred income taxes (Note 10)

Other assets (less allowances of $ 12 in 2025 and $ 26 in 2024)

$ 69,185 $ 61,784

5 unchanged sentences

Short-term borrowings (Note 6)

$ 137 $ 1,968

Current portion of long-term debt (Note 6)

9 unchanged sentences

45,134 42,166

Deferred income taxes

Deferred income taxes (Note 10)

Employment costs

Income taxes and other liabilities (Note 12)

Other liabilities

Total liabilities

28 unchanged sentences

Impairment of goodwill and other intangibles (Note 4) 41 27 680

Loss on sale of Vectura Group (Note 3)

Losses on sales of businesses (including held-for-sale) (Note 3)

Impairment related to the RBH equity investment (Note 5) — 2,316 —

2 unchanged sentences

Restructuring charges, net of cash paid (Note 18)

122 30 ( 93 )

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

7 unchanged sentences

( 266 ) ( 62 ) ( 232 )

Pension plan contributions, net of refunds (Note 14)

Pension plan contributions (Note 12)

( 139 ) ( 110 ) ( 21 )

842 ( 188 ) 479

Net cash provided (used in) by operating activities

Net cash provided by (used in) operating activities

12,233 12,217 9,204

2 unchanged sentences

( 1,569 ) ( 1,444 ) ( 1,321 )

Acquisition of Swedish Match AB, net of acquired cash (Note 3) — — ( 13,976 )

Other acquisitions, net of acquired cash (Note 3) — 43 —

1 unchanged sentence

agreement (Note 3) — — ( 1,775 )

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

Proceeds from sales of businesses, net of cash disposed (Note 3) 30 136 191

Purchases of debt securities ( 202 ) ( 132 ) —

Sales and maturities of debt securities 116 — —

Equity investments

1 unchanged sentence

Collateral posted/settlements for derivatives, (paid)/returned (Note 14) ( 2,274 ) 351 ( 660 )

( 54 ) 78 112

Net cash provided by (used in) investing activities

7 unchanged sentences

Repayments - maturities longer than 90 days ( 170 ) ( 433 ) ( 1,172 )

Borrowings under credit facilities related to Swedish Match AB acquisition — — 13,920

Repayments under credit facilities related to Swedish Match AB acquisition — ( 3,168 ) ( 4,430 )

1 unchanged sentence

Long-term debt repaid ( 5,368 ) ( 4,803 ) ( 2,551 )

Repurchases of common stock — — ( 209 )

Dividends paid ( 8,624 ) ( 8,197 ) ( 7,964 )

Collateral received/settlements for derivatives, received/(returned) ( 693 ) 828 ( 62 )

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

Noncontrolling interests activity and Other (Note 3)

( 489 ) ( 375 ) ( 881 )

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

Noncontrolling interests activity and Other ( 521 ) ( 489 ) ( 375 )

Net cash provided by (used in) financing activities ( 8,132 ) ( 9,481 ) ( 5,582 )

27 unchanged sentences

Dividends paid to noncontrolling interests ( 497 ) ( 497 )

Common stock repurchased ( 199 ) ( 199 )

Acquisitions (Note 3) 2,379 2,379

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

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

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

5 unchanged sentences

Dividends paid to noncontrolling interests ( 494 ) ( 494 )

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

Acquisitions (Note 3) 160 160

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

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

5 unchanged sentences

Dividends paid to noncontrolling interests ( 430 ) ( 430 )

Acquisitions (Note 3) 160 160

Sale (purchase) of subsidiary shares to/(from) noncontrolling interests ( 1 ) 19 18

9 unchanged sentences

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

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

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

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

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

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

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

The transaction was completed on December 31, 2024.

For further details, see Note 3.

Acquisitions and Divestitures.

Basis of presentation

12 unchanged sentences

All intercompany transactions and balances have been eliminated.

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

The four existing geographical segments are as follows:

Europe Region;

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

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

and Americas Region.

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

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

Following the sale of Vectura Group Ltd.

on December 31, 2024, PMI updated in January 2025 its segment reporting by including the ongoing Wellness results (previously referred to as Wellness & Healthcare) in the Europe segment.

For further details on the sale of Vectura Group Ltd., see Note 3.

Acquisitions and Divestitures .

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

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

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

For further details, see Note 4.

Goodwill and Other Intangible Assets, net , Note 13.

Segment Reporting and Note 20.

Restructuring Activities.

Goodwill and Other Intangible Assets, net and Note 11.

Segment Reporting.

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

As communicated in the fourth quarter of 2025, with PMI's smoke-free business now operating at scale across its regions, including substantial growth from its U.S.

business, PMI has implemented an evolved organizational model with two primary business units:

International and U.S.

The updated organizational structure is designed to enhance PMI's agility and to support its journey to become a smoke-free company under the leadership of Jacek Olczak, Group CEO of PMI.

This change was implemented effective January 1, 2026, and as a result PMI realigned its reportable segments accordingly.

The four geographic segments have been replaced with three new reportable segments:

International Smoke-Free, International Combustibles, and U.S.

As of the first quarter of 2026, our reporting will reflect these changes.

Summary of Significant Accounting Policies:

8 unchanged sentences

If PMI determines that assets acquired do not meet the definition of a business, the transaction will be accounted for as an acquisition of assets rather than a business combination and, therefore, no goodwill will be recorded.

In an asset acquisition, acquired in-process research and development ("IPR&D") with no alternative future use is charged to expense.

Cash and cash equivalents

Cash equivalents include demand deposits with banks and all highly liquid investments with original maturities of three months or less.

Contingencies

PMI records provisions in the consolidated financial statements for pending litigation when it is determined that an unfavorable outcome is probable, and the amount of the loss can be reasonably estimated.

Legal defense costs are expensed as incurred.

For further details, see Note 16.

Contingencies .

Depreciation and Amortization

21 unchanged sentences

Level 1 inputs are quoted prices in active markets for identical assets or liabilities.

Level 2 inputs include quoted prices for similar assets or liabilities;

Level 2 inputs

include quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

62 unchanged sentences

PMI recognizes revenue primarily through the manufacture and sale of cigarettes and smoke-free products, including heat-not-burn, vapor and oral nicotine products.

The revenue recorded is reported net of excise taxes, consumer and trade promotions, sales returns and includes shipping and handling charges billed to customers.

The majority of PMI revenues are generated by sales through direct and indirect distribution networks with short-term payment conditions and where control is typically transferred to the customer either upon shipment or delivery of goods.

3 unchanged sentences

PMI has elected to record all shipping and handling activities as costs to fulfill a contract.

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

The shipping and handling costs that have not been incurred at

the time revenue is recognized are accrued.

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

17 unchanged sentences

Acquisitions and Divestitures:

Sale of certain other businesses

During the fourth quarter of 2025, PMI completed the sale of one business and classified as held-for-sale net assets of certain other businesses (disposal group), primarily related to its consumer accessories products acquired as part of the Swedish Match AB acquisition in 2022.

$ 142 million of the disposal group assets and $ 59 million of the disposal group liabilities were classified as held-for-sale and were included within other current assets and other accrued liabilities, respectively, in PMI’s consolidated balance sheet as of December 31, 2025.

As a result, PMI recorded a pre-tax loss of $ 94 million, primarily related to the impairment charge to record the net assets held-for-sale at the lower of their carrying value or fair value less costs to sell and the loss on the completed sale, of which $ 3 million related to the reclassification of currency translation losses from other comprehensive losses for the completed sale.

The loss on sale has been recorded in marketing, administration and research costs in the Europe segment in PMI’s consolidated statement of earnings for the year ended December 31, 2025.

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

Sale of Vectura Group Ltd.

2 unchanged sentences

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

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

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 at December 31, 2025 of up to GBP 101 million (approximately $ 127 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.

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

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

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

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

For the year ended December 31, 2024, sale resulted in a pre-tax loss of $ 199 million ($ 206 million including the tax costs), of which $ 198 million of loss related to the impairment charge recognized in the third quarter of 2024, to record the net assets held-for-sale at the lower of their carrying value or fair value less costs to sell.

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

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

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

Altria Group, Inc.

4 unchanged sentences

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

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

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

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 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.

Business Combinations

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

accounted for using the equity method of accounting.

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

5 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)

The remaining assumed bank loan was repaid in the fourth quarter of 2025.

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 December 31, 2024, were included in PMI's consolidated statements of earnings and were not material.

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

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

(“PMHH”), a wholly owned subsidiary of PMI, acquired a controlling interest of 85.87 % of the total issued shares in Swedish Match AB (“Swedish Match”) and acquired 94.81 % of its outstanding shares as of December 31, 2022.

The shares were acquired through acceptances of the tender offer and a series of open market and over-the-counter purchases.

PMI funded the acquisition through cash on-hand and debt proceeds, as described in Note 8.

Indebtedness.

The aggregate cash paid as of the acquisition date was $ 14,460 million (or $ 13,976 million net of cash acquired), which was included in investing activities in the consolidated statements of cash flows for the year ended December 31, 2022.

The cash paid in connection with the additional purchases of the noncontrolling interests after the acquisition date and through December 31, 2022 amounted to $ 1,495 million and was included in financing activities in the consolidated statements of cash flows for the year ended December 31, 2022.

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

Cash paid in connection with such legal title, together with an immaterial amount attributable to open market purchases that were executed in December 2022 but settled in January 2023, amounted to $ 883 million and was included in financing activities in the consolidated statements of cash flows for the year ended December 31, 2023.

While PMI paid the referenced amounts and acquired legal title to the shares, under the Swedish Companies Act the redemption process was not complete until the final redemption price was determined by an arbitral tribunal.

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

This process was completed in the fourth quarter of 2023 when the opportunity to appeal the arbitral tribunal determination ended.

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

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

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

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

(in millions) Final Purchase Price Allocation Recognized as of

the acquisition date

Cash and cash equivalents $ 484

Trade receivables 135

Other receivables 53

Inventories 437

Other current assets 415

Property, plant and equipment 677

Other intangible assets 7,868

Other non-current assets 216

Current portion of long-term debt 224

Accounts payable 120

Other current liabilities 532

Income taxes 14

Long-term debt 1,121

Deferred income taxes 1,970

Other non-current liabilities 196

Identifiable net assets acquired 6,108

Noncontrolling interest 2,379

Goodwill 10,731

Total consideration transferred $ 14,460

The total fair value step-up adjustment for inventories was $ 146 million, of which $ 125 million was recognized in cost of sales in the fourth quarter of 2022 and the remaining balance in the first quarter of 2023.

The fair value of long-term debt was primarily determined using readily available market prices as of the acquisition date and the total purchase price adjustment of $( 107 ) million is being amortized as an increase to interest expense, net over the lives of the related debt.

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

and intangible assets that did not qualify for separate recognition.

The goodwill is not deductible for income tax purposes.

Identifiable intangible assets of Swedish Match consist of:

Type Useful Life Estimated Fair Value (in millions)

Trademarks Non-amortizable $ 3,133

Trademarks Amortizable 20 - 30 years

Developed technology, including patents 10 years 113

Customer relationships 6 - 15 years

Total identifiable intangible assets $ 7,868

The significant assumptions used in determining the fair values of the identifiable intangible assets included royalty rates, revenue growth rates, profit margins, customer attrition rates and discount rates.

Trademarks primarily relate to $ 3,133 million for the ZYN trademark, which has been determined to have an indefinite life due to the fast growth and the leading position of the brand in the U.S.

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

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

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

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

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

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

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

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

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

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

Bridge and term loan credit agreement related fees associated with the issuance of debt amounted to $ 54 million, of which $ 37 million were capitalized at the acquisition date.

The fair value of the noncontrolling interest was based on the tender offer as of the acquisition date.

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

As a result, these assets were accounted for as assets held for sale and included within other current assets and other accrued liabilities in PMI’s consolidated balance sheets at March 31, 2023 and December 31, 2022.

PMI subsequently sold SMDL on June 30, 2023 and the transaction did not have a material impact on the consolidated statements of earnings for the year ended December 31, 2023.

The unaudited pro forma combined financial information was prepared using the acquisition method of accounting and was based on the historical financial information of PMI and Swedish Match.

In order to reflect the occurrence of the acquisition on January 1, 2021, as required, the unaudited pro forma financial information includes adjustments to reflect the following:

• incremental amortization expense to be incurred based on the current fair values of the identifiable intangible assets acquired;

• incremental cost of products sold related to the fair value adjustments associated with acquisition date inventory;

• additional interest expense associated with the issuance of debt to finance the acquisition, including the effects of the related derivative financial instruments designated to hedge interest rate risks as well as economic hedges;

• reclassification of non-recurring acquisition-related costs incurred during the year ended December 31, 2022, to the year ended December 31, 2021;

• impact of a deferred tax cost of $ 430 million in 2022 and $ 321 million in 2021 related to the theoretical unrealized foreign currency gains on intercompany loans related to the acquisition financing.

These theoretical unrealized pre-tax foreign currency movements were fully offset in the consolidated statements of earnings and were reflected as currency translation adjustments in

PMI's consolidated statements of stockholders' (deficit) equity, while the corresponding deferred tax impacts were reflected in PMI's consolidated statements of earnings;

• other immaterial items (i.e., the alignment of accounting policies from IFRS to US GAAP.)

The unaudited pro forma financial information is not necessarily indicative of what the consolidated results of operations would have been had the acquisition been completed on January 1, 2021.

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

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

(in millions) 2022

Net revenues $ 33,579

Net earnings attributable to PMI $ 8,779

Transactions With Noncontrolling Interests

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

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

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

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

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

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

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

War in Ukraine:

Since the onset of the war in Ukraine in February 2022, PMI's main priority has been the safety and security of its employees and their families in the country.

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

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

Production at the factory in Kharkiv remains suspended.

PMI is not aware of any major damage to its production facilities, inventories or other assets in Ukraine.

On June 20, 2023, PMI announced the investment of $ 30 million in a new production facility in the Lviv region, in Western Ukraine.

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

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

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

These total assets included $ 105 million and $ 396 million in receivables and inventories, respectively.

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

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

PMI is continuously assessing the evolving situation in Russia.

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

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

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

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

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

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

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

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

For further details, see Note 6.

Related Parties – Equity Investments and Other .

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

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

(in millions) 2023 2022

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

$ 15 $ 38 $ 53 $ 42 $ 36 $ 78

— — — 20 53 73

Total $ 15 $ 38 $ 53 $ 62 $ 89 $ 151

1 The 2023 pre-tax charges were primarily due to the cost of PMI’s humanitarian efforts, which includes salary continuation for its employees, severance payments, as well as an impairment of certain long-lived assets in the fourth quarter of 2023.

The 2022 pre-tax charges were primarily due to an inventory write-down, additional allowance for receivables and the cost of PMI’s humanitarian efforts, which includes salary continuation for its employees.

2 The 2022 pre-tax charges were primarily due to machinery and inventory write downs related to the commercial decisions noted above.

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

Goodwill and Other Intangible Assets, net:

The movements in goodwill were as follows:

(in millions) Europe SSEA, CIS & MEA

EA, AU & PMI DF

Americas Wellness & Healthcare Total

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

(in millions) Europe (a)

SSEA, CIS & MEA

EA, AU & PMI GTR

Americas Total

Balances, December 31, 2023 $ 4,563 $ 2,877 $ 492 $ 8,847 $ 16,779

Changes due to:

Impairment — — — — ( 665 ) ( 665 )

Acquisitions and divestitures ( 65 ) 512 — — 447

Currency ( 368 ) ( 138 ) ( 22 ) ( 98 ) ( 626 )

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

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

Changes due to:

Acquisitions and divestitures — 512 — — ( 65 ) 447

Impairment ( 41 ) — — — ( 41 )

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

Currency 690 ( 43 ) ( 9 ) 74 712

Balances, December 31, 2025 $ 4,779 $ 3,201 $ 461 $ 8,823 $ 17,264

(a) Europe goodwill balance is net of accumulated impairment losses of $ 556 million at December 31, 2025, and 2024.

These accumulated losses exclude amounts related to businesses which were subsequently sold or reclassified as held-for-sale.

As discussed in Note 1.

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

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

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

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

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

As a result, the December 31, 2023 and December 31, 2024 goodwill balances for the Europe segment in the table above included the reclassification of the former Wellness segment.

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

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Acquisitions and Divestitures .

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

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 3.

Acquisitions and Divestitures.

At December 31, 2025, goodwill primarily reflects PMI’s acquisitions of Swedish Match AB as well as acquisitions in Indonesia, the Philippines, Egypt, Greece, Mexico, and Serbia.

Other Intangible Assets

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Total other intangible assets $ 14,011 $ 3,127 $ 10,884 $ 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 3.

Acquisitions and Divestitures for further details).

The decrease since December 31, 2023, was mainly due to currency movements of $ 276 million and a pre-tax impairment charge in the first quarter of 2024 of $ 27 million primarily for an in-process research and development project in the Wellness and Healthcare segment.

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

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

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

Changes in the net carrying amount of intangible assets were as follows:

Changes Due To:

(in millions) December 31, 2023 Amortization & Impairment Acquisitions & Divestitures Currency & Other December 31, 2024

Non-amortizable intangible assets $ 4,543 $ ( 27 ) $ 211 $ ( 281 ) $ 4,446

Amortizable intangible assets:

5,321 ( 835 ) ( 187 ) 2,582 6,881

Gross book value 6,884 ( 454 ) 2,513 8,943

Accumulated amortization ( 1,563 ) ( 835 ) 267 69 ( 2,062 )

Total Intangibles, net $ 9,864 $ ( 862 ) $ 24 $ 2,301 $ 11,327

Changes Due To:

December 31, 2024 Amortization & Impairment Acquisitions & Divestitures Currency & Other December 31, 2025

Non-amortizable intangible assets $ 4,446 $ — $ 25 $ 305 $ 4,776

Amortizable intangible assets:

6,881 ( 1,003 ) ( 94 ) 324 6,108

Gross book value 8,943 ( 128 ) 420 9,235

Accumulated amortization ( 2,062 ) ( 1,003 ) 34 ( 96 ) ( 3,127 )

Total Intangibles, net $ 11,327 $ ( 1,003 ) $ ( 69 ) $ 629 $ 10,884

A pre-tax impairment charge in the first quarter of 2024 of $ 27 million for the in-process research and development project in the Wellness business was recorded in marketing, administration and research costs on PMI's consolidated statements of earnings for the year ended December 31, 2024.

Changes due to acquisitions and divestitures reflect the acquisition in Egypt of United Tobacco Company and the sale of Vectura Group and certain other businesses.

For further details, see Note 3.

Acquisitions and Divestitures .

Changes in currency and other in 2024 included the classification of $ 2.8 billion of the IQOS commercialization rights in the U.S.

on the acquisition date (May 1, 2024) as Other intangible assets, net (see Note 3.

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

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

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

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

Acquisitions and Divestitures ).

Amortization expense on a pre-tax basis for each of the next five years is estimated to be approximately $ 987 million or less, assuming no additional transactions occur that require the amortization of intangible assets.

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

(see Note 3, Acquisitions and Divestitures ).

Annual impairment review of goodwill and non-amortizable intangible assets

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

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

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

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

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

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 in the second quarter of 2025 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 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 December 31, 2025, our Russian operations had approximately $ 4.8 billion in total assets, excluding intercompany balances, of which approximately $ 2.3 billion consisted of cash and cash equivalents held mostly in local currency (Russian rubles).

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For further details, see Note 5.

War in Ukraine , Note 6.

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

Contingencies .

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

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

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

Related Parties – Equity Investments and Other .

During the second quarter of 2024, PMI completed its annual review of goodwill and non-amortizable intangible assets for potential impairment.

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

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

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

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At December 31, 2025 and 2024, PMI received year-to-date dividends from equity method investees of $ 203 million and $ 151 million, respectively.

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

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

Additionally, there was approximately $ 633 million of cumulative foreign currency translation losses associated with MDBV reflected in accumulated other comprehensive losses in the consolidated statement of stockholders’ equity as of December 31, 2024.

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

PMI holds a 23 % equity interest in JSC TK Megapolis ("TKM"), PMI's distributor in Russia (SSEA, CIS & MEA segment), which as of December 31, 2025 had a carrying value of $ 303 million.

Additionally, there was approximately $ 523 million of cumulative foreign currency translation losses associated with TKM reflected in accumulated other comprehensive losses in the consolidated statement of stockholders’ equity as of December 31, 2025.

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

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

In June 2024, the Russian government included TKM in the list of economically significant organizations that may be subject to forced localization under applicable Russian law, which referred to the

mandatory removal of a foreign holding company from the shareholding structure.

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

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

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

As 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 December 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.

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

As of December 31, 2024, PMI has not finalized the basis difference allocation resulting from the investment.

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

Additionally, as part of its Wellness business strategy, PMI holds non-controlling equity interests in certain companies, which as of December 31, 2025 had a carrying value of $ 41 million.

During the third quarter of 2025, PMI recorded a non-cash charge of $ 146 million, primarily representing other-than-temporary impairment of one equity method investment following a reassessment of its estimated fair value triggered by the amendment of existing transaction agreements in the third quarter of 2025.

The decline in the estimated fair value was primarily driven by the determination of a lower likelihood of success of certain projects in development.

The impairment charge was recorded within equity investments and securities (income)/loss, net, in the consolidated statements of earnings in 2025.

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

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

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

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

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

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

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

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

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

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

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

Contingencies ).

On January 24, 2025, RBH filed an objection to approval of the Proposed Plan with the CCAA court.

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

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

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

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

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

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

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

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

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

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

In addition, significant estimates were made with respect to the allocation amount of the aggregate global settlement amount among RBH, ITL and JTIM, as well as the deductibility of the settlement amount payment for income tax purposes in Canada.

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

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

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

The Plan reflected a settlement resolving the dispute among the parties with respect to allocation of aggregate settlement amount, and it became effective on August 29, 2025.

On September 24, 2025, as permitted by the Plan, RBH paid a dividend of CAD $ 750 million (approximately $ 536 million) to PMI.

The dividend distribution triggered a re-assessment of the carrying value of the investment in RBH and resulted in a downward adjustment, decreasing the carrying value of PMI’s investment in RBH to $ 567 million.

Consequently, in the third quarter of 2025, PMI recorded pre-tax income of $ 303 million within equity investments and securities (income)/loss, net, in PMI’s consolidated statement of earnings, reflecting the dividend income net of the corresponding decrease in the carrying value of the investment.

PMI evaluated the terms of the Plan and concluded that powers provided under the Plan to RBH’s CCAA Plan Administrator (as that term is defined in the Plan) and to the Claimants (as that term is defined in the Plan) continue to remove certain elements of control of the business from PMI and RBH.

As a result, PMI has determined that RBH will remain deconsolidated as it does not have a controlling financial interest over RBH as defined in ASC 810 (Consolidation).

PMI also does not exert "significant influence" over RBH as that term is defined in ASC 323 (Investments-Equity Method and Joint Ventures).

Therefore, PMI will continue to account for its investment in RBH in accordance with ASC 321 (Investments-Equity Securities) as an equity security, without readily determinable fair value, until the aggregate global settlement amount has been paid and the operating covenants that govern RBH’s business are lifted.

The fair value of PMI’s other equity securities, which have been classified within Level 1, was $ 1,291 million and $ 921 million for the years ended December 31, 2025 and 2024, respectively.

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PMI eliminated its respective share of all significant intercompany transactions with the equity method investees.

Product Warranty:

PMI's heat-not-burn devices and e-vapor products are subject to standard product warranties generally for a period of 12 months from the date of purchase or such other periods as required by law.

PMI generally provides in cost of sales for the estimated cost of warranty in the period the related revenue is recognized.

PMI assesses the adequacy of its accrued product warranties and adjusts the amounts as necessary based on actual experience and changes in future estimates.

Factors that affect product warranties may vary across markets but typically include device version mix, product failure rates, logistics and service delivery costs, and warranty policies.

PMI accounts for its product warranties within other accrued liabilities.

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

At December 31,

(in millions) 2024 2023

Balance at beginning of period $ 80 $ 104

Changes due to:

Warranties issued 76 60

Settlements ( 77 ) ( 83 )

Currency/Other ( 3 ) ( 1 )

Balance at end of period $ 76 $ 80

Indebtedness:

6 unchanged sentences

168 10.3 137 8.6

$ 137 $ 1,968

PMI continues to have access to liquidity in the commercial paper market through programs in place in the U.S.

and in Europe having an aggregate issuance capacity of $ 8.0 billion.

Given the mix of PMI's legal entities and their respective local economic environments, the average interest rate for bank loans above can vary significantly from day to day and country to country.

7 unchanged sentences

Euro notes, 0.125 % to 3.750 % (average interest rate 2.162 %), due through 2039

Swiss franc note, 1.625 %, due 2024

Euro credit facility borrowings related to Swedish Match AB acquisition, (average interest rate 3.445 %), due through 2027

Euro credit facility borrowing related to Swedish Match AB acquisition, (interest rate 2.553 %), due 2027

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

3 unchanged sentences

$ 45,134 $ 42,166

(a) Includes long-term bank loans at subsidiaries, as well as $ 67 million and $ 53 million in finance leases at December 31, 2024 and 2023, respectively.

(a) At December 31, 2025, represents $ 84 million in finance leases;

at December 31, 2024 represents long-term bank loans at subsidiaries, as well as $ 67 million in finance leases.

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.

15 unchanged sentences

Rate Issuance Maturity

$ 750 1.500 % May 2020 May 2025

$ 750 3.375 % August 2015 August 2025

$ 750 5.000 % November 2022 November 2025

$ 750 2.750 % February 2016 February 2026

$ 1,250 4.875 % February 2023 February 2026

(a) $ 450 4.875 % May 2023 February 2026

$ 750 0.875 % November 2020 May 2026

4 unchanged sentences

$ 1,000 4.875 % February 2023 February 2028

(b) $ 550 4.875 % May 2023 February 2028

(a) $ 550 4.875 % May 2023 February 2028

$ 500 3.125 % November 2017 March 2028

$ 400 Floating April 2025 April 2028

$ 750 4.125 % April 2025 April 2028

$ 50 4.000 % May 2013 May 2028

$ 650 5.250 % September 2023 September 2028

$ 300 Floating October 2025 October 2028

$ 750 3.875 % October 2025 October 2028

$ 1,000 4.875 % February 2024 February 2029

3 unchanged sentences

$ 1,500 5.125 % February 2023 February 2030

(d) $ 700 5.125 % May 2023 February 2030

$ 750 4.375 % April 2025 April 2030

$ 750 2.100 % May 2020 May 2030

$ 700 5.500 % September 2023 September 2030

$ 750 4.000 % October 2025 October 2030

$ 750 1.750 % November 2020 November 2030

$ 1,250 5.125 % February 2024 February 2031

$ 750 4.750 % November 2024 November 2031

$ 850 4.250 % October 2025 October 2032

$ 1,500 5.750 % November 2022 November 2032

$ 1,500 5.375 % February 2023 February 2033

(e) $ 750 5.375 % May 2023 February 2033

(d) $ 750 5.375 % May 2023 February 2033

$ 1,000 5.625 % September 2023 September 2033

1 unchanged sentence

$ 750 4.900 % November 2024 November 2034

$ 600 4.875 % April 2025 April 2035

$ 850 4.625 % October 2025 October 2035

$ 1,500 6.375 % May 2008 May 2038

4 unchanged sentences

$ 750 4.875 % November 2013 November 2043

$ 750 4.250 % November 2014 November 2044

$ 500 4.250 % May 2016 November 2044

(in millions)

1 unchanged sentence

Rate Issuance Maturity

€ 750 (approximately $ 972 )

2.750 % March 2013 March 2025

€ 200 (approximately $ 205 )

$ 750 4.250 % November 2014 November 2044

€ 50 (approximately $ 51 )

1.200 % December 2020 November 2025

€ 50 (approximately $ 51 )

1.200 % June 2021 November 2025

$ 500 4.250 % May 2016 November 2044

€ 1,000 (approximately $ 1,372 )

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0.875 % February 2020 February 2027

€ 500 (approximately $ 697 )

(f) € 500 (approximately $ 697 )

2.875 % May 2014 May 2029

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

(f) € 500 (approximately $ 569 )

2.750 % June 2025 June 2029

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

3.750 % June 2024 January 2031

€ 750 (approximately $ 835 )

(f) € 750 (approximately $ 835 )

0.800 % August 2019 August 2031

€ 500 (approximately $ 648 )

(f) € 500 (approximately $ 569 )

3.250 % June 2025 June 2032

€ 500 (approximately $ 578 )

(f) € 500 (approximately $ 648 )

3.125 % June 2013 June 2033

(f) € 500 (approximately $ 578 )

2.000 % May 2016 May 2036

€ 500 (approximately $ 582 )

(f) € 500 (approximately $ 582 )

1.875 % November 2017 November 2037

€ 750 (approximately $ 835 )

(f) € 750 (approximately $ 835 )

1.450 % August 2019 August 2039

Swedish krona notes (c)

Swedish krona notes (b)

SEK 1,000 (approximately $ 95 )

2.710 % January 2019 January 2026

Swedish krona notes (c)

SEK 700 (approximately $ 67 )

Swedish krona notes (b) SEK 700 (approximately $ 67 )

1.395 % February 2021 February 2026

Swedish krona notes (c)

SEK 100 (approximately $ 10 )

Swedish krona notes (b) SEK 100 (approximately $ 10 )

1.395 % March 2021 February 2026

Swedish krona notes (c)

SEK 200 (approximately $ 19 )

Swedish krona notes (b) SEK 200 (approximately $ 19 )

1.395 % September 2021 February 2026

Swedish krona notes (c)

SEK 200 (approximately $ 19 )

Swedish krona notes (b) SEK 200 (approximately $ 19 )

1.395 % January 2022 February 2026

Swedish krona notes (c)

SEK 300 (approximately $ 29 )

Swedish krona notes (b) SEK 300 (approximately $ 29 )

2.190 % April 2021 April 2029

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

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

(b) Notes issued by Swedish Match AB.

USD equivalents for foreign currency notes were calculated based on exchange rates on the date of acquisition.

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

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

(f) These notes are a further issuance of the 4.250 % notes issued by PMI in November 2014.

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

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

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

(e) These notes are a further issuance of the 4.250 % notes issued by PMI in November 2014.

(f) 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 2026.

Debt Extinguishment

On December 4, 2025, PMI redeemed all of its outstanding 4.875 % U.S.

dollar notes due February 13, 2026.

As of this date (prior to the redemption), $ 1.7 billion aggregate principal amount of the U.S.

dollar notes were outstanding.

The pre-tax loss related to this debt extinguishment, which was not material, was included in Interest expense, net on PMI’s consolidated statements of earnings in 2025.

Aggregate maturities:

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(in billions) Committed Revolving Credit Facilities

364 -day revolving credit, expiring January 28, 2025

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

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

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

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

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

Total facilities

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

(1) On January 28, 2022, PMI entered into an agreement, effective February 10, 2022, to amend and extend the term of its $ 2.0 billion multiyear

revolving credit facility, for an additional year covering the period February 11, 2026 to February 10, 2027, in the amount of $ 1.9 billion.

(2) Includes pricing adjustments that may result in the reduction or increase in both the interest rate and commitment fee under the credit agreement if PMI achieves, or fails to achieve, certain specified targets.

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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.

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

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

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

On December 11, 2025, PMI entered into a credit agreement, effective as of January 29, 2026, relating to a senior unsecured revolving credit facility with borrowings up to an aggregate principal amount of $ 2.0 billion expiring on January 29, 2031.

This credit agreement replaces PMI’s existing multi-year revolving credit facility, which was to expire on February 10, 2027.

PMI provided notice of termination of the existing multi-year $ 2.0 billion revolving credit facility on December 11, 2025, with termination effective as of January 29, 2026.

On December 11, 2025, PMI also entered into an agreement, effective as of January 29, 2026, to amend and extend the term of its existing multi-year € 1.5 billion revolving credit facility from January 29, 2028 to January 29, 2029.

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.

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Balances, January 1, 2023 2,109,316,331 ( 559,098,620 ) 1,550,217,711

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

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

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Balances, December 31, 2025 2,109,316,331 ( 552,659,642 ) 1,556,656,689

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

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

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

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

For further details, see Note 3.

Acquisitions and Divestitures.

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

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

At December 31, 2025, 24,866,555 shares of common stock were reserved for stock awards under PMI’s stock plans, and 250 million shares of preferred stock, without par value, were authorized but unissued.

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Such awards are subject to forfeiture if certain employment conditions are not met.

RSU awards generally vest on the third anniversary of the grant date.

RSU awards do not carry voting rights, although they do earn dividend equivalents.

During 2024, the activity for RSU awards was as follows:

RSU awards generally vest on the third anniversary of the grant date.

The fair value of the RSU awards is determined by using the closing market price of PMI’s stock on the date of the grant and is amortized to expense over the restriction period, typically three years after the date of the award, or upon death, disability or reaching the age of 58 .

During the years ended December 31, 2025, 2024 and 2023, the recorded compensation expense related to RSU awards, and the respective tax benefit (charge) were as follows:

(in millions) Compensation Expense Related to RSU Awards Tax Benefit/(Charge) Related to RSU Awards

2025 $ 175 $ 41

2024 $ 157 $ 29

2023 $ 153 $ 26

The expense was recorded primarily in marketing, administration and research costs.

During 2025, 2024 and 2023 the activity for RSU awards was as follows:

Shares Weighted-

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Date Fair Value

Balance at January 1, 2024 4,603,321 $ 96.38

Granted 2,013,350 89.71

Vested ( 1,849,088 ) 85.57

Forfeited ( 224,929 ) 97.43

Balance at December 31, 2024 4,542,654 $ 97.78

During the years ended December 31, 2024, 2023 and 2022, the grant date fair value of the RSU awards granted to PMI employees and the recorded compensation expense related to RSU awards were as follows:

(in millions, except per RSU award granted) Total Grant Date Fair Value of RSU Awards Granted Weighted-Average Grant Date Fair Value Per RSU Award Granted Compensation Expense related to RSU Awards

Per Share Total Grant Date Fair Value of RSU Awards

(in millions) Total Fair Value of RSU Awards that Vested

(in millions)

Balances, January 1, 2023 4,519,470 $ 91.26

1,756,750 $ 101.96 $ 179

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( 189,543 ) $ 96.96 $ ( 18 )

The fair value of the RSU awards at the date of grant is amortized to expense over the restriction period, typically three years after the date of the award, or upon death, disability or reaching the age of 58 .

As of December 31, 2024, PMI had $ 154 million of total unrecognized compensation costs related to non-vested RSU awards.

These costs are expected to be recognized over a weighted-average period of approximately seventeen months , or upon death, disability or reaching the age of 58 .

During the years ended December 31, 2024, 2023 and 2022, share and fair value information for PMI RSU awards that vested were as follows:

(dollars in millions) Shares of RSU Awards that Vested Grant Date Fair Value of Vested Shares of RSU Awards Total Fair Value of RSU Awards that Vested

Balances, December 31, 2023 4,603,321 $ 96.38

2,013,350 $ 89.71 $ 181

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( 224,929 ) $ 97.43 $ ( 22 )

Balances, December 31, 2024 4,542,654 $ 97.78

1,526,970 $ 145.53 $ 222

( 1,431,108 ) $ 104.85 $ ( 150 ) $ ( 216 )

( 177,756 ) $ 108.39 $ ( 19 )

Balance at December 31, 2025 4,460,760 $ 111.43

As of December 31, 2025, PMI had $ 180 million of total unrecognized compensation costs related to non-vested RSU awards.

These costs are expected to be recognized over a weighted-average period of approximately seventeen months , or upon death, disability or reaching the age of 58 .

Performance share unit (PSU) awards

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recipients may not sell, assign, pledge or otherwise encumber such awards.

Such awards are subject to forfeiture if certain employment conditions are not met.

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 2023 and 2022 consisted of PMI's Total Shareholder Return ("TSR") relative to a predetermined peer group and on an absolute basis ( 40 % weight), PMI’s currency-neutral compound annual adjusted diluted earnings per share growth rate ( 30 % weight), and a Sustainability Index, which consists of two drivers:

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

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

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

The performance metrics for such PSU's granted during 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):

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

measuring progress primarily on PMI's efforts to maximize the benefits of smoke-free products, purposefully phase out cigarettes, and reduce post-consumer waste;

• Operational Sustainability ( 10 % weight):

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

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

The performance metrics, targets and relative weights for the PSU’s granted during 2025 were the same as the PSU’s granted during 2024, with the exception of the annual growth rate of adjusted diluted EPS metric goals, which was increased, and for changes to certain components of the Sustainability Index.

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

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

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

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PSU awards do not carry voting rights.

During 2024, the activity for PSU awards was as follows:

The fair value of the PSU awards on the date of the grant, adjusted by performance metrics, is amortized to expense over the restriction period, typically three years after the date of the award, or upon death, disability or reaching the age of 58 .

During the years ended December 31, 2025, 2024 and 2023, the recorded compensation expense related to PSU awards, and the respective tax benefit (charge) were as follows:

(in millions) Compensation Expense related to PSU Awards Tax Benefit/(Charge) Related to PSU Awards

2025 $ 79 $ 20

2024 $ 70 $ 15

2023 $ 59 $ 13

The expense was recorded primarily in marketing, administration and research costs.

During 2025, 2024 and 2023, the activity for PSU awards was as follows:

Shares Weighted-

Average PSU Grant Date

Fair Value Subject to Other Performance Factors Weighted-

Fair Value Subject to Other Performance Factors

(Per Share) Weighted-

Average PSU Grant Date

Fair Value Subject to TSR Performance Factors

(Per Share) (Per Share)

Balance at January 1, 2024 1,427,280 $ 95.45 $ 126.86

Granted 543,560 89.01 85.72

Vested ( 916,452 ) 82.28 107.69

(Per Share) Total Grant Date Fair Value of PSU Awards

(in millions) Total Fair Value of PSU Awards that Vested

(in millions)

Balances, January 1, 2023 1,507,190 $ 90.31 $ 115.45

482,360 $ 102.02 $ 133.54 $ 55

( 902,232 ) $ 85.99 $ 98.45 $ ( 83 ) $ ( 91 )

Adjustments for performance achievement 400,992 $ 85.99 $ 98.45 $ 37

Forfeited ( 78,630 ) 97.42 117.24

Balance at December 31, 2024 1,350,160 $ 98.00 $ 118.55

During the years ended December 31, 2024, 2023 and 2022, the grant date fair value of the PSU awards granted to PMI employees and the recorded compensation expense related to PSU awards were as follows:

(in millions, except per PSU award granted) Weighted-

Average PSU Grant Date

Fair Value Subject to Other Performance Factors Weighted-

Average PSU Grant Date

Fair Value Subject to TSR Performance Factors Compensation Expense related to PSU Awards

Total Per PSU Award Total Per PSU Award Total

( 61,030 ) $ 98.24 $ 131.39 $ ( 7 )

Balances, December 31, 2023 1,427,280 $ 95.45 $ 126.86

543,560 $ 89.01 $ 85.72 $ 48

( 916,452 ) $ 82.28 $ 107.69 $ ( 86 ) $ ( 83 )

The grant date fair value of the PSU awards subject to the other performance factors was determined by using the market price of PMI’s stock on the date of the grant.

Adjustments for performance achievement 374,402 $ 82.17 $ 107.70 $ 36

( 78,630 ) $ 97.42 $ 117.24 $ ( 8 )

Balances, December 31, 2024 1,350,160 $ 98.00 $ 118.55

396,400 $ 145.35 $ 213.72 $ 68

( 686,052 ) $ 104.97 $ 143.64 $ ( 84 ) $ ( 102 )

Adjustments for performance achievement 282,492 $ 104.97 $ 143.64 $ 36

( 38,620 ) $ 105.55 $ 127.27 $ ( 4 )

Balance at December 31, 2025 1,304,380 $ 110.02 $ 139.46

The grant date fair value of the PSU awards subject to the other performance factors was determined by using the closing market price of PMI’s stock on the date of the grant.

The grant date fair value of the PSU market-based awards subject to the TSR performance factor was determined by using the Monte Carlo simulation model.

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(b) Determined using the observed historical volatility.

The fair value of the PSU award at the date of grant is amortized to expense over the performance period, which is typically three years after the date of the award, or upon death, disability or reaching the age of 58 .

As of December 31, 2025, PMI had $ 40 million of total unrecognized compensation cost related to non-vested PSU awards.

This cost is recognized over a weighted-average performance cycle period of approximately seventeen months , or upon death, disability or reaching the age of 58 .

During the years ended December 31, 2024, 2023 and 2022, share and fair value information for PMI PSU awards that vested were as follows:

(dollars in millions) Shares of PSU Awards that Vested Grant Date Fair Value of Vested Shares of PSU Awards Total Fair Value of PSU Awards that Vested

2024 916,452 $ 86 $ 83

2023 902,232 $ 83 $ 91

2022 669,960 $ 54 $ 74

This cost is recognized over a weighted-average performance cycle period of approximately eighteen months , or upon death, disability or reaching the age of 58 .

Earnings per Share:

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Income Taxes:

PMI adopted Accounting Standards Update ASU 2023-09, “Improvements to Income Tax Disclosures” (“ASU 2023-09”) on a prospective basis within its annual reporting for the year ended December 31, 2025.

For further details, see Note 21.

New Accounting Standards .

Earnings before income taxes and provision for income taxes consisted of the following for the year ended December 31, 2025:

(in millions)

Earnings before income taxes

United States $ 870

Foreign 13,010

Total earnings before income taxes $ 13,880

Provision for income taxes:

Current tax expense (benefit)

State and Local 31

Total current tax expense (benefit)

Deferred tax expense (benefit)

State and Local ( 40 )

Total deferred tax expense (benefit)

Total provision for income taxes

Earnings before income taxes and provision for income taxes consisted of the following for the years ended December 31, 2024 and 2023:

(in millions)

2024 2023 2022

Earnings before income taxes

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( 81 ) ( 368 )

( 81 ) ( 368 ) ( 139 )

Total United States

384 ( 167 ) ( 214 )

Outside United States:

2,668 2,468 2,553

( 35 ) 38 ( 95 )

Total outside United States

2,633 2,506 2,458

Total provision for income taxes

$ 3,017 $ 2,339

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.

The provisions and modifications included in the Act did not have a material impact on PMI’s 2025 consolidated financial statements.

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

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

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

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

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

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

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

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

subsidiaries that are expected to be permanently reinvested.

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

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

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

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

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

Many countries have enacted the OECD’s framework on a global minimum tax (referred to as “Pillar Two”), effective for

taxable years beginning after December 31, 2023.

PMI has determined that Pillar Two did not have a material impact on its 2024 or 2025 consolidated financial statements.

At December 31, 2025, U.S.

federal and foreign deferred income taxes have been provided on all accumulated earnings of PMI's foreign subsidiaries.

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

federal statute of limitations on assessment remains open for the years 2019 and onward.

federal statute of limitations remains open for the years 2019 and onward.

Foreign and U.S.

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

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

Years still open to examination by foreign tax authorities in major jurisdictions include Indonesia (2020 onward), Italy (2020 onward), Russia (2023 onward) and Switzerland (2021 onward).

Subsidiaries of PMI in Indonesia, principally PT Hanjaya Mandala Sampoerna Tbk ("HMS"), have recorded income tax receivables in the amount of 4.5 trillion Indonesian rupiah (approximately $ 269 million) relating to corporate income tax assessments paid to avoid potential penalties, primarily for domestic and other intercompany transactions for the years 2017 to 2023.

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

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

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

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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( 4 ) ( 2 ) ( 3 )

( 4 ) 1 ( 3 )

Balance at December 31, $ 105 $ 56 $ 55

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The effective income tax rate on pre-tax earnings differed from the U.S.

federal statutory rate for the following reasons for the year ended December 31, 2025:

(in millions)

Pretax income $ 13,880

Amount Percentage

Provision Computed at Statutory U.S.

Tax Rate $ 2,915 21.0 %

State and Local Income Taxes, Net of Federal Income Tax Effects* ( 12 ) ( 0.1 )

Foreign Tax Effects:

Swiss Federal Rate Differential ( 920 ) ( 6.6 )

Cantonal Taxes - Vaud 248 1.8

Cantonal Taxes - Neuchatel 255 1.8

Other ( 10 ) ( 0.1 )

Other Foreign Jurisdictions 388 2.8

Effect of Cross-Border Tax Laws 67 0.5

Nontaxable/Nondeductible Items ( 17 ) ( 0.1 )

Valuation Allowances 519 3.8

Foreign Exchange ( 384 ) ( 2.8 )

Deferred Taxes on Canadian Equity Investment ( 343 ) ( 2.5 )

Other ( 232 ) ( 1.7 )

Consolidated tax expense / effective tax rate $ 2,737 19.7 %

*State taxes in California, Kentucky, Michigan, New York, Pennsylvania and Wisconsin, made up the majority (greater than 50 percent) of the tax eﬀect in the State and Local income tax category above.

The effective income tax rate on pre-tax earnings differed from the U.S.

federal statutory rate for the following reasons for the years ended December 31, 2024 and 2023:

2024 2023 2022

federal statutory rate 21.0 % 21.0 %

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Effective tax rate 24.7 % 22.4 %

The 2025 effective tax rate decreased 5.0 percentage points to 19.7 %.

The effective tax rate for 2025 was favorably impacted by:

(i) a deferred tax benefit for unrealized foreign currency losses on intercompany loans related to the Swedish Match acquisition financing reflected in the consolidated statements of earnings ($ 384 million), while the underlying pre-tax foreign currency movements fully offset in the consolidated statements of earnings and were reflected as currency translation adjustments in its consolidated statements of stockholders' (deficit) equity, (ii) benefits related to an interest expense election primarily driven by a reduction in tax costs

associated with global intangible low-taxed income (including $ 174 million for 2024) and (iii) refunds expected on amended tax returns filed in Germany ($ 89 million);

partially offset by:

(i) an increase in deferred tax liabilities related to the fair value adjustment of equity securities held by PMI ($ 81 million), (ii) tax impacts of the RBH (Canada) Plan Implementation ($ 166 million), (iii) valuation allowances recorded on deferred tax assets related to U.S.

foreign tax credits ($ 50 million), and (iv) the recognition of current tax expense related to the potential disallowance of intercompany transactions in Indonesia ($ 39 million).

For further details on the RBH (Canada) Plan Implementation, see Note 5.

Related Parties - Equity Investments and Other .

The 2024 effective tax rate increased 2.3 percentage points to 24.7 %.

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

The effective tax rate for 2024 was unfavorably impacted by:

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

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

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

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

and (iii) a U.S.

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Acquisitions and Divestitures , respectively.

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

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

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

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

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

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At December 31, 2024, PMI has recorded a valuation allowance of $ 1,130 million against deferred tax assets that do not meet the more-likely-than-not recognition threshold.

Disclosed below is a summary of income taxes paid by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025:

(in millions)

Income tax payments (net of refunds):

United States:

Federal $ 797

State and Local 107

Total United States 904

Switzerland 929

Total Foreign 2,948

Total $ 3,852

Segment Reporting:

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

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

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

As discussed in Note 1.

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

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

The four geographical segments are as follows:

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

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

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

and Americas Region.

The Wellness and Healthcare segment remains unchanged.

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

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

The Group CEO PMI, who is the chief operating decision maker ("CODM") evaluates geographical segment performance based on the regional operating income, which includes results from all product categories sold in each region.

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

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

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

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

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

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

Segment goodwill and other intangible assets, net, are disclosed in Note 4.

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Summary of Significant Accounting Policies .

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

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

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

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

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

For further details, see Note 23.

New Accounting Standards .

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

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

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

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

For the Year Ended December 31, 2025

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Marketing, administration and research costs 5,404 2,765 1,545 2,635 12,349

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

Impairment of goodwill 41 — — — 41

Operating income $ 7,165 $ 4,096 $ 3,126 $ 505 $ 14,892

For the Year Ended December 31, 2024

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Marketing, administration and research costs 4,669 2,519 1,504 2,455 11,147

Impairment of goodwill — — — — 665 665

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

Operating income $ 6,547 $ 3,429 $ 2,878 $ 548 $ 13,402

For the Year Ended December 31, 2023

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Marketing, administration and research costs 4,252 2,384 1,684 1,740 10,060

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

Impairment of goodwill 665 — — — 665

Operating income $ 5,299 $ 3,136 $ 2,539 $ 582 $ 11,556

Total net revenues attributable to customers located in Japan, PMI's largest market in terms of net revenues, were $ 4.2 billion, $ 4.1 billion and $ 3.9 billion in 2025, 2024 and 2023, respectively.

PMI had one customer in the EA, AU & PMI DF segment that accounted for 11 %, 11 % and 12 % of PMI’s consolidated net revenues, and one customer in the Europe segment that accounted for 11 %, 12 % and 13 % of PMI’s consolidated net revenues in 2024, 2023 and 2022, respectively.

PMI had one customer in the EA, AU & PMI GTR segment that accounted for 10 %, 11 % and 11 % of PMI’s consolidated net revenues, and one customer in the Europe segment that accounted for 12 %, 11 % and 12 % of PMI’s consolidated net revenues in 2025, 2024 and 2023, respectively.

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

5 unchanged sentences

10,233 9,848 9,321

EA, AU & PMI DF

EA, AU & PMI GTR

2,415 2,516 2,676

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Total combustible tobacco 23,794 23,218 22,334

Smoke-free excluding Wellness and Healthcare:

Europe 8,127 7,091 6,500

of which, Wellness 238 333 306

SSEA, CIS & MEA

1,818 1,413 1,308

EA, AU & PMI DF

EA, AU & PMI GTR

4,217 3,877 3,525

Americas 2,691 2,279 1,508

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

Wellness and Healthcare 333 306 271

Total Smoke-free 16,854 14,660 12,840

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

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

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

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

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

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

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

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

• Restructuring charges - See Note 18.

Restructuring Activities for details of the $ 241 million, $ 180 million and $ 109 million pre-tax charges for the year ended December 31, 2025, 2024 and 2023, respectively, as well as a breakdown of these costs by segment.

• Impairment of goodwill and other intangibles – For the year ended December 31, 2025, PMI recorded a goodwill impairment charge of $ 41 million that was included in the Europe segment.

For the year ended December 31, 2023, PMI recorded $ 680 million of goodwill and non-amortizable intangible assets impairment charges that was included in the Europe segment.

For further details, see Note 4.

Goodwill and Other Intangible Assets, net .

• Germany excise tax classification litigation charge – In August 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 with the associated tax assessment totaling EUR 151 million (approximately $ 176 million) covering the period of February 15, 2023, through August 1, 2024.

In April 2025, PM Germany paid the outstanding amount, which was recorded in Other assets on the consolidated balance sheets, while it challenged the MCO’s decision in court.

On September 17, 2025, PM Germany filed a request to withdraw the proceedings.

As a result, the tax assessment amount of $ 176 million was recorded in marketing, administration and research costs in the consolidated statements of earnings for the year ended December 31, 2025, and was included in the Europe segment results.

• Loss on expected sale of consumer accessories and other businesses – See Note 3.

Acquisitions and Divestitures for details of the pre-tax loss of $ 94 million recorded in the Europe segment for the year ended year ended December 31, 2025.

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

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

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

For further details, see Note 3.

Acquisitions and Divestitures .

• Restructuring charges - See Note 20.

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

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

This pre-tax charge was recorded as a reduction of net revenues in the consolidated statements of earnings, and was included in the SSEA, CIS & MEA segment results for the year ended December 31, 2023.

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

For the year ended December 31, 2022, PMI recorded an impairment charge related to definite-lived intangible assets of $ 112 million.

This charge was included in the Wellness and Healthcare segment.

For further details, see Note 5.

Goodwill and Other Intangible Assets, net .

This pre-tax charge was recorded as a

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

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

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

Consequently, we recorded a non-cash pre-tax charge of $ 204 million in marketing, administration and research costs in the consolidated statements of earning, reflecting the full amount previously paid by PM Korea, which was included in the EA, AU & PMI DF segment for the year ended December 31, 2023.

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

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SSEA, CIS & MEA ($ 41 million);

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

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

and Americas ($ 15 million).

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

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

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

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

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

• Charges related to the war in Ukraine – For the year ended December 31, 2023, PMI recorded pre-tax charges of $ 53 million in the Europe segment related to the war in Ukraine.

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

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

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

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

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

Other segment data were as follows:

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SSEA, CIS & MEA 294 304 304

EA, AU & PMI DF 173 144 167

EA, AU & PMI GTR 194 173 144

Americas 950 748 387

Wellness & Healthcare 70 84 85

Total depreciation and amortization expense

$ 1,996 $ 1,787 $ 1,398

For the Years Ended December 31,

(in millions)

2024 2023 2022

Capital expenditures:

Europe $ 783 $ 905 $ 657

SSEA, CIS & MEA 306 287 258

EA, AU & PMI DF 22 38 25

Americas 280 57 92

Wellness & Healthcare 53 34 45

Total capital expenditures

$ 1,444 $ 1,321 $ 1,077

PMI’s total property, plant and equipment, net and other assets by geographic area were:

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other intangible assets, net;

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

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

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

PMI's largest markets in terms of long-lived assets are Switzerland, Indonesia and Italy, as well as the U.S.

Total long-lived assets located in Switzerland, which is reflected in the Europe segment above, were $ 1.7 billion, $ 1.4 billion and $ 1.6 billion at December 31, 2025, 2024 and 2023, respectively.

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Total long-lived assets located in Italy, which is reflected in the Europe segment above, were $ 1.1 billion, $ 1.0 billion and $ 1.0 billion at December 31, 2025, 2024 and 2023, respectively.

Total long-lived assets located in the U.S., which is reflected in the Americas segment above, were $ 1.6 billion at December 31, 2025.

Benefit Plans:

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Employer contributions, net of refunds

139 110 13 14

Employee contributions

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based defined benefit retirement plans.

At December 31, 2025, actuarial losses (gains) consisted primarily of gains for assumption changes related to higher discount rates year-over-year for the Swiss, German and Dutch plans.

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

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

At December 31, 2025 and 2024, the Swiss pension plan represented 71 % and 69 % of the benefit obligation, respectively, and approximately 65 % and 63 % of the fair value of plan assets at December 31, 2025 and 2024, respectively.

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( 2 ) ( 2 ) ( 2 ) — — —

Net transition obligation

Settlement and curtailment

( 3 ) 2 7 1 1 1

Net periodic pension and postretirement costs $ 152 $ 142 $ 90 $ 20 $ 16 $ 16

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Investment funds measured at net asset value (b)

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

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

(a) Investment funds whose objective seeks to replicate the returns and characteristics of specified market indices (primarily MSCI - Europe, Switzerland, North America, Asia Pacific, Japan, Emerging Markets and Small Cap for equities / Bloomberg Core Euro Government Bonds Long Duration, FTSE Non-EGBI EuroBIG, Bloomberg Global Aggr.

ex-CHF and JP Morgan EMBI for bonds / SXI Real Estate and KGAST for real estate), primarily consist of mutual funds, common trust funds and commingled funds.

Of these funds, 59 % were invested in U.S.

and international equities;

13 % are invested in U.S.

11 % were invested in U.S.

and international government bonds;

14 % are invested in corporate bonds and 16 % are invested in real estate.

14 % were invested in corporate bonds and 16 % were invested in real estate.

(b) In accordance with FASB ASC Subtopic 820-10, certain investments measured at fair value using the net asset value per share practical expedient have not been classified in the fair value hierarchy.

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Investment funds measured at net asset value (b)

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

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

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

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The amounts recognized in accrued postemployment costs net of plan assets on PMI's consolidated balance sheets at December 31, 2025 and 2024, were $ 1,036 million and $ 929 million, respectively.

The accrued postemployment costs were determined using a weighted-average discount rate of 4.9 % and 4.3 % in 2024 and 2023, respectively;

an assumed ultimate annual weighted-average turnover rate of 2.9 % and 2.8 % in 2024 and 2023, respectively;

The accrued postemployment costs were determined using a weighted-average discount rate of 4.9 % in 2025 and 2024;

an assumed ultimate annual weighted-average turnover rate of 2.9 % in 2025 and 2024;

assumed compensation cost increases of 2.2 % in 2025 and 2.3 % in 2024, and assumed benefits as defined in the respective plans.

In accordance with local regulations, certain postemployment plans are funded.

As a result, the accrued postemployment costs disclosed above are presented net of the related assets of $ 30 million and $ 33 million at December 31, 2024 and 2023, respectively.

As a result, the accrued postemployment costs disclosed above are presented net of the related assets of $ 30 million at December 31, 2025 and 2024.

Postemployment costs arising from actions that offer employees benefits in excess of those specified in the respective plans are charged to expense when incurred.

56 unchanged sentences

( 6 ) — — ( 6 )

Net transition obligation (asset)

Other income/expense:

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Prior service cost (credit)

( 2 ) — — ( 2 )

Deferred income taxes

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Prior service cost (credit)

Net transition obligation (asset)

( 6 ) — — ( 6 )

Other income/expense:

Net losses (gains)

Prior service cost (credit)

Deferred income taxes

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Prior service cost (credit)

( 4 ) — — ( 4 )

Other income/expense:

Net losses (gains)

Prior service cost (credit)

Deferred income taxes ( 9 ) ( 1 ) ( 18 ) ( 28 )

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( 918 ) ( 24 ) ( 93 ) ( 1,035 )

Prior service (cost) credit

Deferred income taxes 154 6 21 181

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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.

The primary currencies to which PMI is exposed include the Euro, Indian rupee, Indonesian rupiah, Japanese yen, Russian ruble and Swiss franc.

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

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Foreign exchange contracts Other current assets $ 378 $ 772 Other accrued liabilities $ 499 $ 7

Other assets 299 153 Income taxes and other liabilities 60 449

Other assets 107 299 Other liabilities 853 60

Interest rate contracts Other current assets — — Other accrued liabilities 27 50

Other assets 4 — Income taxes and other liabilities 3 18

Other assets 77 4 Other liabilities — 3

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

Other assets — — Income taxes and other liabilities — 1

Other assets — — Other liabilities — —

Derivative contracts not designated as hedging instruments:

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91 331 Other accrued liabilities 319 69

Other assets 12 — Income taxes and other liabilities 58 143

Other assets — 12 Other liabilities 276 58

Total gross amount derivatives contracts presented in the consolidated balance sheets

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

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

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

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

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

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

The fair value of currency options is estimated using a Black‑Scholes valuation model that incorporates foreign

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

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

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

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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

Cash Flow Hedges

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

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

As of December 31, 2025, PMI has hedged forecasted transactions with derivative contracts expiring at various dates through June 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 consolidated statements of cash flows.

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

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

The carrying amount of the debt hedged, which includes the cumulative adjustment for fair value gains/losses, as of December 31, 2025 was $ 5,129 million, including $ 402 million related to discontinued hedges, of which $ 645 million was recorded in current portion of long-term debt and $ 4,484 million was recorded in long-term debt in the consolidated balance sheets.

The cumulative amount of fair value gains/(losses) included in the carrying amount of the debt hedged was $( 56 ) million as of December 31, 2025.

1 unchanged sentence

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

The amount of pre-tax gain/(loss) related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was $ 99 million , $ 48 million and $ 521 million, for the years ended December 31, 2024, 2023 and 2022, respectively.

The amount of pre-tax gain related to the non-derivative financial instruments, that was reported as a component of accumulated other comprehensive losses within currency translation adjustments, was nil , $ 99 million and $ 48 million, for the years ended December 31, 2025, 2024 and 2023, respectively.

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

16 unchanged sentences

Change in fair value

( 89 ) 439 195

Gain/(loss) as of December 31,

9 unchanged sentences

Other Investments

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

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

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

At December 31, 2025 and 2024, the fair values of PMI's certain other investments were as follows:

(in millions)

Level 1, U.S.

dollar denominated bonds in Argentina $ 189 $ 125

Level 2, Indonesian rupiah denominated bonds in Indonesia 27 —

For the years ended December 31, 2025 and 2024, the gross unrealized pre-tax losses on these investments were immaterial.

Accumulated Other Comprehensive Losses:

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

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

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

Damages claimed in some of the tobacco-related litigation are significant and, in the case of the "Health Care Cost Recovery Litigation" described below, could range into the billions of U.S.

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

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

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

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

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

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After assessing the information available to it, except as stated otherwise in this Note 16.

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

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

Contingencies , (i) management has not concluded that it is probable that a loss has been incurred in any of the pending cases mentioned in this Note 16.

Contingencies ;

(ii) management is unable to estimate the possible loss or range of loss for any of these cases;

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Further hearing dates may be scheduled.

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

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

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

Related Parties – Equity Investments and Other .

Stayed Litigation — Canada

Smoking and Health Litigation — Canada

In the first class action pending in Canada, Conseil Québécois Sur Le Tabac Et La Santé and Jean-Yves Blais v.

Imperial Tobacco Canada Ltd., Rothmans, Benson & Hedges Inc.

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

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

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

The class was certified in 2005.

The trial court issued its judgment on May 27, 2015.

The trial court found RBH and two other Canadian manufacturers liable and found that the class members’ compensatory damages totaled approximately CAD 15.5 billion (approximately $ 10.6 billion), including pre-judgment interest.

The trial court awarded compensatory damages on a joint and several liability basis, allocating 20 % to our subsidiary (approximately CAD 3.1 billion (approximately $ 2.1 billion) including pre-judgment interest).

In addition, the trial court awarded CAD 90,000 (approximately $ 62,000 ) in punitive damages, allocating CAD 30,000 (approximately $ 21,000 ) to RBH.

The trial court estimated the disease class at 99,957 members.

RBH appealed to the Court of Appeal of Quebec.

In October 2015, the Court of Appeal ordered RBH to furnish security totaling CAD 226 million (approximately $ 155 million) to cover both the Létourneau and Blais cases, which RBH has paid in installments through March 2017.

The Court of Appeal ordered Imperial Tobacco Canada Ltd.

to furnish security totaling CAD 758 million (approximately $ 520 million) in installments through June 2017.

JTI Macdonald Corp.

was not required to furnish security in accordance with plaintiffs’ motion.

The Court of Appeal ordered that the security is payable upon a final judgment of the Court of Appeal affirming the trial court’s judgment or upon further order of the Court of Appeal.

On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court’s findings of liability and the compensatory and punitive damages award while reducing the total amount of compensatory damages to approximately CAD 13.5 billion (approximately $ 9.3 billion), including interest due to the trial court’s error in the calculation of interest.

The compensatory damages award is on a joint and several basis with an allocation of 20 % to RBH (approximately CAD 2.7 billion (approximately $ 1.9 billion), including pre-judgment interest).

The Court of Appeal upheld the trial court’s findings that defendants violated the Civil Code of Quebec, the Quebec Charter of Human Rights and Freedoms, and the Quebec Consumer Protection Act by failing to warn adequately of the dangers of smoking and by conspiring to prevent consumers from learning of the dangers of smoking.

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

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

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

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

expense, in the first quarter of 2019.

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

In the second class action pending in Canada, Cecilia Létourneau v.

Imperial Tobacco Ltd., Rothmans, Benson & Hedges Inc.

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

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

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

The class was certified in 2005.

The trial court issued its judgment on May 27, 2015.

The trial court found RBH and two other Canadian manufacturers liable and awarded a total of CAD 131 million (approximately $ 90 million) in punitive damages, allocating CAD 46 million (approximately $ 32 million) to RBH.

The trial court estimated the size of the addiction class at 918,000 members but declined to award compensatory damages to the addiction class because the evidence did not establish the claims with sufficient accuracy.

The trial court found that a claims process to allocate the awarded punitive damages to individual class members would be too expensive and difficult to administer.

On March 1, 2019, the Court of Appeal issued a decision largely affirming the trial court’s findings of liability and the total amount of punitive damages awarded allocating CAD 57 million (approximately $ 39 million), including interest to RBH.

See the Blais description above for further detail concerning the security order pertaining to both Létourneau and Blais cases and the impact of the decision on PMI’s financial statements.

RBH and PMI believe the findings of liability and damages in both Létourneau and the Blais cases were incorrect and in contravention of applicable law on several grounds including, the following:

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

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

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

In the third class action pending in Canada, Kunta v.

Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Winnipeg, Canada , filed June 12, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants.

The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic obstructive pulmonary disease (“COPD”), severe asthma, and mild reversible lung disease resulting from the use of tobacco products.

She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products.

In the fourth class action pending in Canada, Adams v.

Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Saskatchewan, Canada , filed July 10, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants.

The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products.

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

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

Canadian Tobacco Manufacturers' Council, et al., The Supreme Court (trial court), Nova Scotia, Canada , filed June 18, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants.

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

He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, as well as restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products.

In the sixth class action pending in Canada, Dorion v.

Canadian Tobacco Manufacturers' Council, et al., The Queen's Bench, Alberta, Canada, filed June 15, 2009, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants.

The plaintiff, an individual smoker, alleges her own addiction to tobacco products and chronic bronchitis and severe sinus infections resulting from the use of tobacco products.

She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers, their estates, dependents and family members, restitution of profits, and reimbursement of government health care costs allegedly caused by tobacco products.

To date, we, our subsidiaries, and our indemnitees have not been properly served with the complaint.

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

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

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

He is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from heart disease allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed.

In the eighth class action pending in Canada, Bourassa v.

The plaintiff, the heir to a deceased smoker, alleges that the decedent was addicted to tobacco products and suffered from emphysema resulting from the use of tobacco products.

She is seeking compensatory and punitive damages on behalf of a proposed class comprised of all smokers who were alive on June 12, 2007, and who suffered from chronic respiratory diseases allegedly caused by smoking, their estates, dependents and family members, plus disgorgement of revenues earned by the defendants from January 1, 1954, to the date the claim was filed.

In December 2014, plaintiff filed an amended statement of claim.

In the ninth class action pending in Canada, Suzanne Jacklin v.

Canadian Tobacco Manufacturers' Council, et al., Ontario Superior Court of Justice, filed June 20, 2012, we, RBH, and our indemnitees (PM USA and Altria), and other members of the industry are defendants.

The plaintiff, an individual smoker, alleges her own addiction to tobacco products and COPD resulting from the use of tobacco products.

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

Health Care Cost Recovery Litigation — Canada

In the first health care cost recovery case pending in Canada, Her Majesty the Queen in Right of British Columbia v.

Imperial Tobacco Limited, et al., Supreme Court, British Columbia, Vancouver Registry, Canada, filed January 24, 2001, we, RBH, our indemnitee (PM USA), and other members of the industry are defendants.

The plaintiff, the government of the province of British Columbia, brought a claim based upon legislation enacted by the province authorizing the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, resulting from a “tobacco related wrong.”

In the second health care cost recovery case filed in Canada, Her Majesty the Queen in Right of New Brunswick v.

Rothmans Inc., et al., Court of Queen's Bench of New Brunswick, Trial Court, New Brunswick, Fredericton, Canada, filed March 13, 2008, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants.

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

This legislation is similar to the law introduced in British Columbia that authorizes the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”

In the third health care cost recovery case filed in Canada, Her Majesty the Queen in Right of Ontario v.

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

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

This legislation is similar to the laws introduced in British Columbia and New Brunswick that authorize the government to file a direct action against cigarette manufacturers to recover the health care costs it has incurred, and will incur, as a result of a “tobacco related wrong.”

In the fourth health care cost recovery case filed in Canada, Attorney General of Newfoundland and Labrador v.

Rothmans Inc., et al., Supreme Court of Newfoundland and Labrador, St.

Johns, Canada , filed February 8, 2011, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants.

The claim was filed by the government of the province of Newfoundland and Labrador based on legislation enacted in the province that is similar to the laws introduced in British Columbia, New Brunswick and Ontario.

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

In the fifth health care cost recovery case filed in Canada, Attorney General of Quebec v.

Imperial Tobacco Limited, et al., Superior Court of Quebec, Canada , filed June 8, 2012, we, RBH, our indemnitee (PM USA), and other members of the industry are defendants.

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

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

Altria Group, Inc., et al., Supreme Court of Queen's Bench Alberta, Canada , filed June 8, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants.

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

In the seventh health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Manitoba v.

Rothmans, Benson & Hedges, Inc., et al., The Queen's Bench, Winnipeg Judicial Centre, Canada , filed May 31, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants.

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

In the eighth health care cost recovery case filed in Canada, The Government of Saskatchewan v.

Rothmans, Benson & Hedges Inc., et al., Queen's Bench, Judicial Centre of Saskatchewan, Canada , filed June 8, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants.

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

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

Rothmans, Benson & Hedges Inc., et al., Supreme Court of Prince Edward Island (General Section), Canada , filed September 10, 2012, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants.

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

In the tenth health care cost recovery case filed in Canada, Her Majesty the Queen in Right of the Province of Nova Scotia v.

Rothmans, Benson & Hedges Inc., et al., Supreme Court of Nova Scotia, Canada , filed January 2, 2015, we, RBH, our indemnitees (PM USA and Altria), and other members of the industry are defendants.

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

Combustible tobacco products litigation

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

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

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

All cases resolved by final and non-appealable liability judgment have been terminated in our favor and only a small number of cases remain pending.

The pending cases include seven health care cost recovery cases, one public civil action, and individual cases.

These do not include nine proposed class actions and ten health care cost recovery cases that have been released pursuant to the CCAA Plan of PMI's wholly owned subsidiary in Canada, Rothmans, Benson & Hedges Inc., that will be formally dismissed in due course, and are no longer reported here.

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, one individual case was initially decided in favor of plaintiffs, and remains on appeal.

Final resolution in the amount of the verdict in such case would not have a material adverse effect on our consolidated financial statements, including our results of operations, cash flows, or financial position.

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

Smoking and Health Proposed Class Actions:

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

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

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

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

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

Health Care Cost Recovery Litigation:

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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 December 31, 2024, there were 17 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Brazil ( 1 ), Canada ( 10 ), Korea ( 1 ) and Nigeria ( 5 ), compared with 17 such cases on December 31, 2023 and 17 such cases on December 31, 2022.

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

As of December 31, 2025, excluding the cases that will be dismissed pursuant to the CCAA Plan described above, there were 7 health care cost recovery cases pending against us, our subsidiaries or indemnitees in Brazil ( 1 ), Korea ( 1 ) and Nigeria ( 5 ), compared with 17 such cases on December 31, 2024 and 17 such cases on December 31, 2023.

In the health care cost recovery case in Brazil, The Attorney General of Brazil v.

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British American Tobacco (Nigeria) Limited, et al., High Court of Lagos State, Lagos, Nigeria, filed March 13, 2008, we and other members of the industry are defendants.

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

Plaintiff seeks reimbursement for the cost of treating alleged smoking-related diseases over the past several decades, payment of anticipated costs of treating alleged smoking-related diseases in the future, various forms of injunctive relief, plus punitive damages.

We are in the process of making challenges to service and the court's jurisdiction.

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British American Tobacco (Nigeria) Limited, et al., High Court of Kano State, Kano, Nigeria, filed May 9, 2007, we and other members of the industry are defendants.

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

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

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

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

In February 2011, the court ruled that the plaintiff had not complied with the procedural steps necessary to serve us.

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British American Tobacco (Nigeria) Limited, et al., High Court of Oyo State, Ibadan, Nigeria, filed May 25, 2007, we and other members of the industry are defendants .

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

Plaintiffs seek reimbursement for the cost of treating alleged smoking-related diseases over the past several decades, payment of anticipated costs of treating alleged smoking-related diseases in the future, various forms of injunctive relief, plus punitive damages.

We challenged service as improper.

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British American Tobacco (Nigeria) Limited, et al., High Court of Ogun State, Abeokuta, Nigeria , filed February 26, 2008, we and other members of the industry are defendants.

In May 2010, the trial court rejected our objections to the court's jurisdiction.

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

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

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

cancer from 2003 to 2012.

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:

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

The plaintiff's appeal remains pending.

The appellate court granted plaintiff a de novo appeal in 2021 and, on January 15, 2026, dismissed plaintiff's claims and appeal.

On February 4, 2026, plaintiff filed an appeal to the Supreme Court of Korea.

Public Civil Actions:

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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.

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

On 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 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.

On September 15, 2025, Plaintiff filed a motion to amend his complaint to add two additional named plaintiffs.

Darryl Maultsby and Griffin Dykes, as well as a new claim under the Florida Deceptive and Unfair Practices Trade Act ("FDUPTA").

On October 14, 2025, the Court granted Plaintiff's motion to amend the complaint.

On October 22, 2025, defendants filed a motion to dismiss the FDUTPA claim.

On December 12, 2025, the Court denied defendants' motion to dismiss the FDUTPA claim.

On December 23, 2025, defendants filed their answers to plaintiff's second amended complaint.

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

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

On June 7, 2024, PMI and Swedish Match North America LLC filed motions

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

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

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

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

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

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

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

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

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

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

The 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.

On September 15, 2025, Plaintiff filed a motion to amend his complaint to add a new claim under the Florida Deceptive and Unfair Practices Trade Act ("FDUPTA").

On October 14, 2025, the Court granted Plaintiff's motion to amend the complaint.

On October 23, 2025, defendants filed a motion to dismiss the FDUTPA claim.

On December 12, 2025, the Court denied defendants’ motion to dismiss the FDUTPA claim.

On December 23, 2025, defendants filed their answers to plaintiff's second amended complaint.

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

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

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

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

The 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.

On September 15, 2025, Plaintiff filed a motion to amend his complaint to add a new claim under the Florida Deceptive and Unfair Practices Trade Act ("FDUPTA").

On October 14, 2025, the Court granted Plaintiff's motion to amend the complaint.

On October 23, 2025, defendants filed a motion to dismiss the FDUTPA claim.

On December 12, 2025, the Court denied defendants’ motion to dismiss the FDUTPA claim.

On December 23, 2025, defendants filed their answers to plaintiff's second amended complaint.

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

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On September 24, 2024, PMI and Swedish Match North America LLC filed motions to dismiss the complaint with prejudice, and a motion to stay discovery.

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

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

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

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.

District of Columbia Attorney General Investigation :

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

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

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

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

and agreed to undertake certain limited conduct obligations moving forward.

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

Philip Morris International Inc., et al.

, filed April 2, 2025, before United States District Court for the Southern District of Florida, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches.

The complaint named PMI, Swedish Match North America LLC, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc.

as defendants.

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

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.

On September 15, 2025, Plaintiff filed a motion to amend her complaint to add a new claim under the Florida Deceptive and Unfair Practices Trade Act ("FDUPTA").

On October 14, 2025, the Court granted Plaintiff's motion to amend the complaint.

On October 23, 2025, defendants filed a motion to dismiss the FDUTPA claim.

On December 12, 2025, the Court denied defendants’ motion to dismiss the FDUTPA claim.

On December 23, 2025, defendants filed their answers to plaintiff's second amended complaint.

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.

On August 6, 2025, Plaintiff filed a motion to remand the case back to state court.

That motion is now fully briefed and remains pending.

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

In the eighth case, an individual complaint, Maultsby v.

Philip Morris International Inc., et al , filed August 5, 2025, before United States District Court for the Middle District of Florida, plaintiff alleged, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches.

The complaint named PMI, Swedish Match North America LLC, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc.

as defendants.

Plaintiff alleged, among other things, that defendants defectively designed ZYN products and sold them in an unreasonably unsafe and dangerous condition, marketed ZYN products to minors, and

misrepresented or failed to warn consumers about information related to ZYN products, including information about health risks associated with these products.

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

On September 15, 2025, Plaintiff in the Kelly case moved to amend the complaint in that matter to add Darryl Maultsby as a named plaintiff in the class action proceeding.

On October 24, 2025, plaintiff voluntarily dismissed this lawsuit without prejudice.

In the ninth case, an individual complaint, Dykes v.

Philip Morris International Inc., et al , filed August 5, 2025, before United States District Court for the Northern District of Florida, plaintiff alleged, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches.

The complaint named PMI, Swedish Match North America LLC, Swedish Match USA Inc., PMI Global Services Inc., and Philip Morris Global Brands Inc.

as defendants.

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

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

On September 15, 2025, Plaintiff in the Kelly case moved to amend the complaint in that matter to add Griffin Dykes as a named plaintiff in the class action proceeding.

On October 24, 2025, plaintiff voluntarily dismissed this lawsuit without prejudice.

In the tenth case, Austin Siegert v.

Philip Morris International Inc.

et al , filed September 26, 2025, before the United States District Court for the District of Connecticut, plaintiff alleges, among other things, addiction to nicotine resulting from the use of ZYN nicotine pouches.

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

Plaintiff purports to represent classes comprised of (i) all persons who purchased ZYN in the United States and (ii) a subclass of persons who purchased ZYN in New York.

Plaintiff alleges, among other things, that defendants misrepresented that ZYN is tobacco-free;

misled consumers regarding ZYN ’s nicotine strength and addictive potential;

and deployed misleading advertisements geared towards those under the legal age.

Plaintiff asserts claims for violations of New York General Business Law § 349 (deceptive and unfair trade practices);

violations of New York General Business Law § 350 (misleading advertising);

violations of state consumer protection statutes;

and breaches of the implied warranty of merchantability.

Plaintiff seeks compensatory, statutory and punitive damages, attorney’s fees and expenses, prejudgment interest, and declaratory and injunctive relief.

On October 30, 2025, defendants 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 November 3, 2025, the Court granted the motion to stay until the court in the Kelly case issues a ruling on class certification.

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.

Other Litigation

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

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

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

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

nicotine pouch market.

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

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

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

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

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

Subsequently thereto, Plaintiff informed Swedish Match North America LLC that he will file an amended complaint, which is due on February 10, 2025 At this time, no estimated loss has been accrued in the consolidated financial statements for this proceeding and we cannot determine the likelihood of loss, or reasonably estimate a range of loss, if any, from this proceeding.

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

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

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

In May 2017, Thailand enacted a new customs act.

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

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

Trial in the case began in November 2018 and concluded in December 2019.

In March 2020, the trial court found our subsidiary guilty of under-declaration of the prices and imposed a fine of approximately THB 130 million (approximately $ 3.9 million).

The trial court dismissed all charges against the individual defendant.

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

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

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

In addition, the Public Prosecutor filed an appeal of the trial court's decision challenging the dismissal of charges against the individual defendant and the amount of the fine imposed.

The appellate court issued its decision on the appeals on January 31, 2023.

The appellate court affirmed the findings of under-declaration of import prices of cigarettes but reduced the fine imposed by the trial court.

The appellate court directed the Public Prosecutor to coordinate with customs officials to calculate such reduced fine in accordance with the appellate court’s decision.

The appellate court affirmed the acquittal of the individual defendant.

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

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

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

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

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

BAT has filed a civil claim against PM Italia claiming vicarious liability for the alleged wrongdoings of its former or current employees and seeking EUR 50 million (approximately $ 51 million) in damages.

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

British American Tobacco Italia S.p.a.

has filed a civil claim against PM Italia claiming vicarious liability for the alleged wrongdoings of its former or current employees and seeking EUR 50 million (approximately $ 59 million) in damages.

After various postponements, the trial before the court of first instance started on September 25, 2023, and will continue into 2026.

The judge has scheduled a final hearing for April 29, 2026, with a decision expected thereafter.

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

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

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

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

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

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

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

For additional information, see Note 6.

Related Parties – Equity Investments and Other.

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

The Brazilian Tax Authority objected to such methodology and, on December 3, 2024, served our affiliate with notice of an assessment alleging underpayments of these indirect taxes during the 2020 fiscal year, for approximately BRL 137 million ($ 27 million).

On March 31, 2025, the Brazilian Tax Authority served our affiliate with notice of a similar assessment alleging underpayments of indirect taxes during the 2021 fiscal year, for approximately BRL 211 million ($ 41 million).

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

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

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

FTKK sought an order stopping the importation of TEREA consumables.

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

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

The Customs hearing was held on May 28, 2024.

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

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

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

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

FTKK withdrew its Customs application

following the issuance of an opinion from expert advisors to Customs that the patent at issue was not infringed.

The proceeding is now concluded.

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

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

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

FTKK asserts a claim for damages.

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

Merits briefing in the matters commenced in December 2024.

In November and December 2024, FTKK filed seven additional patent infringement actions against Sojitz for alleged infringement of seven new FTKK patents by TEREA and SENTIA consumables.

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

After receiving an indicative view from the Tokyo District Court that FTKK's patents were not infringed, FTKK withdrew its claims and the matters were terminated in September 2025.

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

FTKK asserts a claim for damages in these actions.

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

Merits briefing in these matters is expected to commence in the first half of 2025.

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

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

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

The patents FTKK 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 in all of these matters.

On November 24, 2025, the Court provided its indicative opinion that FTKK was not entitled to a preliminary injunction in one of the pending actions, and on January 21, 2026, the Court issued a written decision rejecting FTKK's preliminary injunction petition on the basis that the accused products do not infringe FTKK's patent.

On December 18, 2025, FTKK filed a notice indicating that it was withdrawing its claim in the related damages action, and the action was terminated on December 25, 2025.

Merits proceedings in the remaining matters are at various stages.

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

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

In April 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, on the basis of alleged infringement of another FTKK patent.

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

On November 4, 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.

We were informed on January 22, 2026, that FTKK has filed a request for re-investigation of the matter with Tokyo Customs.

On December 16, 2025, we were informed that FTKK filed a new application with Tokyo Customs against Sojitz, on the basis of alleged infringement of another FTKK patent.

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

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

PMJL has entered an appearance in the proceeding as an interested party and filed its opposition to FTKK’s application on January 9, 2025.

On January 9, 2025, PMJL and Sojitz filed a declaratory judgment action against FTKK in Tokyo District Court with respect to the patent at issue in the pending Tokyo Customs matter on the basis that the relevant patent is not infringed or is invalid.

PMJL entered an appearance in the proceeding as an interested party and filed an opposition to FTKK’s application on January 27, 2026.

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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When applicable, a servicing liability is recorded for the estimated fair value of the servicing.

The amounts associated with the servicing liability were not material for the

years ended December 31, 2024 and 2023.

The amounts associated with the servicing liability were not material for the years ended December 31, 2025 and 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.

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The trade receivables sold that remained outstanding under these arrangements as of December 31, 2025, 2024 and 2023, were $ 1.0 billion, $ 0.9 billion and $ 1.6 billion, respectively.

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

The net proceeds received are included in cash provided by operating activities in the

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 consolidated statements of earnings.

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Restructuring Activities:

For the years ended December 31, 2024 and 2023, PMI recorded total pre-tax restructuring charges of $ 180 million and $ 109 million, respectively.

For the years ended December 31, 2025, 2024 and 2023, PMI recorded total pre-tax restructuring charges of $ 241 million, $ 180 million and $ 109 million, respectively.

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

For the year ended December 31, 2022, PMI did no t record any charges related to restructuring activities.

Manufacturing Footprint Optimization - Germany

As a result of declining demand for cigarettes and other combustible tobacco products in Europe, two of PMI’s German subsidiaries, Philip Morris Manufacturing GmbH and F6 Cigarettenfabrik GmbH & Co.

KG, initiated consultations with employee representatives on October 29, 2024, on a proposal to end production in the factories located in Berlin and in Dresden by the end of the second quarter of 2025, and to seek to agree on fair solutions for any impacted employees.

The consultation processes for both of these factories were concluded in April 2025, and as a result of the closure PMI recorded pre-tax restructuring charges of $ 241 million in 2025.

This amount included pension and employee separation costs of $ 125 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.

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 18.

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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Income Taxes .

Manufacturing Footprint Optimization - Germany

As a result of declining demand for cigarettes and other tobacco products in Europe, two of PMI’s German subsidiaries, Philip Morris Manufacturing GmbH and F6 Cigarettenfabrik GmbH & Co.

Until the consultation process is concluded, the closure is not considered probable, and the total potential costs associated with this contemplated proposal cannot be determined and, as a result, no related costs were recorded in the fourth quarter of 2024.

E-Vapor Products Manufacturing Optimization

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(in millions)

2025 2024 2023

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 —

Separation programs:

Europe 125 — —

Total separation programs 125 — —

Contract termination charges:

Europe 24 — 34

SSEA, CIS & MEA — — 23

EA, AU & PMI DF — 14

EA, AU & PMI GTR — — 14

Americas — 77 7

Total contract termination charges 77 78

Total contract termination and other charges 24 77 78

Asset impairment charges (1)

Europe 92 — 13

SSEA, CIS & MEA — — 9

EA, AU & PMI DF — 5

EA, AU & PMI GTR — — 5

Americas — 65 4

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Cash spent ( 35 )

Prepaid commitments ( 20 )

Currency/other ( 27 )

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Long-term debt — 49 — 30

Income taxes and other liabilities 427 — 456 —

Other liabilities 526 — 427 —

Total lease liabilities $ 733 $ 84 $ 604 $ 67

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

The rollforward of PMI's outstanding obligations under its SCF program for the year ended December 31, 2024 were as follows:

The rollforward of PMI's outstanding obligations under its SCF program for the years ended December 31, 2025 and 2024 were as follows:

(in millions) 2025 2024

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Recently adopted

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

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

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

Recently issued

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

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

ASU 2023-09 also requires disaggregated disclosures of federal, state and foreign income tax taxes paid.

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

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

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

ASU 2023-09 also requires disaggregated disclosures of federal, state and foreign income taxes paid.

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

PMI adopted the additional disclosure requirements on the specified effective date within its annual reporting for the year ended December 31, 2025, on a prospective basis.

Recently issued

On November 4, 2024, the FASB issued Accounting Standards Update ASU 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Tobacco-Related Litigation for Smoking and Health Class Actions and Health Care Cost Recovery Cases

As desc ribed in Note 18 to the consolidated financial statements, the Company has nine smoking and health class actions and 17 health care cost recovery cases pending.

As desc ribed in Note 16 to the consolidated financial statements, the Company has seven health care cost recovery cases pending.

The Company records provisions in the consolidated financial statements for pending litigation when management determines that an unfavorable outcome is probable and the amount of the loss can be reasonably estimated.

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and (iii) evaluating the sufficiency of the Company’s smoking and health class actions and health care cost recovery cases contingencies disclosures.

Impairment Related to the Rothmans, Benson & Hedges Equity Investment

As described in Note 6 to the consolidated financial statements, since the 2019 deconsolidation of Rothmans, Benson and Hedges Inc.

(RBH), the Company has accounted for its continuing investment in the business as an equity security, without readily determinable fair value.

On January 24, 2025, RBH filed an objection to approval of the proposed plan of compromise and arrangement (Proposed Plan) with the CCAA court.

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

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

As a result, management performed a quantitative valuation of its investment in RBH as of December 31, 2024, and recorded a non-cash impairment charge of $2,316 million.

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

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

In addition, significant estimates were made with respect to the allocation amount of the aggregate global settlement amount, as well as the deductibility of the settlement amount payment for income tax purposes in Canada.

The principal considerations for our determination that performing procedures relating to the impairment of the equity investment in RBH is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Company’s investment in RBH;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the discount rate, sales volumes and operating margins related to the fair value of the combustible tobacco product business in Canada and the estimate of the allocation amount of the aggregate global settlement amount as well as the deductibility of the settlement amount payment for income tax purposes in Canada;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s equity investment impairment assessment, including controls over the valuation of the Company’s investment in RBH.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the investment in RBH;

(ii) evaluating the appropriateness of the discounted cash flow analysis;

(iii) testing completeness and accuracy of underlying data used in the discounted cash flow analysis;

(iv) evaluating the reasonableness of significant assumptions used by management related to the discount rate, sales volumes and operating margins related to the valuation of the combustible cigarette business and the estimate of the allocation amount of the aggregate global settlement amount;

and (v) evaluating the deductibility of the settlement amount payment for income tax purposes in Canada.

Evaluating management’s assumptions related to sales volumes and operating margins related to the valuation of the combustible tobacco product business in Canada and the estimate of the allocation amount of the aggregate global settlement amount involved evaluating whether the assumptions used by management were reasonable considering (i) the current economic conditions and recent operating results of RBH;

(ii) the consistency with external market and industry data;

and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in evaluating (i) the appropriateness of the discounted cash flow analysis;

(ii) the reasonableness of the discount rate assumption related to the valuation of the combustible tobacco product business in Canada;

and (iii) the deductibility of the settlement amount payment for income tax purposes in Canada.

/S/ PRICEWATERHOUSECOOPERS SA

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data